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How Life Insurance can help you save tax?

We are aware that Life Insurance is an important investment instrument which provides assured returns on maturity and risk cover to protect your family’s financial needs in case an unfortunate event occurs to you. Life Insurance is also a tax saving investment which provides tax benefits under section 80C for the premium paid towards the policy. There are additional benefits that can be availed even after the policy term finishes which is under section 10(10D), if the annual premium paid for the policy duration is not more than 10% of the sum assured, then the sum assured received is exempted from tax deduction.

Below are the various plans you can invest to save tax:

Term insurance plan: If you are an earning member and you have someone who is directly or indirectly dependent on you financially then a term insurance plan is a must. Term insurance fulfils the need for protection. It provides a lumpsum amount to the nominee in case an unfortunate event of death occurs to you. A term insurance plan assures that your family’s financial needs will be fulfilled even in your absence. There are many term plans available online. Some companies like Edelweiss Tokio Life provides a higher sum assured at reasonable premium rate. It is recommended that you purchase a term plan that provides you a longer coverage atleast till the age of 80 so that you live without any worries.

Health plans or critical illness plans: Both health insurance and critical illness insurance provide get tax benefits under section 80D of up to 15,000 INR on policies for your family member or yourself. A critical illness plan is something that is gaining importance in recent times. A critical illness insurance provides a fixed lumpsum benefit on diagnosis of a critical illness. There are plans which cover multiple critical illnesses like cancer, heart attack, kidney disease, blindness, organ transplant, etc. Plans like CritiCare+ also provide a multiclaim option under which the policyholder can claim thrice.

ULIPS: ULIPs are great investment tools to meet your financial goals and also save tax. Unlike many other investment options ULIPs provide tax benefit. Apart from tax benefit, ULIPs are great option to fulfil your long term goals because it has a five year lock in period and the power of compounding. So, the longer you invest the better the results. ULIPs also provide an option for the policyholder to switch between funds. It is recommended that you invest in ULIPs were the individual funds are rated 5 star.

Now that you have fairly understood the different ways life insurance can help you save tax, you can analyse your insurance needs and start saving tax today itself.