Here’s Why Life Insurance Must be Looked at Beyond Tax-saving

Rajinder Singh has a life insurance policy worth a certain sum that would be paid to his wife (the nominee) in case of his unfortunate death. The policy also offers a lump sum at the end of ten years (term of maturity) if he survives at the end of the term. This policy not only gives him peace of mind that his loved ones will be financially secure in case of his death, but it also offers substantial tax benefits, savings, and wealth creation during the interim. Life Insurance is a Beyond Tax-saving plan and we must admire this plan as a protector.

Such policies provide dual benefits, and many purchasers are attracted to the range of tax savings benefits that a life insurance policy can provide. However, it’s important to view life insurance beyond the tax-saving angle.

What Type of Tax Benefits Are Available?

The Income Tax Act of 1961 allows tax savings at different stages of the life insurance policy. There are four basic types of tax benefits that policyholders can avail of at various points. With time, people start understanding that insurance service is just more about making things easy and helpful for you and life insurance is one of those services that make your life valuable. Giving leverage as a tax in insurance service is, for promoting the insurance service between the public and people also buying the policy for getting leverage in tax.

1. Entry Level: If you purchase life insurance that covers more than 10 times your annual income, you can avail of deductions on premiums under Section 80C, 80CC (pension), and 80D (health).
2. Growth Phase: Investments can grow without being taxed
3. Switching Options: You can conveniently move between equity, debt, and balanced funds at any time, without attracting taxes
4. Exit Level: The maturity benefit you receive at the end of the term is tax-free, subject to Section 10D

Look Beyond Tax Savings

Industry observers note that towards the end of the financial year or “tax-saving season,” there is a rush to purchase life insurance policies purely because of the tax-saving benefits they offer. The current scenario of plummeting interest rates also makes these instruments very attractive.

Many companies also offer guarantees that seem very beneficial at first glance.

However, purchasing life insurance merely to save on taxes can be financially harmful in the long run. Some traditional plans lock in your funds for 15-30 years, with only a 5% return. Pure life insurance plans are intended for protection and security. They allow for planning and financial safety in the event of death.

The features of life insurance policies include

• Safety net: Life insurance policies are designed to offer financial benefits, which should be the primary reason for purchasing a plan.
• Early purchase advantage: Purchasing at an earlier age helps you pay lower premiums, gives your money enough time to grow and provides for your family when you’re no longer around.
• Coverage increase: Some plans allow you to increase the coverage according to life stage, such as providing for children’s education and other expenses later on.
• Retirement planning: Look, we all know that a life insurance policy helps us in our retirement life. If you outlive the policy term, if you have purchased an endowment or unit-linked plan, you can continue to get a monthly return for the rest of your life. With the help of a life insurance plan, you will find a way through which you will get the monthly income that you need most in your retirement life.
• Married Woman’s Property: You can purchase a life insurance policy under the MWP Act 1984 to provide benefits to your wife and children after your death. Widowers can make their children beneficiaries.

Rajinder Singh got the right advice and understands that it’s wiser not to focus on his life insurance policy as a tax-savings instrument but as one that gives him and his family future security.

Advantages of Life Insurance

Financial Security

Not only a life insurance policy, but every insurance policy is also trying to help you financially. As per the cover of life insurance policy, it will help you in your medical crisis, and you always have faith in the policy, and that’s why you choose to insure. A life insurance policy not only helps in your worst situation, but it’ll also help you in a medical emergency. Life insurance plays the role of protector and makes things easy and beneficial for you in a medical emergency. In this whole period, you never spend a single penny, the policy will cover everything, and this is how Life Insurance Policy helps you in financial security.

Wealth Creation

We all want that, “To hit two different targets with one stone” spending money to protect yourself and also getting a return on that investment both can be achieved with only one stone. Buying a life insurance policy for protecting yourself and your family is a quite good decision but think that your premium will be invested by the insurance company to adjust your high-risk returns; it would be quite good for you. Apart from getting returns, the policy also provides you loan services to manage the financial support for you. Buying the best life insurance policy is a question for everyone and sometimes people bought two insurance policies for getting the proper cover option.

Riders

Many policies provide the ability to add riders to the main policy. For instance, you can add on a terminal illness rider if you have a family history of certain diseases. There are other plans with optional coverage against disease and disability but with rider benefit, you can also cover the problems, like accidental death, disability, and disease also. You can add on the covers, but the premium of the policy will also increase as per the service you are adding to the plan.