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Term Insurance Remains a Favorable Tax Saving Instrument Post-GST. Here’s Why


Even a 3% increase in the premium of a term plan has not put off people from looking at the long-term benefits that this plan provides. Want to know why?

We are all part of an age, where almost everything is smart, starting from our phones to houses, from vehicles to offices. It simply doesn’t add up that you wouldn’t let your portfolio to be smart as well. A smart portfolio will not only help you build wealth over time, but also let you leverage the best tools available at that point in time. One such smart instrument that you can add to your portfolio is a term insurance. It has been a favorite of many for quite a few reasons. They are as follows:

Affordability

For starters, term plans are very affordable. By paying a small premium amount you can secure a substantial life cover for yourself. It also ensures that your loved ones do not have to struggle with finances, should anything unexpected happen in life. It is an insurance product at its core, you can avail tax benefits as well. There are of course a lot of other instruments in the market when it comes to tax saving, but a term plan is a smart choice fromothers. And here is why.

Coverage

There are enough term plans in the market for you to choose from. They ensure that you get good value for your money. They offer you features such as critical illness cover as part of the term plan. In case of a critical illness cover, the insurer is liable to pay a pre-defined sum assured to the insurer if he/she is diagnosed with any of the listed critical illness. Some of the insurers also allow you to enhance your policy’s coverage at critical junctures of your life, such as marriage or childbirth.

The Goods and Services Tax (GST) was introduced on the first of July this year and many expected it to play the spoilsport in the sales of term plans. However, that is not the situation. More and more people are opting for term plans. Most of the experts are of the opinion that the mere 3% increase in price should not put off people from looking at the long-term benefits that the plan provides. Even with a slight bump in the prices, you still have access to a handsome sum assured. You should not ignore the tax benefits that you get with the plan as well.

Tax benefits

Most of the insurers let you purchase a term plan that gives you coverage of around 10 - 20 times of your source of income. For an example, if your yearly income is about Rs.8-10 lacs, you can expect a life cover of around Rs.1 crore. Insurers of the current day have calculators on their website, which lets you calculate the life cover based on some basic questions such as age, gender, and consumption of tobacco. You can claim the amount invested for a term insurance under Section 80C from your taxable income, giving you a rebate on your income tax. You can also include the premium amount paid for your spouse and children, up to a maximum of Rs.1.5 lacs.

The evolution of term plans over the past few years has been impressive, to say the least. Some insurers offer additional benefits such as critical illness covers and much more which you can claim under Section 80D up to a maximum of Rs.25000. Should the worst happen to you, taxation should be the least of your family’s concerns. As the payout in case of death is covered under Section 10D(D). This means that the money that your loved ones will receive is tax-free.

Thus, even the inclusion of the GST or additional taxes on the term plans has not dampened the spirits of individuals looking for a smart insurance plan for their portfolio.

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