Tax-saving life insurance plans you need to consider this year

Dec 05, 2017 | 1 year ago | Read Time: 4 minutes | By iKnowledge Team

Say, you’re a 25-year-old planning to retire at 60. If your monthly expenditure is Rs 25,000, you’d need around Rs 5 crore when you retire to sustain your current lifestyle, provided your salary grows by 10% every year, the inflation rate is 6% and you expect to live till 70. This is excluding the amount you would need for medical expenses and other emergencies.

Also, Rs 5 crore is a conservative amount considering that the life expectancy is increasing every year and you still have around 35 years to retire. Besides, the price rise is assumed to be minimal. If the inflation increases unexpectedly, then Rs 5 crore too may be insufficient to live in your sunset years.

Thus, it is recommended that you start planning for your retirement as early as possible. Insurance needs to be an integral part of your planning as it helps you secure your family in the process of investing. In fact, as an added benefit, you could even save taxes while doing so. So, let’s look at four insurance plans that could help you save taxes.

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Term insurance

This is a cost-effective and the most basic insurance that ensures your family leads a comfortable life if something were to happen to you. Additionally, you could claim tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Recently, term insurance has had some upgrades. For example, the iTerm plan from Aegon Life offers the option to increase your life coverage as per your increasing life stage. Also, there are numerous riders that you can add to make them an all-round plan. With additional riders like critical and terminal illness rider and accidental death benefit rider, you can upgrade the iTerm plan to iTerm Plus. In iTerm Plus, you could even claim tax deductions of up to Rs 25,000 under Section 80D.

Additionally, say you buy the insurance for your parents. Then, you could claim additional Rs 25,000 if your parents are below 60 years of age and Rs 30,000 if they are above 60. To top it, the payout for term plans would be tax-free under Section 10 (10D).

ULIPs

The next insurance product that could help you save taxes is Unit-Linked Insurance Plans (ULIPs). ULIPs are a hybrid of insurance and market-linked returns. The payout consists of a combination of sum assured and the fund value.

With a ULIP, you could direct part of your premium towards life insurance and the remainder towards equities and debt instruments. Some ULIPS even allow you to diversify the premium amount being invested in the markets. For example, with Aegon Life’s iMaximize Insurance Plan, you can choose from six unit linked funds: Blue Chip Equity Fund, Accelerator Fund, Opportunity Fund, Stable Fund, Debt Fund, and Secure Fund. Worried about your little ones? You also have the option to choose from triple benefits to give to your nominees in case of an unfortunate event with iMaximize Plan.

You could alternatively choose iInvest Insurance Plan that allows partial withdrawals after five policy years.

With ULIPs, you can claim tax deductions under Section 80C. You don’t need to worry about the tax on payouts as they are exempted from taxes under Section 10 (10D). 

Annuity plans

This plan is specially devised for retirement planning. You could either pay premiums in instalment or pay it in a lump sum. The insurance provider ensures that you get monthly payouts post maturity. Let’s look at Aegon Life’s iGuarantee Insurance Plan. It gives guaranteed annual payouts for six years beginning from the end of policy term. Such insurance policies also provide the sum assured in case of an unfortunate event.

(Click here to know what sum assured is)

You could also claim tax deductions up to Rs 1.5 lakh under Section 80C for annuity plans. Your payouts would be exempted from taxation under Section 10 (10D).

Health insurance plans

Though these are not life insurance plans, they have become an integral part of one’s investment portfolio. No-one is infallible. Illnesses do strike most people at some stage of their lives.

Did you know, there are more than 100 types of cancers that can attack your body part? To play your part in the fight against cancer, you could protect yourself using a cancer protect insurance plan.

You could opt for iCancer Insurance plan from Aegon Life. This plan covers all stages of cancer, increases the payments as the cancer severity increases and even allows claims for multiple unrelated cancers. Also, your future premiums are waived if you are diagnosed with cancer.

The tax benefits don’t include tax deductions under Section 80C; however, you could claim tax deductions up to Rs 25,000 under Section 80D. If you buy the insurance for your parents, then you could claim additional tax deductions of Rs 25,000 or Rs 30,000 depending on your parent’s age. As usual, the payouts are tax exempted under Section 10(10D) in this type of insurance as well.

Bottom Line

There is an array of insurance plans to choose from. You need to select a plan based on your requirements. If you’ve already narrowed down on your insurance plan, click <here> to invest in one through Aegon Life.

To know about AegonLife’s life insurance products like term insurance plans and other products like health insurance , visit our home page.


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