Any sudden unprecedented unhappy incident can jeopardise the financial health of an entire family, moving it into impoverishment. But a well-planned insurance investment might save the day in such crises.
Benefits of Insurance Policies
- Tax Benefits
Certain types of insurance investments such as Term Life Insurance and Health Insurance are eligible for tax benefits. The death benefit of the policyholder in term insurance will be received by the beneficiaries without any income tax implication under Section 10 (10D) of the Income Tax Act. While on the other hand, the premiums paid towards term as well as health insurance plans are also exempted up to a limit of INR 1.5 lakh/INR 1 lakh from tax under Section 80C and 80D of the Income Tax Act respectively. This is a wise investment tool for increasing the overall wealth corpus in a tax-free manner. But, if the cash is accessed prematurely or used for loans or partial surrenders, then the value will definitely get reduced.
- Illness Cover
Observing the current rate of inflation in the medical industry, availing treatment costs are reaching new heights with every passing day. Therefore, medical insurance cover is becoming an indispensable tool to cope up with such medical emergencies. It reimburses all the concerned costs in case of hospitalisation or critical care. In case of a cashless plan, the bills get automatically paid to the concerned network hospital. Medical insurance or preventive health check-ups are also eligible for tax deduction benefits of up to INR 5,000 under Section 80D of the Income Tax Act. There are several types of insurance plans—
- Hospitalisation Plan: Cashless plans where the insurer directly pays the hospital bills
- Super Top-up Plan: Customised to provide additional medical coverage on top of the existing mediclaim
- Medical Insurance Plan: 24 hours or above hospitalisation costs will be reimbursed by this sort of plan.
- Critical Insurance Plan: This sort of plan covers the costs of treating critical illnesses like neurological disorders, cancer under certain terms and conditions.
- Child Plans
Ensuring a smooth financial future of the growing child is the duty of the parents. Therefore, child plan investment is ideal to meet such needs. It ensures better tax planning and efficient financial stability, assuring a hassle-free growth of the child. Even if the parent(s) dies an untimely death, the child is eligible to receive the entire amount and the residue premium is waived off. Also, premium paid for a child plan is eligible for tax deduction of up to INR 1.5 lakh under Section 80C of the Income Tax Act
- Paying for Expenses
Cash value is one of the most deciding factors in case of whole life policies. After a certain period has elapsed since the beginning of the investment, it accumulates to form a healthy wealth corpus. It can even act as a boost for post-retirement savings. Significant accumulated wealth provides great financial stability.
- Term Plans
The term policies ensure the financial safety and security of the family members during the absence of the principal earning member. The premium payable is quite low in these sorts of plans and offers coverage for the assured period. If there is an untimely death of the holder, the nominee(s) receive(s) the assured amount.
- Afloat
Insurance investments keep the financial situation afloat in a positive way. Despite the absence of the investor, the family will continue to receive the term benefits. The idea of dependence does not die with the death of any member in case of insurance plans.
- Affordable
Insurance investment does not require too much of funds, but when accumulated together, it creates a healthy wealth corpus. Through well-planned insurance investments, targeted financial goals like marriage, education, etc. Ccan be easily be achieved with good coverage.
Summary
There are plenty of insurance plans that are currently in circulation in the market. Depending on the financial targets and assessment of the total asset value are the two most important determiners to ensure the amount to be invested towards insurance. Insurance investments improve the performance of the overall financial portfolio of the investor. The whole life insurance factor supplements the fixed income of any individual investor. Therefore, insurance investments are wise tools for reducing financial risk and enhancing better fund management.