Despite efforts by the government and insurers to raise awareness regarding the value of life insurance in India, insurance penetration remains low in the country. In fact, the Economic Survey 2018 revealed that insurance penetration has risen to a mere 3.49% in 2016-2017, from 2.71% in 2001. While an increase is a positive sign, Indians still seem hesitant to put away money for a time when they are no longer there.
Of course, it is difficult to imagine a time that seems so far away, but there is another vital reason why you should consider investing in life cover – wealth protection. Did you know that investing in life insurance can bring tax savings and other monetary benefits? Here’s a look at some of the ways such policies can help you protect and build wealth.
How do you ensure that your family maintains its standard of living even after your demise? The answer is death benefits, paid to the beneficiary of your choice from your life cover policy. The money you invest today can support your spouse, children and maybe even ageing parents; because you never know what life has in store.
The premiums you pay towards life insurance are tax deductible under Section 80c of the Income Tax Act of 1961. You can deduct up to a whopping ₹1.5 lakhs from your income tax by making smart investments in tax saving life insurance And given that the Interim Budget of 2019 has raised the minimum tax slab to ₹5 lakhs per annum, you do stand to gain from finding ways to garner tax benefits.
Riders are specific covers that you can add to your basic insurance policy. For instance, you can add an accidental death cover, partial or total disability cover or a critical illness cover. With a nominal increase in premiums, these add ons prove to be of great help during times of crisis. What if you were to be diagnosed with something as serious as cancer? With a critical illness add-on, you don’t need to worry about the cost of treatment, since the insurance will take care of it.
In addition, riders can also get you further tax benefits. Premiums paid for health-related riders are eligible for deductions under Section 80D, while accident and income benefit riders qualify for deductions under Section 80C of the Income Tax Act.
Life insurance in India offers better returns on investment (ROI) than most other investment options. This is especially true if you invest in Unit Linked Insurance Plans (ULIPs). Here, a part of your invested amount is put up as insurance, while the remainder is invested in various types of funds to bring you the best possible returns on investment. So, with such plans, you get death benefits, tax savings and wealth accrual. What more could one ask from investments?
So, whether you are the primary breadwinner or not, investing in a good life cover can bring you both mental peace and financial benefits.