Life Insurance: The best way to protect your loved ones and save taxes

Humans tend to believe that they are in control. Whether it’s our lives, work or any other thing–we make sure it goes according to our plans. However, our sense of control over everything we do is nothing but an illusion. Our lives are quite unpredictable and nobody knows what unprecedented situation might arise at any given point of time. You are crossing a road thinking you are in control but what about that driver who is driving drunk? We are not trying to be morbid but there are some things we just can’t control. Hence, it is of utmost importance that we protect ourselves and everything important to us.

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And there is nothing more important than our families. We sacrifice our physical and psychological well-being in order to secure the future of our loved ones. However, any unfortunate incident can jeopardise their future.

Considering these factors, the best way to invest in your family’s future is to have insurance. Life insurance acts as a shield in the long run in case of an untimely death. The terms for life insurance can range from anywhere between ten years to sixty years with the policyholder required paying premiums in regular instalments of their choosing. The biggest advantage of buying life insurance is that the premium amount stays fixed for the entire duration.

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According to a report by Cll, lifestyle diseases are on the rise and one in every four Indians is at risk of dying from a non-communicable disease like diabetes, cardiovascular diseases, and cancer before the age of 70. The medical bills can range from INR 15,000-50,000 in metros depending on the ailment and medication needed. The financial aspect can be dealt with having an insurance scheme. Most schemes have a critical illness (CI) cover, which provides a lump sum benefit on the diagnosis of a range of ailments such as cancer, heart attacks, organ failures, etc. The CI cover usually comes as an add-on with an insurance scheme of your choice at an additional cost.

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There are a few things you need to look out for before choosing an insurance policy. Start by calculating the immediate financial expense such as debt/loans and set aside some cash for an emergency fund. Calculate the required amount for current expenses, emergencies and utilise the remaining in insurance you can afford. Now that you know the amount you can invest an insurance policy, consider the following things:

1.  If you die or an accident leaves you unemployed, how long would your nominees need financial support for?

2.  How much do you need for your wedding or children’s education?

Once you have figured out how to answer the above questions, you can then plan your insurance roadmap accordingly. One important criterion when buying insurance is to choose a cover that is 10 times your annual salary. For example, if your annual salary is INR 10 lakh, then select a cover of INR 1 crore.

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While saving taxes through insurance is a great way to save money, it is never advisable to opt for a product solely to save taxes. Your primary objective of buying insurance is to protect yourself and your family; investments are secondary.  Online term plans are gaining popularity these days owing to the ease of buying online and also the cost being lower as compared to offline plans. Term plans such as HDFC Life Click 2 Protect Plus provide a life cover of Rs 1 Crore at just Rs 18/day. Insurance is a crucial element of your financial planning. Therefore, consult a financial advisor before making any decision.

While saving taxes through insurance is a great way to save money, it is never advisable to opt for a product solely to save taxes. Your primary objective of buying insurance is to protect yourself and your family; investments are secondary. Mixing insurance and investments can have serious implications. Hence, consult a financial advisor before making any decision.

This is a partnered post.

 


Published Date: Feb 01, 2017 09:36 am | Updated Date: Feb 01, 2017 09:36 am


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