Term insurance remains a favourable tax saving instrument post GST. Here’s why

One of the traditional methods of investment which is not going to die out is Life Insurance. Under life insurance, one of the popular plans that has been attracting the young parents is the Term Insurance plan.

Term insurance plan has gained popularity over the years as it not only provides life cover to the policy holder and financial security to his/her family, it gives you a number of other benefits. For starters, let’s consider tax saving.

We all want to save taxes and presently, the market is flooded with various new tax saving instruments. However, term insurance is still dubbed as a favourite policy.

It is the top choice for people who are sound financial planners as term insurance is a crucial element of smart financial planning. What makes it popular is affordability as you get a higher life cover for the same premium.

The best term insurance plans in the market gives you critical illness component where in the policyholder on being diagnosed with critical illness receives the sum assured.

Many insurance companies even offer various options to enhance the cover during critical stages of the policyholder’s life.

Even the recent hike in service tax in insurance industry under the Goods and Services Tax (GST), effected from July 1, has not deterred people from opting for term insurance policy.

Many experts are advising people to plan for long term benefits and not get stuck on a mere 3% increase as you may get benefited by getting higher sum insured at the same cost of premium. The tax benefit on premium paid for a term insurance policy is an advantage too.

And, the takers are increasing by the day. As per the Insurance Regulatory and Development Authority of India (IRDAI), life insurance companies mobilized Rs 87,344 crore in first-year premium income between 1 April and 31 October 2016. Insurance penetration reached 3.4% in FY16 and is expected to cross 4% in FY17.

You should definitely consider term insurance policy as a tax saving instrument. Here’s how it’s helpful:

1. You can get a high life insurance amount. For example, if your annual income is Rs 10 lakh, you can get life cover of up to Rs 1 crore. You can buy insurance policies online and even calculate the premium.

Smart term Insurance Calculator

3. New-age term plans with critical illness cover also offer additional tax benefits on premiums paid up to Rs 25,000 under Section 80D. You also get tax benefits under Section 10(10D) on the money that your family receives in case of an unfortunate event.

4. The money your nominee gets from term insurance policies is tax free.

Are you still procrastinating over having a term insurance policy?