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What are term insurance tax benefits?

There are multiple ways to save on income tax. Several exemptions and deductions are available under various sections of the Income Tax Act. Taxpayers can save their taxes by investing in numerous such avenues that qualify for deductions and exemptions. One such tax-saving tool is term insurance. Investing in term insurance offers life cover, and you can enjoy term insurance tax benefits as well.

What is term life insurance?

As the name suggests, term life insurance is a form of a life insurance plan for a fixed term. It provides a high life cover or sum assured at a considerably low premium price. In case of the policyholder's demise during the policy tenure, the insurance coverage amount is paid to the policy beneficiary. Term insurance is a pure protection plan and hence, only provides a death benefit. It does not offer maturity benefit if the policyholder survives the policy term.

Now let's know about term insurance tax benefits:

Term insurance tax benefits under Section 80C

Section 80C of the Income Tax Act offers a tax deduction of Rs 1.5 lakhs for several investment avenues such as PPF, ULIP, ELSS, EPF and payments made towards children's tuition fees, home loan EMIs, life insurance premiums, amongst others. Therefore, under Section 80C of the IT Act, the premiums paid for term insurance are eligible for tax exemption up to Rs 1.5 lakhs. This is one of the most popular tools used by taxpayers for saving taxes.

What are the various conditions for term insurance tax benefit under Section 80C?

The premiums paid annually should not exceed 10 percent of the sum assured. In case the premiums surpass 10 percent, then the deductions get applied proportionately.

The policies issued before March 31st, 2012; the deduction is applicable only if the annual premium does not go beyond 20 percent of the sum assured.

Suppose the policy is voluntarily terminated or surrendered before two years; since the policy started, then according to Section 80C(5), the policyholder will not receive any Section 80C term insurance tax benefits for the premiums paid.

Term insurance tax benefits under Section 10(10D)

According to Section 10(10D) of the Income Tax Act, the pay-out amount or the insurance coverage received as death benefit upon the death of the policyholder or maturity benefit if the insured survives the policy term or surrender of policy is entirely tax-free.

In case of any bonuses received along with such amount, then that is also exempted under Section 10(10D) of the Income Tax Act.

What are the different conditions for term insurance tax benefits under Section 10(10D)?

In case the pay-put is more than Rs 1 lakh, and the PAN of the policyholder is available with the insurer, then a TDS of 1 percent is applicable.

Under Section 10(10D), term insurance tax benefits are applicable if the premium is below 10 percent of the insurance coverage amount or at least 10 times the premium amount.

Term insurance tax benefit under Section 80D

Usually, Section 80D is earmarked only for health insurance policies. This section offers a tax deduction on the health insurance policies taken for either self, spouse, children or parents having specific limits for deduction according to different conditions.

Though certain term insurance plans offer tax benefits under Section 80D, under such plans, the policyholder has to opt for a rider related to health such as surgical care, critical illness, hospital care, and their term policy.

What are the conditions for term insurance tax benefits under Section 80D?

Under Section 80D, tax deductions can be availed for an amount not exceeding Rs 25,000.

In case you have bought an insurance policy for your parents, you can enjoy an additional tax exemption of Rs 25,000.

If parents fall into the senior citizens' category, then the exemption limit goes up to Rs 50,000.

Overall, term life insurance is an inevitable choice for today's lifestyle; however, it is a valuable option for tax saving purposes as well. Taxpayers should carefully choose policies or riders to avail tax exemption under various sections of the Income Tax Act. If you want to know more details on term insurance tax benefits, visit BimaKaro.in and speak to their insurance experts to better understand.

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How can a rider make your life insurance plan more efficient?

We all like something extra – extra toppings, extra cheese, extra discounts and more. These extra elements are just like what riders are for life insurance plans. In layman terms, riders are the additional benefits that come with your life insurance plan and enhance your policy coverage scope while adding more value to it.

What are Life Insurance Riders?

Riders, as clarified above, are add-on coverage to enhance the advantages of your life insurance plan. These are totally discretionary and according to your prudence. The riders available with life insurance just expand the extent of your life insurance plan. Since they can be customised, they improve the person’s financial security according to their requirements.

There are many riders available in the market that you can choose when buying a life insurance plan. Some of the popular life insurance riders include:

Critical Illness Rider: Thelife insurance plan specifies a list of illnesses which are characterised as critical in nature, for example, cancer, kidney failure, heart stroke, and so forth. In case you are diagnosed with any of the listed ailments, you will get benefit under the critical illness rider. Post use of this life coverage rider, the rider’s premium and advantages get terminated.

Accidental Death Benefit:Under this rider, in case of insured’s demise due to an accident, the death benefit is extended. In such a situation, the entire sum assured as a part of the life insurance and the rider benefit is paid.

Premium Waiver Benefit Rider: Since the life insurance plans are for a fixed term; the premium payment are to be paid for that particular period for the policy to remain active. If you don’t pay the premium, the insurance will get lapse. Under the premium waiver benefit rider, the premium payments are totally deferred off, if an injury may leave the policyholder handicapped for a supported period or in the unfortunate situation of the policyholder’s demise. Although all premium payments are cancelled in such case; however, the benefits under the life insurance plan continue to exist for the sum assured. Under certain life insurance providers, this life coverage rider even stretches out its advantages to permanent or partial disabilities.

How to purchase Riders with your Life Insurance plan?

Riders are not sold along with the basic insurance policy; however, they should be purchased independently according to your necessities. Nonetheless, they should be bought all the while alongside your life insurance policy. You can get your life coverage plan as you usually do and simply pay extra to incorporate the particular riders as you wish to your current insurance policy. These riders include critical illness cover, disability cover, accelerated death benefit, accidental death claim amongst a few others.

It is important that you comprehend that life insurance riders can’t be bought post purchasing the policy. This way, it is significant that you invest enough energy and time to assess the type of life insurance rider you may require preceding purchasing your life insurance plan. Some insurance providers even have built-in riders as a part of the basic life insurance plan. At the same time, a couple significantly offers flexibility in their policy which can be customised according to your necessities.

Riders fill in as the ideal answer to make your life insurance plan more robust and efficient. Rather than getting multiple life insurance plans, you can simply add riders to improve your policy coverage. These riders can be adaptable since you can choose risks that are more explicit to you and your family. Moreover, riders can be added to all kinds of life insurance plan, including term insurance plan, ULIPs, endowment policy, or even to a whole life insurance plan. They can be added when you purchase the policy or at times later though if applicable.

There are a few advantages connected to riders since they undoubtedly increase the inclusion of your life insurance plan while offering you the upside of affordability and tax breaks. Further, they likewise give your family extra financial assistance during extremely challenging times. If you want to know more about riders available and your life insurance plan, visit BimaKaro.in today or speak to their financial experts.