RESUME APPLICATION PAY PREMIUM
Fund Performance

Fund Performance

Knowledge Center

Knowledge Center

About Us

About Us

Tools and Calculators

Tools & Calculators

Quick links

Mobile (Download app)
  • Webpages
  • Documents
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment

For NRI Customers

(To Buy a Policy)

(If you're our existing customer)

For Online Policy Purchase

(New and Ongoing Applications)

Branch Locator

For Existing Customers

(Issued Policy)

Fund Performance Check

RESUME APPLICATION PAY PREMIUM

What do you want to do?

Quick links

Mobile (Download app)

Download HDFC Life App

Buy plans, track your policy, make renewal payments & monitor fund performance with HDFC Life App, Download Now!

Apple Logo Go to Google Play Store

Why Looking at Insurance as Just a Tax-Saving Tool Could Be Wrong?

down-arrow
Why Looking at Insurance as Just a Tax-Saving Tool Could Be Wrong?
July 04, 2023

Table of Content

 

Neha is a young millennial working in a large corporate in Mumbai. She lives with her widowed mother in the city. Neha’s company provides many benefits, including a group insurance policy that covers both her and her mother. A few years after Neha joined, her mother started experiencing breathlessness and other symptoms. Neha took her mother to the hospital, where they performed a minor procedure to remove a blockage. The procedure, hospital stay and pre- and post-surgery care amounted to INR 3,50,000. Thankfully, Neha’s insurance coverage helped with the cost. Neha was lucky. Unfortunately, most young workers are not.

The Importance of Insurance

Most young people in India know about insurance. They are aware of the benefits but do not always see the importance of purchasing a policy for themselves. For example, Neha does not have her own health policy nor has she nought a life insurance plans. If anything happens to her, her mother would not have a financial safety net. Having an insurance plan helps you and your loved ones deal with difficult financial situations by offering a payout when you need it most.

Insurance and Tax Benefits

Most individuals use life and health insurance policies as tax-saving tools. A life insurance plan offers tax benefits of up to INR 1,50,000 per year under section 80C, while health plans provide tax benefits worth.INR 25,000 (for self, spouse, children) and INR 25,000 (for parents) against health premiums under Section 80D of the Income Tax Act#. For senior citizens (above 60 years of age) these health plan benefits are capped at a higher amount of INR 50,000. Considering the benefits on offer, taxpayers often purchase plans last-minute to help reduce their tax burden before the end of the financial year. Doing this could mean they do not opt for the right policy for their needs or get adequate coverage for themselves or their loved ones.

What is Adequate Coverage?

When purchasing insurance plans, individuals must understand how much life insurance cover they require. As a general rule of thumb, you should opt for a sum assured amount of at least ten times your current annual income. For better financial stability for your family, select a sum assured that will help replace your lost income in the future and allow your family to pay off any existing debt. So, if you earn INR 12 lakhs per year today and have INR 20 lakhs outstanding on a home loan, your should opt for a sum assured of INR 1,20,00,000 + 20,00,000 = INR 1,40,00,000.

What Are the Benefits of Having Insurance?

  • Security for Your Family

    A life insurance plan provides your family with financial security when they need it most. These policies provide a payout in case anything happens to the policyholder during the tenure. Although nothing can replace you, the life insurance cover helps your loved ones replace any lost income or maintain their standard of living.

  • Helps with Long-Term Planning

    You can buy an investment-linked policy to help secure your financial future while providing your family with stability through life coverage. Policies like Unit-Linked Insurance Plans (ULIPs) allow you to invest in debt and equity funds and build up a corpus for the future. These policies have a five-year lock-in period and let you select tenure as long as 30 years. You can pick the tenure based on your long-term financial goals.

  • Supplements Retirement Goals

    Most young individuals prioritise planning for their golden years and purchase retirement plans early. However, rising inflation could mean their final corpus is worth less than they would like. You can opt for an investment-cum-insurance policy to supplement your retirement goals.

  • Provides Benefits in the Long Run

    Purchasing a life insurance plan today can benefit you in more ways than one. Younger individuals can often opt for higher sum assured amounts without paying very high premiums. If you delay purchasing life insurance cover today, it could become expensive or unavailable in the future.

  • Helps with Debt

    Crucially, the payout from a life insurance plan can help your family members deal with any pending debt. It allows you to leave your loved ones a good legacy, enabling them to move forward without worrying about their finances.

Young workers today may make the mistake of viewing insurance solely as a tax-saving tool. Learning about the benefits and understanding how insurance plans work can help them make an informed decision about their finances while still enjoying tax benefits.

Related Article

ARN - ED/06/23/2777

Term Plan Articles Term Plan Articles

Investment Articles Investment Articles

Savings Articles Savings Articles

Life Insurance Articles Life Insurance Articles

Tax Articles Tax Articles

Retirement Articles Retirement Articles

ULIP Articles ULIP Articles

Health Plans Articles Health Plans Articles

Child Plans Articles Child Plans Articles

Popular Calculators Popular Calculators

Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

LinkedIn profile
Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

LinkedIn profile
Reviewed By Reviewed By:

Here's all you should know about life insurance.

We help you to make informed insurance decisions for a lifetime.

What Is Insurance?

What Is Insurance?

Learn the essentials of what is insurance, its types, benefits, and how it protects your finances. Get insights into life and general insurance policies today.

Blue Chip Fund

Diversified Equity Mutual Funds

Insurance Overload: Are You Hoarding Policies Instead of Securing Your Future?

Find out exactly how many insurance products do you need to protect your familys future. Avoid policy overload and secure peace of mind with expert insights.

Insurance Overload: Are You Hoarding Policies Instead of Securing Your Future?
Insurance Claims Previous
How to Choose the Best Life Insurance Policy/Plan Next
HDFC life
HDFC life

HDFC Life

Reviewed by Life Insurance Experts

HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER

We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Disclaimer

#Tax benefits are subject to conditions under Sections 80C, 80D and other provisions of the Income Tax Act, 1961.

#Tax Laws are subject to change from time to time.

#The customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law

Popular Search

Popular Searches