The Expanding Insurance Sector in India
The insurance sector is set for a major change in 2016, after the RBI notified a hike in the foreign direct investment cap in the insurance sector to 49% from the earlier 26%. The increase in foreign stakes in the Indian market will not only boost the number of new products and schemes available, but will also increase the penetration of insurance policies in the country. Moreover, this will ensure greater consumer awareness about the difference between products, like a life policy versus a term insurance plan.
Tax Benefits Extended by Government Policies
Apart from insuring your life as part of contingency planning, a term insurance plan can help you save big on taxes. According to the Income Tax Act, you can reduce your taxable income if you are paying premiums towards an insurance policy. In 2014, section 80C of the Income Tax Act was amended to increase the deduction of taxable income to Rs.1,50,000, as per the amendment in Finance Act 2015.
Health Insurance Benefits
The Indian Budget for 2016-2017 announced by the government also brought in some key changes related to health insurance. According to this Budget, the government's health protection scheme offered a cover of Rs.1 lakh per family, along with an additional package of Rs.30,000 for senior citizens.
Moreover, there were tax benefits from health insurance premium announced in the 2015-2016 Budget. Under sector 80D, single individuals can avail deductions of Rs.15,000 on medical premiums paid. For senior citizens, the deduction limit is Rs.20,000. If the plan is taken by individuals for their parents, the deductions are Rs.15,000 for parents younger than 60 years and up to Rs.20.000 for parents older than 60 years.
Investment Linked Policies
Insurance is much more than just risk protection. There are several options, like cash value plans, which take some of your premium for accumulating the sum assured, while the remaining is used for investment purposes. Plans like unit-linked insurance or equity-linked secure schemes help to maintain the long-term capital, without an extra-long lock-in period. Plans like Bharti Axa's Life Future Invest offer attractive features like short period of 5 years and zero allocation charges, among other benefits.
Riders for Your Plans
If you are opting for the basic term insurance plans in India, you can make the most out of it but adding additional cover with the help of different riders. These are like add-ons for your insurance plan. Although you will need to pay more premium if your plan has riders, the additional covers are typically available at very nominal rates. There are a variety of options like accidental rider, critical illness, hospital charges protection or premium waiver. Another benefit of these riders is that they can be added at any time through the duration of your plan.
As per a report in LiveMint about protection against critical illness, you can save even more taxes under section 80D, with deductions of up to Rs.25,000 on your taxable income, for the premium paid for riders. Thus, you end up saving even more money due to these tax benefits. You can find out the complete amount you will be required to pay with the help of an insurance premium calculator.