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Insurance Basics Part I

Insurance

Insurance is the lifejacket you wear in a storm, the umbrella that shields you in a downpour, It does not prevent these events from taking place, but makes sure that their impact is lessened and that you have something to hold on to.

It gives you the financial security and certainty to deal with the aftermath of these events. It becomes the earning member of the family and supports you and your family during the rough times.

Why Life Insurance

Protection

You need life insurance to be there and protect the people you love, making sure that your family has a means to look after itself after you are gone. It is a thoughtful business concept designed to protect the economic value of a human life for the benefit of those financially dependent on him. That’s a good reason.

Supposing you suffer an injury that keeps you from earning? Would you like to be a financial burden on your family, already losing out on your salary? With a life insurance policy, you are protected. Your family is protected.

Retirement

Life insurance makes sure that you have regular income after you retire and also helps you maintain your standard of living. It can ensure that your post-retirement years are spent in peace and comfort.

Savings and Investments

Insurance is a means to Save and Invest. Your periodic premiums are like Savings and you are assured of a lump sum amount on maturity. A policy can come in really handy at the time of your child’s education or marriage! Besides, it can be used as supplemental retirement income!


Tax benifits
Deductions from gross income on Life Insurance premium paid (Traditional & Unit Linked Plans)

Under Sec 80C of Income Tax Act

Available for Premium paid (max. up to 20% of SA) on Life Insurance policies with a maximum ceiling p.a. Rs. 1,00,000 irrespective of the Gross Total Income.

A maximum of Rs. 1,00,000 p.a. paid as a contribution on a pension plan is fully deductible from the taxable income (within the max. ceiling Rs. 1 lakh )

Under Sec 80D of Income Tax Act

Premium paid for Critical Illness rider is deductible as medical insurance premium from the annual income chargeable to tax up to a maximum amount of Rs. 15,000.

Exemption from the Life Insurance proceeds

Under Sec 10(10D) of IT Act

Maturity benefits are tax-free in the hands of the policyholder if, at any point of time during the policy life, premiums paid within one year do not exceed 20% of the basic Sum Assured.
Death benefits are tax-free.

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