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Strategize your insurance portfolio with term life insurance and pension plan
Having insurance policies of various kinds give edge to your financial portfolio. Given the uncertainties of life, it becomes crucial to plan for the time ahead. Neither you can make the future nor can you predict it so just one option left with you is to prepare for it. Insurance coverage ensures that rest of your financial resources remains safe. You do not need to empty your bank accounts or disinvest your funds just to meet the needs that arise momentarily. It cannot just wipe out your savings you have accumulated in period of almost half of your age but you may also incur losses by selling funds before they could accrue a good percentage of yields.
Two kinds of life insurance policies that can actually prepare you to fight the odds of life as well as assist you to grow your money simultaneously are term life insurance and pension plans.
Let us delve deep into how the mix of two kinds can help you strategize your funds.
Life comes with two certainties- either the person will live or he will die. Bearing the risk of death, one should consider the period for which he is earning. If he has 10 more years to earn, he should buy the term policy for 10 years. This will ensure that any mishap during this period will provide financial protection to his family.
Though he does not have any investment option in his term plan still it makes sense to buy it since it provides him to opportunity to save and invest it in instruments that can make him earn better returns.
For instance, if an individual buys term plan that charges him premium of Rs 4000 and an investment insurance plan with same coverage has the premium of Rs 10,000. In this scenario the individual is able to save Rs 6000. He can invest this amount in market-linked instruments that garner better yield to him as compared to any insurance investment plan. In case he does not want to invest in any other instrument, he can acquire a pension plan in the same amount. Or he could add more funds say, Rs 4000 to his savings of Rs 6000 and invest in pension plan.
Why pension plan?
A Best Term Insurance Plan in India helps in another certainty i.e. if the person lives. With the hope to live beyond 10 years, the individual can choose the pension plan with accumulation phase of 10 years i.e. the period for which he has bought term plan. As mentioned above, he could also add more funds to savings made and invest in unit-linked pension plans. It would not just help him invest in market-linked products but would also assist him to save for his old age needs.
Premiums paid for any kind of life insurance plan are eligible for tax deductions up to the limit of 1.5 lakhs p.a. u/s 80C of Income Tax Act. That implies, no tax will be charged over the total premium paid for the term plan and pension plan if it does not exceed the amount of 1.5 lakhs p.a. In case of death, the sum insured paid is tax free u/s 10(D). To leverage more tax benefits, the person can choose to withdraw 1/3rd amount of his accumulated pension amount once he reaches his vesting age as it is tax-free.
The combination will fulfill the needs of the individual in case of death as well as if he reaches the old age and lives longer.
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