We’re in the last three months of the financial year, and there’s the usual urgency to invest, plan taxes and to insure. Buying insurance is quite likely one way you’re considering to save on tax. Life and Health Insurance premiums are tax-deductible under Section 80C and Section 80D of the Income Tax Act.
Before you start buying any financial products, make sure they represent your investment, tax-planning and insurance needs adequately. So here are five thoughts for you to consider before you start buying insurance.
Insure Adequately And Aim For Higher Returns
Before you invest in Life Insurance, ascertain if your insurance plan solves two problems:
- One – it should provide an adequate sum assured to cover your dependents. It should take care of your dependents for 10 to 20 years in case of your sudden demise.
- Two – the Life Insurance product used as an investment should provide long-term returns that are better than or at par with returns from other investment options such as PPF, Mutual Funds, etc.
Insurance plans are long-term commitments, and premium payments over a long period add up to a sizeable sum. But if you feel your Life Insurance product solves neither of the two problems, you need to consider other options.
Buy A Term Plan If You Have Dependents
If you, as the primary income generator of your family, were to suddenly pass away, your family would experience financial strain. Therefore, you need a Life Insurance product that covers all your family’s long-term expenses such as rent, EMIs, children’s education, supplies, utilities, healthcare etc. Also, remember that these expenses will become increasingly expensive each passing year, with the annual rate of inflation hovering around the 6% mark. Buying a term plan is the silver bullet solution to all these problems.
If you’re a 30-year-old salaried male earning Rs. 5,00,000 annually, you can seek a cover of Rs. 1 crore with annual premiums starting from Rs. 7,000. With a little higher premium, you can also avail additional coverage options such as monthly income for your dependents, accidental death benefit, and critical illness cover.
Must Have Health Insurance & Critical Illness
Hospitalisations and bouts with critical illnesses can drain any family’s financial resources. An illness such as cancer can take months or years to cure, and can easily set the ailing person’s family back by several lakh rupees. For most families, having to spend such large sums on healthcare would invariably mean upsetting life plans such as paying off loans or providing higher education to children. So why not protect one’s family from these situations?
Always have Health Insurance for all your family members, and also consider the option of having a critical illness plan. Your Health Insurance premium payments made for self, spouse, children and parents are deductible under Section 80D. Do not look to cut corners on premium costs; buy the best health cover for your family after evaluating all its benefits.
Comprehensive Insurance For Vehicle
Third-party insurance for vehicles is mandatory by law. However, such insurance covers damage only to the third party – any party besides the insured (you) and the insurer. It does not cover damage to you or your vehicle. Therefore, any insurance you buy for your vehicle must be comprehensive. It’s also worthwhile boosting your comprehensive insurance with add-on features. For a slightly higher premium, you can add on options such as lost-key protection, on-road repair, personal accident cover, flat-tyre change, emergency fuel, towing facility, depreciation cover, cover for electrical parts, engine protection cover, etc.
Protect Your Home, Too
Homes are expensive to own and expensive to repair. In many places in the world, calamities – both man-made and natural ones – are on the rise. Home insurance cover will cover you against natural calamities, fire, theft, terror attacks, riots, strikes, aircraft damage, etc. If you live in a rented house, you can consider home contents cover to protect your belongings. Repairing your home can set you back by several lakh rupees. But with home insurance in place, you’ll have peace of mind.
While buying insurance this year, give these suggestions some thought and make sure your family has all the protection they need.