TOP 5 advantages of Life Insurance plans and which one will be affected post 31 March 2023!

1. Financial security: Life insurance plans provide financial protection to your family in the event of your untimely demise. It ensures that your loved ones are taken care of and can meet their financial needs, such as paying off debts or funding education.
2. Tax benefits: Life insurance plans also offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961. The premium paid towards the policy is deductible from your taxable income, up to a limit of Rs. 1,50,000 per annum. Additionally, the maturity proceeds, and death benefits are tax-free.
3. Investment option: Some life insurance plans, such as unit-linked insurance plans (ULIPs), offer an investment component along with insurance. The premiums paid towards these plans are invested in equity or debt funds, which can potentially yield higher returns in the long run.
4. Retirement planning: Life insurance plans can also help you plan for your retirement by providing annuity payments or regular income after you retire. This ensures that you have a steady source of income to sustain your lifestyle even after you stop working.
5. Peace of mind: Knowing that you have a life insurance policy in place can give you peace of mind and help you live a stress-free life. It can alleviate financial worries and ensure that your loved ones are taken care of in case of any unfortunate event.

Tax-Exemption Affected

Tax Exemption for Life Insurance will be taken off for certain policies such as-Returns from several traditional plans issued on or after 1st April, 2023 will be taxable if the premium from one or more policies exceed Rs. 5,00,000.

What will you miss out after 31st March 2023

Several Guaranteed Plans come under this category and the tax-exemption taken off will effect these plans. Guaranteed Income Plans are a great option that provides life cover as well as  regular income for a specified period. So if one chooses not to buy Guaranteed Income Plans  because of the tax-exemption applied, they will be loosing on:

Benefits of guaranteed income plans:

1. Guaranteed income: These plans provide a guaranteed income stream for a specific period of time, which can provide a sense of financial security and stability to the policyholder.
2. Tax benefits: Premium paid towards guaranteed income plans is eligible for tax exemption u/s 80C of the Income Tax Act,1961 Additionally, the income received from these plans is exempt from tax under Section 10(10D) of Income Tax Act, 1961
3. Long-term savings: Guaranteed income plans typically have a longer tenure making them a good option for long-term savings and retirement planning.
4. Flexibility: These plans offer flexibility in terms of payout frequency and payout period.
5. Protection against inflation: Some guaranteed income plans offer inflation protection by increasing the payout amount annually to keep up with inflation.
6. Death benefit: In an event of the policyholder's death during the payout period, the nominee receives the remaining payouts as a lump sum, providing financial protection to the family.

What one could miss out on by not opting for guaranteed income plans:

1. No guaranteed income: Without opting for guaranteed income plans, one may not have a guaranteed income stream during retirement, which could lead to financial insecurity.
2. No tax benefits: If one does not opt for guaranteed income plans, they may miss out on tax benefits available under Section 80C and Section 10(10D) of Income Tax Act, 1961
3. No long-term savings: Without guaranteed income plans, one may not have a dedicated savings plan for retirement or long-term financial goals.
4. No protection against inflation: Without inflation protection, the income received may not keep pace with rising costs, leading to a decrease in purchasing power.
5. No death benefit: Without guaranteed income plans, one may not have financial protection in the event of an unfortunate death during the payout period.

Overall, by not opting for guaranteed income plans in India, one may miss out on the benefits mentioned above, which could impact their financial security and stability during retirement and long-term financial goals.