GST was introduced with an attempt to eliminate any double taxation down the supply chain. How GST impacts your term insurance plan, any clue?
In a world where nothing is certain, not even health or longevity, insurance ought to play an important role. Insurance basically is a way of managing risks, be it the risk of a critical disease or the risk of untimely death itself. To cater to these needs insurance companies have come up with a different type of insurances like health insurance, life insurance, term insurance, etc.
Term insurances provide life cover to the beneficiaries for a predefined time period at a lower cost than a normal life insurance would. In case of death of the policyholder, the amount is paid to the nominee. But unlike other life insurance plans, term insurance doesn’t have any investment component and the whole premium goes for covering the risk. So, is a lower price the only benefit of buying a term insurance? Not really. There’s a lot more to it as we will see shortly. The interest in term insurance has been increasing and it still remains the favourite mode of insurance among the financially informed citizenry.
This year, the Government implemented the Goods and Services Tax (GST) with an aim to reduce a myriad number of taxes to a handful, thus making the process of filing and collecting taxes simpler. This, as expected, has affected the insurance industry too. There has been an increase of 3% in the service tax levied on the premium of insurance plans. It means if the service tax levied on insurance premium was Rs. 15 per Rs. 100, now it stands at Rs. 18! Now multiply it by your actual premium (let’s say Rs. 30000) and you can see that you are shelling out a considerable amount of extra money. So should that make you more sceptical about taking an insurance policy now? Definitely not. Here’s why.
- Term insurances provide a considerably higher cover than other plans. One can easily get a cover of Rs. 50 lakh or Rs. 1 crore for less than Rs. 10000 as yearly premium if one starts early and meets necessary salary requirements.
- The premiums paid for the insurance are exempt under Section 80C of the Income Tax Act, 1961. Thus one can save money via a lesser tax that needs to be paid. Tax exemptions can also be availed for premiums paid for a policy of dependents too.
- Any amount received as maturity benefits can be exempted from tax under Section 10(10)D of the Income Tax Act, 1961.
- Also, death benefits received by the policy holder’s nominee are tax-free subjected to a few conditions.
- Furthermore, some insurance companies have plans which return the premiums paid during the policy period if no claim was made. This becomes a huge advantage in case one manages to stay alive until the end of policy term.
- They offer options to enhance the insurance cover in case one is diagnosed with any critical disease covered by the policy.
- A few policies provide a critical illness component wherein the policyholder can receive the sum assured of being diagnosed with a critical illness.
Monetary benefits apart, insurance cover is a must for every earning and non-earning individual alike. A few thousand rupees can go a long way in securing the happiness of one’s family and help fulfilling dreams no matter what. And what’s a better way to invest than a term insurance!