The significance of sustainable life insurance against the menace of rising healthcare costs and other expenses cannot be undermined. Therefore, life insurance becomes a potential tool for engendering substantial returns and tax savings as far as possible. As far as tax savings are concerned, there are innumerable avenues to choose from following the subjective preferences of the concerned policyholder. It is important to keep in mind that the prospects of a scheme for one investor need not be the same for another.
It is also vital to keep in mind that the choice of a particular tax saving instrument should be weighed against the individual coordinates of preference. In other words, one should be clear about one‚Äôs own financial needs and aspirations to choose the most appropriate tax saving instrument.
Common Tax Saving Instruments
Some of the most popular tax-saving tools include the likes of mutual fund schemes, home loan premiums, long-term fixed deposits, PPF and ELSS mutual funds. As mentioned before, the choice depends on the risk appetite and the financial aspirations of the concerned policyholder.
Mutual Funds: Mutual funds constitute a majority of financial choices especially among the young. For instance, individuals in their early 20‚Äôs tend to suit mutual funds better because of the fact that they enjoy relatively fewer liabilities and therefore may be willing to take major risks. The best example of a mutual fund scheme is the ELSS mutual funds. It is a high-risk plan which potentiates big returns.
Term Life Insurance: If one is looking for a long term plan, the choicest pick would be a term life insurance. Specifically, it is important to keep in mind that the USP of term insurance is that it provides a large life cover for a relatively low premium. Apart from that, another congruent plan would be the ULIP which is equally propitious for those seeking to save for long term financial goals.
Public Provident Fund: Generally speaking, a public provident fund is best suited to middle-aged customers. For individuals in their late 30s or 40s, the PPF is mostly the ideal choice. However, it is important to note that PPF returns, relatively speaking, do not translate into considerable savings. Although, the invested amount in PPF is exempt from tax under Section 80C of the Income Tax Act of India.
Retirement Plans: For individuals over sixty, the best tax saving instrument includes the likes of standard retirement plans. For instance, the most common retirement plan is the National Pension System or NPS. Indeed, it is one of the most substantial tax saving instruments aimed at bettering the lives of the superannuated. Specifically, investments up to Rs. 1.5 lakh are eligible for tax deduction under Section 80CCD. Similarly, investment over Rs. 1.5 lakh is also liable for tax exemption under Section 80CCD.
Postretirement Plans: Possibly, the most popular postretirement plan is the SCSS or Senior Citizen Savings Scheme. The highlight of the plan is that it provides almost risk-free returns along with regular interest payout. Also, it is important to keep in mind that the amount invested in the SCSS is eligible for tax deduction under Section 80C of the Income Tax Act of India.
Fixed Deposit: Apart from the SCSS, fixed deposits also constitute a significant portion of postretirement investment choices. Although they have a specified lock-in period of five years, they are by far one of the safest investment tools for senior citizens. At the same time, given the risk-free nature of the fixed deposit, the concerned policyholder is assured of a steady rate of return. Fixed deposits are thus more conducive to conservative investors.
Plans Ensuring Smart Returns
Many potential life insurance schemes offer substantive returns against an investment amount. However, it is important to keep in mind that the choice of a particular scheme should be weighed against the individual financial goals and risk appetite.
Age naturally plays a huge factor in determining the choice of an investment scheme. The needs of life vary from one phase to another. Therefore, one should carefully consider the age determinant while choosing an investment scheme, not to mention the social and financial contexts.
Generally speaking, a majority of investment schemes furnish returns from such features as a death benefit, survival benefit etc. For instance, in the case of survival benefit, the total premiums including the extra ones paid by the investor are returned upon the termination of the plan. Similarly, in case of the death benefit, the concerned nominee is liable to receive a sum assured before the official cessation of the plan.
Besides, long term protection features may also be included in such investment schemes. There are such schemes in which the concerned investor is asked to pay premiums for a fixed amount of time to receive monetary benefits for a long-term range. Terms and conditions, of course, apply.
In a nutshell, the rates of return is generally calculated from the attendant survival and death benefits. The terms for both the features vary from one investment scheme to another. However, the core point is the fact that such investment benefits translate substantially into considerable returns for the concerned investor, short-term or otherwise.
As mentioned at the outset, soaring healthcare costs and other expenses inevitably force one to secure a sustainable life insurance scheme. Again, the criteria of a life insurance scheme should be congruent with the individual coordinates of the investor to generate maximum amounts of returns. Significantly, the degree of risk taking ability should be determined as it goes on to dictate the eventual investment choice. In most cases, it is better to avail an insurance expert to be guided through the labyrinth of investment schemes. However, one can also look up on the Internet to sketch a nominal picture of one‚Äôs investment needs and the current market dynamics.
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