Individuals and members of Hindu Undivided Family (HUFs) are eligible for a tax deduction of up to Rs1.5 lakhs under Section 80C of the Income Tax Act. People may use the tax deductions to lower their overall gross income and minimise their tax liability.
For instance, if you invest in a term insurance policy, you can save up to ₹1,50,000 in taxes under Section 80C.
All These Emergencies Have One Thing In Common
they could result in significant financial outlay for the affected individual and/or their family. And insurance can help in such a situation, since it covers the costs, leaving the insured person's finances secure.
Sounds simple yet brilliant, isn't it? Based on this foolproof concept, we have so many different kinds of insurance today.
To list a few, we have –
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Life insurance
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Health insurance
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Homeowner's insurance
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Two-wheeler insurance
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Four-wheeler insurance
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Travel insurance
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Fire insurance
With so many kinds of insurance plans out there, what are the ones that you absolutely need to buy? If that's what you have been wondering, here are the top 3 must-have kinds of insurance plans, and why you need them.
- Life insurance
Life insurance is a kind of insurance that offers coverage on the life of the insured person. The coverage is generally offered for a specific period. And if the insured person passes away during this period, the insurer will pay out the sum assured under the insurance plan - known as death benefits - to the nominees mentioned in the policy. In return for this cover, the policyholder pays premiums to the insurer on a regular basis.
There are different kinds of life insurance that you can choose from. Here's an overview of the most common kinds of life covers. While life insurance is a must-have kind of insurance, you can choose the kind of life cover based on the benefits they offer, as explained below.
- Term insurance plans
The most basic kind of life insurance is term insurance. It is a pure life cover that offers only death benefits. And consequently, it is also the most affordable kind of life insurance. If you are unsure of what kind of life cover to get, particularly when you are young and just getting started with your career, a term insurance plan can offer you significant coverage for low premiums.
- Savings plans
Savings plans combine the benefits of insurance and savings. They offer death benefits in case of the insured person's demise, just like term plans. But in addition to this, these plans also pay out maturity benefits in case the insured person survives the policy term. These maturity benefits include the sum assured upon maturity as well as bonuses and loyalty additions, if any. It is this that constitutes the savings component.
- Unit Linked Insurance Plans (ULIPs)
ULIPs combine the benefits of insurance and investment. The premium you pay not only goes towards your life cover, but is also redirected to be invested in market-linked funds of your choice. You can choose from a variety of funds that invest in assets like equity, debt and fixed income instruments, money market instruments and more.
At the time of the policy's maturity, the fund value is paid out to the insured person, if they survive the policy term. Depending on the market's performance over the policy term, ULIPs give the policyholder the possibility of long-term wealth creation.
- Retirement plans
Retirement plans are life insurance plans that offer a life cover as well as retirement benefits. These benefits could be in the form of a lump sum amount, or periodic payouts, or a combination of the two. If you are looking for a policy that can give you a life cover as well as help secure your retirement, this is the kind of life insurance that will meet your needs.
- Health insurance
Another important asset that everybody needs to secure is their health. Health insurance helps you do just this. A medical emergency could occur at any point in life. And with the cost of medical treatments and healthcare rising year on year, it is essential to have a security net you can rely on during such emergencies.
Otherwise, you may have to tap into your hard-earned savings to pay the medical bills, and this could delay or prevent you from meeting the other life goals you had planned for.
With a health insurance policy, you can rest assured that your insurer will take care of the medical costs involved. Typically, a basic health insurance policy will cover expenses such as the following.
- Hospital room charges
- Charges for medical examinations and tests
- Doctors' consultation fees
- Ambulance charges
- Other pre and post hospitalization costs
Comprehensive health insurance plans may offer more wide-ranging coverage. So, this is another kind of insurance that you certainly should have in your financial portfolio, in order to ensure that your savings and investments don't take a hit during a medical emergency.
- Personal accident cover
Road accidents are a common occurrence in India. In fact, in the year 2019, before we went into a lockdown, a total of 4,37,396 road accident cases were reported3. Given statistics like this, anyone could meet with an accident at any point - even the most careful drivers. And an accident can often be fatal, leaving the surviving members of the victim's family without any financial security.
Even if an accident is not fatal, it could result in partial or complete disability - which could be temporary or permanent. And this, in turn, can interfere with the victim's ability to earn income for their family.
It is for these reasons that a personal accident cover is essential. Such an insurance plan helps supplement or replace any lost income for a specific period in case of an accident.
Conclusion
Aside from these, there are several other kinds of insurance plans available in India. What works for you depends solely on your needs and the needs of your family. So, write down your goals and your family's dreams, check how financially prepared you are for any emergency, and buy an insurance cover accordingly.
HOW TO FIND THE RIGHT INSURANCE PLAN FOR YOU
There are different types of insurance plans available in the market. And each kind of cover comes with its own set of benefits. Not sure how to find the right life insurance plan for your needs? Why don't you check out our blog on this subject? It can help you figure out what kind of plan may be the right one for you.