Term Insurance is one of the best ways to cover your family against uncertainties of life. It is easy to understand, and the premiums are highly affordable. However, you might not know that you can enjoy tax benefits with a term insurance plan. Moreover, there can be certain unavoidable situations in your life where you have to surrender the policy. In that case, can you get a refund for the policy? What are the rules to get a refund? Find all information about tax benefits and refund details about term insurance in this article.Read more
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To lower tax costs, a wide range of exemptions and deductions are offered under the various provisions of ITA (Income Tax Act). Taxpayers are allowed to invest in a range of financial instruments that can be exempted or deducted from these tax deductions. Having term insurance comes with two main benefits. The insured's nominees are financially covered, and the premiums paid by the insured are tax exempt.
Section 80C under the Income Tax Act is the most widely used tool to save tax by individuals. The section allows the maximum tax deduction of 1.5 Rs. for each of mentioned investments and instruments together. This includes a range of instruments, including PPF, EPF, ULIP, ELSS, and payments such as the repayment of a home loan tuition fees for children, life insurance premiums, etc. Under this Section, the cost of the term premiums made qualify for tax exemptions up to Rs.1.5 Lakhs (total of all investment and payments made under this section).
The requirements to receive the tax benefits for term insurance under Section 80C are:
This section is reserved only for health insurance plans. However, certain term plans also offer tax benefits under Section 80D. Insurance policyholders wherein health-related insurance riders (such as Critical Illness, Surgery Care, or hospital Care Rider) are selected as part of the term insurance plan are also eligible for deductions.
Conditions for the term insurance benefit 80D are:
Following the provisions of Section 10(10D) in the Income Tax Act, the amount assured at the surrender or maturity of a plan or the death of the policyholder is tax-free. The bonuses that are derived from this amount are exempted per section 10(10D).
Conditions for tax exemption under 10(10D) include:
You can cancel your policy and claim a refund if they do not meet the criteria of your long-term plans. However, you must complete this process during the free-look duration.
Purely designed to benefit you, the free-look period aims to help you determine whether you would like to continue the policy or not. To end a term plan or health insurance policy, you must convey your decision to your insurance company. After this, the company will typically offer you some alternatives that might work for you. However, if you still do not wish to continue the policy, you can submit a cancellation form online or visit the nearest office of the insurer.
When the cancellation form is completed and submitted to the insurer, it could take a couple of days to complete your request. Before you file the cancellation request, be sure you have all the information required below:
Before purchasing a term insurance plan, it would help if you understood what it means and the benefits it can offer. Moreover, you must assess your financial conditions and make sure the term plan you purchase will suit your lifestyle requirements. Tax benefits are one of the plus points of buying a term insurance plan. Note that once you buy it, you have anywhere between 10-15 days of free look period (depends on the insurer) to cancel the policy and get the refund. We are sure you now fully understand tax benefits and refund details about term insurance.
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The investment risk in the investment portfolio is borne by the policyholder.
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