By investing in life insurance products that offer both growth and security, investors can secure their family’s financial future and build generational wealth through guaranteed additions
While life insurance is often perceived as a mere protection tool against unfortunate events like medical or accident emergencies and even death, it also acts as a vital instrument that aids in creating a sound financial plan for the long term. If used wisely, life insurance solutions can be used as investment tools to accumulate wealth in order to meet future expenses, while also providing a financial safety net in case of the aforementioned scenarios. Let us delve into why investors ought to supplement their portfolios with life insurance products that offer tax benefits on both investments and maturity proceeds, utilising them to create a sizeable corpus that can be passed on to future generations.
Going beyond term insurance to build wealth efficiently
In spite of improving financial literacy levels and growing awareness of the importance of life insurance, India’s life insurance penetration as a percentage of its Gross Domestic Product (GDP) stood at just 3.2% as of 2021. Comparing this with the world average of 7.23%, it is amply clear that there is significant headroom for growth in life insurance issuance in the near future, with substantial efforts being made to expand the reach and availability of tailored life insurance solutions. Flagship governmental initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY), Janashree Bima Yojana (JBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) have undoubtedly helped secure lakhs of Indians in rural areas with basic term insurance coverage. However, the introduction of novel solutions such as hybrid life insurance products that allow investors to maximize their savings while being protected by a term cover is driving urban insurance penetration. These life insurance solutions are perfect partners for life, providing loved ones with ample financial protection along with the flexibility to choose between receiving maturity benefits or regular income up to age 100, spruced further by declared cash bonuses. Investors can choose from among yearly, half-yearly, quarterly and monthly frequencies to pay premiums as well as receive income; affording the utmost customization to suit every nuanced need.
Exploring the range of savings life insurance plans
For the risk-averse investor, traditional savings life insurance plans that provide a sum assured and a guaranteed or vested bonus at the time of maturity are best suited. Not only are the premiums subject to tax benefits under section 80C and 10(10D) as per the prevailing tax laws, but maturity proceeds are non-taxable too, as long as the premium doesn’t exceed Rs.5 lakh in a financial year. Investors looking for an extra income stream or lump sum payouts over a period of years can opt for guaranteed life insurance plans that provide assured payout(s). These plans can help policyholders to fulfil their future goals such as planning for a dream vacation or funding a child’s education, thereby securing their family’s future with a sound source of a second income. Also known as money-back plans, the usual tax benefits applicable to traditional savings life insurance plans are also available for those investing in these plans. Additionally, policyholders can choose the duration of money-back income as well as enjoy the flexibility to select both the policy term and the premium payment term depending on individual needs. Investors with a larger risk appetite can also opt for Unit Linked Insurance Plans (ULIPs) where a part of the premium is invested in debt, equity or hybrid mutual funds for potentially higher returns. Still, returns are subject to market fluctuations and performance, with maturity proceeds on such ULIPs being taxable if the premiums exceed Rs.2.5 lakh in a financial year.
Benefits of opting for savings life insurance plans
Deputy CEO & Chief Financial Officer,
Future Generali India Life Insurance Company Ltd.
The foremost benefit of investing in either traditional or guaranteed savings life insurance plans is enjoying complete peace of mind when it comes to securing your loved ones. The combination of a term cover that provides immediate support in the form of a death benefit to dependants and survival benefits in the form of regular income or a lump sum payout in lieu of nominally higher premiums makes them suitable for long-term financial planning. Tax benefits on the premium paid as well as the maturity amount make these life insurance products ideal for transferring wealth to future generations, without the uncertainty and volatility of market-linked investments. Thus, for those looking to safeguard their family and pass on a legacy of monetary wealth, investing early in savings life insurance plans is highly recommended.
