Before you buy insurance, factor in the tax implications. These tips can help:
Ulips: Based on the risk you want to take, you can opt for traditional insurance or a unit-linked product. Ulips are ideal for those who want to take high risk. Some plans have the indexation feature, which helps to counter inflation. If you follow a conservative investment strategy, then traditional products that give you assured returns are a good choice. You also get to reap the benefits of the profits of the company through bonuses.
Pension plans: These are good accumulators for retirement and also qualify for the Section 80C exemption. The accumulated corpus can be used to buy an annuity, which is a one-time purchase from a life insurer, that provides a monthly pension from the date of purchase for the rest of your life. Another advantage is that 30% of the corpus can be withdrawn tax-free. But it is compulsory to purchase an annuity with the remaining amount. The pension that will accrue to you each month from the annuity will be taxable at a marginal rate.
Health insurance: The cost of medical care is bound to go up. So the loss of income due to critical illness or disability needs to be covered through health insurance. Premiums of up to Rs 15,000 paid for your health insurance and that of your spouse and children are eligible for Section 80D exemption. The section also provides for the exemption of an additional Rs 20,000 if paid as premium to buy health insurance for parents.
Manik Nangia is Corporate VP, Product Management, Max New York Life Insurance
