The life insurance policy, in addition to provide the policyholder and his/her dependents financial coverage, can help one to save on tax payments. The different tax advantages offered by life insurance plans, under the Income Tax Act, 1961
- Premiums that are payable towards the life insurance policies are eligible for tax reductions under Section 80C of the Income Tax Act and under Section 80CCC of the same act for pension plans and Unit Linked Insurance Plans.
- Tax advantages can be claimed up to an amount of Rs.1.5 lakhs under Section 80C and Section 80CCC of the Income Tax Act. These advantages can be claimed for premiums that an individual pays towards maintaining his/her policy and for premiums that individual pays towards his/her spouse’s or child’s insurance policy.
- The amount of money that individual invests into a life insurance policy, the interest earned by the investment, and the final amount of money that an individual receives is all free from tax deductions.
- If an individual have a unit linked insurance plan, he/she can switch between different funds offered by the insurer. These switches will be free from taxed.
- At the end of the policy tenure, if an individual is eligible to get a maturity benefit, this benefit too will be eligible for tax benefits under Section 80D of the Income Tax Act, 1961.
- A third of the amount that an individual receives at the time of the retirement, via his/her pension plan, is also eligible for tax benefits.
- Life insurance providers grant different riders and add-ons that can be attached to one’s base plan. These riders also offer individual the tax benefits.
Thus, with a life insurance policy, not only individual can achieve his/her long-term financial goals and safeguard their dependents, but they can also save on tax every fiscal year.
Group Life Insurance Plans:
Group life insurance plan is a type of policy that provides security for the group of members under a single policy. Group policies are typically acquired by the employers to provide security to their employees. In addition to employees of an organization, other members of the group including customers of a bank, business groups, housing societies etc. can also avail group life insurance security. Similar to individual life insurance plans, group life insurance plans come in various forms.
Different Types of group life insurance policies:
Mentioned below are some of the common types of group life insurance policies:
- Group term insurance plans: All members of the group will covered under the same term insurance plan. In case of the death of an employee during employment, the insurer will pay the mentioned amount assured in the policy schedule.
- Group investment-linked insurance plans: In addition to insurance protection, this group plan also offers maturity returns through market investments.
- Group gratuity plans: This plan helps the employers to provide gratuity to their employees after they had worked for at minimum 5 years in the company. Employers can also invest in this gratuity funds and make the payment of the amount from that fund.
- Group critical illness riders: This can be taken with any available group insurance plans in the market. This cover can be used to provide protection against different life-threatening illnesses faced by the policyholders.
- Group leave encashment scheme: Particularly for the employers, the group leave encashment scheme offers financial backup and helps the employers fund the leave encashment liability to the employers. This scheme can be either be linked or non-linked.
- Group Mortgage Redemption Assurance scheme: This group plan is for the employers that have availed the loan to buy a house.
Various Features of group life insurance:
Some of the important features of group life insurance are mentioned below:
- The names of the all members of the group must be entered in the policy document. Then the policy will be issued in a single document to the company. The company might share the whole detail of the protection with their employees.
- The company can also choose the assured amount based on the needs of their employees. A fixed assured amount chosen by the employer will be applicable for the all employees of the company.
- The beneficiary can provide the nominee details to the company while starting their employment in the organization. In case of the death of any employee during the policy term, the nominee will get the compensation from the insurer.
- In group life insurance, the protection is provided until the employee remains employed with the company. The security will cease upon their resignation, retirement, or termination.
Advantages of group life insurance:
The Group Life insurance security provides the advantages to policyholders mentioned as below:
- Cost: The cost of the group life insurance is much economical than an individual life insurance policy. The amount for premium is typically paid by employers as a part of their salary package to employees.
- No waiting period: Policyholders need not to deal with any waiting period requirements while taking a group life insurance policy.
- No pre-insurance medical examination: There is no need of any medical tests while signing up for a group life insurance policy. Hence, people with pre-existing requirements may also avail group life insurance protection from their place of employment.
- Relief from tax: The amount of premium paid by employers is eligible for tax relief. Also, the benefit obtained from this life insurance cover is eligible for tax relief.
- Hassle-free claim settlement: In case of a claim, the nominee may simply contact the employer and provide the required information. Once the claim is initiated by the employer, the insurer will give the settlement amount without any issues.
Limitations of group life insurance:
While group life insurance offers different benefits to policyholders, it also comes with its own set of limitations. Some of the limitations of group life insurance are mentioned as below:
- Group life insurance cannot be categorized to the specific requirements of a particular member. It is not possible for members to purchase riders separately to enhance their protection.
- The amount assured offered under a group life insurance policy is fixed by the employer. Members cannot select the amount assured that they need.
- Since the security terminates as early as the member leaves the organization, there might be a little uncertainty linked with this coverage.