Taking an Insurance Policy??? Read it

LIFE is very uncertain and it is considered very important to have an Insurance Cover for any kind of mis-happening. It provides you financial support for the protection of future of your family. But Now-a-days, Life Insurance is not just for financial support but there is also involvement of investment factor in that.

Generally, A person takes a policy relying on the third party known as the Agent. But there are a few thoughts in my mind, so I am referring those to you:

• Can you completely be dependent upon the agent?
• What if he is thinking about his benefits more that his clients & that's you?
• Is there any better policy for you & your family?
• Is the Agent is informing you each & every details about the policy?
• What are the benefits at the time of payment of premium & What about taxability of sum received on maturity?

These issues are here for the reason, not every policy holder is educated enough to consider all the factors associated, while taking the decision of insurance policy, or also he/she is in shortage of time for proper go through to all the pros and cons of the insurance policy and here the role of the agent comes.

Here I will try to inform you a little about the issues so you can think over it before taking any policy from the agent or otherwise, because you should know where your hard earned money is going.

First of all, Ask your agent what is necessity to take the policy he is referring to you, what if he is asking you to start life insurance policy one after another. what is the need to start taking a lot of insurance policies with  huge premium.

For Example: One case happened in my own home that he (agent) refers a lot of policies to my parents even knowing that my father was about to retire at that the time policy inception and the maturity is about after 12 or 15 years. My father also took those policies because of his trust for the agent. Now tell me was it correct to suggest the policy for a person who is about to retire.

Please thoroughly understand the terms and conditions of the policy and before all these, ask your self if you actually need a policy & the policy referred  by the agent is fulfill all your needs?

Secondly, There are different kinds of policies with different benefits such as life insurances, health insurance and many others also. Consider that inspite of having a lot of life insurance policies, do you need a health insurance cover for you & your family.

Presently, Health Insurance is also a basic need for a family. Since medical issues are often being faced, even children are diagnosing with rare diseases which require a heavy medical expenditure over it. Health insurance can be huge financial support for the same.

Think over it and carefully chose your portfolio.

Thirdly, You are being a customer of Insurance policy having a right to consider other agents also.

Whether they are having a better policy option to match your needs? Your agent is not the only agent in the world. So give more importance to your needs and before taking any decision on this, think about your struggle you faced while earning those premium amounts.

Fourthly, Regarding Tax aspect, the policies are allowed for deduction for tax computation purpose. Yes, that's right but not completely.

The premium you pay for insurance is allowed to be deducted but there are some conditions to be fulfilled for the same.

• Premium is to be within limit of 20% of sum assured if the policy issued in between 1st April, 2003 and 30 April, 2012 to be eligible for tax deduction under section 80C of the Income Tax Act, 1961.
• Premium is to be within the limit of 10% of sum assured, if policy issued after 30 April, 2012 in same scenario.
• Premium is to be within limit of 15% of sum assured if the policy issued on or after 1 April, 2013 for the life of any individual person 

1. with a disability or severe disability as per section 80U of the said Act, or
2. Having any disease or ailment as specified in the rules under section 80DDB of the same Act

Also Maximum Limit is 1,50,000 which is allowed for the tax benefits includes other investments also. At the time of receipt of sum assured, there is exemption under section 10(10D) of Income Tax Act. again with some condition, If the sum assured is taxable at maturity time, the amount will be received after deduction of 1% of actual sum assured under section 194DA. If the Policy Holder is not subject to tax by having income not more than the maximum limit not subject to tax, he/she can furnish declaration under section 197A for non deduction of tax.

THINK TWICE BEFORE LETTING GO YOUR HARD EARNED MONEY.



DISCLAIMER: 

All views expressed in this blog are my own and do not represent the opinion of any entity whatsoever with which I have been, am now or will be affiliated.

I am a Semi Qualified Chartered Accountant and this should not be considered legal advice. You should seek appropriate counsel for your particular case. And Please note that this post is for readers in the India.