A term insurance policy is a kind of life insurance plan that offers certain claim benefits to the beneficiary of the insured, post the policyholder’s unfortunate death due to an accident. A term insurance plan, as the name suggests is valid for a specific period alone, unlike the normal life insurance plans that are valid for a year. Term insurance plans can be availed for any number of months, depending on the policyholder’s requirements. A term insurance plan comes with a number of benefits for the insurer as well as the policy beneficiary. One of the several benefits of having a term life insurance plan are the tax exemptions and tax deductions offered under the Income Tax Act 1961, that allow the policyholder to save on tax.
The following are the tax benefits offered under the term life insurance plans:
Tax deductions are offered under Sections 80C and 80CCC.
Individuals as well as HUFs (Hindu Undivided Families) insured under the policy can claim tax deductions under the Section 80C.
In case of individual policyholders, the following people are eligible to claim the tax benefits under section 80C:
In case of HUFs, any family member who is insured under the same term insurance plan is eligible to claim the tax deductions under section 80C.
Tax benefits of term life insurance are offered under the section 80C of India’s Income Tax Act 1961 and includes the following:
Tax exemptions are offered under Section 10 (10D). Under this section, any amount offered at the time of the policyholder's death or when the plan matures, including the bonuses, is exempted from any tax. This is applicable regardless of where the amount is received; in India or in any of the foreign country.
The insured will not be exempted from tax under the following cases:
Under Section 80D of the Income Tax Act, 1961 the insured is eligible for tax benefits on health insurance policy premiums. This is applicable if the term insurance plan availed has covers such as Surgical Care Rider, Critical Illness Rider, Hospital Care Rider, etc. inbuilt or availed as an add-on cover.
In case of HUFs, any family member who is insured under the same term insurance plan is eligible to claim the tax deductions under section 80D.
In case of individual policyholders, the following people are eligible to claim the tax benefits under section 80D:
The following tax benefits are offered under the Section 80D of the Income Tax Act, 1961:
In case the insured isn’t happy with the insurance plan he/she has bought, the same can be returned in the free-look period. A free-look period is one of IRDAI’s regulatory measures to create a consumer-friendly environment. Under this regulatory, if the insured realises that the policy purchased doesn’t adhere with the terms and conditions, the same can be returned to the insurer within a specified period. When returning the policy, the insured should give the insurer a valid reason behind the decision to return and then ask for a refund of the premium paid. In case the insurance policy was purchased via distance marketing, the free-look period would be 30 days starting from the inception of the policy.
In order to avail the refund under the term insurance policy, the insured needs to send a letter to the insurer intimating about the decision to cancel the existing plan. The insured should also submit the original insurance policy document along with the letter to the insurer. The insurer will process the request and refund the amount after deducting a small portion as a risk premium for the policy period. If any medical expenses have been covered by the insurer under the policy, the amount of coverage offered to the insured will also be deducted from the refund offered.
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