What is personal finance? It is a mixture of saving, investing, debt management, tax planning, and insurance. Each of these things play a critical role in your financial life. But it can be argued that the bedrock of your financial life is laid by savings and insurance. Savings leads to investment and wealth creation, but insurance is what protects your finances against foreseen risks. To be financially stable, to create wealth, and to lead a prosperous life, you need insurance. Let’s look at some essential coverages everyone should have. And since we’re in the tax-saving season, we’ll also look at the tax benefits of those insurance products.
Health Insurance For All Your Family Members
Every human being needs health insurance. It is a basic need at par with roti, kapda, makaan. If you don’t have it, you’re at risk. Any person, no matter their age, income or health, may require hospitalisation. We know that healthcare inflation in India is steep. The costs of hospitalisation and treatment of critical illnesses are skyrocketing each year. Without health insurance, you’re reliant on your personal funds and savings. Often, the difference between a family fulfilling its aspirations (such as buying a home or sending their children to college) and not fulfilling them is a health insurance policy. Without coverage, your hard-earned savings are at risk. Therefore, always budget for a health cover for your family members in your grand financial plan. You can save taxes by buying health insurance not just for yourself, spouse and children, but also for dependent parents. Here are the tax benefits for buying health insurance provided by Section 80D of the Income Tax Act.
|Deductions Under Section 80D|
|Age Under 60||Age Over 60|
|Self (plus spouse, dependent children)||₹ 25,000||₹ 50,000|
|Parents||₹ 25,000||₹ 50,000|
Term Plan For Persons With Dependants
You’re a person with financial responsibilities. Therefore, you must also prepare for an eventuality where you may not be around to support your family. Therefore, even in death, you should be able to financially protect your family. This is where term plans are useful. Through them, it’s easy for you to buy a substantial life cover at affordable costs. A term plan helps your family find a substitute for your income. Let’s say your income is Rs. 5 lakh per annum. Your life cover should be at least 10-20 times this income, so that your family can comfortably meet its financial needs and wants for the foreseeable future. For example, a 30-year-old male can buy a cover of Rs. 50 lakh for annual premiums starting around ₹4222. Term plans are pure life covers with no investment benefit or surrender value, which is why they’re very cheap. A basic term plan pays off only in the event of the insured person’s death. Premiums paid towards life insurance policies earn you deductions under Section 80C up to a limit of ₹1.5 lakh per year.
Comprehensive Insurance For Your Vehicles
Third party insurance for your vehicles is mandatory by law in India. Third party is any party apart from you or the insurer. If a third party suffers damages because of your vehicle, the insurance will cover you to a defined limit. However, third party insurance does not cover damages to your own vehicle or yourself. Therefore, you need comprehensive insurance for your car and two-wheeler. A comprehensive coverage pays for third party damages, damages to your vehicle and self, and it could also provide you handy features such as towing facilities, zero depreciation cover, protection of accessories, and overnight accommodation if your car broke down in a remote location.
The writer is CEO, BankBazar.com