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Best Pension Policy in India

Why Pension Plans are Important

Most people do not view life insurance as an essential part of a pension or retirement income plan. Having the right kind of life insurance plan and the appropriate kind of coverage during retirement will not only protect your income, but also provide tax-free cash flow, help to manage taxes and secure families. It could also improve the total returns portfolio.
Some things to keep in mind are:

Protect Your Income in Retirement

In the unfortunate event of death of one spouse, the surviving spouse often struggles to meet their expenses. For many families, life insurance serves as a means to ensure that the normal functioning of life does not change dramatically after the death of the income earner.

Keep Your Retirement Savings on Track.

It is recommended to buy a 10 -15 year term life insurance policy for both spouses prior to retirement in order to protect the retirement savings plan.The premiums for these are generally very inexpensive, thus not posing to be of a huge financial burden. A convertible term can also be considered, which will help protect insurability in case of unwarranted health issues.

Improve Your Investment Asset Allocation and Returns.

The life insurance policy can provide bond-like returns of 3 to 5 percent without the interest rate risk of a bond.

Manage Your Taxes.

The tax-preferential treatment of life insurance can be especially attractive to high income individuals with a higher tax bracket or as a hedge against the constantly rising tax environment. As taxation rises, tax-free cash flow becomes more advantageous. Tapping into cash value income tax free can be a great way to supplement a retirement income plan and, at the same time, help manage taxes.

Reasons to choose LIC

An alarming fact states that only 10 percent of Indians are insured. Though owning a life insurance policy is one of the most prudent financial decisions, most people neglect it without understanding its gravity. Here are some of the key reasons why buying an insurance policy is important:

  • Taking care of your loved ones even after you’re gone
  • The future is uncertain. The least you can do is secure your family financially even after you’re gone.

  • Dealing with debt
    Buying the right insurance policy protects you from outstanding debts in the form of car loans, home loans, credit cards, etc.
  • Supplements your retirement goals
    With a life insurance plan, you can ensure you have a regular stream of income every month till you die. Just like a pension plan, put in some money into a life insurance policy and enjoy a steady income every month after retirement.
  • Tax saving purposes
    The premium you pay on an insurance policy is eligible for a maximum tax benefit of Rs 1.5 lakh under Section 80C, and for tax-free proceeds on death/maturity under Section 10 (D) of the Income Tax Act, 1961.
  • You may not be qualified for it later

Life insurance policies are easier to get when you are in the prime of health. It becomes increasingly difficult to get one as you grow older. It is for this reason that it is always advisable to invest in a policy when you’re young.
Some policies come with benefits like the policy owner can avail all or a part of the policy’s death benefit if he/she has very little time to live or needs money for treatment.