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Lifeline of Insurance Planning

Insurance besides protection is considered as an Investments and tax benefit tool

Kairav Shah

11 Jan 2010

March is approaching and many of you have got busy with your tax planning. In the process you are looking at various financial instruments available in the market and insurance is surely on your agenda. So if you are considering Insurance for the purpose then it is important that you consider the few aspects of Insurance.

Insurance besides protection is considered as an Investments and tax benefit tool too, but is it right to use insurance as money making vehicle?

Not really! Insurance policy should not be considered as far as investments are concerned. If insurance is taken with an intention of generating profits then it's a wrong notion. Insurance is a promise of reimbursement in the case of loss, paid to the families of people in case of any untoward incident, that they have made prepayments to an insurance company. Going by the definition, nowhere it speaks about earning any profits or about any possibilities of investments. In fact it explains about indemnifying the loss occurred and one may pay towards the unforeseen eventuality in advance and cover the same at present.

Different life stages require different types and amounts of Insurance covers.

The table below illustrates the major insurance needs at different life stages:

Life Stages

Cover Requirement

Single, Starts earning

Personal Accident Insurance with temporary total disability clause

Gets married

Continue Personal Accident cover, Buy Term cover for self, Buy medical cover for self & spouse

Has children

Step up term cover to match income growth, continue other covers, start annuities for retirement planning

Buys house

Continue previous covers, Buy Home Loan term cover

Pre-retirement years

Continue covers and add term cover to match income growth


Continue asset, health and personal accident covers

This is covered by Term insurance offered by Insurance Companies which is the original form of life insurance and is considered to be pure insurance protection because it doesn't have any repayment value.

Some of the Term Insurance Plans offered by various insureres are listed below:

TERM (Male 30 years, Sum Assured - Rs. 50 lakhs)

Name of the Company

Plan Name




MET Life India

Suraksha Plus




ICICI Pru Life Insurance

ICICI Pure Protect




Aviva Life Insurance

Life Shield Plus




Birla Sun Life Insurance

High Networth Plan




Kotak Mahindra Old Mutual Life Insurance**

Preffered Term Plan




HDFC Standard Life

Term Assurance Plan





Amulya Jeevan




** Available to non-tobacco users

Along with the Term Insurance coverage you can also consider taking riders for a small extra premium but benefits are big.

What are riders? Riders are add ons bundled with your life insurance policy given at the same time when the policy is issued, for a cost.

One such common rider is accidental death, which is commonly referred to as "double indemnity", which pays twice the amount of the policy's face value if death results from accidental causes, as if both a full coverage policy and an accidental death policy were in effect on the insured.

Another common rider is premium waiver, which waives future premiums if the insured becomes disabled.

This way your life insurance policy becomes all the more valuable with these riders and provides you peace of mind too.

And it provides you with that much sought after tax benefit too.

Now that you have plugged in yourself and your dear ones, it is time to look for some investments. For that there are various financial instruments available in the market like Public Provident Fund, Equity Linked Saving Scheme of mutual funds, National Saving Certificates and Fixed Deposits which offer tax benefit too.

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