{"id":3244,"date":"2023-02-28T11:01:17","date_gmt":"2023-02-28T11:01:17","guid":{"rendered":"https:\/\/shoonya.com\/blog\/?p=3244"},"modified":"2023-06-20T07:02:42","modified_gmt":"2023-06-20T07:02:42","slug":"secure-and-grow-pure-term-plans-mf-combo-for-your-future","status":"publish","type":"post","link":"https:\/\/shoonya.com\/blog\/secure-and-grow-pure-term-plans-mf-combo-for-your-future\/","title":{"rendered":"Secure and Grow: Pure Term Plans + MF Combo for Your Future"},"content":{"rendered":"\n

Don’t fall for the traditional insurance policies trap! Learn how to make informed decisions by combining pure-term plans and mutual funds. With the new taxation proposal taking effect in April 2023, this guide will assist you in choosing the best investment + insurance combo to help save your tax in obtaining better coverage and higher returns.<\/p>\n\n\n\n

Changes taking place from 1st April<\/strong><\/p>\n\n\n\n

The Indian insurance market is in turmoil due to the new taxation proposal that will affect traditional insurance policies. <\/p>\n\n\n\n

From April 1, 2023, maturity proceeds of all life insurance policies (other than unit-linked insurance policies or ULIPs) that are issued after April 1, 2023, and have an annual premium of more than Rs 5 Lakh will now be taxable<\/em>.<\/em> making these policies even less attractive than before. <\/em><\/p>\n\n\n\n

Now is the time for smart investors who want adequate coverage and long-term returns. Here\u2019s how to combine insurance with investment options.<\/p>\n\n\n\n

USPs of the Combination of Term plan and Mutual Funds<\/strong><\/p>\n\n\n\n

The combination of a term plan and mutual funds can offer the following:<\/p>\n\n\n\n

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  1. Tax benefits<\/strong>: Both term plans and mutual funds offer tax benefits<\/mark><\/a>. The premium paid towards a term plan is eligible for tax deduction under section 80C of the Income Tax Act. Similarly, investments in equity-linked savings schemes (ELSS) of mutual funds are eligible for tax deduction under section 80C.<\/li>\n\n\n\n
  2. Comprehensive financial protection<\/strong>: By combining a term plan with mutual funds, the policyholder can also create a corpus that can provide financial stability to the family even during his\/her lifetime.<\/li>\n\n\n\n
  3. Long-term wealth creation<\/strong>: By investing in mutual funds, the policyholder can create a long-term wealth corpus that can be used to meet various financial goals such as children’s education, marriage, retirement, etc.<\/li>\n\n\n\n
  4. Flexibility and liquidity<\/strong>: The policyholder can choose to invest in mutual funds as per his\/her risk appetite and financial goals. Also, mutual funds provide liquidity, which means the policyholder can easily redeem the units as and when required.<\/li>\n\n\n\n
  5. Cost-effectiveness:<\/strong> By combining a term plan with mutual funds, the policyholder can save on the high charges associated with unit-linked insurance plans ULIPs.<\/li>\n<\/ol>\n\n\n\n

    The winning formula is a combination of pure-term insurance plans and mutual funds. Mixing insurance and investment often results in low returns and inadequate coverage, so it’s essential to opt for a simple term life insurance plan and invest the remaining balance in mutual funds.<\/p>\n\n\n\n

    Tip-<\/em><\/strong> If you are looking for a convenient trading platform to start your Mutual Fund investments, then you can check out our <\/em>Shoonya<\/mark><\/em><\/a> today, where you can start your SIP even with the amount of Rs. 500.<\/em><\/p>\n\n\n\n

    Consider the following example:<\/strong><\/p>\n\n\n\n

    A 30-year-old purchasing a popular LIC New Jeevan Anand plan with a 20-year tenure and a Rs 1 crore cover will be required to pay a yearly premium of Rs 5.7 lakh. Assuming tax-free status and 5% returns at maturity, the amount available would be Rs 1.98 crores. <\/p>\n\n\n\n

    In comparison, an annual premium of around Rs 11,000 is required for a term plan like LIC New Tech Term for a 30-year-old with a 20-year tenure for a cover of Rs 1 crore. The remaining Rs 5.59 lakh can be invested in mutual funds with 10-per cent average returns, accumulating to approximately Rs 3.52 crore over a 20-year period.<\/p>\n\n\n\n

    Even after adjusting for LTCG (Long-term Capital Gain) tax, the returns from a combination of a pure-term plan and mutual funds are much higher than traditional insurance policies. <\/p>\n\n\n\n

    To sum up, this guide has provided valuable insights and recommendations on effectively managing the upcoming taxation proposal in India from April 1, 2023.<\/p>\n\n\n\n

    Sources: moneycontrol.com<\/mark><\/a><\/p>\n\n\n\n

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    Disclaimer<\/mark><\/a>: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.<\/p>\n\n\n\n

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