Term Insurance for Financial Protection
Purchasing term insurance is an integral part of financial planning for NRIs in Australia. It helps build life cover by offering high coverage at affordable premiums. Here’s how a term insurance can be used for financial protection:
High Coverage at Low Premiums
A key advantage of purchasing term insurance is that you can obtain high coverage at lower premiums. This ensures that, even without making a significant dent in your pocket, you can build adequate coverage for your dependents.
Tax Benefits
As an NRI living in Australia, you can get a GST refund of 18% for premium payments (subject to eligibility conditions and submission of necessary required documents every year) made towards a term insurance plan. Additionally, you might also be eligible for tax benefits under section 80C of the Income Tax Act 1961, in case of old tax regime. The death benefits received are tax-free.
Additional Coverage with Riders
Term insurance plans allow you to enhance the scope of coverage with riders. You can opt for riders like a critical illness benefit rider, waiver of premium rider, accidental death benefit rider, etc. These riders are available at a minimal additional premium and come in handy in enhancing your coverage.
Did You Know that you can opt for return of premium plans, better known as TROP plans. Under this, if the life assured survives the policy tenure, the insurer returns the total premium paid during the policy in the form of maturity benefits.
Unit-Linked Plans for the potential of Wealth Creation
A unit-linked insurance plan is a life insurance plan that offers dual benefits of life cover and market-linked returns. Here’s how ULIPs can help with the potential of wealth creation:
Market-Linked Returns
ULIPs are designed to offer the dual benefits of life insurance and market linked investment. A portion of the premium you pay goes towards life cover, and the remaining is invested in a market-linked fund of your choice. Thereafter, depending on market performance, the fund grows, generating returns on the invested premium.
Lock-In Period
ULIPs come with a five-year lock-in period during which withdrawals are not permitted. This gives your premiums time to grow with market movements and you can avoid the temptation to withdraw prematurely during the lock-in period.
Flexible Fund Switching
One of the key advantages of purchasing a unit-linked insurance plan is that you get to switch between funds (subject to policy terms and conditions. This way, you can easily modify your market linked investment according to your changing needs and market performance. Moreover, switching is tax-free and allows you to change your exposure from the equity markets to debt markets and vice-versa without incurring any taxation.
Tax benefits
ULIPs also offer attractive tax benefits on the premiums paid and benefits received. While Section 80C allows a deduction of up to ₹1.5 lakhs on the premiums, the maturity benefit is exempted under Section 10(10D), subject to specific terms and conditions. Even the death benefit is tax-free, giving your family a tax-efficient corpus for their financial needs.
Combining pure protection with ULIPs
While both term insurance and ULIP are life insurance plans, they are very different from each other. Given their separate sets of benefits, it is better to buy both and enjoy their respective benefits. You can purchase a term insurance for building pure life cover and enjoy high sum assured levels. At the same time, unit-linked insurance plans would provide added life insurance coverage and market-linked returns.
The term plan financially secures your family, while the ULIP helps grow your money through market-linked returns. With India’s booming economy and rising markets, long-term ULIP investments can harness compounding benefits. This balanced approach ensures financial security while letting you capitalise on India’s growth story, making it a smart move for future wealth.
Exploring Life Insurance Plans for NRIs
Purchasing life insurance that also allows wealth creation has become easier with the online portal of Bajaj Allianz. As an NRI in Australia, here are a few other options you can explore for financial security and returns:
Endowment Plans
Endowment plans help you to enjoy life insurance protection while creating a stable corpus for your financial goals. Under an endowment plan, the insurer provides a death benefit to the nominee in the case of the life assured’s death during the policy tenure and a maturity benefit if the policy term expires and the life assured is alive. This way, an endowment plan can be used to combine insurance, savings and assured* benefits. There are different kinds of endowment plans:
- Regular Endowment Plans
- Whole Life Endowment Plans
- Child Oriented Endowment Plans
- Money Back Plans
- Participating and Non-Participating Endowment Plans.
ULIPs
A unit-linked insurance plan is designed to offer the benefit of life insurance and market linked investment. Features such as market-linked returns, multiple investment options, fund switching, flexibility, liquidity through partial withdrawals after the lock-in period, and tax benefits make it an appealing option for NRIs. Whether it is for a long-term investment strategy or building a comprehensive life insurance plan, these options are worth exploring.
Conclusion
Building life insurance and making investments that facilitate long-term wealth creation are integral parts of smart financial planning. The Indian life insurance market, with the choice of plans offered, is an appealing space for NRIs in Australia.7 Assess your financial needs and choose a plan of your choice today to secure your future tomorrow.
FAQs
Can NRIs purchase ULIPs in India?
Yes, NRIs can purchase ULIPs in India. You can do this when visiting India or through online portals of the respective insurance companies.
How can NRIs in Australia build wealth through life insurance plans?
NRIs in Australia can build wealth by purchasing life insurance plans, such as endowment plans, unit-linked insurance plans, and whole life insurance. These plans not only offer life coverage but also allow financial benefits through savings, tax benefits, and more.
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