While buying a term plan, many will concentrate only on the comparison of Term Insurance Premium of different companies. However, there are other methods by which one can save their term insurance premium. Let us see them in detail.

 

#1: Using Life Insurance Ladder–

How you arrive at the sum assured requirement for your life insurance? In simple terms, these are based on below assumptions.

• You need money to cover your family expenses until your spouse dies or your kids get a job-To arrive at this value, you must know the current household expenses, number of years you need this income stream (up to the death of your spouse or job of kid), inflation of such expenses and suppose you die today then how much return you can expect from the corpus of term insurance maturity claim.
• Based on your financial goals-Insurance requirement for such goals be arrived at by considering the current cost of your financial goals.
• Based on your existing outstanding loans-You are clearing the interest part by paying the EMIs. Hence, you must consider the outstanding principal to arrive at insurance requirement.

Let us take an example. First, we calculate the total amount of requirement for meeting your family expenses. Suppose your monthly expense is Rs.25, 000, inflation of such expenses is around 9% and you are sure that these expenses will be for the next 30 years. In addition, we have to consider the return on investment (when we invest the death claim amount of term insurance) to meet these expenses for next 30 years. I mean to say that how much amount you need today so that we invest that amount in any product and start to withdraw money monthly from this. Hence, we have to assume the return on investment of such corpus. Let us assume this around 9%. The total corpus required for meeting these expenses will be Rs.90, 00,000. This amount is your insurance requirement to cover the household expenses for the next 30 years (in case you die today).

In the same way, we have to calculate for the each financial goal. For example, kid's education. You need Rs.15, 00,000 (in current terms) for education after 10 years from now. Let us assume the education inflation at 10% and return on investment to generate this much amount will be 9%. Then the current amount required to meet this goal will be around Rs.17, 00,000.

Finally, you also include the outstanding loan principal to your life insurance requirement. This is required, because if you die today, then your family member will pay and clear off the loan from the claim amount of Term Insurance. This let us say as Rs.50, 00,000 (current outstanding amount).

Many people add up all these figures and arrive at the sum insured requirement. In addition, they try to choose the term up to the age of their retirement or the maximum term offered by insurance companies. However, you all know that term insurance premium depends on the term you chose. The premium will be higher if your term insurance term is longer and shorter if the period is shorter.

Instead of sticking to one term plan and choosing a single term, if we split based on our requirement like one for expenses, others based on the tenure of financial goals and one for outstanding debt, then definitely this saves premium.

From above three examples, if we split our term insurance buying like Rs.90, 00,000 to meet the household expenses (up to your retirement age), Rs.17, 00,000 to meet the financial goal of kid's education and a term of 10 years, and finally Rs.50, 000 term insurance matching the term equal to loan tenure. Instead of having a term insurance of Rs. 1, 57, 00,000 (Rs.90, 00,000+Rs.17,00,000+Rs.50,00,000), if we split based on our requirement like above then it will drastically reduce your premium. We buy Rs.90, 00,000 sum assured term insurance with tenure of 30 years (Hoping you are 30 years of age and planning to retire at the age of 60 years), Rs.17, 00,000 sum assured term insurance with tenure of 10 years (to meet kid's educational) and Rs.50, 00,000 term insurance for tenure of  15 years (hoping loan tenure is 15 years from now).

This step of laddering your life insurance will definitely reduce the premium you pay towards term insurance.

Advantages of using the Life Insurance Ladder method-

• Indirectly you are planning for your major financial goals. Hence, it creates a systematic financial approach.
• You receive a fresh cash flow as and when the individual policies close.
• It may lower your premium.

Disadvantages of using the Life Insurance Ladder method-

• It may complicate nominee to handle all policies. Hence, better to have insurance with one company rather than choosing different companies.
• It creates a major financial burden, in case you not planned for other goals. From above example, if one not planned for retirement and dies at the age of 55 years, then his nominee will receive the claim amount of Rs.90, 00,000 only (because two policies matured due to maturity of tenure of kid's education and loan repayment). However, if one opted a single policy until his retirement age, then his nominee will receive a higher sum assured (In above case Rs.1, 57, 00,000).
• Tracking of term insurance will leads to complication. Because managing a single policy is easier than managing 5-10 policies.
• Finally, if your insurance company giving you higher sum assured rebate or loads for a lower sum assured options then this may not actually save premium.
• Postponing of goal may harm the goal funding. For example, you assumed that kid's marriage will be after 20 years from today and buy a term insurance matching 20-year term. However, if kid's marriage postponed to 24th year and your death occurs after 22 years from now then your nominees may feel hard to fund the marriage expenses. Hence, you must be particular about goal period.

#2: Buying at early age–

We all know that buying a term plan when young is cheap. Because term insurance premium depends on age. Younger the age means lower the premium. Hence, try to buy the term insurance immediately once you start to earn.

#3: Restricting your term of term insurance–

People have a tendency to try to get benefit at any cost from term insurance. They know that risk of dying is higher when they get old. Hence, instead of restricting the tenure up to their retirement age, they go beyond that. They look for term insurance, which covers them up to their age of 70 Yrs of 75 Yrs. However, sadly they forget the simple funda that, the value of current sum assured they looking for will not be same when they return at that age.

In addition, by increasing the tenure, you are indirectly increasing your premium payment. As I said above, longer the term insurance period leads to higher the premium. Hence, restrict your tenure to the maximum of up to your retirement age.

#4: Comparing the insurance companies–

There is a huge competition among insurance companies when it comes to term insurance. Hence, all companies lure you by providing the competitive rate. Therefore, do your own research to compare the premium. However, never compromise on the features you are actually looking for. Usually, new insurance companies offer lesser premium than the older. However, at the same time, I am not suggesting you to go for new companies. Instead, buy from a company, which suits your need and your comfort with the company.

Note-Never, heed the advice of comparative portals. I know they insist you for a particular company to go. Because there is a commission if they promote or sell a particular term insurance (even if it is ONLINE).

#5: Buying a plain product-Nowadays, insurance companies offer many variants of term insurance plans. Few of them are like premium back term insurance, part of the sum assured as a lump sum along with monthly income over a period or 100% of Sum Assured on death and a monthly income depending upon the option chosen: Level income or increasing monthly option. Understand your need, cost involved in such fancy offers then only try to buy.

Along with such fancy offers, insurance companies offer riders like accidental or critical illness. Nothing is free, that applies to here too. All these features will actually come up with a cost. Hence, don't buy those products which combine riders. Instead, I always suggest buying accidental or critical insurance policies from General Insurance companies. If buying them separately, then you will get many more features than these riders will.

Hope above 5 points will definitely help you to save the term insurance premium.

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Filing your tax return is not enough. You also need to verify it to complete the process. Here's how to do it.

Though the tax filing deadline is still a week away, many taxpayers have al ready filed their returns. However, many of them have not completed the entire process. After filing the tax return, the taxpayer also needs to verify the return. If this is not done within the stipulated time, the return will be deemed invalid and the taxpayer will have to file it again.

Taxpayers who e-file have the option to e-verify their returns.This can be done at the time of uploading or even after uploading. They also have the option to take the physical route by sending the signed verification to the Centralised Processing Centre (CPC) at Bengaluru.

FIVE WAYS TO E-VERIFY YOUR TAX RETURN

AADHAAR LINKED OTP

Can be used only if the Aadhaar is linked to your registered mobile number. An OTP is sent to your mobile number. Enter the OTP and click on submit to verify the return.

OTHER OTP

If gross income after deductions is below `5 lakh andor the refund or demand is less than `100, the taxpayer can e-verify using an OTP from the tax department's e-filing portal. This OTP is sent to mobile phone and e-mail.

THOUGH NETBANKING

Log in to Netbanking and click on tax filing to go to e-filing website.Then generate the EVC. An EVC will be sent to your email and mobile number. Use it to verify return.

USE BANK ACCOUNT TO VALIDATE

Taxpayer must first pre-validate his bank account using the profile settings of the e-filing account. Possible only if PAN and name match with bank records. Enter the registered mobile number.After it is validated by the bank, generate EVC. Only 12 banks offer this facility.

USE DEMAT ACCOUNT TO VERIFY

Similar to the val idation using the bank account.

Taxpayer must first validate his demat account.

Once validated by the depository, generate the EVC.

TAKING THE TRADITIONAL PHYSICAL ROUTE

If you are not able to e-verify your return because of any reason or are not comfortable with e-verification procedures, download the ITR-V (also known as the acknowledgement receipt), sign it and send it to CPC at the following address: CPC, Post Box No 1, Electronic City Post Office, Bangalore 560100, Karnataka, India.

Here are a few things to keep in mind when you do so.

The ITR-V should reach the CPC within 120 days from the date of e-fil ing the return.

Sign in blue ink and send via ordinary post or speed post. Do not use a courier to send the ITR-V.

ITR-V is auto-generated and is emailed to you after you successfully uploade-file your income tax return. It can also be downloaded from the e-filing website under the 'View ReturnsForm' on the 'Dashboard'.

You are not required to send any supporting document along with the ITR-V. Just send the one page signed ITR-V.

When your ITR-V is received at the CPC, you will receive an email and an SMS alert. Processing of your return will only start after verification.

Note:

HUFs and individuals using ITR 3 for the financial year 2016-17 (ITR 4 for 2015-16) to file their tax returns and whose accounts are required to be audited under section 44AB have to mandatory verify their returns using the digital signature certificates. Returns filed using the digital signature method are not required to be verified further.

DON'T MISS THIS INCOME IN ITR

Though fully taxable, some interest often gets ignored when filing returns, says PRAGATI KAPOOR

INTEREST ON LOCKER FDs

Customers seeking lockers in a bank are often pushed to invest in FDs. The income from these deposits often goes unnoticed by the investor. In most cases, the fixed deposit is linked to the locker and the interest earned is adjusted against the annual locker rent. If the fixed deposit is cumulative, there is no periodic interest entry in the savings account. As a result, the taxpayer forgets to include this inter est even though it is fully taxable.

INTEREST ON APPLICATIONS

The year 2016-17 witnessed several public issues, many of which were oversubscribed. Oversubscription means that a large number of appli cants get partial allotment and the balance application money is refund ed to them with interest. Since this interest is not a very large sum, it is often overlooked by individuals. How ever, this interest has to be included in the tax return.

INTEREST ON SECURITY SUMS

Some power and telecom companies ask subscribers to make a one-time security deposit at the time of apply ing for a connection. Many suppliers pay interest on these deposits to the subscribers. Mostly, the interest is adjusted in the last bill of the finan cial year instead of being actually paid out. This interest is also fully taxable and has to be reported.

INTEREST EARNED ON NSCs

NSCs offer cumulative interest which is paid on maturity after five years.

The interest earned every year is reinvested and therefore qualifies for deduction under Section 80C. Howev er, interest accrued on the NSC in the last year is paid on maturity and not reinvested. So, it cannot be claimed as a deduction.

TAX FREE INTEREST ON PPF

Interest on the PPF is tax free, but has to be declared as `Income claimed exempt from tax' on an year ly basis in one's tax returns.

 

 

1. Exemptions/reimbursements – Identify the reimbursements available from the company and take maximum advantage of the same. Normal expenses that one incurs could help save tax. Example- Telephone/fuel reimbursements, meal vouchers and company car. A person in lower tax slabs can reduce his tax liability to nil with exemptions alone.

Similarly, salaried employees staying in rented apartments can claim exemption under Section 10(5) of the Act in respect of house rent allowance by making the HRA a component of there salary.