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Those wanting to take a new life insurance policy would do well to weigh the risk cover with the premium payable. One must do this if only to enjoy the benefits of tax deduction under Section 80 C of the Income-Tax Act.
If the idea is to take a policy where the risk cover is less than 10 times the premium payable, one had better be warned.
‘NOT SURPRISING'
This is because deduction in respect of premium paid on policies issued on or after April 1, 2012, is now being restricted to a maximum of 10 per cent of the sum assured.
The current applicable maximum is 20 per cent. The change in the limit has been proposed in the Union Budget 2012-13.
Mr P. Srinivasan, an LIC agent, says that India is now following the practice of other countries such as Malaysia and Singapore.
But he feared that products such as Jeevan Vriddhi introduced only a fortnight in advance of the Budget might cease to exist.
JEEVAN VRIDDHI
Jeevan Vriddhi, a single-premium non-linked plan, was introduced on March 1. Here, the risk cover is only five times the premium chosen by the insured.
“At the end of 10 years (which is the maturity period) you get some returns which get broken down into guaranteed and fixed returns.”
The receipt (on maturity) would now attract tax under Section 80 D of the Act, Mr Srinivasan added.
Agents admit to some ‘customer indifference' with regard to Jeevan Vriddhi.
MOSTLY UNAWARE
Mr P. G. Dileep, General Secretary, LIC Agents' Organisation of India, agrees. “Ninety per cent of customers are unaware of the tax implications,” he told Business Line .
Nor do they bother themselves until the month of December, when suddenly they begin scouting for tax saving instruments.
He felt that while awareness may improve through the media, Jeevan Vriddhi sales could get affected in the bargain.
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