5 Ways to Plan a Tax-Free Life with Life Insurance Plans and Other Investments

Do you have dreams and responsibilities that you need to fulfil? Of course, you do. Everyone has their own list!

For instance, you might want to be a globetrotter, or become a millionaire, or send your child to the best university out there. But, to tick-off these items from your list, it’s important that you plan. And when it comes to financial planning, what better than life insurance plans. Yes, you heard it right!

Life insurance plans aren’t just restricted to providing insurance cover. They also act as significant tools for financial planning and meeting your life’s goals. Whether your goal is to create wealth, fund your child’s education, or plan a peaceful retirement, these plans come in handy. Most importantly, the tax benefits offered by these plans make them valuable financial planning tools, allowing you to plan a tax-free life.

The primary advantage of life insurance plans is that the death benefit goes to the beneficiaries completely tax-free. Meaning, the amount received can be fully used for replacing lost income, paying off debt, or meeting other important goals.

Here’s a look at some significant financial goals and how you can achieve them using life insurance and other investments:

Saving for Your Child’s Education (Child Plans)

A firefighter, a ballerina, an astronaut, an artist your child may dream of being anyone! Therefore, it’s upon you to foster an environment in which their dreams are valued and fulfilled. As a parent, it’s your responsibility to financially safeguard your children’s dream so that they can carry on their passion into adulthood.  

For this, parents can make prudent investments in child education plans and create a financially secured environment for their growing big dreamers. These days customized ULIP based child plans are available with insurers and these plans are equipped with dual power of investment and insurance!

Reputable insurers like Max Life Insurance offer many benefits with such ULIP-based child plans including unlimited free switching, zero premium allocation and policy administration charges, flexibility to choose the premium payment term and tax benefits under section 80C. Also, one of the biggest ULIP tax benefits is that the maturity amount is entirely tax-free under Section 10 10(D).

Creating Wealth (ULIPs)

Each one of us attempts to wrap our minds around building wealth over time. The good news is, you can make it happen by investing in the right wealth creation instruments. Again, ULIPs are the best financial products when it comes to increasing your income and hitting your wealth goals for early retirement.

And as mentioned above,  ULIPs also help to build tax-free income. If you are in your 20s or 30s, therefore, purchasing a long-term ULIP plan, having 20-30 year tenure is a wise decision.

Ensuring A Financially Secured Future for Your Family (Term Insurance)

Term insurance can help mitigate the financial problems associated with untoward life’s eventualities, thereby, helping your dependents to overcome the financial trauma arising because of such risks.

If you have a spouse, children or other dependents who depend on your income, you need term insurance to provide for them in your absence. It is one of the least expensive and least complicated types of life insurance.

Additionally, it also offers life insurance premium tax deduction up to Rs 1.5 lakh under Section 80C, and the death benefit is completely tax-free too.

Retiring Well (Pension Plans)

If your vision of “happy retirement” includes, spending time with your grandkids, travelling the world, or buying a small beach house, then you need to have a sizable retirement nest egg. This will ease your worries about money, and help you lead your desired life post-retirement. After all, retirement is the time to sit back and enjoy what the world has to offer!  

However, to enjoy your retired life, you need to plan for it and start investing early in instruments like retirement plans, pension plans, PPF and ELSS funds. Retirement plans would not only provide you with a stable source of income in your hay days but also help avoid the fear of not having enough money when you stop working.

When you invest in pension plans, you get tax benefits under Section 80CCC. From your taxable income, maximum up to 1.5 lakhs can be deducted as your life insurance premium tax deduction. And when you decide to take a lump sum of the accumulated corpus, 1/3rd of the fund value can be availed tax-free.

Managing the Spiralling Healthcare Expenses (Health Insurance)

Emergencies tend to overwhelm us, and we never know when we may get involved in one. Therefore, it is recommended to be safe than sorry, especially when it comes to medical emergencies. Health insurance can provide you and your dear ones financial security in times of need. Additionally, it allows you to avail tax deductions under Section 80D, as follows:

Premium Paid for
Self, Spouse and Children Parents Total Deduction
No one is above 60 years Rs 25,000 Rs 25,000 Rs 50,000
You are less than 60 years. Your parents are above 60 Rs 25,000 Rs 50,000 Rs 75,000
You as well as your parents are above 60 years Rs 50,000 Rs 50,000 Rs 1,00,000


So, go ahead and invest in plans which will not only take care of financial needs and dreams of your loved ones but also help you plan a tax-free life.


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