The #IncomeKaTopUp Plan

Exide Life Insurance has come out with a pretty decent new plan they call the Exide Life Income Advantage Plan : Link.And I find quite a few things about it that I like.

Basically the plan involves you choosing a tenure for which you want to enjoy insurance cover and paying premium for the first half of that tenure. In the second half your insurance cover remains intact, even as the insurance company pays you fixed sum plus the yearly bonus if available. Alternatively, you could opt to receive just the fixed sum each year and receive all the accumulated bonuses in the final year along with the last income cheque from the insurance company. So you basically get to decide how to take your income, depending on your exact situation in life, your needs and preferences and the exact purpose this plan might play in your financial plan.

Personally I like this insurance plan because it hits the sweet-spot for me both from the insurance angle and the tax-saving-tax-sheltering angle.

As far as insurance needs go, I like that a 30 year cover is available for a person as old as 50 years.ie insurance cover up to 80 years. Though in my case it would alas cover me only up to the age of 67.I’m a big fan of Whole of Life Insurance Plans, and these days is getting to be incredibly hard to find insurance plans that cover you up to your 80th year and beyond. Additionally, I like the fact that this Plan allows for an optional Critical Illness Rider and an Accidental Death, Disability and Dismemberment Rider. Between them they help me part-plan a defence against a sudden requirement of larger sums of money in case of serious illnesses and hospital stays.

As for tax planning and tax-sheltering,this plan allows for 80C deductions on premiums paid and 80D deductions on the critical-illness rider. But the most interesting aspect is the tax-freeness on the income paid out and the maturity amount under section 10(10D)of the Income Tax Act,1961.Today many long term savings instruments are taxed at maturity, insurance pay-outs are not. And in this case you don’t have to take market risks and guessestimate market returns over the long term or market levels at the time of pay-outs as this is a traditional plan and you the policy holder don’t have to take market-risks as in case of ULIP Plans. So this Insurance Plan allows us to know with certainty just how much you will receive more or less exactly and you have options as to when to receive it and this income is tax-free. And it is here that I specially find the shorter tenure plans more interesting. By purchasing 3 or more plans of different tenures and feeding in the income from one into another, its possible to shelter your savings longer from taxes. To make things more interesting, this insurance company pays good bonuses on similar plans.

Such plans are often sold by banks as a wealth-management products to their privileged customers and they often have high premiums as they are targeted at HNIs. But this plan offers similar features at a much lower threshold of Rs12,000 pa only for the 30 year tenure version.1e something similar to a small recurring deposit deduction or a nominal Mutual Fund SIP.So in addition to just securing a source of second income to spend on small treats on a regular intervals, as the ad shows, this plan can be a clever way to save and add some stability to your net-worth along with securing you against unexpected expenses relating to serious illnesses and disability due to accidents.