The most effective ways to save money on taxes. Legally!

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While it’s no secret that life insurance can save your family from financial hardship if the unexpected happens, did you know it can also help you shave money off your tax bill?
Term life insurance plans provide coverage over a specified period and are not subject to federal income tax in the same way that permanent life insurance policies are. Here are the top 8 benefits of the best term insurance plan and why they are so beneficial for saving money on taxes in the long term.

1) Tax-deferred gains

The money you put in your retirement account is growing tax-free until you withdraw it. That’s not true with investments outside an IRA or 401(k).

If your portfolio is outside these accounts, then you’re subject to capital-gain taxes if and when you sell—and that can add up over time, making them less attractive from a long-term tax perspective. And once those dollars are withdrawn from your investment account, they will be treated as ordinary income and taxed at whatever rate is applicable.

2) A Back-Up Policy

Many people can’t afford life insurance or think that they don’t need it. However, you never know when you might have to cover an unexpected expense – especially if you have dependents who rely on your income.

A best-term insurance plan life policy is a great way to protect your loved ones and build savings in your tax-deferred retirement account at the same time. Here are some more benefits

3) Asset Protection

Your home is likely your most valuable asset, so protecting it with life insurance makes sense.

By securing a best-term insurance plan that will pay out after your death, you can leave behind financial resources for your loved ones—meaning they won’t have to worry about covering funeral costs.

4) Income Replacement

Whether you suffer from an on-the-job injury or become unable to work, term life insurance can replace your lost income and provide your family with financial security.

In addition, if you have debts left when you pass away, a term life insurance plan can pay off any remaining balance on these debts so that your loved ones are free in that area.

A best-term insurance plan is one way to help ensure that you and your family have financial security in case something unexpected happens.

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5) Estate Planning

Proper estate planning ensures that your money and property go where you want them to go after you pass away. It is always important to sit down with a financial planner or CPA and design an estate plan for yourself so that your family does not have to pay unnecessary inheritance taxes. After all, what good is making more money if you have to give it away?

6) Inflation Protection

Inflation protection is one way to ensure that your savings keep up with rising prices. It’s based on an amount per year in addition to what you’re saving now.

That amount can vary depending on how much inflation protection you choose and which term life insurance policy you have.

7) Death Benefit Cost Savings

Because most term plans don’t pay benefits until you die, they can qualify as a tax-free inheritance. If you’re married, your surviving spouse won’t have to pay income taxes on any life insurance proceeds they receive.

That can mean an instant increase in their savings if they inherit enough money to reduce their overall tax bill significantly (that is if they wouldn’t have to pay taxes on it at all).

8) Cash Values for Retirement Needs

If you’re close to or have entered your retirement period, term life insurance can help replace some of your income—and it can also give you cash right now if you need it.

For example, if someone dies in their 60s or 70s, they might not have many remaining years to contribute to their 401(k) accounts and may want cash as they start down that last stretch. A death benefit payout would cover those final expenses and leave them with some money that could go into savings or be used to pay off debt.

Canara HSBC Life Insurance has designed the iSelect Smart360 Term Plan keeping your goals in mind. You can get tax benefits up to Rs. 46,80012 with this plan. If you have any questions regarding tax benefits, please contact your independent tax advisor for the plan. Tax benefits may be available based on prevailing Income Tax laws and are subject to change.

Conclusion

In addition to traditional life insurance plans, there are other ways you can use life insurance to plan your estate and save on taxes. One such option is the term life insurance plan, which provides a simple and affordable solution that only pays out once in the event of an untimely death, while still fulfilling its tax-saving potential. Do check it out in case you’re interested in investing.

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