Aversion to risk is a basic human trait that pushes us to get ourselves and our loved ones insured. Insurance policies form an integral part of our financial planning, in terms of savings and investments, right from the moment we start earning. However, there is more to insurance policies than safeguarding ourselves.

Insurance helps you save tax. How?

1. Life Insurance

Premium on life insurance policies for self, spouse or children qualifies as expense allowed to be reduced as a deduction from your total taxable income under Section 80C of the Income Tax Act, 1961 subject to Rs 1.50 lakh. For an HUF, premium paid for any member of the family is allowed as deduction.

The amount received on maturity of life insurance policies is tax free, which means it will not be added to your taxable income. However, this is possible only if the premium paid does not exceed 10 per cent of the sum assured on maturity.

2. Medical Insurance

Under section 80D of the Income Tax Act, 1961, a deduction up to Rs 25,000 from the total income is allowed for health insurance premium paid for you, spouse or children. In case of parents who are above the age of 60 years, Rs 50,000 is allowed as deduction. If you or your spouse is a senior citizen then the limit increases to 30,000.

For an HUF, the limits are Rs 25,000 for any member of the family insured which has been increased to Rs 50,000 in case of senior citizens.

Also, expenses for preventive health check-ups can also be claimed subject to Rs 5,000 per year.

3. General Insurance

Any premium paid on insurance cover taken to protect property which is used in your business or profession, is allowed as expense under Section 30/31 of the Income Tax Act, 1961. Basically, insurance for your workplace, machinery or furniture used by you for work helps you reduce your total taxable income.

In fact, medical insurance premium paid for an employee by a company is allowed as an expense to the company.

However, to claim these deductions, the premium should not be paid in cash.

According to Insurance Regulatory and Development Authority May 2018 report, there has been a remarkable increase in the insurance premium from 2013-14 to 2016-17, for life as well as general insurance.