Go for Insurance
I had been thinking for last few weeks on which insurance policy to consider, which would give me an insurance coverage, tax benefit and investment in the same order. After going through various reviews, Q&A sections, blogs etc. Following things evolved ULIP, Insurance Tax schemes and Term policy. Then further investigation on them made certain things more clear to me, which I would like to share in this blog.
Let me explain the scheme's nature briefly one after the other in simple ways:
Term Insurance: One would pay a fixed premium for certain duration ( 5/10/15/20/25/30/35 years ) on regular basis or single (one time lump sum), until this duration he/she would be covered from insurance. There is no survival benefit under this scheme, means if you survive the term period you get nothing. This is purely a risk protection scheme. Here the premium paid would depend on your age and term.
Insurance schemes: One would pay a fixed premium for certain duration ( 5/10/15/20/25 years ) on regular basis or single (one time lump sum), until this duration he/she would be covered from insurance. In case of death one's nominee receives sum assured + interest accrued. On survival one would get sum assured + interest accrued. In such schemes the premium paid would be much higher than the Term insurance for the same insured amount. Here the return on investment as a survival benefit would also be lower compared to investment in funds therefore risk free.
ULIP: One would pay a fixed premium for certain duration ( 5/10/15/20/25 years ) on regular basis or single (one time lump sum), until this duration he/she would be covered from insurance. In case of death one's nominee receives sum assured or fund value, which ever is higher. ( Fund value because certain amount from premium would be used in investing in market). In ULIP plan, part of the premium would be covered for insurance and other part for investment in markets and another part is paid for admin charges ( fund management, broker commission, mortality charges ). Premium would be much higher compared to Term insurance for the same insured amount. Return on investment on survival could be better than Insurance schemes because markets returns could be higher.
Amongst these, the best one could be an Term Insurance + Investment into ELSS or PPF or FD according to your convenience. This accumulated amount ( Term insurance premium + investment into ELSS or PPF or FD ) can be lesser than the premium paid for ULIP ( since no admin charges) for the same or better benefits considering both case of death and survival. Consider the example given in the link here <http://www.business-standard.com/india/storypage.php?autono=280394>.
Disclaimer: I am neither an financial analyst nor finance student the above writing is based on my understanding after reading few reviews, blogs and Q & A sessions at rediff. Comments are appreciated.
Let me explain the scheme's nature briefly one after the other in simple ways:
Term Insurance: One would pay a fixed premium for certain duration ( 5/10/15/20/25/30/35 years ) on regular basis or single (one time lump sum), until this duration he/she would be covered from insurance. There is no survival benefit under this scheme, means if you survive the term period you get nothing. This is purely a risk protection scheme. Here the premium paid would depend on your age and term.
Insurance schemes: One would pay a fixed premium for certain duration ( 5/10/15/20/25 years ) on regular basis or single (one time lump sum), until this duration he/she would be covered from insurance. In case of death one's nominee receives sum assured + interest accrued. On survival one would get sum assured + interest accrued. In such schemes the premium paid would be much higher than the Term insurance for the same insured amount. Here the return on investment as a survival benefit would also be lower compared to investment in funds therefore risk free.
ULIP: One would pay a fixed premium for certain duration ( 5/10/15/20/25 years ) on regular basis or single (one time lump sum), until this duration he/she would be covered from insurance. In case of death one's nominee receives sum assured or fund value, which ever is higher. ( Fund value because certain amount from premium would be used in investing in market). In ULIP plan, part of the premium would be covered for insurance and other part for investment in markets and another part is paid for admin charges ( fund management, broker commission, mortality charges ). Premium would be much higher compared to Term insurance for the same insured amount. Return on investment on survival could be better than Insurance schemes because markets returns could be higher.
Amongst these, the best one could be an Term Insurance + Investment into ELSS or PPF or FD according to your convenience. This accumulated amount ( Term insurance premium + investment into ELSS or PPF or FD ) can be lesser than the premium paid for ULIP ( since no admin charges) for the same or better benefits considering both case of death and survival. Consider the example given in the link here <
Disclaimer: I am neither an financial analyst nor finance student the above writing is based on my understanding after reading few reviews, blogs and Q & A sessions at rediff. Comments are appreciated.
posted by Arun kumar T | 11:07 PM
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