Why to buy Life Insurance? Life insurance is the best way to protect your family financially. In plain language, it protect the family members financially incase of death of the polcy holder. There are other benefits available apart from death benefit. I have come across calls from many insurance agents who try to sell other life insurance products like endowment plans and ULIPs trying to push as term plan. In this post, we will talk about why term plan/ protection plan/ peru life insurance makes sense for a bread winner.
Term Insurance product has caught fancy of savvy Investors only recently , little more than a decade and constantly gaining popularity in Urban India especially. Let us look at what is a pure term insurance and how it works in our scheme of financial planning.
Read – How life insurance claims gets rejected? What to do if claim is rejection is wrong?
“Insurance” is a contract to protect against risk. Investment components are added to the product to make it more attractive. I must add, that a chunk of lump-sum money payout together at a deferred term incase of ULIP and Endowment insurance plans makes the products (savings/Investment + Insurance) a very attractive offer. But this one is unable to over any family adequately.
For all Life Insurance insurance plans, IRDAI (Insurance regulator and Development Authority of India) has mandated a maximum premium to be capped at 10% of the sum assured (or Sum Assured to be 10 times) to be annual policy premium to become eligible for tax deduction benefit under income tax section 80C for and total maximum investments capped at Rs. 1,50,000 as on FY 2020-2021 .
Let us consider we have 3 insurance policy options – a) Option offering 10 times Sum Assured and Option B) 20 Times of Sum Assured and a 3) A Term policy. For illustration we are chosing a 30 year old male non-smoking with 1 crore sum assured for 3 years. I will not mention any insurance company here, as I am doing this illustration for education purpose and understanding only. I am also not including the saving or investing benefits offered by option A and Option B (Cause they do have assurance of retun on maturity, Option C is only death benefit, No Maturity value).
I am taking HDFC Life insurance Term insurance premium for illustration purpose.
| Life Insurance coverage | 10 times of yearly premiumPlan A | 20 times of yearly premiumPlan B | Term Insurance (Pure protection plan) [HDFC Life]Plan C [approx] |
| 25 Lakh | 2.5 lakh | 1.25 lakh | Rs. 3,600/- (approximate) |
| 50 Lakhs | 5 lakh | 2.5 lakh | Rs. 6,000/- (approximate) |
| 75 Lakhs | 7.5 lakh | 3.75 lakhs | Rs. 8,000/-(approximate) |
| 1 Crore | 10 lakhs | 5 lakhs | Rs. 10,000/*- (approximate) |
So we can see, the premium for adequate life coverage can be bought at a very affordable rate in Term insurance plan, while the other plans offer same insurance cover at 40 to 80 times of the term plan.
However, Plan A and Plan B has additional investment component – Noteworthy, your investment cannot be partially withdrawn, making it an illiquid investment option through out the policy term. If you have job change, take sabbatical or some minor setback, Plan A and Plan B will become a burden and on non-payment Insurance benefit will be compromised.
What we can Expect from a pure-term Insurance plan? It is a low cost high coverage insurance plan. It is designed for financially protect the family of the policy holder in-case of untimely death. This insurance is only for the bread-winner of the family whoseuntimely demise can shake the financial foundation of the loved ones. , it should be taken by anyone who has responsibilities like elderly dependant parents, dependant wife and children, home loan, car loan etc. One should consider higher insurance cover incase of medical conditions of self or family members, impending college education cost for children or absence of retirement kitty.
As Life insurance acts as protection against untimely death, it is said that one should take atleast 10 times of one’s annual salary, to adequately protect the loved ones to protect against inflation, child education, non-earning spouse, dependent elderly etc.
Term plan doesn’t guarantee a return on your premium. There is no financial product which is risk free. But I have learnt with experience, that biggest ‘risk’ in finanacial product is not knowing the product and category well. So check the exclusions each insurance company has mentioned in their websites and learn and choose the insurer after reading and taking proper feedbacks.
Important factors to choose term insurance policy –
How many dependents you have – If you have elderly parents dependent on your income or you are married and your spouse is a home maker (and) or school going Children
Family financial Goals – If you have not yet saved enough for adequate critical milestones like children higher education, have outstanding big loans (home loan/ vehicle loan)
What is the adequate life cover you need– Do some calculation on this. Apart from 10 times of yearly salary rule, do you have any high liability like children high education/ outstanding Home loan etc
Compare a few options based on coverage amount, claim-ratio, policy exclusions and rejection ratio
Term plan is not a substitute for investment. It offers a support system. In ideal situation, term-insurance premium we should consider as a yearly premium to Insurance company for protecting future of your loved ones in your absense, while buying this insurance, we really hope and pray that we should never require to file this claim settlement form ever. As this insurance cover offers a lumpum benefit to the immediate family members in case of death, this works like a parachute or a cushion from a hard-landing.
Investment and Insurance are both essential and important part of our financial plan. But, both has different purpose in the plan. Even if you choose to buy ULIP or Endowment, you should do some research and learn about all the insurance option before opting for an insurance plan
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POSTED ONEDIT”अटल पेंशन योजना -PENSION FOR EVERYONE – FINANCIAL SECURITY FOR ALL”
अटल पेंशन योजना -pension for everyone – Financial security for all
Old age deserves some peace of mind and happiness. But millions of people under poverty line, that is still distant dream in India. To fight the perils of poverty and old age, PM Narendra Modi introduced multiple social security scheme in year 2015. And Atal Pension Yojana is one of them.
What is Atal Pension Yojana? This is a pension yojana now you can suggest your maid, cook, Kirana wala, Plumber and contract labours and everyone who doesnt have one and doesn’t pay income tax yet..
Read here about Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana,
In 2015, Indian Government introduced important financial inclusion and social security programs for the financially non-protected citizens especially. To enseure financial security to especially for those working in informal sector or self-employed Indian citizens, The Government launched Life Insurance, Personal Accident Insurance and Pension Scheme – a simple savings scheme.
Atal Pension Yojana is a scheme aimed at protecting the financial future of the low-income self employed people and people with unorganized sectors, like shop-keepers, contract labours etc.
This scheme is open to citizens of India who doesn’t pay income tax yet and not empanelled under EPF and other schemes (chart mentioned below), one can subscribe to it between 18-40 years, the contribution can be made till 60 years of age. Under this scheme, a subscriber will receive a minimum guaranteed pension of Rs 1,000 to Rs 5,000 per month after attaining the age of 60 years, depending upon his contributions. According to a recent announcement in July 2020, Finance Ministry is considering a proposal to relaxing the maximum monthly pension to Rs 10,000 from Rs. 5000 currently and raise the maximum age limit for entry age in the Atal Pension Yojana scheme to 50 years.
Finance ministry is also considering the proposal to enable the Atal Pension Yojana (APY) subscribers to increase/decrease their pension plans as per their changed income levels and capacity to pay APY contributions, which will be very uselful foo continue the subscriber contributions in the scheme till 60 years.”
How can One apply for Atal Pension Yojana (Online too)?
This scheme is currently being distributed through 258 active APY Service Providers consisting of Banks and post-offices as this scheme is only available to those who have a Savings Bank account. Having a Aadhaar card will be very useful in this.
Who can Apply?
Any Indian Citizen Between Age 18 – 40 can enter the scheme and continue the contribution till 60 years. Who is not empanelled with any other government pension / EPF scheme.
What is the minimum contribution requirement for APY? And how frequently one has to pay?
The contribution will depend on the entry age and target pension, . One can choose monthly, quarterly or half-yearly payment. The contribution can be made by auto-debit facility.
Atal Pension Yojana Chart
There is a small-payment on non-payment on non-contribution. Banks are required to collect Rs. 1 per month for contribution of every Rs. 100, or part thereof, for each delayed monthly contributions. On non-payment, one has to make the contribution next month.
Does your house maid has a life Insurance? It costs Rs. 330
It is mandatory to provide nominee details in APY account. If the subscriber is married, the spouse will be the default nominee. Unmarried subscribers can nominate any other person as nominee & they have to provide spouse details after marriage.
How to Check the Status of your contribution in Atal Pension Yojana?
Find Atal pension yojana statement here – Keep Your PRAN No. handy.
https://www.npscra.nsdl.co.in/scheme-details.php
Then click on APY e-PRAN/Transaction Statement View
You will be directed to your contribution page.
How does Pension distribution happen?
Subscribers would receive the guaranteed minimum monthly pension of Rs. 1000 or Rs. 2000 or Rs. 3000 or Rs. 4000 or Rs. 5000 at the age of 60 years. The monthly pension would be transferred to the subscriber’s account, and after him to his spouse and after their death, the pension corpus, as accumulated at age 60 of the subscriber, would be returned to the nominee of the subscriber.
Ask your plumber to get a personal accident insurance cover- It costs Rs. 12
In case of premature death of subscriber (death before 60 years of age), spouse of the subscriber can continue contribution to APY account of the subscriber, for the remaining vesting period, till the original subscriber would have attained the age of 60 years.
Other pension plans are there like NPS, lic pension plan, Annuity plan etc you can check online for them.
Who cannot apply for Atal Pension Yojana?
Indian Citizens who are already part of a social security system such as mentioned below cannot apply for it.
Employees’ Provident Fund and Miscellaneous Provision Act, 1952
The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948
Assam Tea Plantation Provident Fund and Miscellaneous Provision, 1955
Seamens’ Provident Fund Act, 1966
Jammu Kashmir Employees’ Provident Fund and Miscellaneous Provision Act, 1961.
Or any other statutory social security scheme
Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana aims to cover the lower section of our society, let us spread the word about the benefits to the people who may need it.
Banks – State Bank of India, Canara Bank, Punjab National Bank, Federal Bank, UCO Bank and many more
You can open Atal Pension Yojana account at India Post office branches too. The forms are available in Hindi, Bangla, Gujarati, Marathi, Tamil,Telegu, Oriya etc.
Find more details at –https://npscra.nsdl.co.in/nsdl/scheme-details/APY_Scheme_Details.pdf
Must read for Financial Education –
Let’s Talk Money – Monika Halan
I will teach you to be rich – Ramit Sethi
Rich Dad Poor Dad – Robert Kiyosaki
Easy Money Triology – Vivek Kaul
Aapka Paisa Aap Samhalein (आपका पैसा, आप संभालें)- Rajnish Kant https://www.youtube.com/embed/XE2iFvR5rQc?feature=oembedPOSTED ONEDIT”DID YOU KNOW PERSONAL ACCIDENT INSURANCE COSTS RS. 12?”
Did You Know Personal Accident Insurance costs Rs. 12?
Many a times lack of awareness is what makes us feel helpless. During this lock-down phase, I have spoken to many women who work as house-helps, other jobs earning small sum, many of them didnot have Jan-dhan account, the ladies who had Jan-dhan account, most of them, depending on the eligibility, got the money deposited in their account as promised by government. We may not have ultra-social security facilities, but we do have many benefits which a lot of people are not aware of. Let us take the responsibility and share the information on Jan Dhan account, Life Insurance – Pradhan Mantri Jeevan Jyoti Bima Yojana, Personal accident insurance (Pradhan Mantri Suraksha Bima Yojana) and Atal Pension Yojana.https://www.youtube.com/embed/XE2iFvR5rQc?start=43&feature=oembed
Pradhan Mantri Suraksha Bima Yojana
Pradhan Mantri Suraksha Bima Yojana offers Accident cover for only Rs. 12 per year. Let us look at Eligibility, Cover and benefits. It is a government-backed accident insurance scheme.
It is an personal accident insurance, introduced by PM Narendra Modi in the year 2015, to include all Indian Citizen under this social security cover. This is helpful for people especially who don’t have life insurance or health insurance cover to financially protect the policy holder incase of permanent partial or total disability incase of an accident.
Tip – To keep your PMSBY and PMJJBY insurance working, ensure to keep Rs. 340 in your Bank Account in Month of May, so that there is no default, otherwise insurance will expire and you will happy to apply fresh.
What are the features of PMSBY?
PMSBY gives the policy holder to insure oneself against unfortunate events that can lead to death or disability.
The premium is Rs. 12 per year
Insurance cover is Rs. 2 lakh
One can only have one policy under this scheme
What are the top benefits of PMSBY scheme?
In case of accidental death, as the claim amount can be availed by the nominee.
Flexibility to continue or discontinue as per one’s wish
Tax deduction as per Income tax Section 80C and Sum Insured of Rs. 1 lakh is non-taxable as per Section 10(10D)
Incase of Permanent total disability policy holder gets Rs. 2 lakh (insurance cover)
Incase of Permanent partial disability, policy holder gets Rs. 1 lakh (insurance cover)
What is the premium payment process?
The premium payment process relies on the auto-debit facility. The policyholder must approve of this while enrolling for the scheme.
When will the policy be terminated?
The policy will be terminated in the cases if the registered bank account is closed, the account balance is insufficient in the time of the yearly premium payment or the policyholder reaches the age of 70.
Eligibility Criteria for Pradhan Mantri Suraksha Bima Yojana
The minimum entry age for this scheme is 18 years
Age limit for availing this insurance benefit is 70 years
Applicant’s saving bank account should be integrated with the person’s Aadhaar card
PMSBY application form is available in several regional languages apart from English and Hindi. For example, the form is available in Hindi, Gujarati, Marathi, Tamil, Telegu, Oriya
Must read for Financial Education –
- Let’s Talk Money – Monika Halan
- I will teach you to be rich – Ramit Sethi
- Rich Dad Poor Dad – Robert Kiyosaki
- Easy Money Triology – Vivek Kaul
- Aapka Paisa Aap Samhalein (आपका पैसा, आप संभालें)- Rajnish Kant
