life insurance – My Money Streets

August 21, 2020August 21, 2020

Term Life Insurance PMJJBY पीएम जीवन ज्योति बीमा योजना – security for all

Who should buy this insurance? Why should anyone buy?

पीएम जीवन ज्योति बीमा योजना – लाइफ कवर

Pure term insurance plan (टर्म इंश्योरेंस स्कीम ), with low premium option can help many families in difficult times. If one doesn’t have any other life insurance policy, if one cannot afford a premium over Rs. 350/- a year, have income less than Rs. 15,000 a month, can begin with this term life insurance policy, as this insurance will cover 1 year salary incase of any unforeseen events. This is an Indian government initiative.

Have you asked your driver, cook, maid, caretaker, security guard, office peon if they have insurance? Its never too late – help as many as you can, take an effort – choose to walk them to nearest bank branch if required.

Covid19 pandemic has caught the whole world off-guard, more so for people at lower income and people with a lot of financial obligations. People who are financially fit, will find it easier to sail through the tough time, they always do.

Every one needs an insurance, but due to expensive premium and complex procedures, it wasn’t possible until year 2015. In the year 2015, government of India launched 4 important financial product aiming at financial inclusion.

– PMJDY – Pradhan Mantri Jan Dhan Yojana

– Atal Pension Yojana

– PMJJBY – Pradhan Mantri Jeevan Jyoti Bima Yojana

– PMSBY – Pradhan Mantri Suraksha Bima Yojana

Under Jan dhan se Jan suraksha program, Prime Minister launched this in May 2015. This is under government’s social welfare schemes. In this post, will discuss about the Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana. Both these insurance products are aimed at including all sections of society. These insurance products are affordable in all big private and public sector Banks, listed here in the post. Lets get to the details first.

प्रधानमंत्री जीवन ज्योति बीमा योजना

PMJJBY – Pradhan Mantri Jeeevan Jyoti Bima Yojana – is life insurance scheme, a protection plan, renewable from year to year, offering coverage for death due to any reason and is available to people in the age group of 18 to 50 years. Important for every working member of the family. For enrolment banks have tied up with insurance companies. Participating Bank is the Master policy holder.

Important points –

Life cover of Rs. 2 lakhs is available for a one year period stretching from 1st June to 31st May at a premium of Rs.330/- per annum

One can enter at the age between 18 years to 50years, renewable upto 55 years

A person can join PMJJBY with one Insurance company with one bank account only

Individuals who exit the scheme at any point may re-join the scheme in future years by paying the annual premium and submitting a self-declaration of good health

It offers tax deduction benefit under Income tax section 80C

Exclusion – Suicidal death is not covered under this scheme

Note – This scheme doesn’t offer any maturity benefit, insurance without any savings or investment component. It only covers death benefit of the policy holder in during the policy term uptill 55 years. The amount of Rs.2 lakh will be passed on to nominee on such unfortunate situation, helping the family through the tough times with financial support.

Links

Form of application and claim settlement is available here in Hindi, Bangla, Gujarati, English Kannada, Telegu, Tamil, Oriya Marathi – https://www.jansuraksha.gov.in/Forms-PMJJBY.aspx

Pradhan Mantri Jeevan Jyoti Bima Yojana Eligibility – Any Indian citizen who is between 18- 50 years old and has a savings account can enroll for this scheme through the participating banks. (List of Banks listed below)

One must have an Aadhaar Card

How to enroll to Pradhan Mantri Jeevan Jyoti Bima Yojana?

PMJJBY is managed by LIC and other private life insurance companies. One may apply through their Banks – Public sector Banks, Private sector banks, co-operative Banks, as per LIC website, about 1000 banks are associated with PMJJBY as nodal agency or Banking partners

Ask your Bank they offer if they offer PMJJBY or check online, will put a list of big Banks who does offer the scheme

You need to mention nominee (wife/ children/any other legal heir)

How to claim the insurance amount? कैसे उठाएं प्रधानमंत्री जीवन ज्योति बीमा योजना का लाभ?

Claim can be made by nominee incase of death of the policy holder.

Nominee has to approach the Bank, referring to the savings account which is attached with the Jeevan Jyoti Policy

Nominee needs to collect the claim form

Submit the claim form duly filled along with – Death certificate, cancelled cheque of the nominee’s bank account,

In next steps, Bank will verify the claim form. Along with the aforesaid documents of nominee, Bank will forward the claim to insurance company within 30days of submission.

Insurance company will verify all the documents of the policyholder, nominee details, within 30 days of receiving the claim, Insurance company needs to disburse the claim amount in favour of the nominee.

List of Bank partners

State Bank of India

Punjab National Bank

Union Bank of India

Bank of Baroda

Canara Bank

HDFC Bank

Federal Bank

ICICI Bank

South indian Bank

Allhabad Bank

Many other Banks are partnering in this scheme. Please speak to your home Bank branch or nearest Bank to get more details. If you have any observation, suggestion or queries do share in the comment box.

Look forward to come back with a informative blog post.

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April 16, 2018

The good side of the endowment plans which can be used smartly

I would like to call myself a rational person who likes to be without bias and greed. Well with a bit too much of rationalistic approach, I found myself actually biased towards ‘being rational.’ I can call myself rationally biased towards my investment choices, aggressive allocation of equity on portfolio and staying away from debt heavy instrumemts, especially the fixed deposits for short term amd endowment plans for long term to be specific. Well, that fits well with my current age, but that is not the only way to look at long term investing. Endowment plans fits perfectly for a set of investors based on their risk profiles, investment objective, personal choice and priorities. Endowment plans stand out in long term debt investments.

Though I like aggressive equity allocation for long term, with all humility I will accept that endowment as on today stands equal with the other long term debt products in various ways. Endowment plans have always have been a popular insurance cum savings product in India, credit goes to the hefty commission the insurance agents receives from the insurance companies for decades. My personal opinion have been rationally biased against it because of its lack of transparency on asset allocation, high agents commission, low coverage and low returns. The fact which bothered me the most is the “miss-selling”. You may think, if I have so many rational points against the endowment plans, why I am even writing this post and what is my agenda? You will come to know.

source – Wikipedia

With my first job, I joined the bandwagon of mutual fund investing, as the mutual funds investments were just picking up at fast pace, SIP was gradually getting introduced as a disciplined way of investing, superior tax-free return over long term was very attractive. And I hated the Endowment plans. I do have a active policy, I bought this one before I signed my first joining letter. Every time I paid the premium, I felt irritated about what a waste of my hard earned money until… until the ‘D’ day 2018-19 union budget struck hard on my equity dreams. Levying 10% tax on my artistically built equity portfolio on long term capital gains hit hard on my mind. It wasn’t that the few other factors were not coaxing me to have a rational look at endowment plans and completely reject it, but the budget day nailed it. Budget not only introduced tax on long term capital gains, it also introduced 10% tax on dividends of equity and mutual funds. The equity dreams came crashing momentarily for many of us.

I recalled my father’s advice, my boss’s suggestion, inflation numbers and newly introduced Long-term-capital-gain-tax. In a whole it did push me to give a thought about taking a rational look at the cost and return analysis.

While my view of equity being the best investment for long-term capital growth remains the same, endowment plans have made a special space for itself. Here is the list of things you get as benefits of endowment plans.

1. Life cover, as per IRDA regulations, insurance companies have to give a minimum 10 times life cover of annual premium, so at given point during the policy term you have a life cover, which is upto 20 times incase of endowment plans. For a 10 thousand yearly premium, you will be covered for about Rs. 2 lakh. The maturity value will be the accumulation of premium and interest earned from various instruments as the insurance company deplys the same to generate return.

2. Income Tax benefit under section 80c. This product gives you tax benefit under income tax, the yearly premium can be calulated to reduce the income tax burden.

2. Loan against insurance at a minimum interest rate – This is an interesting benefit which mutual funds, ULIPs or term insurance plan can’t provide you. This instrument can be used as a collateral for an emergency loan if required, the loan amount and eligibility will depend on how long are you invested in the policy. Few people in my circle were immensely benefitted during medical and business emergencies.

3. At the current interest rates, the return of 4-4.5% tax free is equivalent to the post tax fixed deposit returns. Also,there are no long term fixed deposit schemes over 10 years tenure in India. Over the years, India is moving towards low tax regime, which means in coming years the interest rate could go well below 5%. Endowment plans could give equivalent returns.

4. Tax-free return of accumulated corpus. This is a bonus. Given the recently launched LTCG, very few instrument like PPF and Life insurance.

This option is ideal for individuals above 45 years of age, as financial planners suggest reducing the equity exposure gradually and look for fixed income options. This option is also applicable for people in the highest tax bracket, as the post tax return on Fixed deposits are equivalent to the maturity value of a long-term endowment plans.

This is a viable option for somebody who dont like equity investments, above 45 and looking at saving a corpus for retirement. Individuals with 30% tax bracket bracket can also consider the same as a long term FD with a provision of getting loan and tax exemption at maturity with life cover. However, One should keep a low exposure given its low return. For savvy investors, Term insurance and ULIP are good product which has a low cost structure and puts your money to good use maximising your profits.

To maximise the benefits, you should ask your insurance agent to pass on some cash benefit to you by paying first two premiums. This is a negotiable deal you can broke with the agent.

Kindly note that endowment plan should be bought only for long term like 20 years and above. Endowment plans attract heavy penalty on missing due dates for premium, surrender pre-mature and may close the policy if policy-holders consecutively misses premium payments. Also, it is an illiquid inveatment as one cannot withdraw the investments before its maturity or policy-holder’s death. If one doesnt continue paying premium upto atleast 3 years, the investors will not get any return on the investments. Also, this may give very low or no inflation adjusted return given India’s average inflation rate is about 5%.

THIS POST IS FOR EDUCATIONAL PURPOSE, AND NO WAY I AM PROMOTING ENDOWMENT PLANS AS TOP CHOICES FOR INVESTMENT FOR EVERYBODY, THIS IS APPLICABLE TO SELECT SET OF INDIVIDUALS, THIS ARTICLE IS JUST A RATIONAL LOOK AT ENDOWMWENT PLANS. TAKE A CALL ANALYSING YOUR FINANCIAL POSITION

January 3, 2017

Which life insurance to buy? Term insurance – pure life insurance

eTouch Online Term and Health Cover Plan – a comprehensive solution for all #IfsOfLife

Why to buy a life insurance? The answer is to have peace of mind. If unforeseen situation abruptly end your journey of life, your loved ones need not face a financial crunch in addition to mental agony. Financial planning is a must, but what if it ends in the middle of your wealth creation, if an accident breaks the life thread when your toddler just started talking and has a complete life ahead without one parent? Few things are very difficult to plan but planning for these emergencies is now possible in with the #Term insurance plans.

#Term insurance is a pure life insurance product without a string of saving or investment attached with it. What it simply means is that if the policy holder dies within the policy term, insurance company is liable to pay the sum assured. In case of survival during the term, insurance company has no liability towards policy holders. As the younger generation is warming up to this insurance product, companies are bringing in additional features to include some more additional risks to give a comprehensive solution to policyholders with a little extra premium.

Recently I attended the launch of eTouch Online Term Plan by Bajaj Allianz LIC, and interacted with the team as well. In the question answer session, I actually came to know about certain facts about term insurance, which we don’t think deeply but is essential to know.

5 ultimate features of eTouch Online Term and Health Cover Plan

1. Complete online product which can be bought in few minutes with online chat support. A dedicated call centre is also available to walk you through the whole process, it reduces the agent interference and reducing the premium for the product

2. This product takes care of the scariest #IfsOfLife untimely death, permanent disability due to accident and 34 critical illnesses, one has an option to choose from – Shield, Shield Plus, Shield Super, Shield Supreme gives the policy holders flexibility to choose from

3. A minimum cover of 50 Lakh can by bought but anybody who has a yearly income of Rs. 3 lakh, the premium for the same could be as low as Rs. 5 Thousand, for a healthy 30 year old.

4. The plan also offers an inbuilt waiver of premium rider applicable in case of accidental total permanent disability or on critical illnesses, depending on the variant opted for.

5. Apart from the flexible options for policy holder, Bajaj Allianz Life eTouch Online Term and Health Cover Plan also allows for the nominee to receive the policy benefits in a lump-sum amount or in monthly instalments. Option 1 – lumpsum, option 2- 50% lumpsum and rest in increasing monthly instalment, option 3 – monthly level or increasing instalments.

Click here

Step 1- Calculate your premium

Step 2- Generate your quote

Step 3- Choose your plan

Important features of the plan

1. Tax benefits under 80C

2. Minimum entry age 18 years

3. Maximum age at entry 65 years

4. Minimum age at maturity – 28 years

5. Maximum age at maturity – 75 years

6. Minimum and maximum policy term – 10 – 40 years

7. Premium payment frequency – yearly, half yearly, quarterly and monthly

8. Minimum sum assured = Rs. 50 lakhs

9. On non-payment of premium before the expiry of the grace period, then, the policy will lapse at the expiry of the grace period, and no benefit under the policy will be paid.

10. HSAR Benefit – The plan offers a premium discount for all policies based on smoker categorization, variant, sum assured slab for each age and policy term. The HSAR will be applied for every additional `1lac increase in sum assured above the base sum assured.

11. Free look period – 30 days

12. Grace period – 15 days

B-Fit wellness app

With the new policy, Bajaj Allianz LIC also launched wellness app, B-Fit, for its employees and policy holders. Equipped with features like a food guide for Indian cuisine, a health score tracker, expert recommendations basis health score and personalized health articles curated to the user’s interests to make the app engaging. Providing a multitude of other exciting services, B-Fit is an assured and reliable app to help one achieve one’s fitness goals.

So, take care of your health, wealth and family by buying a right term plan. Stay fit with B-Fit app. Do post your queries on financial planning or worries, would love to help you out.

December 20, 2016

Bajaj Allianz is all set to bring an ultimate inclusive term insurance plan for all

Term insurance is making its place in India with its own right. The beauty of the pure insurance product has charmed the savvy Indian investors and steadily catching up with all.

What is a term insurance ?

Term insurance is the purest form of life insurance with no strings of savings or investment attached to it. It is known for providing a lump sum benefit incase of unfortunate death of policyholder. It is an ultimate protection plan for the claimant.

Who should buy term insurance policy?

Term insurance is one of the most important financial instrument for every earning individual who has dependants to look after. The tenure can vary from 10 to 40 years. However, generally the cover is extended till upto 70 years of age.

Affordable premium for high coverage

The benefit which make it most attractive to the younger generation is it’s low-cost pricing. The pricing is extremely affordable compared to the other forms of life insurance with a high monetary coverage for the policyholder ensuring unforeseen situation doesn’t cause financial distress. It’s best to buy the insurance policy early to lock-in a low premium for the entire term. With every passing year, the premium cost increases, entering early has it’s own advantage. So, with increased age of the policy holder, premium increases significantly. Two other important factor which affects the premium are the lifestyle of the policyholder (smoking/drinking habits) and nature of profession, individual with life risk exposure in the job, will fetch higher premium.

What do we expect from a friend? To be flexible, helping and being around through ups and downs and sail through the #IfsOfLife. This product aims to be just that. This product aims to protect you and your family like that best friend, who will help you in sail through all tough times.

What is so special about the new product by Bajaj Allianz Life Insurance company?

Looking at the growing interest on term insurance plans, Bajaj Allianz has designed an inclusive product which will not only provide death benefit but also extend a caring hand incase of critical illness or permanent disabilities.

Isn’t it great if an insurance product is committed to you for life, like your best friend, staying around and helping during the toughest phase of your life. Many a times it is not untimely death, but a critical illness or permanent disability caused by an accident which leaves the family morally and financially down and distressed. This product will be an answer to these unforeseen circumstance. And all these can be done with few clicks! Starting from choosing the right protection amount and tenure, term, and additional benefits which is a flexible choice. It also will encourage the buyers to do a thorough check on inclusions and exclusions.

Bajaj Allianz, a joint venture between Allianz SE, the world’s leading insurer, and Bajaj Finserv Limited an established name in the life and non-life insurance segment. It has done an extensive research to develop the insurance plan keeping in mind the changing lifestyle of the progressive Indians. The gen Y is now aware and accept the concept of pure insurance and increasingly opting for term plans which offers adequate cover at rational pricing.

I am eagerly waiting for the launch of the new life insurance product by Bajaj Allianz @BajajAllianzLIC, on 23rd of December 2016 in Mumbai. #IfsOfLife

August 30, 2016

Term Life Insurance in India – essentials

Term insurance is the pure form of life insurance, wherein the policyholder pays a premium to cover his/her death risk for a particular sum of money for a particular term i.e.15, 20, 25, 30 years and so on . On demise of the policy holder within the term, the nominee (the beneficiary) is entitled to get the sum assured in lump sum or deferred manner as mentioned the policy contract. If the policy holder survives the term he is entitled to no payment/ #maturity benefits. This policy is highly recommended for the earning members of the family with dependants.

What is an ideal life insurance amount for you?

While choosing an ideal #insurance product, one need to do basic calculation of future monetary requirements based on the laid out financial goals, it cannot be a guess work.

Please write down the present costs you would incur for the following purpose

Elderly parents to look after
Present age of children and their future needs for education
Do you have a working spouse? If not, her lifelong expenses on health and living

Though exact cost you may not be able to arrive at, please click to find the future costs (inflation) and expenses of education, marriage, living standards etc.Adding up these costs would help you arrive at the right amount, your ideal insurance cover. Still, if you are confused, multiply your yearly income with 10. This should be your ideal sum insured.

Ex – If your yearly income stands at 10 lakh, sum insured should be Rs. 1 crore.

What is the premium you need to pay for this insurance product?

The premium of a term insurance is calculated on few factors.

1. Age of the applicant – With each passing birthday you would need to shell out extra money as premium to buy a new policy, however, it remains the same through the term. So, early entry gives you a good deal. Buy a term plan before your next birthday to save on premium

2. Health of the applicant – It plays an important role too. Two persons of same age may get different quotes for premium depending on the medical history and current health of the applicant.

3. Lifestyle – For example there shall be significant difference in premium for Smoker and a non-smoker of same age and health.

4. Policy term – You may chose the policy term depending on the offer and your needs, usually 10 -40 years, higher the policy term , higher will be the premium

The reasons why you should buy term Insurance is peace of mind. It buys you a adequate protection at a very low cost.

Parameters to chose the right insurance plan

For the same amount of sum assured, different insurers would quote different pricing. The points we should look at –

1. Inclusions and exclusions – This means, what are the exact conditions to be satisfied by the policy holders to receive the claim amount. Reason of death is one point insurers look at very closely for the payment of claims. Insurers may not cover unnatural deaths, suicide, death due to drug/alcohol etc.

2. Claim settlement ratio of the insurers – While comparing premiums, one must not ignore the CSR. It indicates the percentage of claims honoured on death of the policy holders in the particular year. A high percentage makes the insurers more dependable

3. Additional benefits – In addition to the basic life cover, insurance companies have added many additional features like accidental death benefit, permanent disability benefit, critical illness cover and deferred payment options to ease the burden of the policy holders

Tax Benefits on term insurance

On premiums paid and benefits received as per section 80C and 80D of Income Tax Act,1961.

Disadvantages of term plans

1. No maturity benefit on survival

2. Policy may lapse on not honouring 30days grace period for premium payment. And ou have to buy new policy all together

Top insurance companies based on claim settlement ratio 2015-16

Insurance Provider	Death claims received	Claim settlement ratio	Death claims paid	Claims pending	Per claim average value (Rs)
LIC	755,901	98.19%	742,243	0.5%	120,654
Max Life	9,223	96.23%	8,804	0.1%	278,816
ICICI Prulife	12,309	96.20%	11,546	0.8%	305,612
HDFC Std	12,189	95.02%	11,031	2.3%	238,890
SBI Life	14,876	95.70%	13,303	3.2%	229,572
Tata AIA Life	3,873	94.47%	3,659	1.0%	241,241
Star Union Daichi	1,266	94.08%	1,191	0.3%	285,306
PNB MetLife	2,466	92.90%	2,290	1.5%	448,821
Bajaj Allianz	20,661	91.30%	18,978	3.0%	183,291
Kotak Mahindra Life	2,686	90.73%	2,437	3.2%	296,143
AegonReligare	460	95.30%	413	0.2%	744,068

Top 5 basic online term insurance plans in India for #non-smoker, healthy female, age 30 years, Cover for 1 crore based on CSR, term and premium cost

Insurer	Policy Name	Policy Term	Premium
Max life Insurance	Online Term Plus plan	35 years	Rs. 8970/-
Aegon Religare (No. of policies claimed is very less)	Aegon Life iTerm Insurance Plan	35 years	Rs. 8395/-
ICICI Prudential	iProtect Smart Lumpsum Plan	35 years	Rs. 11,900/-
HDFC Life	Click 2 Protect Plus	35 years	Rs. 11,630/-
PNB Metlife	Mera Term Plan-Full Lumpsum payout Plan	35 years	Rs. 9258/-

The chart data source: Policybazaar

10 Reasons why you should avoid Endowment Insuranc…

August 29, 2016

Good news for the Indian investors, fewer bank representatives will push you to buy wrong insurance plans #ULIPs #bankassurance

Personal finance take on IRDA’s latest move on banning incentives to bank staffs

IRDA bans incentives to bank stuffs, #bankassurance

Impact –
1. To help lower misselling of insurance products by bank representatives. #bankassurance

2. The structure remains untouched for the other agents with 7% incentives over and above the commision.

3. The affect on the premium difference or anyother service differential is yet to be seen post this development.

The overall commision expenses have reduced over last decade, however, it still remains a costly affair for the investors.

The commision on sales still remains very high at 35-40% on the first year, 7.5% at the seond year and 5% for rest of the tenure, especially for the offline products

While online counterpart offers better pricing compared to these agent/ bank led products, one need to be careful to compare the exact offerings and the difference in benefits, if any.

#newsyoucanuse

August 26, 2016

10 Reasons why you should avoid Endowment Insurance Plans and chose Term Plan instead

10 Reasons why you should not by endowment insurance plans, slide show#

Endowment plans (Life insurance product) especially made popular by #LIC since mid 20th century, are very popular products in Indian households because of its high pitch campaigns and rampant mis-selling by insurance agents. Due to limited knowledge on the return calculation and conservative mindsets for investments, Indian population often fall for this wealth eroding instrument. Let us at look what these insurance cum investments/ savings plans actually offer.

These plans offer a sum assured on the maturity and added bonus componen accrued over the tenure. It cover death benefit upto sum assured and additional bonus component upto the premiums paid by the investor till the tie of death. Though it sounds very simple, I have found atleast 10 reasons, we should avoid this age old dominant insurance product.

1. The premium is exorbitant compared to the assured returns

For an insurance cover of 1 lakh, endowment plan would cost about five thousand; a term plan would approximately cover you for 50 lakhs in the same amount (considering the applicant is 30 years old)

2. It doesn’t adequately cover risks

Sum assured compared to the premium is very low. Hence, people end up buying a very low coverage sum assured compared to the actual requirement

3. The returns are not comparable to the rising inflation

Thumb rule of investment is projected return should beat the inflation numbers. If you rightly calculate the bonus payment in addition to the sum assured, on maturity, the return is no more than a 4% y-o-y appreciation of the total investment, while India is fighting inflation at 6-8% in last few years.

This investment is actually eroding the capital

4. Very high cost of investment

For a 10 lakh cover, it costs about 50,000 a year, while a Term Insurance plan would do the same for just 1 thousand

5. The allocation charges, expense break-up are hidden

Endowment plans in India doesn’t disclose the break-up of agent commissions, asset allocation charges, expenses, allocation for sum assured, death benefits etc, while in other investment products like #ULIPs, #mutual funds, it is mandatory disclose actual break–up

6. It is a complex product Insurance + Investment and fails in both area

To attract the attention of conservative investors who strive for capital protection at any cost, the category mixes two benefits, making it a poor product for both the needs, neither it is capable of providing adequate cover, nor giving any opportunity of wealth creation

7. The Bonus component is the biggest joke, offers simple interest, missing out on the Power of compounding

The ‘BONUS’ element in the endowment plans is the biggest miss-selling point used by the agents. The Insurance Company announces a yearly bonus, this is not given to you yearly, is added to your sum assured kitty. But, the bonus component varies every year, and it doesn’t get accumulated as compound interest, it stays the same, without earning a single penny interest on it. So, for example in an 20 years policy, if you earned Rs. 5,000 in the 5^th years as a bonus, it will remain 5000 till the 20^th year, without earning any interest on the amount.

8. The agents/ brokers push and miss-sell because, they get a high commission on this

There has been enough media bashing over high charges on #ULIPs, which #IRDA promptly lowered and capped the expense charges making it a bit better product for the investors. But, endowment plans charge as high as 40% of the premium in the first year, there are also high recurring charges attached to it

9. There is a requirement of pure insurance, keeping it clutter free

#Life Insurance is an important element of over-all financial planning. It is meant to cover life risk of a earning member in the family. It must cover atleast 3 times the annual income of the member, which ensures a financial cushion during a time of trauma and despair. A term insurance product is perfect answer for this. It has low cost structure and offers only death benefit and sometimes critical illness/ permanent disability cover for an additional cost. The premium difference between endowment and term plan is as huge as 80% which can be invested efficiently.

10. There are much better options available for wealth creation in the long term

The sentiment behind endowment plan is mostly having an extra income/ pension post retirement. But the product fails to deliver on the area because of its complex nature and high cost structure. If you are conservative investor also, you may consider dividing the remaining amount in two parts, one for monthly/ quarterly/ yearly PPF contribution (enjoys triple tax exemption benefit and return of 8-8.5% annually). The remaining part can be invested in Systematic Invest Plan (SIP) in a hybrid fund/ balanced mutual funds(about 60% equity 40% debt), will earn you over 12-14% annually over long term. [Note: When a mutual Fund invests 60% of its AUM in equity, it is considered to be an equity mutual fund for taxation purpose, and the return earned on the same over 1 year is exempted from taxation]