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Rediff.com  » Business » 'Term plans are excellent ways of getting insured'

'Term plans are excellent ways of getting insured'

March 04, 2010 15:30 IST

InsuranceThe much anticipated Budget announcements are over. The entire Opposition walked out from the Lok Sabha in protest terming the Budget as 'inflationary'.

The FM changed the slabs cutting the rate to 10 per cent for income up to Rs 500,000. The tax concession the FM said will give more money in the hands of the people.

But raising the duties on petro products will automatically hike the cost of petrol and diesel, which will not only hurt vehicle owners, but prices all around will also rise.

How to manage your insurance portfolio at this juncture? Is it right to put more money into insurance now?

During a chat on rediff.com on Thursday, financial expert Kapil Mehta explained how best to mainatin your insurance portfolio. Here is the transcript:

Kapil Mehta says, Hello Everybody, This is Kapil Mehta. I am here to answer your questions on life insurance! Kapil


Foresight asked, Since it is likely that tax benefits on housing loans and possibly insurance are likely to be withdrawn next year when the direct taxaes code comes into effect, will it be worthwhile availing a new housing loan or a new insurance policy at this juncture ?
Kapil Mehta answers,  at 2010-03-04 14:00:38Dear Foresight, The decision to purchase a housing loan or insurance is a very fundamental one and should not be driven purely by the tax benefits. Regarding life insurance, protection oriented life insurance (such as term plans) are likely to remain tax free even in the new code. So don't wait and make your purchase now.
harish asked, how insurace is more saver than FD?
Kapil Mehta answers, Dear Harish, Insurance serves many objectives. It provides protection to the family in case of death as well as ensures savings. FDs focus only on the investment aspect.
ashu asked, I wan't to invest 5000 monthly in equity Funds. Kindly advice
Kapil Mehta answers, Dear Ashu, You could consider the purchase of a unit link life insurance product and select the equity option. Most companies give the facility for monthly debiting through an ECS mandate.
nitesh asked, i want to invest money but can u suggest where to invest?
Kapil Mehta answers, Dear Nitesh, That is a very broad question. You might want to think through your investment objective. If you are looking for long term returns then equity is good. However, if you want less risk then debt or savings schemes in banks can be relevant. Having a clear objective is important.
Pradeep asked, Are term insurance plans of any help? I mean you don't get any money back at the end of the tenure.. so?
Kapil Mehta answers, Dear Pradeep, Term plans are an excellent way of getting insurance. They are low cost and provide security to the family if the breadwinner passes away. In my view term is an essential component in all financial planning.
Naveen asked, Sir..FM has increased the tax slab but also increased other taxes and petrol prices. I don't see much profit to middle class people. I am a software prof. i am ready to invest(spend) money in insurance...what insurance policies are best to get the maximum benifit and savings...
Kapil Mehta answers, Dear Naveen, The budget puts more discretionary spending ability in your hands. You are right that after cost increases are factored in there might not be much incremental surplus with individuals. There are several good insurance policies available. Why don't you reach out to our company DLF Pramerica!

anilnakti@rediffmail.com asked, Hello Sir, I have 3 Reliance life insurance ULIP's policies with 10yrs term with low cover & hogh premium. i had already paid 1 year premium, but now i realise that instead of investing in ULIP's better to inv.in term insurance & other inv.option, my question is if i cancelle this policies now what will my 1 yr premium will refund & when. thnks Anil
Kapil Mehta answers, Dear Anil, There is a 100 % charge if the policy is cancelled in the first year. Therefore, I would suggest that you continue to pay your premiums. Over the medium term you will find that the returns and benefits of life insurance are as attractive if not more than the other options that you might be considering.


skjain asked, What about home loan interest/principal rebate after implementation of direct tax code in 2010-11.
Kapil Mehta answers, Dear SK, This is not my domain. You might want to check this with some of the banks.


vikas asked, Hi kapil Recently FM has announced additional rebate of Rs 20,000 on long term investment in Infrastructure bonds. can you please suggest few good Infra bonds which will be considered for rebate?
Kapil Mehta answers, Dear Vikas, There are several secure infastructure bonds available. For example, REC, IDFC. Any broker can give you a complete list along with the credit ratings. Go for secure highly rated bonds.


Vijay asked, Sir, How is the LIC's new health plus policy from long term benefit point of view?
Kapil Mehta answers, Dear Vijay, I would prefer not to comment on a specific product. However, in general, it is a very good idea to purchase some form of health insurance.


halls asked, Hello Sir, I wish to take insurance & health policy for my 9 yrs, old son, at present I'm earning 30,000/- per month. Which policy is OK for me & should be beneficial him in future too?
Kapil Mehta answers, Dear Halls, You should consider two different policies. Regarding the health insurance there are several options avaialble in the market. For life insurance I would suggest that you purchase a term policy combined with any standard unit link policy. This combination should take care of your long term savings as well as protection requirements.


Prasanna asked, hi, i am a salaried class person, i have not invested in any of the policies , i have home loan as my TAX saving investment as of now. Now, that i am married, would like to know what is the investment OR pocilies i need to consider so that my spouse and children are taken care of in my absence.
Kapil Mehta answers, Dear Prasanna, That is an excellent question. I would suggest that you buy a term and a ulip. In the unit link product select a high sum assured multiple. The death benefit in these products should add up to atleast 10 times your annual income.


Chhailabihari asked, What is the impact if I will opt mutual fund investment as retirement plan.
Kapil Mehta answers, Dear Chhailabihari, Retirement products have two aspects: Fund accumulation and annuities. Mutual funds provide only the accumulation aspect. Annuities can only be given by life insurers. The annuity ensures that you get a fixed income each year after retirement. Go for a pension product offered by any life insurer.


ds asked, Hi Kapil, I would like to ask one suggestion from you regarding the investment for the unmarried person.Say if i need to invest 1 Lakh per annum which are the best sector to do that ? Where i will not get any loss in future and will be safer ?
Kapil Mehta answers, Dear DS, I am assuming that you do not have anyone financially dependent upon you. I suggest a single premium unit link product where you opt for an equity fund. Some of these options come with capital guarantees.


Vishwas asked, People keep telling me not to buy insurance just to save tax.. Why is that? Also, even if my primary aim is currently to save tax, I am ending up buying some insurance, so what is the problem? Please could you explain?
Kapil Mehta answers, Dear Vishwas, There is no harm in getting a tax benefit. I think what people are referring to is that the highest priority must be death protection, followed by savings, followed by investment and then tax savings.


bittle asked, Once DTC is implemented then what will happen for LICs and ULIPs ?
Kapil Mehta answers, Dear bittle, The DTC is still under development and being finetuned. We need to see what the final rules are.


guru asked, Sir, Do you have only two products in your portfolio? I have visited your website and it shows only two products.
Kapil Mehta answers, Dear Guru, All the products are in the download section on the homepage as brochures.


sunny asked, Dear Sir, I have a son who is just 5 months old. I would really appreciate your advice in investing with guaranteed returns for childs career. I hope it is not too early to think for the child's future!
Kapil Mehta answers, Dear Sunny, You are thinking about insurane at exatly the right time. Don't look for guaranteed returns as in the long term guarantees work out expensive. Invest in an equity fund.


ajit asked, LIC/ ICICI/ SBI/ Bajaj/ Kotak/ Aviva 7yr Highest NAV retrn policy is better or Mutual fund is gud for tax saving option ? pls reply ?
Kapil Mehta answers, Dear Ajit, For tax benefits both are fine.


karun asked, Sir ihave invested 54000.00 over the last 4 Yrs. starting from year 2006 in prudential icici ULIP(Life Time Plan). Present fund value is 58.800.00.I am planning to buy a home for dwelling purpose and for which i am in the need of some fund.Is it advisable to surrender this policy?
Kapil Mehta answers, Dear Karun, If you have other sources of funds go for this. Surrender your policy as the last resort.


pooja asked, Sir I have purchased Life time super in the year 2007 Feb.Rs 40000/= per year .After 3 years I 'm allowed to with draw i.e .,this month I'm planning to withdraw or surrender.Because I have purcahsed Life assure plan last year 30000/ per anumn.Is that I'm going in the rightway.I'm 42 years old.If I surrender I donot loose any tax benefit because I have many insurances in LIC. Premium would be 40000/=.per anumn.
Kapil Mehta answers, Dear Pooja, don't surrender a policy unless you really need the money. Each time you churn or surrender there are costs involved. Keep these policies long term.


grg asked, My son becomes 18 years in June 2010. Pl suggest which company and what plans for Pure Risk coverage and can Rs.25 lacs sum insured be taken even if he is a student doing B.Tech?
Kapil Mehta answers, Dear Grg, I suggest that you look at a broker's website to compare term prices. Apnapaisa is one example.


A asked, is buying a health ulip good option from investment point of view( for a perosn aged 28) as it will entitle one to rebate under section 80 D as well
Kapil Mehta answers, Dear A, Yes.


Niti asked, What percentage of the net annual income one should pay towards LIC premiums?
Kapil Mehta answers, Dear Niti, I like to see people saving atleast 20% of their income. About a quarter of this could go into insurance.


pvkrao asked, In have taken money plus(growth) option from LIC about 3 years and the scheme is not faring well, if I reddeem there will be 10 % loss at present NAV please advice me whetehr to continue or redeem units and invest in Bank FD's or other schemes
Kapil Mehta answers, Dear pvkrao, Wait for some time. Over the long term the volatility decreases and returns become steady. Don't worry about short term fluctuations.


suppandi asked, Dear Sir, i have been investing in Max New York Life - ULIP from last 3.5yrs. Fund is underperforming. Pls suggest if I need to continue or exit. Thanks in advance
Kapil Mehta answers, Dear Suppandi, Hard to answer without knowing the reason for underperformance.


AKR asked, Sir, I have a very broad question, need your suggestion. I save around 50,000 a month and want to invest the same for short term say 3 years. I have divide the same in 3 parts. 1) NSC - 10,000 2) Mutual Funds - 30,000 3) Recurring deposit a/c - 10,000 What do you advise? How should I divide the sum or what other Investment options do I have. Thanks, AKR
Kapil Mehta answers, Dear AKR. Since you have only a 3 year window, my only additional suggestion would be to opt for balanced funds in the mutual fund space.


srk asked, Hello Sir, We a cash overflow of 5 lacs How and where do I invest?
Kapil Mehta answers, Dear SRK, You could consider single premium life insurance plans. Do reach out to us on our website www.dlfpramericalife.com.


rohit asked, do you suggest ulip or conventional plan with time horizon of 20 years and on what parameters?
Kapil Mehta answers, Dear Rohit, In ULIP you bear the investment risk and in traditional policies the companies takes on some of the risk. You need to decide based on your risk appetite.


Surender asked, Sir, As DLF is new in insurance have they made any special policy other than trendy ones.
Kapil Mehta answers, Dear Surender, We have very innovative protection oriented products (e.g. school fee protect). Reach out to us on the website for more information.


LMahesh asked,  Dear sir, From last 2-3 months there are lots of highest nav products are being launched; plelase suggest if we can go for that compared to mutual funds.
Kapil Mehta answers, Dear LMahesh, Yes. These are attractive options.


anis asked, Please elaborate on 80CCF which has been introduced in this budget session? Is it only for the infrastructure bond or can we purchase Infrstructure mutual fund as well. I know this will be aplicable from next finanical year.
Kapil Mehta answers, Dear Anis, We are waiting for the detailed notification due within a month.


sharadkantverma asked, how much can i expect under a ULIP plan in say ten years ? will it be 2 times(of the total investment) against a ten year annual premium payment vide an insurance product ?
Kapil Mehta answers, Dear Sharadkantverma, What you can earn is a function of the fund selected.


Suman asked, Dear Sir, can you shed some light on this much discussed question: Which option is better - (1) long term investments in mutual funds (ELSS) + good amount term insurance, OR (2) long term investments in a equity oriented ULIP (where, say for both the investments, horizon is 20yrs)? In MFs we dont have entry load, but in ULIP we have a sum deducted from the invested amount every time.
Kapil Mehta answers, Dear Suman, The advantage of life insurance is that it forces you to systematically save. Research shows that on their own most people will not save systematically.


partha asked, i like to invest 10k per month for 10 yrs. in which investment i will 12% per annum for 10 years
Kapil Mehta answers, Dear Partha, Your return expectations are not realistic. Equity could give that return but then be prepared for the accompanying risk and volatility.


kinikarns@rediffmail.com asked, Hallo! Usually what should be an Ideal amount of Life cover one should go for at the Age 30. Monthly take home around Rs.30000/-
Kapil Mehta answers, Dear kinikarns, Purchase a policy with sum assured of Rs 36 lakhs. That is 10 years annual income.


Tini asked, In one of the replies you said that one should invest 20 per cent of the income in policies. But does that hold true even if a person is having a housing loan?
Kapil Mehta answers, Dear Tini, 20% should be saved and invested. Not all of that need go into insurance. The home loan will form part of the 20%.


abbas asked, will u please inform me that if I invest Rs,100000 then inactual how much amount will be deduct n firstyear by a insurance policy like lic, icici,reliance or any other?
Kapil Mehta answers, Dear Abbas, The deduction depends upon the product being purchased. The brochure always specifies the exact amount of deduction.


ganesh asked, I am 28 years ,working in automobile company and completed 3 years in job.Till date i have taken lic policy of 5 lakhs for 15 years and given two premium of 35000 for last 2 years.I have invested 20000 in lic ulip,35000 in sbi mutual fund.is my strategy policy will work good in future and also suggest me for future planning for getting good corpus around 50-70 lakh in 10 years as of now.my monthly saving amount go up to 20000
Kapil Mehta answers, Dear Ganesh, We need to do more detailed financial planning and analyses to answer your question. Reach out to a financial planner.


aditya asked, I earn 23000 a month and have a education loan EMI or Rs.11000. I am 26. I also pay a ULIP in TATA AIG of Rs.1250 per Month for Tata AIG Life InvestAssure Flexi. No health Insuranc or Life Insurance. Please advise which is a good one to start
Kapil Mehta answers, Dear Aditya, Purchase a health insurance from the market on priority.


vidyadharan asked, whether LIC or Private Insurance give more secure.
Kapil Mehta answers, dear vidya, Both are equally secure and governed by IRDA, the regulator.


Kapil Mehta says, Friends, That's all the time we have today. Do email me on kapil.mehta@dlfpramericalife.com for any insurance related questions. Kapil