Skip to main content

Consider Rate of Inflation when Deciding Life Insurance Cover

Tax Saving Mutual Funds Online

Current open Infra Bond Application form

Inflation is the buzzword these days. However, most people don't include inflation into the picture while reviewing or assessing their insurance needs. While the rule of thumb states, you should look at a life cover of around 12 times your annual income deducting your investment assets plus any liabilities; it is also important to consider another mix - your rising income and increasing inflation. Your rising income will have natural impact on your standard of living and rising inflation will have multiple effects on an individual's consumption. As life goes on, the needs and demands of your family grow too. As the head of your family, you need to fulfill your responsibilities towards your loved ones and provide the comfort which they need. However, life is full of uncertainties and it is a need of every individual to sustain the same lifestyle for their family even when he/she is not around.
Hence, unless you are purchasing a term life insurance policy for only a few years, inflation should be an important consideration; the future value of money should play an important part in your calculations and hence the need to continuously evaluate your life insurance needs.


If you are interested in a longer term policy — for example, 20 or more years — or if you are obtaining a whole life insurance, then the future value of money should play a part in your calculations.


Why is inflation consideration so important in the context of insurance?


Most individuals when they purchase insurance, one consideration that is frequently overlooked is the future value of money. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the domestic economy. From 1969 to 2010, the average inflation rate in India was 7.99%.


Time Factor of Inflation on term life insurance Policies


A term life policy is generally paid over a long period of 15, 20 or 30 years. The rate you pay for term life insurance is by definition usually a fixed rate that you pay over this span of time. Therefore, because the rate of inflation is commonly in the range of about 7 -9% annually, the value of the rupee decreases by this percentage each year. Which means, the purchasing power of rupee is reduced and — is not able to acquire the same amount of coverage benefit in terms of money as the previous year. The premium you pay per month for life insurance today will in rupees terms be the same, but will be less money 10 years from now due to inflation. Take this example – anything that could be purchased for . 10 lakh in 2011 would cost . 45 lakh approximately in 2031 at 8% inflation rate.


Solution: Increasing Term Insurance policies


An Increasing Term Assurance policy may provide the flexibility to increase the 'sum assured' (the cash amount that you receive upon your death) by 5-10% each year to reflect the rate of inflation. Thus it will hedge against the rising cost of living with an option of increasing the sum assured. It brings adequate financial protection at an affordable cost. Most companies also provide this enhanced insurance with appropriate rider options at a nominal extra cost and reward for healthy lifestyle habits like non smoking etc, too.


Who should buy a term plan like this?


If you are concerned about the rise of inflation and you are buying a policy relatively young in life, for example just after starting a family, this may be a suitable option for you. However, it is worth noting that the cost of your insurance premium is also likely to rise to reflect the increased sum assured, so you would need to be certain that you would be able to support this increase. Speaking to a qualified insurance adviser to get full details about this type of policy and discuss whether an increasing term assurance policy is in fact the best policy for your circumstances would be a worthwhile exercise.

 

 

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

 

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

 

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

 

These Application Forms can be used for buying regular mutual funds also

 

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. HDFC TaxSaver
  2. ICICI Prudential Tax Plan
  3. DSP BlackRock Tax Saver Fund
  4. Birla Sun Life Tax Relief '96
  5. Reliance Tax Saver (ELSS) Fund
  6. IDFC Tax Advantage (ELSS) Fund
  7. SBI Magnum Tax Gain Scheme 1993
  8. Sundaram Tax Saver

---------------------------------------------

Application form for Tax Saving Infrastructure Bond and more information

Current open Infra Bond Application form

 

Submit filled up application    Collection canter near you

Popular posts from this blog

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...
Read more

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Read more

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now