Skip to main content

Insurance is not for returns

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

Return- of- premium plans are more expensive than pure term plans and have lower maturity amount than traditional products

"Kitna deti hai?" was the tag line for an advertisement for Maruti cars. While this referred to the mileage, this is the question uppermost in the minds of people buying insurance products in India, even today. We still don't feel the need for an insurance offering only life cover. Due to this attitude, insurance agents often try to sell products offering some savings, but not always suiting customers' needs. Agents do this for the high commissions and to achieve company targets.

However, after products like the term plan with return of premium ( RoP), chances of agents having to mis- sell a product become slim, because agents have a product that customers are willing to buy.

Such products cater to the needs of a segment of people who expect something in return on maturity of their policy. Unlike a term- plan that doesnt give anything on maturity, RoP term plans give you back all the premiums paid. Aegon Religare and Aviva Life insurance were among the recent ones to launch a term plan with RoP. While it functions like any normal term plan, the RoP feature comes as an added advantage. Term with return of premium ( TROP) plans, on an average, are two to four times more expensive than a term plan offered by the same insurer, depending on the sum assured and age.

To get an Aviva RoP term plan product, a 30- year- old male ( sum assured of ₹ 20 lakh) will have to shell out ₹ 14,072, against a mere ₹ 4,242 for its pure term plan. Similarly, for a sum assured of ₹ 30 lakh with a policy tenure of 20 years, one can get ICICIs iCare ( online term plan) for ₹ 4,753 whereas for RoP (online), one will have to shell out an annual premium which can be as high as ₹ 30,799.

One has to pay a higher premium for any savings product under the insurance umbrella.

Similarly, the premium for RoP term plan is used partly for risk ( mortality) cover and the remaining for savings ( investment).

Many insurers have plans that only give back the premium, whereas some give it back with interest. One needs to check how much interest the product is promising. For instance, Aviva's RoP plan gives premium plus interest, whereas HDFC Life's RoP product only gives back the premium. Hence, insurers that return only the premiums could charge a high premium.

The part of the premium is invested in RoP term plans is able to give the returns for the RoP feature to work. Premiums are high and insurers having limitations on investing can generate an average of seven to eight per cent. These returns may not be sufficient for the insured. Financial planners suggest one should not complicate one's investments.

Hence, it is best to go for a pure protection plan and invest the balance in financial instruments suiting one's requirements.

For instance, if you invest ₹ 3 lakh for 20 years in a bank fixed deposit giving eight per cent annual return, you will get ₹ 14.35 lakh after 20 years. This proposition sounds more lucrative and beneficial than just getting your premium paid back. While paying premium for an RoP plan may give you mental satisfaction, this may not be profitable in future.

To make the product look more attractive, some agents might try to sell this product like an endowment plan. However, Sanjay Tripathy, head of marketing at HDFC Life, cautions that endowment products' maturity amount consists of the sum assured plus bonus, whereas the RoP plans only return the premium with interest. Hence, the maturity amount will be smaller compared to any other traditional plans. The surrender value rules, which apply to traditional plans also apply to RoP term plan. Just that in some cases it includes first- year premium; in some others, it doesn't.

For instance, on an average, most insurers offer a 30 per cent guaranteed surrender value ( GSV) if you stop paying premiums from the third year onwards. However, one needs to check if the insurer is offering this GSV, including the first- year premium or not. Reason: IDBI Federal's RoP plan offers 30 per cent GSV, including first- year premium, whereas Metlife's RoP plan offers it excluding the first- year premium.

According to experts, getting a loan on this policy is difficult due to its low surrender value, compared to endowment and money back. Reason: only the premiums paid are returned, while endowment and money back include the sum assured and not just the premiums paid.

 

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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

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. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaverInvest Online
  3. DSP BlackRock Tax Saver FundInvest Online
  4. Reliance Tax Saver (ELSS) FundInvest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) FundInvest Online
  7. SBI Magnum Tax Gain Scheme 1993Invest Online
  8. Sundaram Tax SaverInvest Online
  9. Edelweiss ELSS Invest Online

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

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFundsInvest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more

Reliance Regular Savings Fund - Debt Option

Reliance Regular Savings Fund - Invest Online     The scheme aims to generate optimal returns consistent with moderate levels of risk. It will invest atleast 65 per cent of its assets in debt instruments with maturity of more than 1 year and the rest in money market instruments (including cash or call money and reverse repo) and debentures with maturity of less than 1 year. The exposure in government securities will generally not exceed 50 percent of the assets. The fund uses a mix of relatively low portfolio duration with active investments in higher-yielding corporate bonds. It does not take aggressive duration calls but tries to improve returns by cherry-picking corporate bonds. This is reflected in the fund's returns matching the category and benchmark for five years - at 8.4 per cent - but lagging behind the category during a raging bull market in bonds in the last one year. The fund has been a consistent but not chart-topping performer in the income category. Despite its ...
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

IIFL NCDs

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) IIFL NCDs IIF's six-year unsecured NCD 2012 Risk-wary investors should stay away from this issue, and even, risk-taking ones should think twice It is a public issue of unsecured redeemable non-convertible debentures ( NCDs ) by India Infoline Finance ( IIF ), an unlisted company, which is a 98.9 per cent subsidiary of India Infoline, a listed company. The issue seeks to raise Rs 250 crore with an option to retain over-subscription up to Rs 250 crore taking the total potential issue amount to Rs 500 crore. It will be open for public subscription from September 5 to September 18 with a minimum application size of Rs 5,000 in the form of five NCDs of face value Rs 1,000, TENURE & RATES: IIF will redeem the NCDs at the end of six years, and investors wanting out before six years will be able to sell the...
Read more

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...
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