Skip to main content

Term Insurance Plan Payout




If the beneficiaries of the term policy are financialy literate, lump sum payout plans offer greater rewards.

When you buy a term insurance plan, it usually comes with the option of receiving the sum assured (death benefit) either as a lump sum or in the form of staggered payouts. The lump sum option is quite simple. If the policy holder passes away during the policy term and, say, the sum assured was `1 crore, his family would get the amount as a lump sum payout. The staggered payout option is still a new phenomenon. The plans have been launched only in the last couple of years. This option has several variants. One, where part of the sum assured is paid as a lump sum and the rest is in monthly payouts. Two, where the entire sum assured is divided into monthly payments. Three, where the monthly payouts gradually increase for a certain number of years (see table).

To make an informed choice on which plan or variant suits you the best, consider the following: To start with, evaluate the lump sum and the staggered payouts from an overall return perspective.Bear in mind, the money available today is worth more than the same amount in the future. A `1-crore payout today is worth a lot more than `1 crore or even `1.2 crore payout staggered over 10-15 years. This is because you can invest the lump sum amount received and earn returns over the years.


A good way to calculate overall benefit of a staggered payout is by ascertaining its internal rate of return (IRR). The staggered payout options aren't that attractive when you take into account their IRR. For most plans, the IRR is below 7% (see: The real worth of staggered payouts). The 4-7% returns are tax-free and may appear attractive compared to returns from fixed deposit (FD) rates, where you have to pay tax on interest income. But, FDs are not the only option when it comes to investing the lump sum payout. A combination of debt funds, systematic transfer and systematic withdrawal plans, post-office monthly income scheme, etc. can fetch a much higher return.


You also need to look at your total premium outgo. The premium is generally the highest for the staggered payout option with gradually increasing payouts. From a pure returns perspective, it is better to opt for the lump sum payout option. However, you also need to take into account your family's financial literacy: Would the members be comfortable investing the lump sum payout? "For people whose dependents or family members lack financial awareness, the regular income option is better suited. They don't have to worry about how and where to put any lump sum death benefit.


When it comes to life insurance, you must make decisions that are easy to understand and implement for your family. If you feel your family may find it difficult to use the insurance funds effectively, opt for an income plan. Security reasons also make staggered payouts a better choice. "A large amount in the bank can make the family without a bread-winner vulnerable to frauds or misuse or abuse of the funds.


Consumers can also chose a mix of the two options: You can opt for both. To settle liabilities, it is better to opt for the lump sum option. To ensure regular income, go for the staggered payout






-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saver Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in India for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Religare Tax Plan

4. DSP BlackRock Tax Saver Fund

5. Franklin India TaxShield

6. ICICI Prudential Long Term Equity Fund

7. IDFC Tax Advantage (ELSS) Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

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

 

Popular posts from this blog

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...
Read more

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...
Read more

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...
Read more

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...
Read more

Mutual Fund Exit Load Changes

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 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
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