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

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