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

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...
Read more

HSBC MIP Savings Fund dividend

Invest HSBC MIP Savings Fund Online   HSBC Mutual Fund   has announced dividend under the following schemes: Scheme Dividend ( R /unit) HSBC Income Investment-DQ 0.1733436 HSBC Flexi Debt Direct-DQ 0.18056625 HSBC Flexi Debt-DQ 0.18056625 HSBC MIP Regular-DQ 0.18056625 HSBC MIP Savings-DQ 0.2022342 HSBC MIP Savings Direct-DQ 0.2022342                     The record date has been fixed as June 27, 2016.     ----------------------------------------------- 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 Saving 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. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan I...
Read more

Stocks with a high dividend yield

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) Stocks with a high-dividend yield can provide investors additional cash flow. More importantly, it is tax-free   With April 2011 just over, the 'earnings season' is well and truly here. This is the time most companies pay out a portion of their profits as dividends to shareholders. Since dividends are tax-free, they are an attractive income source with a select class of investors, who depend on these for additional cash flow. SIGNIFICANCE A company doing well and generating profits will usually be in a position to declare dividends regularly. Hence, a key parameter one should look at whilst investing in a stock is whether the company has a good dividend record. Typically, dividend yield stocks are large-caps and generally not capital-intensive. This is suggestive of the fact that the downside risk on...
Read more

For Retirement Invest in growth Assets

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   Last week, I wrote about the need for retired investors to have a growth component in their corpus to fight inflation. In the financial advisory space, it’s a challenge to convince retired investors to take risks in order to achieve capital appreciation in their portfolios. Many choose a compromised lifestyle and curb their expenses in retirement. What should they do instead? There are only two ways to create a large corpus: saving a large part of the income, or investing the saving in growth assets. In a country of savers, the first has been the natural choice. However, the second deserves attention. An investor who is saving for retirement is trying to replace the human asset with an investment asset that will generate the require...
Read more

Systematic withdrawal plan

  Start Systematic withdrawal plan Online Although an SWP gives you regular income and saves on taxes in the long term, you cannot open an SWP on a scheme where you have an ongoing SIP   iStockPhoto If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens' Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is. WHAT IS SWP? Many of us would be familiar with a systematic investment plan (SIP ), where a corpus ...
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