Need for Term Insurance Policies

Term insurance policies, which are ‘high value - low premium’ in nature, are often rejected since there are no returns if the insured survives the policy. Here’s a look at why this policy needs to form an integral part of your financial plan…

Harshal*, 30, is recently married. He earns around Rs. 35,000 per month. His fixed expenses amount to Rs. 25,000 and other expenses, like entertainment and paying the medical bills of his dependent elderly parents, eat into the balance, leaving very little for saving at the end of the month. Buying an insurance policy (and that too a ‘pure expense’ policy) seems like a waste of money to Harshal. “I don’t get anything back if I am alive!” he wails. However, for someone in Harshal’s situation, having a term plan is not just important, it’s crucial!

Different products for different needs

Life insurance is primarily protection against two types of risks –

1.     The risk of leaving our dependents behind

2.     The risk of living long without adequate savings and pension

Your financial plan needs to ensure that you have an ideal mix of investments that cater to both these long term risks.  This is where life insurance plans come in. 

There are different life insurance plans to suit your individual needs based on your income and life stage.  Term plans are primarily for protection whereas endowment plans and ULIPs offer a combination of insurance and saving or wealth creation.

Hence, if you have dependents and are the sole bread earner of the family, it is ideal for you to first ensure your family is financially secure in case of any unfortunate life event.  Also if you are young and have limited income, term plan offers better protection per rupee of premium you pay.  For example, you can get a term plan that ensures a sum assured of Rs. 49 lakh for as low as Rs. 6,000 per year*.

Remember

Fundamentally, the objectives of insurance and of investments are different.  Both ‘growing’ money as well as safeguarding your family in case of unexpected life events are both important

With geometrically progressing inflation rates, it is important for you to ensure you have secured your dependents adequately

Appointing A Nominee in Life Insurance policy

Intro: Safeguard the interests of your dependents by appointing a nominee to your policy.

A life insurance policy secures the financial interests of your dependents in case of an untimely demise. To ensure that the bereaved dependents can easily receive the death benefits, life insurance companies have made certain provisions. ‘Nomination’ is one such provision.

Understanding Nomination

As a life insurance policyholder, you have the right to make a ‘nomination’. This involves appointing a nominee. A nominee is the person designated to receive benefits under a life insurance policy in the event of death of the policyholder. The nominee thus performs the role of a ‘trustee’ for the legal heirs of the policyholder.

Benefit Of Nomination

By making a nomination, you safeguard the interests of your dependents. Even though in the absence of nomination, your legal heirs are entitled to the benefits receivable under a life insurance policy, they would have to undertake time-consuming hassles of submitting a succession certificate or a will in order seek their claim. Nomination removes this time-consuming process. With nomination, the heirs do not face such procedural difficulties, which could delay the receipt of their claim.

Undertaking a nominee

Though nomination can be undertaken any time during the policy term, ideally, it should be undertaken at the time of policy purchase. As a policyholder, you need to mention the full name, address and age of the nominee. You are also required to state your relationship with the nominee. Also, you have the right to make multiple or successive nominations and change nominations any number of times during the policy term.

Important Points To Note

Inform your nominee about the nomination details and the whereabouts of the policy documents.

Nominees do not have absolute rights. Your legal heirs can sue the nominee.

The transfer or assignment of the policy automatically cancels the nomination.

In case you have more than one heir, there could be a dispute on the percentage of benefits receivable by the different heirs. To avoid this, you should mention the entitlement of each heir in the nomination section of the policy.
Your written will takes precedence over the nomination.

Understand HLV to ensure that you are not under insured

Life is unpredictable. Though you may commit yourself to planning each and every rupee of your financial life, you never know what is round the corner. An unfortunate and unexpected event may lead to a life cut short, a financial plan cut short and a family not only in an emotional but also a financial turmoil. This is where life insurance comes in. Purchasing a life insurance cover in any form (term, endowment, etc.) ensures that your family is financially secure even when you are no longer there to provide for them.

Importance of HLV

The key to ensuring your family’s financial security lies in the quantum of insurance cover you wish to purchase. So, how do you arrive at this magic figure? Well, by knowing your Human Life Value (HLV). The HLV provides an indication of the insurance cover required to ensure the financial security of your dependents after taking into account your life’s existing and future financial situation.

Factors impacting your HLV

Factors such as your age, annual income, age of retirement, goals, assets and liabilities, current and future expenses and of course, the existing insurance cover, if any, are considered.

Annual Income- Your average annual income is computed for a given number of years, beginning from your present age to the age of retirement, adjusting for increments. All expenses such as taxes, EMIs, household expenses, etc. are deducted from the annual income.

 Sources of Income other than Salary- Over and above your salary, you may have other sources of income such as rental income, investment income, dividend income, pension received by your parent(s) if any, etc. All these are also considered as annual cash inflows.

IndiaFirst Life Insurance Money Balance Plan – An Ideal Plan For Many

Enjoy life cover, market linked returns and match policy receipts with important milestones, all through a single plan.

Rohan Singh (name changed) is in his late 30’s and a single parent of two school going children. He has recently concluded that his existing insurance cover may no longer be enough to provide for his dependants in case of an untimely demise. With multiple insurance policies on offer, he does not know which policy he should purchase. He shares his dilemma with his close friend, Tejas Kapoor (name changed), who after understanding his needs, suggests him a money back unit linked plan. The advantages of earning market linked returns and getting the insurance proceeds in installments that can match the various milestones in Rohan’s children’s lives, forms the basis of his recommendation. He thereby suggests IndiaFirst Money Balance Plan.

Are you too in a similar boat as Rohan? If “Yes”, then, IndiaFirst Money

Balance Plan is the ideal plan for you too

About IndiaFirst Money Balance Plan

IndiaFirst Money Balance Plan is a Ulip plan. It offers an ‘automatic trigger-based' investment option that guarantees consistent return along with a life cover. The policy sum assured is payable in case of the untimely demise of the life assured during the policy term.

Suitability

•    Savings plus insurance cover: This two-in-one plan is suitable for those who are seeking life insurance coverage along with savings at market-linked returns

•    Flexibility: You can select and switch between high risk - high return funds and low risk - low return funds according to your risk profile and investment needs

•    Doubles up as a savings account: The partial withdrawal facility allows you to meet unexpected financial emergencies with ease.

•    Invest regularly: You can save and invest regularly and use the market volatility to your advantage

•    Loan facility: You can avail a loan under this plan before completion of 5years of the policy.

Benefits

•    You have multiple premium payment frequencies to choose from - monthly, six monthly, yearly or one-time

You enjoy tax benefits under section 80C on the premium payable and section 10 (10D) on the policy benefits receivable on maturity or death