Category: Life Insurance

When Is The Right Time To Invest In A Retirement Plan?
by Edelweiss Tokio Life Insurance

Retirement is that golden period in your life which we start dreaming about once we get stuck in our day-to-day life, that’s no longer in our control. At home, our family controls us. At work, the Corporate Devil. It’s that phase of your life where you would want to invest in doing things and activities that you love – relaxing, travelling, indulging in hobbies, etc. You can finally take a break from your responsibilities and focus on fulfilling your dreams such as going on a world tour or living a relaxed life in your dream house at your favorite destination. However, you need to plan for your retirement well in advance.

Financial planning is a must in order to ensure a financially secure and comfortable retirement. You have to first realize that you will have the time to plan for your dreams post retirement but you may not have a regular source of income and a very good health. To ensure that you are financially independent even post retirement you have to plan for a regular source of income so that your regular expenses are taken care of and you are also able to achieve your retirement goals. Nobody would like to be financially dependent on someone else during their retirement.

It is prudent that you start saving money as early as possible because every penny counts and the earlier you start, the better your returns.

If you are able to put only a small fraction every month towards your retirement fund; it shouldn’t dissuade you from saving. Mid-twenties is a time when you are slowly adjusting to your new lifestyle, saving money for your retirement is the last thing on your mind. However, this is the time when you have not many responsibilities. And so, this is the ideal time for you to start investing in your retirement goals; not only will you have a larger investment corpus because of the power of compounding but you will also get into the habit of saving.

As years pass on, you are burdened with more responsibilities like taking care of your family, being a financial pillar for your family’s needs, work pressure and the constant race to succeed. You may have liabilities such as home loans, car loans, credit card bills, etc. You may assume that investing for your retirement is not a priority because you are already burdened with ample of responsibilities and liabilities. Forming multiple saving or investing habits at this phase of your life would be difficult.

When you are in your 40s you and your spouse will be burdened with responsibilities like funding your child’s education and there may also be health problems which can add on to your level of stress.

This is also the time when you are nearing your retirement stage.

At 50s you are at the final stage of your retirement. You would have already made a list of all the things that you want to do after you retire; giving you an idea as to how much money you will need for your daily household expenses and fulfillment of your retirement goals.

Now, if you take a smart move and invest your money right from the start i.e. in your 20s, imagine the corpus you have already built. It may be a fraction of your monthly income now but as years pass by, this regular habit of investing, would give you great returns, thanks to your decision to plan early.

So, whether you are in your 20s or 30s don’t assume it’s too early to invest because the earlier you invest, the greater your returns and you are nearer towards achieving your retirement goals. Don’t delay, the right time to invest towards your retirement goals is NOW!

When Should You Plan For Your Child’s Future?
by Edelweiss Tokio Life Insurance

Children are the lifeline of every parent. Every parent wants to go out of their way and give their best to their children. For this they work day and night, so that their children can become their best and brightest.

Parents have to save money to meet the future needs of their children. It is also essential for them to see that there is a substantial increase in savings, as the expenses increase along with time. In such a situation, it becomes important that according to the set out long-term goals for the children, whether the investment is being made or not in the appropriate financial instruments. It is often seen that parents delay in making financial plans for the children and they realise it in the later stage where the scope of having the best facilities are already compromised.

The basic idea of financial and investment planning is that not only the savings and investment should be started as soon as possible, but it should also be continued for a long period of time. In this way, the future of the children through these schemes is sure & secure and parents’ dreams are also fulfilled.

Fees at the Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs) and other top colleges increase every two to four years. Inflation also contributes significantly to the rising cost as it goes up steadily year after year. Scholarships may only be provided to the brightest student. With every passing year, the cost of education is going up by leaps and bounds.

So, take control and invest right to give your child the very best. Parents generally give up on all their luxuries to fund a good education for their children. And the growing cost of education only adds to stress levels. The more you delay, the more difficult it is going to be to accumulate such huge amount of wealth. Hence, it makes sense to start early.

If you have not yet started investing for your child’s future, go ahead and start it now, as money needs to be compounded to multiply wealth over a period of time.

Start as early as possible in fact even before the child is born because for such long term goals money needs to compound. If you give time to your investment the magic of compounding will work.

While a career choice for your child is a major decision, picking the right investment product is also something that is far-reaching for your child’s education. Here’s how to give wings to your child’s dreams.

When it comes to planning for your children’s education, conventional investment choices such as fixed deposits and PPFs may not always be the best options. Consider 7%-10% inflation in the coming years. Now imagine the cost of education! Investing at an early stage in the right plan is the only way to combat this sky-rocketing cost. Investing in FDs would be more ideal for your shorter goals that have to be achieved in the next 5 years. However, when it comes to child education you need to plan for it at least 10-15 years well in advance.

So the right investment would be going the Systematic Investment Plan (SIP) route.

Equities have delivered over 1,000 per cent return over the past 15 years. Selective equity mutual funds have also delivered over 15 per cent annualized return in the past 10 years. Investing for your child’s education is a long term goal and it’s beneficial to start early so that you gain enormous returns. You can also consider investing in a new age ULIP, where your lock-in period is 5 years and you also get the flexibility to switch between various funds from debt, balanced to equity. A long term investment plan like ULIP can help you reap the benefits as the market evolves, a regular and systematic approach also helps to average the markets lows and highs. ULIP also provides you with a life-cover, so your child’s future is secured even in your absence.

Investing smart and early for your child’s education is crucial. To calculate how much funds you can accumulate for your child’s education, click: http://ed.edelweisstokio.in/Landing/wealthpluscampaign/index.html?

Common Life Insurance Jargons Explained
by Edelweiss tokio life

Life insurance is a sector which the common man has distanced from knowing about because of the perception that it is a jargonised industry with a lot of complex terminologies. There are various terms used in life insurance which may be difficult for an average buyer to comprehend. Here, we try to explain 9 terms used in the life insurance sector.

Premium: The amount that you pay for getting an insurance policy from the life insurance company is the premium. This can be paid regularly, in a staggered fashion or as a single amount.

Life Insured or Insured: The person whose life is insured by the life insurance contract. In most cases, the Life Insured is the breadwinner of the family. So, in case, the life insured meets with an untimely demise, the designated nominee is paid the full value of the Sum Assured.

Life Insurer or Insurer: The life insurance company that has insured the life of the customer. The life insurance company makes the payment of the Sum Assured to the designated nominees in case an event of death occurs to the Insured.

Sum Assured: It is the guaranteed amount that you or your nominees will receive. This may be the minimum amount or the total amount that they receive, depending on the type of policy.

Riders: An additional benefit attached to the policy to enhance and make the cover more comprehensive. It offers financial protection over and above the Base Sum Assured. Some of the popular Riders like Waiver of premium provides you with the facility of continuously getting the benefits of the policy without having to pay the premium after a particular event.

Term: The tenure of the policy. The time till which the policy remains in force, provided you make timely premium payments.

Bonus: For participating life insurance plans, life insurance companies may announce a bonus or an additional payment that is given to the insured. Bonuses are accumulated and paid at the time of maturity.

Maturity/Survival Benefit: The amount payable by the life insurance company to the Insured on maturity of the policy. This is also called as survival benefit as it is paid to the Insured on his survival till the maturity of the policy. It includes the Sum Assured as well as bonus, if any.

Surrender Value: The amount paid by the life insurance company if you surrender or redeem your policy mid-way through the policy period. You are paid the surrender value and the policy is terminated.

Critical Illness: Critical illness is different than other common diseases. They refer to cancer, artery bypass surgeries, heart attack, stroke, kidney failure, heart valve replacement, organ transplant, paralysis, etc. Critical illness insurance plans are different from a regular mediclaim, and the coverage varies from policy to policy.

Traditional Plans: Traditional insurance plans cover term, endowment or whole life insurance plans. These plans are considered safer and risk-free as a specific pre-determined amount is paid upon the death of the policyholder or maturity of a term of the policy.

Non-Traditional Plans: Unlike traditional plans, these plans provide a window of investment in the market and pay out higher returns. It also presents an opportunity for the investor to partially withdraw funds and re-apportioned funds along with insurance coverage that can be increased or decreased as needed. However, these plans require the more active participation of policyholder as he is responsible for the investment. Unit Linked Insurance Plans (ULIPs) are the most common form of non-traditional insurance plans.

Section 80(C) Benefits: Section 80C of the Income Tax Act provides a deduction of the actual insurance premium paid by the policyholder in respect of his life insurance. This benefit is however restricted to Rs. 1,50,000/- per annum under current tax laws.

Section 80(D) Benefits: Section 80D of the Income Tax Act provides benefits of premium paid under medical policies up to Rs. 25,000/- as a deduction from total income of the policyholder.

Section 10(10D) Benefits: This section if Income Tax acts states that any sum received (including any bonus) by the policyholder or his/her nominee is exempt from tax unless:

1. it is received under a keyman insurance policy
2. it is received under section 80DD(3) or section 80DDA(3)
3. The policy was issued after 31-Mar-2003 but before 01-Apr-2012 and premium paid during any of the years of policy exceeded 20% of Capital Sum Assured.
4. The policy was issued after 31-Mar-2012 and premium paid during any of the years of policy exceeded 10% of Capital Sum Assured.
However, any sum received in the event of a death of policyholder is exempt from tax.

10 Questions You Should Ask Before Buying An Insurance Policy
by Edelweiss Tokio Life

The basic requirement for a successful financial plan and a secure financial future is a life insurance policy. A life insurance policy not only provides a lump sum amount at the time of death but some polices also provide a maturity benefit. All life insurance policies offer great tax saving benefits.

As there are numerous life insurance plans offered which differ in their features and long-term benefits, buying an insurance policy can be a hectic task for an individual who doesn’t know what to look for. Lifestyle and financial conditions differ from person to person, a policy purchased by one person may not meet the needs of another person. This is the reason why you should be cautious when buying insurance. You must ask yourself these ten questions before buying an insurance policy so that the policy you purchase is ideal for you in every situation of your life.

Ten questions you should ask before buying an Insurance policy

1. How much money will you need in the future?

As vague as it may sound, it is the foundation of every investment you will make for the future. Take a look at your financial condition, write down every possible future expenditure you can think of, add them up and get a rough idea of the amount you will need in the future. This will give you the amount for which you have to buy the policy and which, you will get after the maturity of the policy. If you find this process complicated, you can always consult a financial adviser.

2. After how many years will you want the insurance money?

Keeping in mind that you will get the sum assured at the time of death, you can also live to see the policy mature. At the time of maturity, you will get the whole sum assured as a lump sum and that maturity time should synchronize with your big future expenditures. In other words, you should figure out after how many years you will need the money to cover your big expenses like child’s marriage or college education. Once you have determined the number of years, you will get your tenure for which you have to buy your Insurance policy.

3. How much money can you afford to pay for your insurance policy?

You will have to pay a regular premium to the insurance company for the promise of a life cover, failing which will result in the lapse of the policy and its benefits. You have to ask yourself if you will be able to afford the premium on a regular basis. If yes, go ahead and buy the policy. If not, you could go for a policy which has a lower premium amount.

4. Who am I buying from?

The company (insurer) as important as the plan or policy itself. You must figure out for how long the company has been in business, its ratings and consumer reviews. Meet with its insurance advisor and ask about the business they have done over the years, the claims they have fulfilled and the growth they have made. Investing in a policy without researching about the company is never a good idea.

5. What is the lock-in period?

Many insurance policies like Unit Linked Insurance Plans (ULIPs) provide a policyholder to invest in the financial market, apart from providing a life cover like a traditional insurance plan. Every policy or scheme offering an option to invest in the financial market has a lock-in period before which you cannot withdraw your money. You must ask about the lock-in period, and if you think you can go for that time without withdrawing your money, go ahead and buy the policy.

6. When will you have to pay the premium?

After you have determined how much you can afford to pay as a premium, you must ask when you have to pay the premium: monthly, quarterly, half-yearly or annually. For some people who don’t have a regular source of income, paying the premium monthly can be difficult, and for that, they will prefer a policy which doesn’t have a monthly premium paying rule. If the period of paying the premium affects you, it must be something you should ask about before buying the Insurance Policy.

7. How much money will you get if you surrender the policy?

Surrender Value is the amount which you will get if you voluntarily surrender your policy before its maturity. Surrender value differs with every policy and with every Insurance company. If you have figured out the tenure and the amount of your policy, you must ask about the surrender value and base your decision of buying the policy accordingly.

8. Will the company charge you if you surrender the policy?

The insurance company charges a part of surrender value if you wish to surrender the policy. It reduces your surrender value and you are left with a lower amount. Before buying a policy, you should ask about the surrender charge and make your decision accordingly. In general, it is always a smart decision to avoid buying a policy which charges a surrender fee at the time of surrendering the policy.

9. Does the policy have other benefits?

Every life insurance policy provides a life cover; what matters is the added benefits you get if you choose a specific plan from a particular insurer. You should contact the company and ask about the features it provides which you will get. It can include Top Up facility to increase your sum assured, riders to customize your Insurance policy and other bonuses to increase your overall savings. While choosing among different policies, go for a policy with the most benefits.

10. Does the policy provide a Free Look Period? How long is it?

The policy you buy will affect your entire financial future and to safeguard yourself that you have bought the right one, a free look period is a perfect way. As per regulatory norms, all insurers must provide a time period (lasting fifteen days) to a policyholder to decide whether to keep it or not and if he/she is not satisfied with the policy, the company returns the whole amount to the policyholder. If you are not sure that the policy you bought is the perfect one, you can opt out within the free look period.

Keep in mind there are a lot of different insurance products in the market. Each product has its own features, benefits, terms and conditions. One should always read the policy document and understand the product carefully before making a purchase.