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Sanjib

Sanjib Jha  | Answer  |Ask -

Insurance Expert - Answered on Feb 02, 2023

Sanjib Jha is the CEO of Coverfox Insurance. His expertise includes health and auto insurance. He has over 22 years of experience in the financial sector. He has completed his post-graduation from the Institute of Company Secretaries of India.... more
Prasanna Question by Prasanna on Jan 25, 2023Hindi
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Hi Sanjib. Why is a term insurance considered better than insurance that comes with annuities and bonus?

Ans: Hi Prasanna, life insurance protects your family in case of an unfortunate demise of the policy holder. In case of a premature death, while in case of annuity plans, it protects your income if you live longer than the expected term.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 02, 2024

Asked by Anonymous - Apr 12, 2024Hindi
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Sir, I am 37 years old and plan to take a term life insurance for my family, which consists of my wife and 6 year old daughter. I am confused whether I should choose a normal policy which expires after the coverage period, or one which returns the premiums after the coverage period. Obviously, the latter involves spending a higher sum as premium per month. Also please suggest the companies offering policies with better claim settling history
Ans: opting for a pure term life insurance policy is generally advisable over a return of premium (ROP) policy. ROP policies tend to have higher premiums, as they offer to return premiums at the end of the term if the policyholder survives. However, this feature often comes at the cost of higher premiums, making it less cost-effective in the long run.

With pure term insurance, you pay lower premiums for the same coverage amount, ensuring that your family receives a substantial sum assured in case of your unfortunate demise. It's a straightforward and transparent form of protection without any investment component or frills attached.

When selecting an insurance provider, prioritize companies with a strong track record of claim settlement and customer service. Look for insurers with high claim settlement ratios and positive reviews from policyholders.

Remember, the primary purpose of life insurance is to provide financial protection to your loved ones in your absence. By opting for a pure term policy, you ensure that your family receives the necessary financial support without any unnecessary frills or complexities.

..Read more

Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 19, 2024

Asked by Anonymous - Aug 16, 2024Hindi
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what about term insurance with investment policy ?
Ans: Mixing insurance with investment may seem convenient, but it’s often not the best approach. It’s crucial to understand the distinction between these two financial needs: protection and growth.

Why You Shouldn't Mix Insurance with Investment
1. High Costs: Insurance-cum-investment policies, such as endowment plans or ULIPs, often come with higher premiums. A significant portion of these premiums goes towards administration charges, commissions, and mortality charges, leaving less for actual investment.

2. Low Returns: The investment component in these policies typically provides lower returns compared to other investment avenues. This is because the funds are often invested in conservative instruments with limited growth potential.

3. Complicated Structure: These policies can be complex, making it difficult to understand the real value of your investment. The returns are not always transparent, and the surrender value is often much lower if you decide to exit early.

The Better Approach: Keep Insurance and Investment Separate
**1. Term Insurance for Protection:

Affordable Coverage: A pure term insurance plan offers a high sum assured at a relatively low premium. This ensures your family is financially protected in case of an untimely event.
No Investment Element: Since there’s no investment component, the entire premium goes towards providing life cover, making it a cost-effective option.
**2. Invest Separately Based on Risk Appetite:

Risk-Averse Investors: If you are cautious and prefer guaranteed returns, investing in Public Provident Fund (PPF) is a safe and tax-efficient option. It offers a stable return with the benefit of EEE (Exempt-Exempt-Exempt) tax status.
Comfortable with Risk: For those comfortable with market risks, investing in mutual funds is a better option. Equity mutual funds, in particular, have the potential to generate higher returns over the long term, which can significantly grow your wealth.
Final Insights
Combining insurance with investment usually doesn’t serve either purpose effectively. Instead, opt for a pure term insurance plan for protection and invest separately based on your risk tolerance. This strategy ensures you get the best coverage for your family while maximizing your investment returns, whether through safe instruments like PPF or higher-risk options like mutual funds.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Dr Dipankar

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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