Why you Should Have More Than One Life Insurance Policy?
Everyone looks for convenience and easy way out when it
comes to complex matters such as claiming tax deduction through life insurance
plans. Abhishek Raizada, 38, was no exception. As a sales and marketing
director in a multinational company he was earning over 25 lakh a year.
In order to save on tax, he bought a life insurance policy
with a premium liability of Rs 1 lakh and ever since he got hold of it, he was
paying the premium every year religiously. A year ago, the government raised
the tax exemption limit for life insurance premium payment to Rs 1.50 lakh. So,
he bought another life insurance policy of Rs 50,000.
Do you think that Abhishek was following the right approach?
More often high-flying professionals are so busy with their
work that they hardly get time to think dedicatedly about their investment.
Thanks to the exemption under Section 80C of the Income Tax Act that every
corporate employee is asked to declare his investment in life insurance
products. And everyone takes it very seriously. After all, one can save
sizeable tax in the range of 10-30 per cent on his taxable income.
But there is more to it. If you act wisely, you can generate
much more from your investment in life insurance plans. Traditionally, life
insurance policies are known for their low but secured returns. This is due to
the long standing monopoly of public sector life insurance companies which
promoted life insurance plans more as a risk coverage tool than return generating
investment instruments.
Most people carry this mindset even today – that expecting
returns from a life insurance policy is not right and one should just focus on
the kind of security it provides to family, and things like that. It is
definitely true that the primary objective of a life insurance plan is to cover
risk of loss of life. At the same time, it is far from any rationale to not
expect returns your investments deserve.
Professionals in the age group of 20 and 45 years should aim
for superior returns and not restrict themselves to traditional low yield
insurance plans. This is the age when you can generate more income and thus
save more. If you invest your savings wisely, you can achieve financial freedom
and secure a good life for yourself and your family.
If you are willing to invest Rs 1.50 lakh in life insurance
every year, then it is advisable that you go for a combination of various life
insurance policies. You can consider 2-5 life insurance policies.
What are the benefits of having multiple life insurance
plans?
Well, there are many. You must have heard how companies
follow diversification strategy in order to spread their business risks and
generate better returns. In fact, many of you must be recommending and working
on such plans in their employer organizations. So, why not to follow this
approach as an individual, for your own benefit?
Of course, this helps in spreading risks of low returns from
low performing companies. You can buy multiple policies from multiple
companies. Thus, if one life insurance company is not able to generate good
returns, the other one may get you something better.
Also, never stick to one type of life insurance plan.
Develop a portfolio with Unit Linked Insurance Plans (ULIPs) and Equity Linked
Savings Scheme (ELSS). In the mid to long term horizon of 3-10 years, these
plans can bring you much better returns than conventional endowment life
insurance plans.
If you research on these plans, the top performing ULIP and
ELSS plans have pumped returns of over 20 per cent a year than 5-8 per cent of
conventional plans. Further, when we compound the returns over a period of
time, the implications are much larger and deeper.
Thus, put your money to the best use and generate wealth
from each bit of it. At the end, Investment In India it is a win-win situation
for you. In order to shortlist the best-possible life insurance plans, insurance
comparison portals such make decisions that may turn out to be the most prudent
decisions of your life.
Post Your Ad Here
Comments