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Insurance Query Corner

Insurance is a form of risk management to protect dependents from loss of income. Surprisingly neither you nor the agent who sold the insurance policy to you appears to have viewed insurance from this angle. Individuals with no encumbrance hardly require life insurance; your primary requirements should be health insurance, accident, critical insurance and protection against the risk of living longer. They should primarily have adequate savings towards retirement.

Coming back to your basic question of return on ULIP investment, by and large the performance of ULIPs has not been bad. But what really is a matter of concern are the upfront charges that have the ability to dent return. Going by the investment experience of equity market over a long period, earning 15 per cent return should not be too difficult if the funds are well-managed. Even if you are losing 3-4 percentage points due to various charges, you can comfortably earn returns of 10 percent-plus.

LIC Jeevan Tarang is a whole-life plan, which means that you are insured up to age of 100. In case you survive till your policy term of 20 years, you will get an annuity to the extent of 5.5 per cent of the sum assured till your death and accumulated bonus will be paid as lump sum at the end of the accumulation period. Going by any yardstick, Jeevan Tarang is not a superior option, hence it may be better to close the plan and accumulate funds in PPF for your retirement needs. Your allocation in ULIP between equity and debt appears inline with the general thumb rule and does not require any modification.

Going by your income and age, it would be ideal to increase the mediclaim sum insured by another Rs 2 lakh with a product that has an inbuilt option of increasing sum insured by 5 per cent for every claim-free period.
Insurance is a long-term contract and it is not a three-year product. Unless you pay premium for 7-8 years, your returns will not be commensurate to the risk assumed for equity investments. If you stop paying premium from the second year, you have to pay surrender charges according to the policy document. After deducting surrender charges from your fund value the balance money will be kept remain suspended for the next two years without any accretion. Hence it’s advisable to pay the premium.

This entry was posted on Tuesday, July 6th, 2010 at 2:25 am and is filed under Health Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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