Life Insurance
Protection
From an investor’s point of view, an investment can play two roles – asset appreciation or asset protection. While most financial instruments have the underlying benefit of asset appreciation, life insurance is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation.
The core benefit of life insurance is that the financial interests of one’s family remain protected from circumstances such as loss of income due to critical illness or death of the policyholder. Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The customer therefore benefits on two counts and life insurance occupies a unique space in the landscape of investment options available to a customer.
Investments
It is suitable to people who aspire to have high returns on their savings along with insurance protection. Its uniqueness lies in the various options available to the policyholder in selecting the type of fund, secured, Balanced or Risk Fund, etc. It even provides low cost term life insurance cover for the sum assured selected.
Savings
Each of us has some goals in life for which we need to save. For a young, newly married couple, it could be buying a house. Once, they decide to start a family, the goal changes to planning for the education or marriage of their children. As one grows older, planning for one’s retirement will begin to take precedence.
Clearly, as your life stage and therefore your financial goals change, the instrument in which you invest should offer corresponding benefits pertinent to the new life stage.
Life insurance is the only investment option that offers specific products tailor-made for different life stages. It thus ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage and hence ensures that the financial goals of that life stage are met.
Pension Plans
Pension Plans are Individual Plans that gaze into your future and foresee financial stability during your old age. These policies are most suited for senior citizens and those planning a secure future, so you never give up on the best things in life.
Annuities
These policies are best suited for planning children’s future education and marriage costs. The nominee receives a guaranteed amount of money at a pre-determined time and not immediately on death of the insured. On survival, the insured receives money at the same pre-determined time.
Gratuities
Under the Payment of Gratuity Act, 1972, it is the employer’s statutory liability to pay 15 days’ salary (15/26 of a month’s wages) for every completed year’s service to each of his employees on their exit, for any reason after five years of continuous service, subject to maximum limit of 3.5 lacs. Higher benefits can be paid if the employer so desires. Gratuity payable to the employees can be paid as and when liability arises and can be claimed as deductable expense under P & L A/c of the relevant financial years. However, the sound system of financial management envisages providing for Gratuity liability every year and claiming the tax benefits as it is mandatory as per Accounting Standards 15 (AS15) to account for the liability on Actual basis. This can be done by creating a Trust, managed privately or by LIC and paying the amount to the Trust every year. In case of Privately Managed Trust, investment of funds will have to be done as per Income-Tax Act, by the trustees and entire administration of the Trust including Actuarial Valuation will be the responsibility of the Trustees. In case of LIC managed trust, the job of investment and actuarial valuation is taken over by the corporation free of charge and in addition, interest is paid by the Corporation on the accumulated funds.
Retirement Plans
These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term. Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deduction, as opted by insured, throughout the term of the policy or till earlier death. Alternatively, the premium may be paid in one lump sum (single premium).