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are some myths that are associated with Insurance.
To choose insurance as a good investment, you
need to be informed about these myths.
Insurance is for saving tax
The primary function of life insurance is to
cover you against sudden losses arising out
of sudden death or liability. Unlike other investment
options like the Public Provident Fund that
saves tax or other small savings schemes like
post office deposits and national savings certificates,
Insurance isn’t a tax saving investment
vehicle.
Insurance, primarily offers you complete security
arising out of risk coverage against the uncertainties
of life. And secondarily serves you as a good
investment option and tax saving tool. Hence,
as an instrument, life insurance offers you
the ideal blend of risk cover, returns and tax
benefits.
Insurance does not give good returns
It’s true that there are other investment
options that could give you more returns than
life insurance. If returns are evaluated in
isolation, a fixed deposit option offering you
6% interest definitely looks good in a depressed
market. However, life insurance offers you other
benefits, in addition to returns.
For example, say, you invest Rs.5000/- in fixed
deposit. You would ideally get back the money
at the end of the year with marginal interest.
Whereas, if you decide to pay a premium of Rs.5000/-
per annum on a life insurance policy, you could
buy an insurance cover of Rs.50,000/- to Rs.2
lakhs depending on your age and type of policy.
And if, the unfortunate happens during the tenure,
your near and dear ones get to receive the amount
for which you are insured. If not, you get back
the entire sum at the end of the tenure.
Insurance products are not flexible
Insurance products have become more flexible
with the introduction of riders that allow you
to customize your plan. Riders allow you to
tailor your insurance policy to suit your unique
needs. They are attached to your base policy
when it is purchased and are available at nominal
rates. For example, there is the Critical Illness
Rider, which provides for payment of an amount
based on the diagnosis of a critical illness
condition of the life assured. The illnesses
covered include critical conditions such as
heart attack, stroke, cancer, kidney failure
and major organ transplant.
Flexibility is also provided through different
premium payment options. By utilizing these
payment options, you need not get tied down
to paying the premiums through out the term
of the policy. With Limited payment option,
you can complete your premium payments in short
intervals, while enjoying the benefits of the
policy for a longer term.
My money gets tied down in Insurance
The withdrawal facility available with select
insurance policies makes it possible for you
to withdraw your accumulated money any time
when you need it. There are also loan options
available on most policies that enable you to
utilise your returns much earlier than the completion
of the term of the policy.
In essence, life insurance offers you risk coverage,
tax benefits and returns on investment
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