Page 31 - Life Insurance Today March 2016
P. 31
Insurance as an
estate planning
tool
I n India, insurance is largely from whole-life plans, unit-linked financial products that are long-term,
bought for tax exemption and plans (Ulips), endowment plans to it would be a good idea to include a
investment. Actually, it is a risk non-participating or participating component in succession planning,
product, meant to protect the plans. says Parag Mathur, general counsel at
policyholder and his or her family from BankBazaar.com.
uncertainties such as death, illness or Typically, they buy a set of policies
disability as a result of accidents, etc. across a set of insurance companies in It can be done by a combination of
Or to provide a replacement for order to ensure diversification. The term plans, which are cheap and
income in case of loss of a job. policies will have varying terms. The provide substantial cover in case of
premia vary between ` 2.5 lakh and death of the insured, traditional
And, it is also possible to use it for ` 10 lakh and the sum assured endowment plans and Ulips.
passing on wealth to your heirs, between ` 25 lakh and ` 1 crore each. Endowment policies, though expensive
something high net worth individuals “We have observed that businessmen when compared to term plans, allow
(HNIs) are slowly adopting. buy across seven to 10 policies; sums you to plan for events in your and your
of ` 5-10 crore could be set aside for successor’s life, providing a life cover at
There is a trend of HNIs purchasing their heirs as the policies over time,” the same time.
life insurance policies. “We find Mittal says.
protection plans being purchased by “You can plan in advance and tie your
HNI businessmen that extend beyond These could be policies where the returns from the policy to major
60 years, at times up to 80 years. They premium paying term is limited but milestones. This is the biggest benefit
buy insurance not only for protection, the coverage extends for a longer of including insurance in succession
but to address the need for legacy time, such as a single premium policy. planning. However, make sure you
transfer,” says Deepak Mittal, “A single premium life insurance is a understand the premium utilisation,
managing director, Edelweiss Tokio good option through which HNI charges involved, and guarantees
Life Insurance. customers can invest their mass provided by the insurer, before you
wealth for paying a single premium, purchase a policy. These factors
For instance, in the case of one son or which will create an immediate death decide your returns. If you misjudge
daughter inheriting the business, the benefit and transfer the wealth to these, your policy might not prove as
father might utilise a part of the their next generation after them,” beneficial as you thought it to be,”
profits from the business to buy says Naval Goel, founder, PolicyX.com, says Mathur.
insurance policies aimed at creating insurance aggregator.
an estate for other siblings or The biggest benefit of using life
dependents. The policies could range Since life insurance is one of the few insurance policies to pass on wealth is
Life Insurance Today "Good friends, good books, and a sleepy conscience: this is the ideal life." 31
March 2016
