Page 32 - Life Insurance Today March 2016
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the advantage of the tax shield. to differentiate between the legal whole life plan, you get both maturity
“Returns in the form of interest, inheritor and other inheritors. “The and death benefit. Since both events
dividends, and capital gains are nomination concept will ensure there are a certainty, the premia are higher.
sheltered from tax. Therefore, you can are less chances of any dispute arising Other policies may not have both
transfer the wealth without the as the nominee details are clear,” benefits together and consequently
burden of the tax,” Goel of Mittal says. have lower premia,” says Gaurav Roy,
PolicyX.com says. co-founder and operations head at
While buying an insurance plan, a BigDecisions.com, a personal finance
Not only the maturity proceeds but policyholder should keep in mind that advice platform.
the premium invested also gets tax maturity proceeds of the policy are
benefits, notes Mudit Kumar, aligned to meet his own financial The entire bucket of insurance
appointed actuary, Bharti AXA Life objectives. He should also be aware of policies being used for estate planning
Insurance. the premium payment term, is not very prevalent in India, though
affordability of paying the premium there is a provision for doing it by
“The benefit of using insurance for every year and risks involved in the assigning the policies under the
creation of assets or for passing on policy, plus the consequences of Married Women’s Protection Act, says
wealth is that beside the maturity discontinuing the premium payment. Roy. A policy assigned under this law
value, the policyholder gets life cover He should also make sure the effectively shields the proceeds from
for the entire policy term. Investing in nominee details are correct and claims by any other party like
a fully funded policy can also provide complete, Kumar adds. creditors or banks and ensures the
income to the purchaser, by proceeds are divided only among the
surrendering the policy for its cash Insurance companies offer whole life nominees. One can assign any kind of
value. Policyholders should develop a plans as products specifically meant policy, term plan, traditional or Ulip
strategy before investing, as on how for passing on wealth to heirs. Such under this Act.
much to invest (one must not plans offer two payments. One sum
overfund the policy and should save assured, along with the bonus and “Although the name is Married
for their own purpose as well) and in other benefits, is paid as survival Women’s Protection Act, you can
which instrument,” Kumar says. benefit at the end of the policy term. include your wife and children under
In addition, there is another sum it as nominees. But once it is assigned
Conditions to note assured for the entire life. Recently, under this Act, the policyholder may
Reliance Life Insurance launched a not make any further changes to it
Policyholders have to careful about Lifelong Savings Plan. HDFC Life and since it is not the property of the
the nomination in such cases. IDBI Federal are some others with policy holder any longer,” Roy notes.
Through the nomination, it is possible similar products.
It is due to this rigidity and partly due
The idea is that customers can buy to lack of awareness about this clause
the plan at 30 years of age, when that not many take advantage of it to
premia are lower, enjoy cover for pass on their wealth. It also requires
their entire lives and leave some the policyholder to fill up an
Money for their families when they additional form while purchasing the
pass away, not possible in a pure term policy. As the policyholder can decide
plan. But, if you compare costs, whole how much of the proceeds should be
life plans are costlier than pure term assigned to each nominee, it can be
ones. The returns don’t justify the effectively used for passing on your
high premia, which is why financial wealth and ensuring no disputes.
planners don’t advise such plans.“In a (Source: Business Standard)
"The fool doth think he is wise, but the wise man knows himself to be a fool."
32 March 2016 Life Insurance Today
