Under Section 80C of the Income Tax Act, investments into a Ulip can be claimed as a deduction from taxable income up to a maximum of Rs 1 lakh (Rs 100,000). But there is a slight catch to this, which most insurance companies do not tell you when they sell their insurance policies or is usually buried in the fine print.
As per subsection 3 of Section 80 C of Income Tax Act, a deduction is available only to so much of the premium which is not in excess of the 20% of the actual sum assured on the policy.
Lets try and understand what this means through an example of an individual who takes up a single premium insurance policy for Rs 1 lakh. He hopes that he will get the entire tax deduction of Rs 1 lakh, as is allowed under Section 80 C.
A Ulip has both investment and insurance features. A part of the premium is invested and another part goes towards paying the mortality charge for the insurance cover that an individual taking an Ulip receives.
As per current norms set by the nation's insurance sector regulator, the Insurance Regulatory and Development Authority, the minimum sum assured (the insurance cover that you have) in case of a single premium insurance policy, has to be 125% of the premium paid.
So if the premium paid is Rs 1 lakh, the minimum sum assured has to be Rs 1.25 lakh.
Now let's go back to what the subsection 3 of Section 80 C of Income Tax Act. It clearly points out that a deduction is available only to so much of the premium which is not in excess of the 20% of the actual sum assured. In this case, the single premium of Rs 1 lakh is 80% of the sum assured of Rs 1.25 lakh.
Hence, a tax deduction will not be available to an entire amount of Rs 1 lakh. A tax deduction of Rs 25,000, which is 20% of the sum assured, can be made.
Wednesday, October 31, 2007
Saturday, October 27, 2007
They sell you what you don't want
They sell you what you don't want
Mis-selling (Selling insurance products without understanding your needs) is rampant and whether you are a newborn or a 60 year old, insurance will be the first product sold to you.
Selling insurance is a business and you better understand what's under all their sweet talk and projects.
Don't mix insurance with investment. They are two separate decisions having different impacts on your life.
Generally insurance is sold through friends, and family and hence there is a social obligation to buy the policy. So even if you have to honour a social obligation, buy a term plan.
Mis-selling (Selling insurance products without understanding your needs) is rampant and whether you are a newborn or a 60 year old, insurance will be the first product sold to you.
Selling insurance is a business and you better understand what's under all their sweet talk and projects.
Don't mix insurance with investment. They are two separate decisions having different impacts on your life.
Generally insurance is sold through friends, and family and hence there is a social obligation to buy the policy. So even if you have to honour a social obligation, buy a term plan.
What your insurance agent will never tell you
What your insurance agent will never tell you
Data from the Insurance Regulatory and Development Authority of India, the insurance regulator, suggests that 90 per cent of the insurance sold by the private insurance companies during the last financial year (April 2006-March 2007) were Unit-Linked Insurance Plans.
A Ulip has, both, investment and insurance features. A part of the premium is invested and another part goes towards paying the mortality charge for the insurance that an individual taking a Ulip receives. This two-in-one feature is one of the reasons for the popularity of this product.
The other major reason being the high upfront commission offered to insurance advisors selling the product. This leads to insurance advisors pushing Ulips more than other insurance products like term insurance.
Let us say an investor takes a 20-year Ulip. Every year he has to pay a certain premium. In the first year, 15-71 per cent of the premium can be deducted as a premium allocation charge, depending on which insurance company the individual goes to.
What this means is that if an individual decides to pay a premium of Rs 50,000 and the premium allocation charge for the first year is 30 per cent, then only Rs 35,000 will be invested. The remaining Rs 15,000 the insurance company will recover as a premium allocation charge.
The majority of this will be passed onto the insurance agent. When you compare this to the around 2-4 per cent a mutual fund agent makes on selling a new scheme, this is fantastic.
Try buying a simple term insurance policy from an insurance advisor. For those individuals who already have an investment plan in place through mutual funds, it does not make sense to buy a Ulip. But at the same time they do need insurance and term insurance policy which simply insures an individual for a certain amount for the period of the policy, is their best bet.
If the policy holder dies during the period of the policy, his nominee will get the amount for which the individual is insured, if he survives the period, he does not get anything.
Most Indians look at insurance either as a mode of tax saving or investment. Hardly anyone looks at insurance for the sake of insurance. Given this, most do not like to take on a term plan, as they do not get any money if they survive the period of the term plan.
Using this fact as a selling point, an insurance advisor usually tries to dissuade any individual from taking a term insurance policy. The main reason though is that the premiums to be paid in case of term insurance policies tend to be very low.
Also a lot of private insurance companies run contests for their insurance advisors. These contests have expensive cars, foreign trips, etc., as prizes. Insurance advisors are eligible for it only if they manage to generate a certain amount of new business for the company.
If insurance advisors are to get anywhere near having a chance of winning these contests, they can never get there by selling low premium term insurance policies. They have to sell Ulips to be eligible for prizes that these contests offer. Some insurance companies do not consider term insurance policies sold for these contests.
Data from the Insurance Regulatory and Development Authority of India, the insurance regulator, suggests that 90 per cent of the insurance sold by the private insurance companies during the last financial year (April 2006-March 2007) were Unit-Linked Insurance Plans.
A Ulip has, both, investment and insurance features. A part of the premium is invested and another part goes towards paying the mortality charge for the insurance that an individual taking a Ulip receives. This two-in-one feature is one of the reasons for the popularity of this product.
The other major reason being the high upfront commission offered to insurance advisors selling the product. This leads to insurance advisors pushing Ulips more than other insurance products like term insurance.
Let us say an investor takes a 20-year Ulip. Every year he has to pay a certain premium. In the first year, 15-71 per cent of the premium can be deducted as a premium allocation charge, depending on which insurance company the individual goes to.
What this means is that if an individual decides to pay a premium of Rs 50,000 and the premium allocation charge for the first year is 30 per cent, then only Rs 35,000 will be invested. The remaining Rs 15,000 the insurance company will recover as a premium allocation charge.
The majority of this will be passed onto the insurance agent. When you compare this to the around 2-4 per cent a mutual fund agent makes on selling a new scheme, this is fantastic.
Try buying a simple term insurance policy from an insurance advisor. For those individuals who already have an investment plan in place through mutual funds, it does not make sense to buy a Ulip. But at the same time they do need insurance and term insurance policy which simply insures an individual for a certain amount for the period of the policy, is their best bet.
If the policy holder dies during the period of the policy, his nominee will get the amount for which the individual is insured, if he survives the period, he does not get anything.
Most Indians look at insurance either as a mode of tax saving or investment. Hardly anyone looks at insurance for the sake of insurance. Given this, most do not like to take on a term plan, as they do not get any money if they survive the period of the term plan.
Using this fact as a selling point, an insurance advisor usually tries to dissuade any individual from taking a term insurance policy. The main reason though is that the premiums to be paid in case of term insurance policies tend to be very low.
Also a lot of private insurance companies run contests for their insurance advisors. These contests have expensive cars, foreign trips, etc., as prizes. Insurance advisors are eligible for it only if they manage to generate a certain amount of new business for the company.
If insurance advisors are to get anywhere near having a chance of winning these contests, they can never get there by selling low premium term insurance policies. They have to sell Ulips to be eligible for prizes that these contests offer. Some insurance companies do not consider term insurance policies sold for these contests.
Saturday, October 20, 2007
ING LIFE PLUS
NEW POLICY FROM ING VYSYA LIFE INSURANCE:
ING LIFE PLUS:
DEAR FRIENDS,
IT GIVES ME IMMENSE PLEASURE TO INTRODUCE YOU MOST SUCCESFUL POLICY OF ING VYSYA (COMBINATION OF PURE INSURANCE AND ULIP ). NO HIDDEN FACTORS, ALL THE TRUTH IN FRONT OF YOU.
Age
ü Min Age at entry : 10 lbd (for age 10 and 11 the risk will commence 2 years later)
ü Maximum Age at entry : 45 lbd
ü Maximum Maturity Age : 65 lbd
ü Non Medical Plan from Age 10 to 45 years
ü Customize the policy as per the customer age
Premium Paying Term
ü 10 Years
ü 15 Years
ü 20 Years
Premium Payment Term = Policy Term
Sum Assured
ü 10 year term: 5 times annual premium
ü 15 year term: 7.5 times annual premium
ü 20 year term: 10 times annual premium
ü E.g. If annual premium is Rs. 20,000/- and term is 20 years then the sum assured is 2,00,000 (i.e. 20,000 x 10 = 2,00,000)
Enhanced Protection Cover
The risk cover increases automatically by a simple rate of 5% of the sum assured every policy anniversary provided premiums are paid up to date.
E.g. If premium is Rs.50,000/- p.a. for a 20 year term, then normal sum assured = 50,000 x 10 = 5,00,000
Enhanced Protection cover = 5% increase over 5,00,000 every year i.e. 25,000 p.a.
Therefore, in 20 years this will reach to 4,75,000
So total risk by end of term = 5,00,000 + 4,75,000 = 9,75,000
ü The 5% automatic increase in life cover makes up for inflation
ü Incase the Fund Value depletes e.g. a customer making a partial withdrawal, the Enhanced Protection Cover will provide enhanced protection incase of death.
ü The increase in life cover is without any further medicals during the entire policy term as long as premiums are paid regularly.
Premium
ü Minimum Premium
Annual Mode :10,000
Half Yearly Mode : 5,000
Quarterly Mode : 2,500
Monthly Mode : 833
ü Maximum Premium
Annual Mode :50,000
Half Yearly Mode :25,000
Quarterly Mode :12,500
Monthly Mode : 4,166
(Minimum premium to be collected upfront Rs 2,500/- monthly option available only with ECS,CC or standing instructions)
ü Enables the customer to pay as per his Convenience
ü Allows entry into the market at different points enabling a SIP mode of investment
Choice of 5 funds
ü Debt Fund - 100% in debt instruments
ü Secure Fund- Up to Min of 10% & to a max of 20% in equity
ü Balanced Fund- Up Min of 20% & to a max of 40% in equity
ü Growth Fund- Up to Min of 40% & to a max of 60% in equity
ü Equity Fund- Up to Min of 90% & to a max of 100% in equity
Maturity Benefit
ü On completion of chosen policy term the balance available in the policy holder fund value is paid
Settlement Options
ü Entire maturity benefit can be received in one lump sum OR
ü 3 annual installments OR
ü 5 annual installments
The settlement option should be exercised 3 months prior to maturity date.
ü The flexibility to settle maturity proceeds in 1 , 3 or 5 years enables the customer plan receipt of maturity proceeds based on his needs
ü It also gives scope to utilize or avoid market volatility based on the market performance at that point in time
Partial Withdrawals
ü On completion of 5 Policy Years partial withdrawals can be made
ü One partial withdrawal per policy year is allowed, restricted to 25% of the Fund Value.
ü Minimum balance in policy holder fund value after any withdrawal should be equal to one and half years annual premium
ü Un utilized partial withdrawal cannot be carried over in the next year.
ü No partial withdrawals are allowed while the life assured is a minor
ü Partial withdrawals are subject to charge of 1% of the amount withdrawn and minimum amount is Rs. 100/-
Surrender Benefit
ü Any time after the completion of the third Policy anniversary
ü If at least one full years premium is paid
ü Amount payable on surrender shall be the Fund Value less the applicable surrender charges. (Fund Value – Surrender Charge)
Death Benefit
ü On death before the policy maturity date, the (Sum Assured plus Enhanced Protection Cover) prevailing at that time OR the Fund Value, which ever is higher, will be payable
ü Partial withdrawals if any made during the preceding 24 months are deducted from the Sum Assured while calculating death benefit
ü If age at entry is less than 12, risk will commence at the end of 2 years from the date of commencement of the policy.
ü Lien Clause: If age at entry is 12 and above, in case of death within 6 months from the policy commencement date, only the Fund Value is payable.
Fund Management Charges
| Fund | % per annum |
| Debt Fund | 0.75% |
| Secure Fund | 1.00% |
| Balanced Fund | 1.25% |
| Growth Fund | 1.25% |
| Equity Fund | 1.50% |
FOR MORE CLARIFICATION, FEEL FREE TO CONTACT ME ON MY CELL NO. 9811511501.
Just get insured for your beloved ones.
Hi All,
Myself Vivek Patwal working with ING VYSYA LIFE INSURANCE CO. LTD. as an Insurance Advisor. And its a pleasant experience for me in sales field. I saw many people enjoying life with full expense in beer and wine, smoking but refuse to invest in their life.
So advised people to get insured because:
* First, life insurance helps you to protect your income and your family’s financial future in case you are not around.
*Second, life insurance works as a long term saving, thus giving you the financial strength to achieve your life goals. It also gives you tax benefits.
*Third, life insurance makes sure that you have regular income after you retire and also helps you maintain your standard of living.
*Final, life insurance is a safe, long-term investment, free from the risk of market swings. At the end of the term, you or your family can enjoy added returns on investment.
Most people are smart enough to understand the need for life insurance. But not all of them know that since insurance products are based on the lifestage and need factors, they are all different. So it is better to approach them with a bit of advice, so you can maximise the plan’s benefit. That’s where the LifeMaker comes in.
So here I am please to answer your querries regarding Insurance and ULIPs plans.
Myself Vivek Patwal working with ING VYSYA LIFE INSURANCE CO. LTD. as an Insurance Advisor. And its a pleasant experience for me in sales field. I saw many people enjoying life with full expense in beer and wine, smoking but refuse to invest in their life.
So advised people to get insured because:
* First, life insurance helps you to protect your income and your family’s financial future in case you are not around.
*Second, life insurance works as a long term saving, thus giving you the financial strength to achieve your life goals. It also gives you tax benefits.
*Third, life insurance makes sure that you have regular income after you retire and also helps you maintain your standard of living.
*Final, life insurance is a safe, long-term investment, free from the risk of market swings. At the end of the term, you or your family can enjoy added returns on investment.
Most people are smart enough to understand the need for life insurance. But not all of them know that since insurance products are based on the lifestage and need factors, they are all different. So it is better to approach them with a bit of advice, so you can maximise the plan’s benefit. That’s where the LifeMaker comes in.
So here I am please to answer your querries regarding Insurance and ULIPs plans.
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