INSURANCE IS NOT A PROFIT GENERATOR IF CONSIDERED FOR A SHORTER PERIOD
Insurance planning is about coverage for eventualities, not profit.
March is approaching and many of you have got busy with tax planning. In the process, you are looking at various financial instruments and insurance is surely on your agenda. If so, it is important that you consider some aspects.
Insurance, besides protection, is considered an investment and tax benefit tool, too. Is it right to use insurance as a money-making vehicle?
Not really! If insurance is taken with an intention of generating profits, then it's a wrong notion. Insurance is a promise of reimbursement in the case of loss, paid to the families of people in case of any untoward incident, after prepayments to an insurance company. There is no mention of profit here, only about indemnifying loss out of earlier precautionary payment towards an unforeseen eventuality.
There are 'n' number of charges which are to be paid by the policyholder in the initial years. And every policyholder does not know about this. He thinks that if he is paying Rs.10000 annualy for 3 years continuously that means he has invested Rs.30000 in the market over the past three years. But this is not true, his annual premium which is Rs.10,000 is not invested fully in the market, he is being debited with the various charges like Allocation charges, Administrative charges, Mis. charges etc. depends on policy to policy.
So I would like to give advise to all the people that they should ask for the charges which will be deducted out of their premium annually and what is the actual amount which will be invested in the market?
And always keep in mind, if you are going for any ULIP plan then don't withdraw your money before 5 years. If you withdarw your money after 5 years then only it will give you the expected returns based on market performance.
March is approaching and many of you have got busy with tax planning. In the process, you are looking at various financial instruments and insurance is surely on your agenda. If so, it is important that you consider some aspects.
Insurance, besides protection, is considered an investment and tax benefit tool, too. Is it right to use insurance as a money-making vehicle?
Not really! If insurance is taken with an intention of generating profits, then it's a wrong notion. Insurance is a promise of reimbursement in the case of loss, paid to the families of people in case of any untoward incident, after prepayments to an insurance company. There is no mention of profit here, only about indemnifying loss out of earlier precautionary payment towards an unforeseen eventuality.
There are 'n' number of charges which are to be paid by the policyholder in the initial years. And every policyholder does not know about this. He thinks that if he is paying Rs.10000 annualy for 3 years continuously that means he has invested Rs.30000 in the market over the past three years. But this is not true, his annual premium which is Rs.10,000 is not invested fully in the market, he is being debited with the various charges like Allocation charges, Administrative charges, Mis. charges etc. depends on policy to policy.
So I would like to give advise to all the people that they should ask for the charges which will be deducted out of their premium annually and what is the actual amount which will be invested in the market?
And always keep in mind, if you are going for any ULIP plan then don't withdraw your money before 5 years. If you withdarw your money after 5 years then only it will give you the expected returns based on market performance.
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