#THEARTOFWEALTHBUILDING #MUTUALFUNDS #CERTIFIEDFINANCIALPLANNERINDIA Due to mis-selling of Insurance; more than 91 Lakh policies worth Rs 1000 Crore lapsed in 2016. A policy is considered lapsed when the premium is not paid within 60 days of the due date.
If possible, we should try for exit policy rather than getting it lapsed. Let’s check out some of the exit strategies.
What is meant by PAID UP?
When you stop paying a premium but do not withdraw the money from the Insurance company, the company reduces all your benefits proportionality. The benefits like SUM ASSURED, MATURITY VALUE etc. But in case of Endowment & Money Back Plans Insurance Amount ceases to exist. You do not lose anything by this approach. For example, if your policy is for 10 years with SUM ASSURED of Rs. 2 lacs and you have paid premium for 5 years, your SUM ASSURED will now be 1 lac only and other benefits will also reduce by 50% as you have paid 50% of the overall amount that your were supposed to pay.
After making the policy PAID UP, you may choose to redeem the amount or continue with the insurance without further paying of Premium.
In case you were to redeem the policy, you get the amount as per SURRENDER VALUE.
Now what is meant by Surrender Value?
Surrender value is the amount that Insurance company will give you in case you were to withdraw policy before its maturity date based on their pre-decided calculation. For the first 3 years, the Surrender Value is NIL or very low. As the time increases, this amount keeps going up.
Typically, Insurance Policy people have either ENDOWMENT, MONEY BACK, ULIPs or Pension Plans.
If you have taken ENDOWMENT OR MONEY BACK POLICY(Traditional Policies)
After First Year premium, we suggest that you should stop paying further premium. You would lose all you have paid, but it is better to stop travelling on wrong road once you know it.
If you have paid 2 years premium, we suggest that you should pay one more installment and the stop paying premium. By doing that, you will actually make this policy PAID UP.
If you have paid the premium for more than 3 years, we suggest that you should stop paying further premium and get this policy into PAID UP ZONE until you get reasonable value.
Tax treatment: The entire surrender value added to your income in the year of receipt.
If you have made mistakes by taking BAD policies, we would say that learn from past experience and get rid of your Insurance Agents who pretends to be your friend. Always remember that Insurance and Investment are best bet only if they are not served as Cocktail.
Systematic Investment Plan is an investment vehicle, where an investor makes fixed, regular payments into a mutual fund, to reap the benefits of long-term investing. It helps you gain exposure to your selected asset class through the investment of a small or large amount of money, at fixed intervals and in a disciplined manner.
Benefits of a SIP
The compounding factor: make your money work for you by generating earnings which are further reinvested to generate their own earnings. The compounding process ensures that both the capital gains and interest earned from an investment, earn interest, as time passes.
Rupee cost averaging: trump the maxim “buy low, sell high” by automatically adjusting quantity bought against price, in order to average the cost of acquisition over time. Investing a fixed amount in the markets, at regular intervals helps lower the average cost of investment, as one buys more quantity when the price falls, and less quantity when the price rises.
Market timing becomes redundant: invest wisely across market cycles, reducing the impact of volatility. Since investments are made at fixed regular intervals, timing the market for appropriate entry levels becomes less important.
I have also explained why you need a financial planner.
Disclaimer:
before you take decision, we would advise that you should either read the fine prints of the policy document or contact the insurance company. You may also WHATS APP us in case you look forward to our advice. 9004789500
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