While there are various life insurance and investment products in the market, a Unit-Linked Insurance Plan or a ULIP carries an edge because it offers the dual benefit of life insurance protection and wealth accumulation. It ensures you achieve yourself and your family’s life goals both in your presence and absence – helping you strike the perfect balance between insurance and investment.
How does a ULIP work? As a ULIP is a mix of insurance and investment, it allocates the premiums you pay towards the plan in two avenues. A part of the premiums goes into securing the life insurance cover and necessary fund charges, while the rest goes into investing in equity, debt or hybrid funds. The performance of these funds over 10-25 years gives the investor increased returns. What does a ULIP offer? A ULIP offers the investor: 1. A guaranteed death benefit: As a part life insurance product, a ULIP gives the policyholder’s nominees (family members) of the plan a fixed and guaranteed monetary payout called the sum assured. This sum secures the family of the buyer in his/ her absence. 2. A maturity benefit: At the end of the ULIP plan, you get the returns (also called fund value) from the invested funds in case you survive the term. You can receive the maturity benefit as a one-time lump sum amount or in periodic monthly, quarterly, semi-annual and annual payouts. 3. Partial withdrawals: A ULIP comes with a mandatory lock-in period of five years, after which you can make partial withdrawals or choose to end the plan as per your convenience. However, it is wise to wait the entire term of the plan out as you receive higher returns and face lesser losses. How can Edelweiss Tokio Life’s Wealth Secure+ help you achieve your financial goals? The Edelweiss Tokio Life Wealth Secure+ is one such ULIP that gives you the complete flexibility to align your personal goals with your financial goals. With this Edelweiss Tokio Life plan, you get: 1. The choice to secure yourself, your partner and your children with the Individual Life Cover, Joint Life cover or Child Cover option. You can make these choices as and when the need for them arises and make top-up additions to your ULIP. 2. The freedom to kick-start your wealth-creation journey with affordable premium prices as less as Rs. 1,000 a month. 3. Whole life insurance coverage even up to 100 years of age! 4. A guaranteed death benefit that includes:
However, this is applicable only for the Individual or Joint Cover option. For the Child Cover option, the nominee will only receive the base sum assured and 105% of the total premiums paid until the death of the policyholder. 5. A maturity benefit: Here, you receive the entire fund value (between interest rates of 4% - 8%) calculated at the prevailing net asset value (NAV) on the expiry date of the ULIP plan. You can either receive this in a lump sum or monthly, quarterly, semi-annual or annual installments for a maximum period of 5 years. 6. Additions such as:
7. The freedom to choose from seven diverse fund options:
You can get us to manage your funds through the Life stage and Duration-based strategy or choose to manage them yourself through the Self-managed strategy option. 8. The liberty to:
9. Tax benefits on the premiums paid and the maturity benefit received at the end of the term under the relevant sections of the Income Tax Act, 1961. To conclude: A ULIP is perfect for ticking off two goals at the same time. It gives you enough flexibility to meet milestones such as marriage, education, retirement, and so on. Moreover, it is no longer an expensive product after the Insurance Regulatory and Development Authority of India passed rules to bring down its charges. However, you have to be in it for the long haul and be open to financial commitment to gain better returns.
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People usually prefer investments in mutual funds India for varied reasons. These may include meeting financial goals or acting on the basis of their individual risk appetite. A mutual fund investment should however be chosen carefully since you should zero in on the right reason first, i.e. risk appetite and financial goals. Choosing between the twain may appear a little difficult and rightly so! However, both are entwined in ways that you have not imagined yet.
You cannot always choose from mutual funds India on the basis of their earlier performance and other factors. You also have to look at fees and added charges, downside risks, consistency of overall performance and similar factors. A mutual fund is a suitable investment option for planning out financial goals. This instrument for investment will be sufficient for catering to a bigger spectrum of risk tolerance or appetite. It is vital to keep risks in mind while investing in mutual funds since returns from the investment are also related to risk factors. You should ideally select funds which have higher risk appetite in case capital appreciation is your investment goal. Simultaneously, you may consider taking more risks if you look for a longer investment tenure. Even if you seek a longer investment duration with sizable capital appreciation but do not have ample appetite for volatility, you will find suitable options pertaining to mutual funds as well. Investors have varying risk tolerance even in case of varying objectives. The first thing to do is identifying your financial goals and objectives. You should first zero in on the investment objectives, i.e. long term capital gains or current earnings. Work out what you will use the returns for, i.e. paying for higher education, funding your retirement or buying a house/car down the line. You should also consider personal tolerance for risk thereafter. Are you okay with sudden market fluctuations and changes in the value of your portfolio? Are you looking for something conservative or can you take some market risks? You will have to balance your need for returns with the risks involved. The desired time horizon or tenure should be carefully considered. How long do you wish to continue your investment? Do you foresee any concerns relating to liquidity in the near future? A horizon of at least 5 years is suitable since there are added costs of mutual funds and these may initially take away a chunk of your returns or earnings. Investors may invest to earn better returns for the shorter duration as compared to fixed deposits. They may plan long term goals for investments with mutual funds. These include the education and weddings of children, buying a home and also retirement. The risk tolerance may vary from one investor to another. Some investors have a higher appetite for risk while planning for retirement although risk tolerance may be low while planning for higher education costs of children. Hence, do the math and operate accordingly. Pension plans or retirement plans do help you to save enough to remain financially self-reliant during your old age or retirement years. It needs retirement planning under which you decide on the date you affix as your age of retirement. If you have the best retirement plans, you can decide on how many monthly expenses you will need during the retirement period. The plan should help you build the corpus for your years of retirement.
You should choose a good retirement plan for the following reasons:
Retirement planning is essential for a fulfilling life of retirement. If you don’t plan for your years of retirement, those years will pose a challenge to you maintaining the same standard of living when you were active and earning. Tips to choose a good retirement plan
Investors are always looking for a better-diversified investment portfolio. When your investment is spreading across several asset classes, the risk associated with them is minimized. With this diversification, investors are now crossing geographical boundaries and investing in some International Mutual Funds. As the name suggests, these investments are involved in foreign investment tools and are also known as Foreign Mutual Fund. These funds are associated with higher risks but offer chances of greater returns.
Overseas Mutual Funds are best suited for smart investors. The economic condition for various countries may differ from time to time and so is the economic state of your investment. This means you need to be sure to overcome minimal losses or earn smoother returns. Most financial advisors recommend investors put 15 to 25% of their funds in foreign stocks. A good starting point is with a 20% investment. If you are having a low-risk appetite, then it is advisable to invest a little to diversify your investment portfolio. Things associated with International Mutual Funds are -
International funds can be classified as Global Funds, Regional Funds, Country Funds, and Global Sector Funds. Global Fund investment refers to investing in securities globally except in your home country. Regional Funds referred to investment in some specific geographical regions of the world. Country Funds refer to investment in securities of only one foreign country. And Global Sector Funds purchase stocks from specific sectors in various countries globally. Look into an international mutual fund online for a better idea. Your fund manager invests money in international mutual funds by either purchasing the stocks directly or investing in some global funds that consist of investments in foreign stocks. Before you invest you must know where the fund is invested in, what the investment risks are, and how high are the chances of getting better returns. You should invest in Mutual Fund for financial gains that may come with some risk. The risk can be managed or averted with some advice from the experts. You should select one top Mutual Fund in India and collect information about it. You may have to consult a professional who is ready to help you even for a fee. The person will definitely know about financial funds in India. That person has years of experience in the field of the Mutual Fund. You must know for sure that the Mutual Funds investment is fraught with risk. With complete awareness of which mutual fund is performing well and with the assistance of some experts, you should go ahead and invest in Mutual Fund. It is imperative for an investor to have some awareness about the top Mutual Fund in India. You must have your financial goals in place and the level of risk appetite that you have. These are the very basics.
Before investing in a fund, you should know for sure what your goals are for investing. Is it a goal of long-term capital gains or is it important to get monthly returns? There are funds that are good to invest in for the future college education of children or a marriage in the family after a few years. Almost all the categories of the mutual fund are performing well according to their claims. It is not possible to put your finger on one category and say it is the best. You have to look into the various performance parameters and relate them to your own needs. If you can tolerate risk, you may expect better returns. You should look at the style and fund type. The main aim of a fund category is capital appreciation. If you can handle long-term risk and your goals are long-term, the long-term capital appreciation fund will be good for you. These funds hold their assets in common stocks, and they are consequently riskier. With the higher level of risk, these funds promise greater returns in the distant future when you need to fulfill your goals. These growth and capital appreciation funds don’t pay you any dividends. If you need current income from your investment in your portfolio, you should an income fund. These funds buy government bonds and corporate debts. There are funds based on the time horizon like short, medium and long term. Investors may have long-term needs but they may not be willing to take the assumed risk. For these people, a balanced fund is advisable that is invested in both stocks and bonds. A personal loan does not come attached with utility restrictions and can be used as immediate help for an urgent need. The current rate of interest varies between 11 % to 35 %, which depends on several factors like your income, credit score, age, other debts, etc.
Since it is an unsecured loan, you might have to pay a high rate of interest. If you are thinking of pre-closure, you must pay off the loan with the highest rate of interest first. Methods of preclosing a Personal Loan - part-payment or pre-payment? A personal loan can be availed when facing a cash crunch, and once finances look sorted, you would want to get rid of the debt as soon as possible. There are two ways how to prepay your loan:
You can use a calculator to assess the real profit by a prepayment. If the profit is marginal, then it is not recommended to make the prepayment. Consider factors like:
Procedure for the Pre-closure of Your Loan A loan closure can be a regular closure or a pre-closure. In both cases, you must follow these crucial things while closing a loan
How to pre-close the loan? Pre-closure or prepayment means repaying your entire loan before the tenure ends. There could be a penalty for pre-closing the loan, but it can lead to a reduction of interest rate and debt burden. Following is the procedure involved in pre-closing your loan: Step 1 - You need to visit your bank or visit the credit line webpage or app from where you have taken the personal loan. Step 2 – You would need to submit the necessary documents mentioning the loan account number, clearance of your last EMI, and a cheque or online payment for prepaying your entire loan. Step 3 – If there is any charge or penalty charged by the lender, you would need to pay that too, along with the prepayment. Step 4 – Collect the acknowledgement letter for future references. Step 5 – After following the appropriate procedure, you will get the loan agreement after the closure of the loan. Documents required for Personal Loan Pre-closure
Documents to collect after Pre-closure
When you must invest and not prepay:
When you must prepay and not invest:
Conclusion Pre-closure of personal loans is a relatively simple process, especially if taken through a credit line. The correct norms and procedures should not be neglected at any cost to avoid any problems related to your credit. It has numerous benefits which you can enjoy after the closure, provided the appropriate factors are considered and followed. You are faced with a dilemma: Your insurance advisor asks you to start a ULIP for better growth, but you wish to create a fixed deposit for 10 years. Let’s check what both options can do.
Understanding ULIPs and FDs A Unit Linked Insurance Plan (ULIP) is an insurance-cum-investment option, which offers life coverage as well as controlled exposure to the markets. Thus, your investment in the plan is partially diverted to a mix of high grade securities to secure growth for your money. A bank FD, is a sum of money that you set aside with the bank at a certain rate of interest for a fixed tenure. At the end of the tenure, you receive your entire principal plus the interest earnings on it. A ULIP plan… * Flexibility of investment: ULIPs offer a high degree of flexibility, by letting you choose a plan as per your risk appetite and future goals. You can switch funds based on your investment objectives and market trends – this means you can exercise control over the final growth of your investment. * Risk is spread: There is always some element of risk in market-linked instruments. However, the risk is spread when the tenure is longer, and this is true in the case of unit linked insurance plans. * Gradual savings lead to bumper rewards: By staying invested in a ULIP policy for 10 years, your investment grows with focussed savings into a large amount of money that fulfils future objectives easily. * You can withdraw money against it: After the cut-off period of 5 years, you may borrow money against the ULIP plan if you need funds. * The premiums are tax-exempt: Premiums paid are tax deductible under Sec 80C of the Income Tax Act, 1961. Whereas, a 10-year Fixed Deposit… * Offers predictability: You know how much your deposit will grow even before you invest in it. The interest rate offered on the FD is unchanged despite changes in market rates during the FD’s tenure. * Provides loan against the deposit: You can borrow a loan against the deposit instead of prematurely withdrawing it, if you need money. You may borrow up to 90% of the deposit amount as a loan. You may repay the loan and choose to renew the FD at time of maturity. * The income is taxed: However, the biggest drawback of creating the FD is that the interest earning on it is taxed 10% TDS if it exceeds Rs 10,000 in a year. This is a loss especially when you create a long tenure FD. Meanwhile, you can get around this situation by creating a 5-year tax saving FD and then renewing it for a further 5 years. * Returns are not always high: The returns on FDs are not always commensurate with inflation. So even if you get a good corpus at maturity, it may not be high enough to make future plans with. Based on the information above, we recommend choosing ULIP policies for their potential to create wealth without the tax burden. The Coronavirus pandemic has scuppered normal life as we know it, and just like you your child is also spending a lot of time indoors as they study and play. It might help to focus your energies on your child’s home school environment.
It is important to prioritise and plan for your child’s future education this year onward. Here are the 3 most important things you can do for your child this year: #1 Buy a child plan. Investing in a good child education plan is the first step towards helping your child on to a successful future. A good education is the foundation for future financial success, and the best child insurance plans in India ensure that they get the right footing for their ambitions. The best child plans help you pay for their future education, and they take care of your child even in your absence by waiving off future premiums but keeping the plan active till maturity age. Child insurance plans take the pressure off your income by paying for expensive future education and even your child’s wedding. Several people go into debt to pay for expensive college education, but a child plan can help you avoid the debt trap and reap bumper rewards for investing in it for several years. #2 Open a savings account in your child’s name. The savings habit will hold you – and your child – in good stead for the future. However, saving money regularly requires a lot of focus and commitment, but it is a habit that your child will thank you for later. Step #2 in investing in your child’s ambitions is to open a savings account in their name. Leading banks in India have minors’ accounts, and you can easily open one for your child and start setting money aside in it every month. Aim to add at least Rs 5,000 in it the moment you receive your salary, and any cash gifts your child may get from relatives. If your child has a piggy bank, encourage them to set aside three-fourths of the savings in the bank account and spend the rest on treats for themselves. In fact, you can teach your child the basics of banking and even take them to the bank branch to deposit money in their account, to pique their interest. #3 Create a study corner for them. Your child probably already has a study table in their room, but this would hitherto be used only for a few hours each evening to complete homework. With the Coronavirus shutting down schools indefinitely, it looks like kids across India will be attending school from home for several more months. Set up your child’s study nook with everything they need to attend online classes, group study sessions, extra tuitions, etc. Get a chair with an ergonomically designed back and armrests, a fast broadband connection, a new laptop, a headset with microphone, an extra storage drawer for books, etc. to make the learning experience comfortable and fun. You should make a note of tax on equity mutual fund and several other factors before you invest in this category of funds. Yet, it should be mentioned that these investments are great options for future-proofing your investment portfolio above all else. Many call equity funds as income mutual funds since they will generate inflation beating returns down the line. Some also consider them as the best tax saving mutual funds if you take prevalent aspects of tax on mutual funds into account.
ELSS (equity linked savings scheme) is perceived to be amongst the best and most productive tax savings funds and you can easily start SIP mutual funds in these investments minus any hassles. Tax saving SIP funds or equities may help you beat inflation for the future while also building a sizable corpus that is adequate for meeting all your financial objectives. Diversification of the stock portfolio with periodic rebalancing will ensure that you get the sheer growth and increase that you are basically looking for. Equities can get you high returns and capital appreciation alike. For instance, over the last 5, 10 and 15 years, the Compounded Annual Growth Rate (CAGR) of the Sensex has stood at 15.71%, 11% and 10.96% respectively. The interest rates on provident funds in comparison have hovered between 8.25-9.5% per annum over the last 15 years. In spite of coronavirus induced economic fluctuations, the equity markets are forecasted to bounce back once again. The country will achieve its target of transforming into a $5 trillion economy by 2024-25. Naturally, the equity markets will touch all-time peaks in the future. Disciplined, patient and committed investors will reap the benefits as a result. Equities will go a long way towards helping you surpass inflationary levels in the future. If you earn lower rates on investment as compared to the rate of inflation, then it will lead to erosion in your wealth. Equity investments will enable earning superior returns than inflation while maximizing creation of wealth for the future. LTCG up to Rs. 1 lakh on equity investments will be exempted from taxation while LTCG surpassing Rs. 1 lakh will be taxed at a rate of 10%. STCG (short term capital gains) from equity investments will be taxed at 15%. Returns on gold or debt investments will draw higher obligations in taxes as compared to equities. If you are seeking investments with higher tax efficiency in comparison to debt or gold, you should check out opportunities for investments in equities. You can also draw loans in the future if you need on equity mutual funds and shares alike. You can sell your fund units any day and get the money credited swiftly into your account. You can also pledge investments for loans and repay in the future for removing this pledge likewise. You should avoid investments of the entire corpus or sum into equities. Choose how much to deploy in equities depending upon your age, risk tolerance or appetite, expectation of returns and preferred tenure for investment. You should diversify into various asset classes while retaining equity funds in a considerable chunk for future-proofing the portfolio against inflation. Invest through SIPs in equities for rupee cost averaging benefits and for staggering risks throughout the tenure. People often look to purchase an insurance product with maximum coverage and the least premium. For some others, it is one of the most efficient tax savings products. However, some insurance plans serve the dual purpose effectively. In this article, we will be discussing tax savings insurance plans and their benefits. Life and health insurance plans are a good way to cover the family in the event of an unforeseeable tragedy, and they come with a tax savings rider as an added benefit. Different types of Tax Savings Insurance PlansThere are two types of tax savings insurance plans available, these are :
Best health insurance plans in India Best Life- Insurance Plans in India What are the Different Sections to avail Tax Benefits?
Sections under which an applicant can claim tax benefits are: Ø Section 80 C Tax deductions on the premium amount on ULIP or life insurance are eligible for a tax rebate up to Rs.1.5 lakh per year. Ø Section 10(10D) No tax on money received from insurance products like an endowment. Ø Section 10(10A) You receive one-third payment as a pension plan at the retirement time. This is tax exempted. Ø Section 80D Tax deductions up to Rs.25000 on a health insurance plan is available Under the above-mentioned sections of the IT Act, a person can claim deductions for himself, dependent children and spouse. Many people buy tax savings insurance plans to reduce tax outgo, however, it is necessary to read and understand the policies and select the one that suits your need. |
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