Traditional Saving Plans vs Whole Life Insurance Plans

Our day to day life is full of uncertainties which may cause risk for our family, especially in case you are the only wage earner of your family. To prevent such risks one can either start saving on regular basis using different schemes like provident funds, recurring deposits or can start term insurance plans. But there are other whole life plans which give you both in a single bundle.

No doubt those traditional saving plans can do better than whole life plans in term of savings like a regular saving deposit account which is offering a valuable interest rate up to 7%. But are they also covering other benefits like tax rebate, risk cover, insurance riders and loan against deposited money?

There are more than 40 life insurance companies serving whole life insurance plans in India. All plans are designed bundling features mainly investments and risk cover. There are many reasons apart from sales strategy and brand value of insurance companies which are attracting consumers to invest in whole life plans. Here is a one to one comparison of whole life compositions to available top saving schemes in India.

Regular Saving Accounts:

I would like to start with regular deposit accounts because this is most commonly used saving plan and paying good interest rate since Reserve Bank of India has given flexibility to banks over interest rate offered. Banks are providing up to 7% interest and it has also gain a healthy competition among public and private sector banks. Probably it may not give banks a long term asset but this part of investment makes a running base of banks. Many banks are offering death benefits with saving accounts but are not that much successful. Saving accounts have several disadvantages like no tax rebate and no loan against deposited money.

Recurring Deposit:

Recurring deposit are likely one of the most popular schemes among service class people with good enough interest rate up to 9-10%. Several Banks in India have started flexible recurring deposit schemes, where a group of people is targeted with variable income. This also lacks tax benefits and loan facility against deposit. Usually schemes are offered no long term deposit and no life cover.

Fix Deposit:

This is top interest paying scheme and popular in business class. But at the same time this scheme lacks tax savings and required lump sum amount to invest. It also does not come with too long term. No tax benefits and no loan facility available. It also does not provide risk cover.

Provident Funds:

This investment plan strictly challenges to whole life plans due to tax saving benefits and loan against investment with great interest rates. It also competes pension plans by insurance companies but does not have risk cover likely in whole life insurance plans.

What Does Whole Life Plan Covers?

I have explained advantage and disadvantages of several saving schemes available in India. Let us have a look at the benefits in whole life plans which are not completely covered in above arrangements.

• Tax rebates on premiums and maturity / death claim
• Maturity benefits with bonus
• Surrender values
• Loan against policy
• Additional riders for accidental death
• Premiums paid monthly / quarterly / half yearly / yearly

Why You Need to Have Life Insurance!

Why You Should Have Life Insurance!

Here are four questions for you to consider:
1. What would your family lose if you died tomorrow?
2. Would your family have enough money to survive the next few years after you died?
3. If your family needed to tap into their qualified retirement plans, will they need permission and be penalized for accessing their money?
4. Do you know how you can you place your money out of the reach of creditors but have it be accessible to your heirs, tax free?

If you answered yes to any of these questions, your money is not in what I would consider a “simple” tool. A simple tool that protects you from loss with guaranteed returns. You will not have to pay a penalty to access your money, or need to ask permission to get it. You can ensure your money is safe if you’re ever sued.

There are precious few financial tools around today that will protect your money from lawyers! In many states there are but two truly safe financial tools that can do this. Those tools are cash value life insurance and annuities. Financial security is the main reason why the wealthiest people in America make these tools the foundation of their financial portfolios.

Celebrities like O.J. Simpson have used these tools often to avoid having to pay millions of dollars in damages after being sued and held liable in the civil courts. I’m sure you’ve heard countless people asking how he could afford to play golf every day at those ritzy expensive country clubs when he owed millions in judgments. It’s because he had a professional like me set him up with the right financial tools early in his career. Nobody ever would have dreamed he would’ve been in that kind of trouble. But something as simple as a car accident can result in legal actions that can cause you to lose everything, retirement money included, if you’re not protected with the right tools. You can’t afford not to have the proper protections.

I’ll share these wise words with you. If you are faced with paying for your kid’s college with limited money, or funding your retirement, ask yourself this, “Would I rather have the kids sleep on my floor while they’re in school, or would I rather sleep on theirs when I’m retired?

Life Insurance – The Better Investment Plan

Everyone is aware that death is real and will definitely occur on some unknown future date. But despite this awareness, people strangely do not have the right life insurance policy so critically needed.

Americans finding it tough to meet their essential expenses in today’s downtrodden economy may think they can skip on life insurance. But families – that too with children – not having a life insurance policy are exposing their kids to a terrible risk if the inevitable happens.

Investment in life insurance when you are single or a lately married person is a wise financial decision. The premiums will be low and the possibility of getting a 30-year term is feasible. As regards the quantum of life insurance you need to invest in, there are differing opinions. Some financial experts suggest you should insure for five to seven times your salary, while others insist it should be more.

You can obtain life cover, education cover and post retirement benefits when you invest in insurance. Additionally, you can enjoy tax exemptions to reduce your current tax liabilities. For instance, you can invest in the insurance plans which offer not only life insurance, but also riders for investment of the premium amount – so that you get handsome returns when you retire.

Life insurance policies are of three different types. Term insurance offers basic protection at a low cost. There is whole life policy that has an attractive savings component. The third type, the return of premium, may be defined as a hybrid of the first two.

Finance professionals mostly recommend term life policies as they allow consumers enjoy maximum coverage at little cost. They can thereafter invest on their own the savings they obtain by avoiding costlier options. Term life is indeed the most affordable variety of life insurance. You can buy policies with larger face values than you could otherwise afford.

Investing in whole life insurance policies has a host of advantages. The policy is permanent and there is no expiry provided you regularly pay your premiums – year in and year out. Death is simply inescapable and with a whole life policy, you know you are leaving behind something for your dependents.

But, whole life policies are not cheap in view of the fact they build up a savings account (“cash value”) that swells tax-deferred, and this can be tapped during retirement. Please remember that your death benefit will stand reduced by the amount you withdraw.

Robert Miller, president of the National Association of Insurance and Financial Advisors, opines that term insurance is usually the best option. “I’ve always believed in insuring up to the point that you need insurance,” he says. “You can do that with term insurance and it comes out to be far cheaper.”

There are however a few exceptional circumstances where whole life insurance is preferable. If you have children who are handicapped and will need financially dependence for their whole lives, you can consider the permanent coverage.

Lately, there is a new type of life insurance that protects you with living benefits riders. The riders allow you to avail a part of the death benefit while you are still alive. It is designed to offer you financial protection if you are stricken with a covered critical ailment like heart attack, stroke, cancer, etc.

Imagine a life insurance investment that combines the benefits of life insurance, disability, and long term care into one single policy. In a lighter vein, this is life insurance investment that you do not have to die to avail.

Income Protection Compared To Life Insurance

In order to compare life insurance to income protection you need to have a good understanding of how each of them work in terms of the cover they provide. Of course they both insure different things, but the fact that they are the same type of insurance is enough to create parallels between the two so you can understand them both a bit better. After all, these are the two most misunderstood and least liked types of insurance that you find in the market to date. They both fall under the term long term insurance and it is usually because you have the policies for a long time. They also insure something intangible to the policy owner until such time that a claim needs to be put into the insurer.

It is only at claims stage that you start to see the difference between the two policies. Essentially on a life policy, if you are the insured life on the policy and you are paying for it, then it is unlikely that you will see any benefits from the policy itself, but at least you know that whoever is left behind will be taken care of the way you intended. When it comes to income protection, the only time you will get to see the benefits is when you are fall ill and you can no longer attend work, or you end up getting retrenched by the company you are working for.

The similarities come in when you look at how you have to pay for something every month without getting to reap any of the benefits. In addition to that, you also have to do a few calculations to ensure that you are adequately covered when the policy comes into effect. That means that you need to have enough money on a monthly basis for a specified period of time to ensure that you still get an income that is sufficient enough to pay for your essentials while you are unable to work and earn the money you need.
When it comes to life insurance, you have to make sure that that the benefit amount is sufficient to cover you needs as well. You have to calculate how much money your family will need without you being there to contribute to the monthly household income. If you want to settle a home loan so you know your family always has a place to stay then you should include that amount in there to give them exactly that.

So the parallels are there even though the benefits are slightly different, and if you are still uncertain you can take a look at to get it in more details.