Why are child insurance plans ideal for your child?

A child is a joy for its parents. You, as a parent, try to ensure that your child receives the best nutrition, healthcare and education. You even create a financial plan for your child’s future so that your child can choose whatever education he/she likes without having to worry about necessary funds. What if your financial plans for your child take a backseat if you die prematurely? Would the funds, you thought about, be available to your child when he/she grows up and seeks higher education?

They might not and this is where a child insurance plan comes into the picture. The plan, with its unique coverage benefits, provides a secured saving for your child’s future. Do you know what these plans are?

What are child plans?

Child insurance plans are savings oriented life insurance plans taken on the life of a parent or a child. The plan has an inbuilt premium waiver benefit. If the parent, who is the policyholder, dies during the term of the plan, the plan does not end. Future premiums are paid by the insurance company and the plan continues till the term selected. In case of death of the parent, a death benefit is paid (if the parent is the insured). On maturity, whether the death benefit has been paid or not, the promised maturity benefit is paid.

Types of child plans

There are two types of child insurance plans – traditional and ULIPs. While traditional plans come as endowment or money back plans with guaranteed benefits, unit linked plans (ULIPs) provide market-linked returns.

Why are child plans ideal?

The only feature which makes child insurance plans ideal for your child’s future financial security is the premium waiver benefit. This benefit makes the plan uniquely suitable to creating funds even in the absence of the parent. This is what sets child insurance plans apart from other popular investment tools like Fixed Deposits (FDs) and mutual funds. Let’s understand –

Child Insurance plans

So, while FDs and mutual funds stopped creating wealth at the death of the parent, the child plan continued. It stopped only on the promised maturity date and paid the promised maturity benefit. Thus, the child plan guarantees wealth creation even in the absence of the parent and is an ideal investment avenue compared to FDs and mutual funds.

You can choose traditional child plans or unit linked ones based on your requirements. Traditional plans, however, provide lower inflation-adjusted returns. ULIPs are better since their returns are higher and depend on the market movement. Therefore, such returns are inflation proof.

The verdict –

The verdict is clear. Child plans are an ideal investment solution if you want to create exclusive funds for your child’s future. They also have a tax advantage which is missing in case of FDs and mutual funds. The premiums you pay and the benefits you receive under the child plan are both tax-free.

Read on to Know about tax benefits of life insurance policy

Thus, child plans provide you dual advantages. They not only create assured funds for your child, they also help in lowering your tax liability. So, if you have a child and want to create funds for his/her future opt for child plans.

Read on to know The reasons why you need life insurance policy

Read more to know Common terms in life insurance policy

Know about single premium term insurance plan

Securing one’s family in one’s absence is one of the most important needs of every individual. That is why you work hard to provide financial security to your family. But what if, suddenly, your financial plan goes haywire because of your untimely death. Would your family be financially secured?

They might not be. After all, your financial planning would be cut short in your absence, wouldn’t it? What would you do to ensure that it is not?

The answer is simple – buy a term insurance plan.

A term insurance plan is a life insurance plan which pays a lump sum benefit in case the insured dies prematurely. The plan has very low premium rates which allow you to buy a high sum assured level. Thus, the plan ensures that you can afford a substantial coverage which would provide your family the much-needed financial security in your absence.

Why is a term insurance plan important?

The importance of a term insurance plan lies in its design. The plan, usually, pays only the death benefit. As such, the premium is charged for the risk cover only. Since the mortality cost is low, the resultant premiums are also low. Therefore, as stated earlier, you get to buy an optimal sum assured level which provides the required financial security to your family. In your absence your family gets a lump sum amount which, being optimal, secures them financially.

Single premium term insurance plan

A single premium term insurance plan is a term insurance plan which requires only one premium payment. You pay a lump sum premium when buying the policy while the plan continues for the chosen tenure.

Benefits of single premium term plan

A single premium term insurance plan is beneficial in the sense that it frees you from regular premium payments. So, if paying annual premiums seems like a hassle or if you have a short-term source of income, buying a single premium term plan is a better alternative. You can pay premiums once and enjoy coverage for the chosen tenure. It is, therefore, a convenient plan which gives you all the benefits of a term insurance plan and yet requires only one premium.

Things to look out for when buying such a plan

Before you buy a single premium term insurance plan you should look out for the following factors –

  • The sum assured

Term plans allow you a high coverage at affordable premiums. So, you should ensure that the sum assured you choose is sufficient for your family’s financial goals. Don’t underinsure yourself. Choose an ideal level of coverage depending on your income and expenses, your financial goals and your family’s lifestyle requirements.

  • Premium

Since the plan requires a single premium the amount of premium would be substantial. The insurance company would charge the premium in one lump sum for the tenure you have chosen. Thus, you should be careful about the affordability of the premium amount. Make sure that the single premium is affordable and doesn’t blow a hole in your pockets.

Read more about Common terms in Life Insurance policies

  • Tenure

A term plan pays the death benefit only if death occurs during the chosen term of the plan. So, you should, ideally, choose the maximum possible tenure. This would allow you to avail coverage for the longest possible time and increase the probability of claim.

  • Rider

Term plans provide additional riders which help in increasing the scope of cover. You can choose an accidental death benefit rider which pays an additional sum assured in case of accidental death. You can also choose a critical illness rider which covers major illnesses. There are other riders too which give you additional coverage benefits. So, choose from the available riders and enjoy a wide scope of coverage under your term plan.

Read more about Should you buy Term Insurance riders?

Single premium term plans are an ideal solution if you are looking for financial security with a one-time payment. Now you also know how the plan works and its benefits. So, invest in a single premium term plan if you want you ensure your family’s financial security without having to burden yourself with regular premium payments.

Know more about Difference between Life Insurance and Term Insurance

Read more about Common mistakes to avoid when buying Term Insurance plan

How to save money on your teen’s car insurance

Mr. Sharma wanted to gift a car to his son on his graduation ceremony. After all, his son was the topper of his institute! Though Mr. Sharma decided the car which he was going to buy he wanted to the cheapest car insurance policy on his son’s car. He didn’t know how to achieve what he wanted. Do you?

You can save money on your teen’s car insurance policy if you follow some tips. Let’s see what these tips are –

  • Buy a used car

While you want to buy a car for your child you should remember that your child is not a seasoned driver. Chances are that your child would learn driving after getting a car. In such a case, buying a brand new car is a waste. You should buy a second-hand car so that your child can learn and practice his or her driving skills. A used car would come cheap, have a low Insured Declared Value (IDV) from the perspective of your car insurance policy and would, therefore, have a low car insurance premium. You can, thus, save not only on the car’s cost but also on the car insurance premium. A double treat, is it not?

Read more about car insurance terminologies you should know

  • Install safety devices

Car insurance companies allow a premium discount if the car is fitted with safety devices. This is because of the fact that safety devices reduce the chance of accidents and theft. So, if you install safety devices in your teen’s car you can avail premium discounts and save on the premium cost.

  • Ask your teen to maintain a clean driving record

A clean driving history goes a long way in saving premium costs. It shows that the driver is careful and the possibility of a claim is low. Insurance companies, therefore, allow lower premium rates for drivers having a clean driving record. Moreover, a clean record also earns no claim bonus which lowers the renewal premium. So, ask your child to maintain a clean driving history so that future premiums are low.

  • Renew the policy on time

A car insurance policy is offered for a period of one year after which you have to renew it. If the policy is renewed on time you get two benefits. One, the premiums are low compared to lapsed plans where the premiums are high. Two, your earned no claim discounts can be used for discounting the renewal premium. If the policy is not renewed on time you might lose the accumulated no claim discount. That is why, renewing on time is always recommended.

Read more about why is an on-time renewal of car insurance important?

  • Compare

Never buy a car insurance policy in a hurry. Always compare the available plans before finalising one. When you compare you can find out the coverage features, promised Insured Declared Value (IDV) and the premium of various plans. Then you can weigh in the coverage and premium of different plans and choose one which offers the best features at the lowest possible premium. So, always compare car insurance before buying to ensure lowest premium rates.

  • Look for available discounts

Discounts are allowed in car insurance plans for different factors. If you are a member of a reputed automobile association you get a premium discount. Installing safety features gets you a discount. You also get a discount if you choose a voluntary deductible or buy a policy online. So, when buying a car insurance policy for your child, look for the available discounts and lower your premiums.

Mr. Sharma’s friend advised him to buy a second hand car in which safety devices were installed. Both these tips saved Mr. Sharma thousands in premium on his son’s car insurance policy. He couldn’t be happier. If you also want to save premiums on your teen’s car insurance, follow the above-mentioned tips and save your money.

Read more about what makes your car insurance more expensive

Read more about how much car insurance do you really need?

TDS on life insurance policies

Tax saving is a primary motive in every investor’s mind. That is why people try and invest in tax saving avenues which help in lowering their tax liability. When it comes to life insurance policies, one of their USP is tax-saving. Life insurance policies allow tax relief on both the premiums paid and the benefits received. That is why many of you prefer buying a Life Insurance policy along with from the fact that it ensures financial security. However, there is confusion among many individuals regarding TDS (Tax Deducted at Source) on life insurance policies. Many of you don’t understand whether there is a TDS element in the premium paid and the benefit received. Is there? Let’s find out –

What is TDS?

Before we move onto the TDS implication on life insurance policies, let us understand what TDS is. TDS is a tax which is deducted from the earnings before they are paid to you. This tax is then deposited with the Income Tax department in advance on your behalf. If your tax liability is lower than the TDS deposited you can claim a tax refund on the TDS deposited.

TDS on insurance policies

In case of insurance policies, TDS might factor in on the benefits received. Let’s understand how TDS applies in life insurance –

  • On the maturity or death benefit – the benefit received from a life insurance policy is exempted from tax under Section 10 (10D) of the Income Tax Act. There are certain qualifying conditions under this section. If the insurance policy qualifies on the prescribed conditions, TDS is not deducted. If, however, the policy does not qualify under such conditions, TDS would be deducted on the benefits.

Now you must be wondering what the qualifying conditions are? These conditions include the following:

  • The sum assured should be at least 5 times the annual premium amount for policies which have been issued before 31st March, 2012
  • For policies which have been issued on or after 1st April, 2012, the sum assured should be at least 10 times the annual premium amount

If these conditions are fulfilled, no TDS is deducted on the maturity or death claim. If, however, the conditions are not fulfilled, TDS is deducted on the maturity amount.

Deduction of TDS

According to Section 194DA, if your PAN details are available, TDS is deducted at the rate of 1%. If, however, PAN details are not available TDS is deducted at the rate of 20%.  TDS is deducted if the maturity amount is Rs.1 lakh and above.

For NRIs, TDS is deducted under Section 195 if the qualifying conditions of Section 10 (10D) are not fulfilled. TDS would, however, not be deducted for NRIs residing in countries which have the benefit of Double Tax Avoidance Agreement (DTAA).

Read more to know how tax is computed on your life Insurance policy.

Life insurance policies are, usually, free from the implication of TDS. However, if the prescribed rules are not fulfilled, the maturity benefit is taxable. So, understand the implication of TDS on your life insurance policy to understand the taxation on your policy benefits.

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Why should women buy term life insurance?

Women empowerment has become the all new rage in today’s age when women are becoming increasingly independent. The importance of women is being felt everywhere. Women have become independent and it is no surprise that they also need an insurance plan of their own. However, many of you don’t give due importance to a term insurance plan for women. You might feel that women don’t need term insurance. You are wrong. Women also need a term insurance plan. If you don’t believe me here are some reasons why women should invest in a term insurance plan of their own –

  • Financial security for the family

Gone are the days when only men were the sole breadwinners of the family. Nowadays women can also be the sole breadwinners of their family. For instance, unmarried women can be the bread-winners for their dependent parents. Similarly, single mothers are the chief wage-earners of their family. In such cases, in case of the unfortunate demise of the female breadwinner causes a heavy financial loss for the dependent family. A term insurance plan is needed in these cases to provide financial assistance to the bereaved family. The plan pays a lump sum benefit on death of the breadwinner ensuring financial security for the family.

  • Supplementing the husband’s insurance cover

If women also invest in a term insurance plan for themselves, they can supplement their husband’s insurance cover and create a larger financial corpus. Just like working women supplement their household’s income, women having a term insurance plan supplement their husband’s insurance cover. The enhanced coverage can, therefore, provide a better financial security for the family. Since inflation is increasing day by day, an additional term plan would ensure a better financial cushion for the family.

  • For the children’s financial security

Every parent wishes to create a secured future for their children. While husbands do all the necessary financial planning for their child’s future, women too can contribute to it. By buying a term plan on their lives they can create an additional financial corpus for their children in case of their premature death.

All these reasons highlight the importance of a term insurance plan for women. Whether you are a husband or a father, ensure that the women in your family also have a term insurance plan. If you are a woman yourself take the next step in empowering yourself. Buy a term insurance plan and secure your family. However, before you buy a plan you should look out for the following factors –

  • The sum assured

Your plan should have an optimal sum assured based on your financial goals. Term plans have low premiums which allow you to afford a higher coverage. So, don’t skimp on the coverage amount. Expenses are on the rise and if you want your term plan to create financial security, an optimal sum assured is required.

  • Premium rate

Check the premium of the plan. While you might be enthusiastic about having a higher coverage, ensure that the associated premiums are affordable. Compare the different term plans available in the market before you settle on one plan. Comparing would let you buy a plan which has the best premium rate and also a comprehensive scope of coverage

Read more about understanding life insurance terms.

  • The riders

Riders are additional coverage features which are available at an additional premium. The additional premium required is minimal while the coverage is quite comprehensive. Some popular riders which you can consider include the following –

  • Accidental death benefit rider – the rider pays an additional sum assured in case of accidental death
  • Critical illness rider – the rider covers major critical illnesses and pays a lump sum benefit if you are diagnosed with any of the covered illness
  • Premium waiver rider – this rider waives future premiums if you are become disabled due to an accidental injury
  • Terminal illness rider – this rider pays an additional sum assured and also waives future premiums in case you are diagnosed with a terminal illness.

So, choose the necessary riders depending on your requirement for a more enhanced coverage under the plan.

(Here’s why riders are necessary)

Women’s contribution to the society cannot be ignored. Their lives also have a financial value which needs to be protected with a term insurance plan. So, you should ensure that you yourself and the women in your family understand their importance and insure their lives under a term insurance.

Read more about why you should buy life insurance plan if you are thinking of not buying one.

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