Life Insurance: Deepak Sood
I am 45 and plan to retire by 55. I have two pension plans. Do I still need to take the New Pension Scheme (NPS)? What will be the difference and its benefits?
One should make provision for post-retirement income of around two-thirds of pre-retirement income (net of tax and accounting for inflation). It’s good you already have two pension policies. But, it is not clear whether those will, along with other resources, be able to generate sufficient income after retirement. Retirement provision may be made through NPS or through various pension plans offered by life insurers. NPS is likely to have a lower charge structure than life insurers’ pension plans. But, pension plans offered by life companies are more flexible than NPS. For example, NPS has a fixed retirement age of 60 years, while life insurers’ plans have wider choice, between 40 and 80 years. You need to evaluate these and decide whether you need additional provisioning for pension. If so, whether you should invest through NPS or a life insurer.
I am 28 and earn Rs 35,000 a month. I am yet to buy a life cover. Should I buy a unit-linked insurance plan (Ulip)? A friend suggested Ulips give life cover and help in investments, too. What do you recommend?
Given your age & income, we suggest a combination of term policy & Ulip. While a term plan provides maximum life cover at a lower premium (so you can have sufficient cover of, say, 10 to 15 times your current annual income), a Ulip will provide life cover with scope for wealth creation. Ulips give wide choice of funds and transparency of charges. Do not invest in a Ulip if your objective is short-term return, as Ulips are suited for long-term wealth creation. Choose a Ulip that suits your fund requirement (time frame) in relation to the product construct, fund objective, the fund & fund manager’s track record and charge structure.
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The writer is the MD & CEO of Future Generali Life Insurance. Views expressed are his own. Send your queries at firstname.lastname@example.org