Financial Planning style

POSTED BY Market Hypothesis ON October 26, 2010 9:18 pm COMMENTS (7)

If you have term insurance of sum assured Rs.25,00,000/- for 25 years duration at your 30 years age, then your annual premium will be approximately Rs.7,300/-. That means you have to spend Rs.1,82,500 for your 25 years insured life. If you are alive after 25 years, then you will get nothing after your 55 years age. If you invest 90000 to 100000 in MIS Scheme then your monthly income will be Rs.600/- per month and yearly it will be amounting to Rs.7200. If RD Interest rate added then term insurance annual premium can be earned from your invested amount in MIS. Your principle amount will be saved and further bonus will be added after 6 years. You can continue it further 19 years. Do you think, this concept can be a good financial planning style?

7 replies on this article “Financial Planning style”

  1. prabeesh says:

    I think what he is trying to say is invest 1,00,000 in MIS which will yield a sum of around 7,200 as interest ,which can be used for paying the premium for term insurance cover of 25Lakh.

    I see no problem with this style.Its a conservative approach in which your trying to automate the term insurance premium payment.He is not saying to stop term insurance and start MIS.Am i right?

    As mainsh said its ultimately is your money,the method mentioned will just automate the process.
    It will be a good process until you dont touch that amount anytime and run it through out. I persume over period because of compunding the interest will also increase and along with bonus you will have good amount at the end.

    So incase of death you family will get the term insurance money and also the MIS money of maturity.

  2. venshu says:

    @ Market Hypothesis,

    Do you own a vehicle – say a car or a two wheeler? If yes, have you insured the same? If yes, why are you wasting money on insurance for vehicles? You might as well invest it in some MIS. However, as per the law, it is mandatory to insure the vehicle so you (and all of us) have to comply. This is to cover the risk posed by your/our vehicle to other road users and to yourself/ourselves (if one opts for the comprehensive insurance).

    Do you expect any money back or return on investment for the premiums that you pay for the vehicle insurance? I am sure you don’t (actually you can’t!!). Similarly treat the risk to your life in a similar fashion and insure the most important risk in your life (which is untimely death) – especially if you believe in letting your loved ones have a good life in case of your untimely demise. Treat the term insurance premium as an unavoidable expense.

    How I wish the Govt. makes it mandatory for every citizen (bread winner) to have a term insurance policy (sum assured to be proportional to the income earned by the person)!!

  3. Market Hypothesis

    Not sure what you are trying to achieve , looks like you are trying to create a situation where you also pay term insurance premium and save money till and and have to not pay in between from your pocket ?

    Right ?

    However this is just in mind , at the end the return you get from MIS is your own money and then you are paying it to term insurance , it comes from your pocket or MIS , its your money .

    Manish

    1. Yes, We can save our principle amount from any kind of term insurance. We need not not spend premium amount from our pocket every year. Not only that mediclain premium has become very huge amount now a days. It is very difficult to run the mediclaim policy after the untimely death of leading earning member of the family. if the family has this kind of investment cum insurance, then they can continue the mediclaim policy without any extra earning effort for rest of the member. It is assumed that mediclaim has been done in family group.

  4. rakesh says:

    But then who will guarantee that you will live 25 years, that’s why we take insurance for protection, so that our family will live happily once we are gone. Why do you renew your two / four wheeler insurance every year. Just don’t renew it next year and take a chance that you don’t damage it.

    Rakesh

  5. Dear Rakesh

    Who will give you the guarantee that you will die after two years. Here I tried to save my money if I have term insurance. Because term insurance has only risk coverage, no return.

  6. rakesh says:

    I beg to differ. You are mixing investment and insurance. Look at this way, suppose you pay the premium for 2 years and you die on the third year. Your nominee will get 25 Lakhs. So just for paying 15k you are getting 25 Lakhs. Calculate how much is the returns here?

    Rakesh

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