Which is the best critical illness policy in India in 2020? Many of us have Term Life Insurance and Health Insurance. However, we never gave importance to Critical Illness policies. Let us see the importance of having a Critical Illness policy and analyze which is the Best Critical illness policy in India 2020 with a comparison table.

Why we need Critical Illness Policy?

Your Life Insurance will come into picture when the insured die. Health insurance in the other hand is “Indemnity” based insurance. This means the health insurance will indemnify the cost of hospitalization. Hence, health insurance will pay you the cost of hospitalization costs.

However, in a case of critical illness policies, they are called “Fixed Benefit” plans. Assume you are diagnosed with Cancer, and then irrespective of the cost involved in treatment, an insurance company will pay you the lump sum.

Due to diagnose of critical illness, you neither may die nor hospitalized but bedridden due to this critical illness. In such a situation, along with hospitalization, you have to bear your family obligations from your own pocket.

Also, in the case of health insurance, the benefits are defined as room rent cap or ICU cap. However, in the case of critical illness insurance, an insurance company will just pay you the lump sum.

The major critical illnesses are a heart attack, cancer or a stroke. Also, there are major chances that you survive after diagnosed with such critical illness. Hence, to compensate the work loss, financial burden of kids education and your financial commitments, you need a product which can compensate such losses.

Below image will show you the possibility of survival % from the critical illness.

Source: – ICICI Lombard

Hence, we may say such survival after the critical illness will come with the COST. To compensate for this cost, you must have insurance.

No matter how good your health insurance is, there are deductibles, co-insurance payments, prescriptions that are no longer covered and exclusions. While you are recovering from critical illness, you’re not working. But that doesn’t stop the need to pay your household expenses, utility bills, EMIs towards home or car and your credit card bill.

Also, do remember that majority of health insurance products excludes the critical illness covers. Hence, it is important for you to have a critical illness.

It is not necessary for me to put some data which reflect the possibility of you and I may in future get such critical illness. Because now it is known fact that possibility is high due to our food habits, lifestyle and the stress we are into now.

Also, the medical inflation rising at an alarming rate of 10% to 12%. Hence, it is imperative for us to compensate such a high cost. We can’t pay all such costs from our own pocket. It will devastate our financial life and ruin us. Hence, it is a must for all of us to have a critical illness.

Best Critical illness policy in India 2020 -How to choose?

# Size of the cover-How much is the right cover? There is no such specific yardstick. But ideally, it should not be less than Rs.10 lakh. Also, few suggest having around 4-5 times of your annual income. But in my view, if you are capable of paying a higher premium, then go for higher cover. This will compensate for your future medical inflation for a certain year.

Ideally, I suggest the cover must not be less than Rs.10 lakh and also it must be around at least 3-4 times of your annual income.

# Illness covered-Higher the illness covered means higher the premium. Also, make sure that you must check different organs are covered than the same organs for different diseases covered. For example, a single disease may split into different cover and you may get fooled that the product is covered much critical illness.

# Definitions-The biggest task for all of us is to understand the medical terminologies. Hence, it is always best to consult a family doctor if you have doubt in this. Critical Illness policy turned to be complex for many of us because we can’t understand the medical words used in proposal or policy document.

Hence, it is a must to understand before jumping into buying.

# Sub-Limits-Insurers fix some sub-limits for each disease. For example, let us say there is a sub-limit of Rs.5 lakh for a critical illness of heart. If you diagnosed with this disease, then the insurance company will pay you Rs.5 lakh only. The policy will continue with a reduced amount of Rs.5 lakh.

# Renewal-You must always look for life long renewable products. Because the possibility of facing critical illness is high when you grow older. Hence, choose the product which offers you the life long renewability.

# Exclusion-You checks for the exclusions listed in the policy. Usually, the pre-existing diseases are covered after 3 years of the waiting period. The immediate cover of pre-existing diseases comes with a cost in higher premium. Hence, better to avoid.

Along with that, few plans specifically avoid few particular diseases. Hence, check the diseases that are excluded.

# Premium affordability-The more benefits you look for will comes with the cost. Nothing is at free. Hence, better you understand your requirement and plan accordingly. The premium will also increase as you grow older. However, if your purchased critical illness as a rider along with Life Insurance, then this will remain same throughout the policy period.

However, such riders come with limitations which sometimes may feel useless. Hence, even though standalone critical illness policies are costlier, better to go with them.

# Survival or waiting Period Clause-In critical illness policies, this is as per me is the BIGGEST drawback. Let us assume you today diagnosed with kidney failure, then these critical illness policies will accept the claim if you survived for certain period after the diagnose.

Let us assume your policy define the survival period as 30 days, then you must survive for a minimum 30 days after the first diagnoses of the critical illness. Then only you can make the claim. Assume the insured died before 30 days, then his nominee will not receive anything.

Do remember that this survival period differs for different diseases. Hence, better to check and know beforehand.

Along with that, there is a waiting period clause. It usually commences from the issue of the policy and around 90 days. Hence, an insurance company will not accept any claim if you diagnosed with a critical illness during this first 90 days of policy start.

# Claim Settlement Ratio-Even though it is hard to find the exact reasons for rejection of the claim, it gives you bit relief if you know the CSR ratio of your insurer. At the end of the day, CSR is a raw data which not point the reasons for rejection and delay in rejection. But give you some indication of how the company dealing the claims.

# Critical Illness as a RIDER or a Standalone-Many Life and Health Insurance products offer critical illness as a rider. They are cheaper than the standalone critical illness plan.

The biggest advantage of having a standalone critical illness is that the freedom to choose the coverage. Usually, in the case of Life and Health Insurance, you are not allowed to go beyond the sum assured or sum insured covered. However, in a case of standalone critical illness, you have the freedom to choose as per your comfort.

In a case of life insurance, the premium will remain same throughout the policy period. However, in a case of health insurance and critical illness insurance, it changes as you grow older (but in the case of health insurance in an age slab).

One more advantage of buying critical illness as a rider is that along with health or life insurance, your rider also gets renewed automatically when you renew both. However, in the case of standalone policies, you have to renew separately.

Nowadays few insurers offering you the disease-specific plans like Cancer Plan or Diabetic Plan. But in my view, it is better to go for plans which cover more critical illnesses than the single one or two. We don’t which critical illness we suffer.

However, when it comes to control and features, rider always comes with some restrictions. Hence, I prefer standalone critical illness.

Best Critical illness policy in India 2020 – Comparative Table

Now we understood what is the importance of critical illness policy and how to choose the best critical illness policy in India. Let us now look into the available critical illness policies in India and study the comparison.

Considering the above facts, I assume HDFC ERGO, Max Bupa and Religare stands best with features and premium range and hence I consider them as “Best Critical illness policy in India”.

Income Tax Benefits of Critical Illness Insurance Policies

Premium paid by you towards critical illness insurance policies will be eligible for tax deduction under Sec.80D of IT Act. Do remember that this benefit is not available if you paid the premium through cash.

Also, any claim amount you receive from critical illness insurance policy is completely tax-free for you.

Can we buy a critical illness policy?

The critical illness policy is the complicated product which defines many medical terminologies. It is hard for a common man to understand. Also, diagnosing of critical illness not enough. Even though your doctor diagnosed it, there is no guarantee that claim will be accepted. Because the insurance company’s own doctor has to diagnose and establish that you are suffering from critical illness.

Also, the definition of diseases is not so exhaustive. Hence, there is a scope that an insurance company may reject your claim on the benefits of doubts and no clear definitions.

Check for family history of your’s for such critical illness. If you found its necessary then go ahead. Because in many cases as per insurance companies, the critical illness which they define is hard for the individual to survive. Hence, he may end up with no claim but to pay the hefty hospitalization bills.

Buy enough health insurance. If you still feel shortage, then go for super top up plans. Create an emergency fund especially for such diseases.

Hence, I feel critical illness policies are a bit complicated. Instead, I suggest enhance your health insurance and if possible go for super top-up and create an emergency fund. Rest you have to decide based on your own family history.

Conclusion:-Do remember that when you buy life insurance along with riders like Critical Illness, then you have to understand one fact that life insurance is required for a limited period. However, critical illness is required for you forever. Hence, if have a family history of critical illness, then buy the product as standalone rather than the rider.

Read our latest posts:-

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The post Best Critical illness policy in India 2020 – Comparative Table appeared first on BasuNivesh.

Recently LIC declared the bonus rates for the year 2020 – 2021 (As per March 2020 valuation). Let us see the complete details about LIC Bonus Rates for 2020 – 2021 and how they affect your life insurance returns.

LIC of India has declared the latest bonus rates for the valuation period 1 st April 2019 to 31st March 2020.

Meaning of bonus for LIC policies

When you buy a traditional with profit product from LIC, then your returns from such policy mainly depends on what will be the rate of bonus. LIC declares bonus on the yearly basis. Usually, you will not find any such drastic change. But it is always better to track the bonus rates.

Let us say you bought LIC’s Jeevan Anand for the term of 20 years and the sum assured as Rs.5,00,000. If LIC declared a bonus as Rs.45 for this product, then the calculation will be as below.

The bonus rates will be based on three criteria.

# Term of policy-Higher the tenure means higher the rate.

# Sum Assured-LIC bonus depends on per Rs.1,000 of Sum Assured. Hence, if you bought higher sum assured policy, then your bonus accumulation will be at the higher end.

So from above example, if LIC declared you Rs.45 as bonus per Rs.1,000 sum assured for 20 years policy, then the bonus accumulation for that year will be as below.

Rs.22,500=(Rs.45 x Rs.5,00,000)/Rs.1,000.

Remember this Rs.22,500 will not be payable to you. But it will be with LIC and you receive this amount during the time of death claim or maturity. The most important point to note that they will not add any amount on this Rs.22,500. It will remain same till the period of death claim or maturity date.

There are various types of benefits LIC policies offer you like Bonus, Loyalty Addition or Final Additional Bonus.

Types of LIC benefits

# Simple Reversionary Bonus

LIC will declare this on yearly basis and added to your policy account. You will get it either at maturity or if there is a death claim. If you decide to exit from the policy during the policy period by surrendering it, then a certain portion of such accrued bonus will be payable to you. Do remember that this type of bonus does not compound every year and hence it is called a simple reversionary bonus.

# Final Additional Bonus (FAB)

Final Additional Bonus (FAB) is a one-time additional bonus, which is paid along with the maturity amount. It is an additional one time bonus along with the simple reversionary bonus and added to the policy account. As I told, it is a one-time payment you will receive at maturity, death claim if you surrender it (one year preceding the date of maturity).

# Loyalty Bonus (LA)

Based on the policy features, certain LIC policies are eligible to avail this LA. LA is also a one time payment kind of benefit. Unlike the simple reversionary bonus, which becomes a part of the policy benefits as and when it is declared, loyalty additions shall be available to the policyholder only at the time of exit from the policy. Hence, they became the part of policy benefit at once during the policy exit (due to maturity, death or surrender)

How to calculate returns for your LIC policy?

In simple, I explained how to calculate bonus for a year. But LIC offers different products like the endowment, limited endowment or money back plans. In such a situation, you may find it difficult to calculate returns on your LIC plan. Hence, I created a video about this.

This below video will explain you about how to calculate returns on your LIC plans using excel sheet. It is too simple and convenient for you to calculate.

LIC Bonus Rates for 2020 – 2021 for closed plans

Hope you got clarity about the importance of bonus rates for your traditional plans. Now let us concentrate on recently declared LIC Bonus Rates for 2020 – 2021

The below reversionary bonus rates are applicable for policy year entered upon during the inter valuation period i.e. 01/04/2019 to 31/03/2020 and in force for full sum assured as on 31/03/2020. It would apply to policies resulting into claims by death or maturity (including those discounted within one year of maturity) or surrendered on or after 01/01/2020.

The interim bonus rates are applicable to policies in respect of each policy year entered upon after 31/03/2020 and result into claims by death or maturity (including those discounted within one year of maturity) or are surrendered during the period commencing from 01/01/2020 and ending 9 months from the date of next valuation.

This time, I separated the plans in two ways. One for the old policies which are closed and another list for the new policies which are currently available for purchase.

The above list is for the basic policies. In the below list, I am sharing with you the remaining special products which are closed.

LIC Bonus Rates for 2020 – 2021 for new plans

Let us now look into the bonus rates of new plans.

Final Additional Bonus for 2020 – 2021

As I mentioned above, FAB is a one-time additional bonus payable to policyholders. The minimum term of the policy to be eligible for FAB is 15 years and above. LIC maintained the same FAB rates which are available for the last year. You can refer the last year’s FAB rates at the LIC website.

his Final (Additional) Bonuses are applicable In the case of Plans of Groups 1, 2, 8, 9 and 10 mentioned below.

• (Group 1) Whole Life type (Plans 2, 5, 6, 8, 10, 28 (Before Conversion), 35, 36, 37, 38, 49,77,78, 85 & 86)
• (Group 2) Endowment type (Plans 14, 17, 27 (After Conversion), 28 (After Conversion), 34, 39 40, 41, 42, 50, 54, 79, 80, 81, 84, 87, 90, 91, 92, 95, 101, 102, 103, 109, 110 & 121)
• (Group 8) Jeevan Mitra (Double Cover plan), Jeevan Saathi (Plans 88 & 89)
• (Group 9) Jeevan Mitra (Triple Cover Plan: Plan 133 )
• (Group 10) Limited Payment Endowment (Plan 48)

LIC Loyalty Addition Rates 2020 – 2021

Few plans like Jeevan Saral or Jeevan Shree have additional beneficial features like offering you the LA. I will try to share the LA rates for Jeevan Saral, Jeevan Shree and for few popular plans. .

LIC Jeevan Saral Loyalty Addition Rates for 2020 – 2021

Let us now look at the LA rates for most popular product of LIC Jeevan Saral.

Conclusion:- It is evident that LIC policies even though invested heavily by Indian investors, are low in returns and the returns may vary anywhere around 5% to 6%. For long term goals, relying on such debt products and also illiquid products may not be a prudent idea of wealth creation. It is up to you to judge whether you want to go ahead and buy such low yielding products are not. At the same time, those who already invested may continue if you feel 5% to 6% tax-free returns are best for your long term goals.

• Interest on interest waiver on loan moratorium – Eligibility and cashback calculation
• LIC New Jeevan Shanti (No.858) – Single Premium Guaranteed Pension Plan
• Saral Jeevan Bima Term Life Insurance – Features, Eligibility, and Benefits
• PM Narendra Modi Assets Declaration 2020
• EPF Whatsapp Helpline Numbers – Full list of Regional Offices
• Sovereign Gold Bond Scheme 2020-21 Series VII – Who can invest?

The post LIC Bonus Rates for 2020 – 2021 – A Complete List appeared first on BasuNivesh.

IRDA issues new guidelines for Life Insurance companies to bring in the new standard term life insurance policy with the name Saral Jeevan Bima Term Life Insurance. It is exactly like how IRDA did with respect to the health insurance policies (Arogya Sanjeevani Policy – Standard Health Insurance Features and Benefits).

To be frank Term Life Insurance is the simplest form of Life Insurance one can buy without any complication. However, to show that they are the leaders in the market, these Life Insurance Companies started to add many features. Due to this, for a common person, buying a term life insurance turned to be a complicated task.

Hence, to bring the simplicity and uniformity in the product feature, IRDA instructed all the Life Insurance Companies to launch this new Saral Jeevan Bima Term Life Insurance.

All Life Insurers will have to mandatorily offer the standard product with effect from 1st January 2021. The product may be filed by the Insurers latest by 1st December 2020. However, Insurers may file the product earlier and offer the same on approval even before 1st January 2021.

Saral Jeevan Bima Term Life Insurance – Features, Eligibility, and Benefits

Let us now look into the features, eleigiblity and the benefits fo Saral Jeevan Bima Term Life Insurance.

The Life Insurance companies can offer the riders like Accident Benefit and Permanent Disability Benefit Riders along with this product.

You noticed that as per IRDA the maximum sum assured offered under this plan is set as Rs.25 lakh. However, it has given freehand to life insurers to offer the sum assured beyond that. Hence, I hope the life insurance companies will offer beyond Rs.25 lakh than restricting themselves to Rs.25 lakh sum assured.

The new feature of this Saral Jeevan Bima Term Life Insurance is that for single premium and limited premium payment option, you are allowed to cancel the policy, and based on certain calculations, Life Insurance Companies will return you the amount. But there is no such cancellation feature for regular premium policies.

Policy Cancellation Value shall be payable:-

# upon the Policyholder applying for the same before the stipulated date of maturity in case of Single Premium Policy;

# upon the Policyholder applying for the same before the stipulated date of maturity or at the end of revival period if the policy is not revived, in case of Limited Premium Payment Policies.

For Single Premium: The Policy Cancellation Value acquires immediately after receipt of Single Premium and is calculated as follows:

=70% X Single Premium Paid X (Unexpired Policy Term/Original Policy Term)

Limited Premium Payment Term (LPPT): 5 and 10 years: Policy Cancellation Value acquires if at least two (2) consecutive full years’ premiums are paid and is calculated as follows:

=70% X Total Premiums Paid X (Unexpired Policy Term/Original Policy Term)

Conclusion:- By bringing in Saral Jeevan Bima Term Life Insurance Standard Life Insurance, I think IRDA to be frank gave a big relief to Life Insurance buyers. These Life Insurance companies in the mad rush to show their product is the BEST in the market, confused the buyers.

Refer our latest posts:-

• Interest on interest waiver on loan moratorium – Eligibility and cashback calculation
• LIC New Jeevan Shanti (No.858) – Single Premium Guaranteed Pension Plan
• Saral Jeevan Bima Term Life Insurance – Features, Eligibility, and Benefits
• PM Narendra Modi Assets Declaration 2020
• EPF Whatsapp Helpline Numbers – Full list of Regional Offices
• Sovereign Gold Bond Scheme 2020-21 Series VII – Who can invest?

The post Saral Jeevan Bima Term Life Insurance – Features, Eligibility, and Benefits appeared first on BasuNivesh.

LIC launched its new pension plan LIC New Jeevan Shanti on 21st October 2020. It is a single premium, deferred pension plan. The pension rates are guaranteed at the time of buying itself.

Few days back, LIC launched Jeevan Akshay VII, an immediate annuity plan (LIC Jeevan Akshay VII Pension Plan (857) – Features, Benefits, and Eligibility). Due to falling interest rates, LIC closed the earlier Jeevan Shanti Plan and launched the new Jeevan Shanti. Let us see it features.

What do you mean by deferred pension plan?

Let me give you an example. Assume that you are 40 years old. You are buying this product with the intention that you start your retirement life at the age of 50 years. Then this 40 years to 50 years period is called as a deferment period. From 50 years onwards it is called as a retirement period of the post deferment period. You can refer to the below image for clarity.

LIC New Jeevan Shanti (No.858) Eligibility

Let us now look into the eligibility conditions for buying LIC New jeevan Shanti (No.858).

You noticed that the maximum deferment period is 12 years and the maximum vesting period is 80 years. The second point you have to notice is the reduction in pension if you opted for a half-yearly, quarterly, or monthly pension. The policy is eligible for surrender also.

Benefits of LIC New Jeevan Shanti (No.858)

Annuity Benefits:-

# Deferred Annuity for Single Life:- Nothing is payable during the deferment period. After the deferment period, you will receive the pension as per the option you have selected as long as you are alive.

# Deferred Annuity for Joint Life:-Nothing is payable during the deferment period. After the deferment period, you will receive the pension as per the option you have selected as long as the primary or secondary holder alive.

Death Benefits during deferment period

Higher of the below will be payable:-

# Purchase Price+Additional Benefit on Death-The total annuity amount payable till date of death

OR

# 105% of Purcahse price.

(Additional benefit on Death=(purchase price*Annuity rate per annum payable monthly)/12)

This Additional benefit on death is applicable only during the deferment period but not while you are issuing the pension.

Death benefit options after defermnet period

You have an option to choose three types of death benefit to be payable to your nominee.

a) Lump Sum Death Benefit:-Your nominee will receive the lump sum amount in one go.

b) Annuatisation of Death Benefit:-Under this option, the nominee can purchase the LIC New Jeevan Shanti (No.858) in his name. Your nominee can opt for full purchase or partly he can purchase this pension plan.

c) In Installment:-Your nominee can receive the death benefit in installments like 5, 10 or 15 years. Such installments can be receivable in monthly, quarterly, half-yearly or yearly.

LIC New Jeevan Shanti (No.858) – Should you purchase?

In India to sell a financial product if you tag two lines GUARANTEED or TAX-FREE, then people buy such products like hot cake. In this product, LIC mentioned it as a GUARANTEED pension. Hence, obviously, investors look at this feature itself. However, consider the below factors before you buy such annuity products.

# Inflation:- Do remember that in this product, the pension will not increase as you grow older. It will remain fixed. Hence, the pension of what you will get today may have no value after few years due to inflation.

# Taxation:-Whatever the pension you receive from this product is taxable as per your tax slab. Hence, post-tax returns may be much lesser than actually what you receive. If you are under the highest tax bracket, then such products are not suitable for you.

# Annuity Age:-If one plan to enter into this plan at 30 years of age, then he has to opt for a pension when he reaches 42 years (to the maximum). Do you need a pension during your 42 years of age?

# Features in question:-If you choose monthly, half-yearly, and quarterly annuity options, then you receive less pension than opting for yearly. I think this is the biggest hurdle. Because people buy such products only to get a constant monthly income. The maximum deferment period set as 12 years. It means after 12 years you have to start receiving the pension. What if you are extending your working age?

Such products are suitable for those who are desperately looking for a GUARANTEED income stream and who not bother about taxation, inflation and ready to locking their money.

It is hard to predict the returns from annuity plans. Because it all depends on how many years you survive after the deferment period. Also, if this plan is purchased by the young guy, then obviously the returns will be lesser and for those who are elders, for them, the rates may look attractive.

Conclusion:-Annuity products are best for those who are actually looking for a constant stream of income rather than worrying about the market or interest rate movements. However, it is not worthy to rely on such products as such products fail to beat the index in long run. Hence, my suggestion is that rather than completely relying on such products, you may explore the products like PMVVY, SCSS, Tax-Free Bonds, and RBI Floating Rate Bonds for your immediate needs. At the same time, if you are looking for an income stream after 10 years or so, then the combination of equity and debt as per your risk appetite will be the best hedge against inflation.

Refer our latest posts:-

• Interest on interest waiver on loan moratorium – Eligibility and cashback calculation
• LIC New Jeevan Shanti (No.858) – Single Premium Guaranteed Pension Plan
• Saral Jeevan Bima Term Life Insurance – Features, Eligibility, and Benefits
• PM Narendra Modi Assets Declaration 2020
• EPF Whatsapp Helpline Numbers – Full list of Regional Offices
• Sovereign Gold Bond Scheme 2020-21 Series VII – Who can invest?

The post LIC New Jeevan Shanti (No.858) – Single Premium Guaranteed Pension Plan appeared first on BasuNivesh.

What are the new taxation rules with respect to ULIPs and especially after Budget 2021? Even though ULIPs are equity products, they used to enjoy the tax benefits like other traditional products under Section 10(10D).

However, to bring equality between ULIPs and Mutual Funds, during the Budget 2021, Finance Minister proposed the changes in the taxation of ULIPs. Let us see the new taxation rules of ULIPs.

All about the Taxation of ULIPs

There are three aspects of taxation that we have to consider while investing in ULIPs. The first one is at the time of investing, the second one is when it mature or surrendered and the third one is at the time of death. Let us see one by one in detail.

# Taxation of ULIPs while investing

There is no change in the rules with respect to the tax benefits while investing in ULIPs. Hence, the deduction under Section 80C is allowed for the investment made in ULIPs (up to the maximum limit of Rs.1,50,000 per year). An Individual can claim a deduction for the investment made for himself, spouse or children (dependent or independent) and HUF can claim a deduction for the investment made for any member of HUF.

The deduction under section 80C is restricted to 10% of the sum assured. It means suppose the sum assured is Rs.10 Lakh, then the premium that you pay under the ULIP should be up to the maximum of Rs.1,00,000. If the premium is beyond 10%, then it is not eligible for deduction under Sec.80C. Any amount of premium paid more than this limit is not deductible under Section 80C.

One more important point to understand here is that, If you stop the premium payment before the expiry of five years or you terminate your participation by notice to that effect, the aggregate of deductions allowed to you in the earlier years shall be deemed as his income and charged to tax in the year in which such termination or cessation occurs as per your income tax slab.

Hence, discontinuing of ULIPs is like a double-edged sword. One way ULIPs charge you with hefty discontinuation charges and in another way, the reversal of tax benefits what you received under Sec.80C.

Do remember that you can pay the premium as much as possible. However, the benefit in Sec.80C is limited to Rs.1,50,000 a year and the premium must be 10% of the sum assured.

# Taxation of ULIPs at maturity

Here is what the Budget 2021 proposed the changes. Let us try to understand the existing old rules at first.

Taxation of ULIPs (Before the Budget 2021)

Section 10(10D) provides for exemption with respect to any sum received under ULIP, including the sum allocated by way of bonus on such policy. However, if the premium payable for any of the years during the term of the policy exceeds 10% of the actual sum assured, then no exemption is allowed.

Taxation of ULIPs (After the Budget 2021)

Effective from 1st February 2021, no exemption is allowed under Sec.10(10D), if the amount of premium payable for any of the previous year during the term of the policy exceeds Rs. 2,50,000.

However, if the total premium payable during any financial year is less than Rs.2,50,000 (including all the multiple policies), then you still enjoy the tax-free maturity benefits under Sec.10(10D).

The Finance Bill, 2021 proposes to insert a new sub-section (1B) to Section 45 to provide that where any person receives at any time during any previous year any amount under a ULIP, to which exemption under Section 10(10D) does not apply on account of the fourth and fifth proviso thereof, including the amount allocated by way of bonus on such policy, then, any profits or gains arising from receipt of such amount by such person shall be chargeable to tax under the head “Capital gains” in the previous year in which such amount was received. Further, the income taxable under this head shall be calculated in such manner as may be prescribed. Thus, the manner of computation of income shall be notified subsequently.

The definition of ‘Equity-Oriented Fund’ in Section 112A is proposed to be amended by the Finance Bill, 2021. It is proposed to cover ULIPs to which exemption under Section 10(10D) does not apply on account of the applicability of the fourth and fifth proviso thereof. Thus, the high premium ULIPs shall be considered as Equity Oriented Fund even if a portion of the fund is invested in the debt-based scheme.

Thus, the long-term capital gains, in excess of Rs. 1,00,000, shall be taxable at the rate of 10% without indexation under Section 112A. Whereas the entire amount of short-term capital gains shall be taxable at the rate of 15% under Section 111A. The ULIPs shall be considered as a long-term capital asset if they are held for more than 12 months and short-term capital assets if held for 12 months or less.

One more important aspect to consider here is the taxation about the switching. As of now, switching from one fund to the other provided the maturity/redemption of units of ULIPs are exempt under Section 10(10D). However, as per the new proposal, if the premium is more than Rs.2,50,000, then they are not eligible to claim the exemption under Sec.10(10D). In such a situation, we have to wait for clarity about the taxation on switching of the policies whose premium is more than Rs.2,50,000.

# Taxation of ULIPs at death

In the event of the death of the policy-holder, the exemption shall not be denied under Section 10(10D) from either of the policy, that is, excess premium policy (more than 10% of sum assured) or higher premium policy (more than Rs. 2,50,000).

Hence, irrespective of the premium amount, the death benefit is always tax free in the hands of nominee.

Security Transaction Tax (STT) Applicable on ULIPs

Finance Act, 2021 has proposed to amend various provisions of Finance (No. 2) Act, 2004 to enable levy of STT on the amount received by the policyholder at the time of maturity or partial withdrawal from the ULIPs issued on or after 01-02-2021. Levy of the STT on the ULIPs will bring it at par with the equity-oriented mutual fund units. STT will be levied if all the following conditions are satisfied:

(a) ULIP is issued on or after 01-02-2021;

(b) Sum received from ULIP is taxable under Section 10(10D) on account of applicability of fourth and fifth proviso thereof;

(c) The policyholder has transferred units of equity-oriented funds issued by the insurer with respect to ULIPs;

(d) The amount is received on sale or surrender or redemption of the units on account of maturity or partial withdrawal.

STT will be levied at the rate of 0.001% on the value of the transaction and is required to be paid by the seller of the units. Amendment in other provisions regarding furnishing of return and collection and recovery of STT has also been proposed.

It should be noted that the STT shall not be levied in the following situations:

(a) On switching of funds from one scheme to another;

(b) On redemption or surrender otherwise than on withdrawal (in case of death);

(c) If the premium is invested in debt-based, money-market or balanced funds.

Conclusion:-I hope this the above points will bring clarity about the taxation of ULIPs after the Budget 2021. Let me know if you have any questions or doubts.

Refer our latest posts:-

• Best Short Term Investment Plans 2021
• Best Tax Free Bonds 2021 in India
• LIC Bima Jyoti (Plan No.860) – Features, Benefits and Review
• IRDA Life Insurance Claim Settlement Ratio 2021
• Budget 2021 – All about the Taxation of ULIPs
• Investing more than Rs.2.5 Lakh in EPF is still the BEST strategy!!

The post Budget 2021 – All about the Taxation of ULIPs appeared first on BasuNivesh.

The majority of Life Insurance Companies nowadays luring the buyers based on the IRDA Life Insurance Claim Settlement Ratio. Let us see the IRDA Life Insurance Claim Settlement Ratio 2021 based on the Annual Report 2019-20.

What is the meaning of Claim Settlement Ratio?

Claim Settlement Ratio is the indicator of how much death claims Life Insurance Company settled in any financial year. It is calculated as the total number of claims received against the total number of claims settled. Let us say, Life Insurance Company received 100 claims and among those, it settled 98, then the claim settlement ratio is said to be 98%. The remaining 2% claims the Life Insurance Company rejected.

Based on this, we can easily assume how much customer friendly they are in dealing with death claims. However, I warn you that this claim settlement ratio is raw data.

It will not give you a clear picture of what types of products they settled. They may be Endowment plans, ULIPs or Term Insurance Plans. Hence, this is not the sole criterion in judging the performance of a life insurance company.

IRDA Life Insurance Claim Settlement Ratio 2021 – Annual Report 2019-20

Below is the IRDA Claim Settlement Ratio 2019-20 or up to 31st March, 2020. Few points to notice from this Annual Report are as below.

# Claim settlement ratio of LIC was at 96.69% as at March 31, 2020, when compared to 97.79% as at March 31, 2019. The proportion of repudiations has increased to 0.81% in 2019-20 compared to that of 0.43% in the previous year.

# For private insurers, the settlement ratio had increased to 97.18% during 2019-20 when compared to 96.64% during the previous year. The proportion of repudiations came down to 2.42% in the year 2019-20 when compared to that of 2.83% in the previous year.

# The industry’s settlement ratio declined to 96.76% in 2019-20 from 97.64% in 2018-19 and the repudiation ratio increased to 1.02% compared to that of 0.74% in 2018-19.

# Claims of Life Insurers is as per the below table.

# Death Claims of Life Insurers for FY 2019-20 can be classified as below.

You noticed that claim rejection is high in LIC along with uncliamed and claims pending ratio also.

# The below chart will show you the duration wise break up of pending claims of Life Insurers during FY 2019-20.

Note here that pending claims for less than 3 months is high for private insurers. However, it is high in the case of LIC for the 3-6 months period. I am not sure the reasons for such a huge delay from LIC.

# Let us now look into the complaints side. The highest complaints about mis-spelling are against the banks. Then comes the brokers. The break up is as below. BEWARE OF BANKERS!!

# Causes of Mis-Selling are listed as below:-

a. Incorrect explanation of product features and benefits by sales person sourcing the business.
b. Incorrect premium paying term and policy term is explained to policyholder especially in cases
where regular premium paying product is sold as single premium product.
c. Policy is sold to gullible prospects assuring Loan / Bonus / Medical Benefits/ Gold coins/Mobile Towers/other benefits upon purchase of insurance policy.
d. Tampering, forgery of proposal/ other related documents.
e. High attrition rate amongst Sales team
f. Pressure on the sales person to meet sales target.
g. Free look cancellation requests are rejected by sales personnel who are not authorized to take such decisions.
h. Splitting of policies wherein multiple policies are issued to the same proposer at the same time.

i. Life Insurance policies are sold only as Tax saving/ Investment plans.
j. Sales personnel lack proper knowledge /are inadequately trained, thereby recommending unsuitable products to prospects.
k. Improper/Incorrect financial needs assessment of Prospect is done while sourcing the policy by the sales personnel.
l. Charges under the policy and lock in period are not properly explained while sale of Unit Linked Insurance Policies.
m. Churning of policies.
n. Contact numbers updated on the proposals are tampered, which restricts the success of the pre-issuance verification calls.
o. Lack of awareness on insurance on the policyholder’s part thus being misled into buying the insurance policy.
p. Policyholders failing to cross-check details.
q. Financial Problems/incapacity of the policyholder to pay future premiums.
r. Bundling and making it conditional for availing bank services.
s. Sale without proper consent of customer t. Insurance is sold to clients who were not present in India at the time of sourcing along with premium being funded without customer consent through bank accounts held with the bank.
u. Instigation by employees, advisor, channel partners, others who are no longer sourcing new business for the insurer.

I am sharing these reasons mainly to make you aware of the ways mis-selling may happen in the Life Insurance space.

Let me share you now the IRDA Life Insurance Claim Settlement Ratio 2021.

You noticed that 20 out of 24 companies have a claim settlement ratio of more than 95%. As I pointed above, LIC’s claim settlement ratio reduced compared to private players.

Average Claim Settlement Amount of Life Insurance Companies in 2019-20

It is hard to find what type of products these insurers settled. Hence, I always try to look into the average claim settlement amount of these insurers. Even though it may not give us a clear picture, but a better indicator of the types of policies they settled.

If you look at this data, then you noticed that Aegon is a topper and Sahara with LIC is at lower. LIC’s average claim settlement amount is Rs.1,74,403. It means the majority of the claims are traditional plans.

Top 10 Best Life Insurance companies in India for 2021

Based on the IRDA Claim Settlement Ratio 2019-20, which are the Top and Best Life Insurance Company in 2021? I select only ten based on the above data. You may differ in my view and come up with a different set of ideas. But these are my choices.

1. LIC
2. HDFC Standard Life
3. ICICI Pru Life
4. Max Life
5. Tata AIA Life
6. Aegon
7. SBI Life
8. Aditya Birla Sunlife
9. Bajaj Allianz
10. Bharti Axa

Few important points before jumping into selecting of Life Insurance Companies

# Claim Settlement Ratio is raw data

As I pointed above, the claim settlement ratio is just raw data. It will not give us the specific data. Hence, never rely on this single data alone while shortlisting the insurance company.

# Concentrate on Product rather than company

Choose the product which suits your requirement and premium affordability. Declare the facts properly. Never hide any material facts. If all these you do, then an insurance company will have to accept your claim. Never give a room of suspicious on you to reject the claim.

# Section 45 of Insurance Act will guard YOU

According to Section 45 of Insurance Act “No policy of life insurance shall be called in question on any ground whatsoever after the expiry of three years from the date of the policy, i.e. from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later”.

It says a lot. Even if you shared wrong information or hid some material facts, then also it is purely life insurance Company’s responsibility to dig deep and find out faults WITHIN 3 YEARS ONLY. After 3 years, they cannot question. Note the period of 3 years, it is from the date of issuance of the policy, or the date of commencement of risk or the date of revival of the policy or the date of a rider to the policy, WHICHEVER IS LATER. So let us say if you took the policy today and after a few years, the policy lapsed due to non-payment of premium. However, you thought to renew it again and paid all dues. In such situation, this 3-year period starts from such revival date, but not from the original policy issued date.

Read the complete details about this IMPORTANT act of Life Insurance in my earlier post at “Term Insurance-Claim Settlement Ratio no more a big criteria”.

# Disclose the facts Properly

While buying Life Insurance products, you must fill the proposal form on your own. Never allow any agent or Life Insurance Company representative to fill it. Disclose the facts properly without hiding anything. This will really help you in a big way. Also, it will not give any room for insurers to reject your claim.

Do the things properly which are in your hand. Rest HOPE for the best.

Refer our latest posts:-

• Best Short Term Investment Plans 2021
• Best Tax Free Bonds 2021 in India
• LIC Bima Jyoti (Plan No.860) – Features, Benefits and Review
• IRDA Life Insurance Claim Settlement Ratio 2021
• Budget 2021 – All about the Taxation of ULIPs
• Investing more than Rs.2.5 Lakh in EPF is still the BEST strategy!!

The post IRDA Life Insurance Claim Settlement Ratio 2021 appeared first on BasuNivesh.

LIC is launching a new plan Bima Jyoti Plan (Plan No.860) with effect from 22nd February 2021. It is usually a tax-saving season for many salaried. Considering this in mind, every year LIC launch such new plans. Let us see the features, benefits, and eligibility of this plan.

LIC Bima Jyoti (Plan No.860) is a Non-linked, Non-participating, Individual, Limited Premium Payment, Life
Insurance Savings Plan. Under this plan, Guaranteed Additions shall accrue at the rate of Rs.50 per thousand Basic Sum Assured at the end of each policy year throughout the policy term.

This plan is available in both ONLINE and OFFLINE mode.

LIC Bima Jyoti (Plan No.860) Eligibility

Let us now look into the eligibility of LIC Bima Jyoti (Plan No.860).

Available riders in this plan are – Accidental Death and Disability Rider Benefit, Accident Benefit Rider, Term Assurance Rider, New Critical Illness Benefit Rider and Premium Waiver Benefit Rider.

Premium Payment Option – Yearly, Half Yearly, Quarterly and Monthly.

Loan is also available under this plan. After payment of premiums for at least two full year’s subject to the following conditions:
a) The maximum loan that can be granted as a percentage of surrender value are as under:
• For inforce policies – upto 90%
• For paid-up policies – upto 80%
b) The rate of interest to be charged for the loan amount would be determined by the Corporation from time to time.
c) The loan during the minority of Life Assured can be availed by the proposer provided the loan is raised for the benefit of the minor Life Assured.
d) In the event of default in payment of loan interest on the due dates and when the outstanding loan amount along with interest is to exceed the surrender value, the Corporation would be entitled to foreclose such policies. Such policies when being foreclosed shall be entitled to payment of the difference of surrender value and the outstanding loan amount along with interest if any.
e) In case the policy shall mature or surrendered or becomes a claim by death, the amount of
outstanding Loan together with all interest shall be recovered from the claim benefit
payment.

LIC Bima Jyoti (Plan No.860) Benefits

The benefits payable under this policy are as below.

Death Benefit

a) Before the commencement of Life Risk- On death during the policy term before the date of commencement of risk: Return of premiums paid excluding taxes, any. extra amount chargeable under the policy due to underwriting decision and rider premium(s), if any.

b) Death during the commencement of Life Risk – On death during the policy term after the date of commencement of risk: “Sum Assured on Death” along with accrued Guaranteed Additions Where “Sum Assured on Death” is defined as the higher of
• 125 % of Basic Sum Assured or
• 7 times of annualized premium
This death benefit shall not be less than 105% of all the premiums paid upto the date of death. Premiums referred above shall not include taxes, any extra amount chargeable under the policy due to underwriting decision and rider premium(s), if any.

Maturity Benefit

On the life assured surviving to the end of the policy term, “Sum Assured on Maturity” along with accrued Guaranteed Additions, shall be payable. Where “Sum Assured on Maturity” is equal to the Basic Sum Assured

Guaranteed Addition (GA) in LIC Bima Jyoti (Plan No.860)

This policy not offers any bonus. Instead a fixed GUARANTEED ADDITION at the rate of Rs.50 per thousand Basic Sum Assured shall accrue at the end of each policy year. In case of death under inforce policy, the Guaranteed Addition in the year of death shall be for full policy year. In case the premiums are not duly paid, the Guaranteed Additions shall cease to accrue under a policy.
In case of a paid-up policy or on surrender of a policy, the Guaranteed Addition for the policy
year in which the last premium is received (i.e. wherein full year’s premiums have not been
received) will be added on proportionate basis in proportion to the premium received for that
year.

LIC Bima Jyoti (Plan No.860) – Should you invest?

In India, to sell any products easily three things are important. They are SAFETY, TAX BENEFIT and GUARANTEED. This plan offers all these three features. However, at what cost? Let us see.

# In this plan the main highlight is GUARANTEED ADDITION of Rs.50 per Rs.1,000 SA. We feel great that in such a low-yielding Bank FD rates, LIC is offering us the GUARANTEED Rs.50 per Rs.1,000 Sum Assured. It is nothing but 5%. Also, such GUARANTEED ADDITION added each year to your policy will not earn additional interest. LIC will show it as yearly accumulated guaranteed addition. But as it is idle for the next 15 years or 20 years, its value will diminish drastically. Hence, never assume that your returns on investment is 5%. Instead, it may be around 4%. Let us take an example of Term 20 Yrs and Premium Paying Term 15 Yrs
Sum Assured Rs.10 Lakh, Age-30 Yrs (Premiums are inclusive of AB, DB and GST (4.5%). The yearly premium will be Rs.82,545 . The returns are less than 4%. Look at the below table.

As I told above, even though you may feel LIC is giving us the GUARANTEED ADDITION of Rs.50 per Rs.1,000 Sum Assured, due to no additional returns to this GA, the end results will be less than 4%.

# But few may argue that it is tax-free. Hence, why not explore? I feel if you really looking for safety, tax benefit, and decent returns, then products like PPF or SSY (if you are thinking of this policy for your daughter’s educational or marriage goals) are far far better. Even though interest varies in these two products. However, if we compare the current rates, these two are far better than this product.

# If you are looking at this product as insurance, obviously it will not cover your life risk with a hefty premium. If you try to buy the Life Insurance coverage of around 15-20 times of your yearly income (The ideal life insurance one must have to protect his or her life risk), then you have to cough huge premium.

Conclusion:-Considering all these aspects, I repeat again which I am repeating since 10 years of my blogging journey – NEVER COMBINE INSURANCE WITH INVESTMENT. WHEN THE AVERAGE COST OF AGENT COMMISSION IS AROUND 6%, HOW CAN YOU EXPECT RETURNS BEYOND 5%? BUY A PURE TERM LIFE INSURANCE (Even LIC offers it online “LIC’s Tech-Term (No.854) – Online Term Life Insurance Review“) AND STAY AWAY FROM SUCH DUMMY PRODUCTS. If you still feel less than 4% returns for 20 years of your investment is the BEST, then don’t wait…Go ahead and buy it. Your agent will also be richer than you as without investment he will earn a decent around 6% returns for the next 10 or 15 years (as per your premium paying term). The best product for agents but not for investors 🙂

Read our latest posts:-

• Best Short Term Investment Plans 2021
• Best Tax Free Bonds 2021 in India
• LIC Bima Jyoti (Plan No.860) – Features, Benefits and Review
• IRDA Life Insurance Claim Settlement Ratio 2021
• Budget 2021 – All about the Taxation of ULIPs
• Investing more than Rs.2.5 Lakh in EPF is still the BEST strategy!!

The post LIC Bima Jyoti (Plan No.860) – Features, Benefits and Review appeared first on BasuNivesh.

LIC Bachat Plus (Plan No.861) is available from 15th March 2021 and available for sale online as well as offline for a maximum period of 180 days.

LIC‘s Bachat Plus plan is a Non-Linked, Participating, Individual Life Assurance Savings plan. Under this plan, the premium can be paid either as Lumpsum (Single Premium) or as Limited Premium with a Premium Payment Term of 5 years. Under each of these premium payment options the proposer will have two options to choose “Sum Assured on Death”.

As I said above, the plan is available online and offline also.

LIC Bachat Plus (Plan No.861) – Features and Eligibility

Let us see the features and eligibility for LIC Bachat Plus plan.

LIC Bachat Plus (Plan No.861) – Benefits

Let us now look into the benefits of LIC Bachat Plus Plan.

a) Maturity Benefit

If the Life Assured survived till the maturity of the policy, he will receive Sum Assured at maturity and Loyalty Addition (LA) is payable. Here, sum assured at maturity means basic sum assured.

Note that LA is not payabe if you convert your policy to paid up.

b) Death Benefit

Here, the sum assured on death benefits can be available to choose for the policyholder at the time of buying the policy. The premium and benefits will vary based on the option you choose here. The benefits are as below.

Death benefits along with the above sum assured on death benefits are as below:-

a) Death during the first 5 years-

If death occurs before the commencement of risk, LIC will refund the premium without any interest.

If death occurs after the commencement of risk, then LIC will pay the nominee Sum Assured on Death.

b) Death after 5 years but before the maturity-

Sum Assured on Death+Loyalty Addition.

Other featurs of LIC Bachat Plus (Plan No.861)

1) Settlement Option for maturity-Under this, one can receive the paid-up as well as maturity benefits in installments like 5 yrs, 10 years or 15 years.

2) Settlement Option for death-Under this, nominee can receive the death benefits as installements for 5 yrs, 10 years or 15 years.

LIC Bachat Plus ( Plan No.861) – Should you invest?

Let me take an example. I have taken an example of Age-35 Yrs, PPT-5 Yrs, Sum Assured-Rs.1,00,000, Policy Period-25 Yrs, LA Rate-Rs.1,000 per Rs.1,000 Sum Assured.

Considering the current LIC bonus or LA trend, and assuming the highest LA rates, you noticed that the returns are around 6.6%. Do remember that I have not considered the GST Tax. If you consider GST, then returns may be lesser than 6.6%.

Hence, if you feel by investing around 25 years and looks 6.6% is FANTASTIC returns, then go ahead. However, if you are looking for real returns (returns beating the inflation), then stay away from this product.

The post LIC Bachat Plus ( Plan No.861) – Features, Benefits and Review appeared first on BasuNivesh.

There are 24 Life Insurance companies in India. Among those 24 companies, which one we can choose to buy the term life insurance? Let me share with you my Top 5 Best Term Insurance Plans in India 2021.

Majority of us who are looking for term life insurance always try to concentrate on the claim settlement ratio as a first indicator. However, what are the other things we have to consider while buying term life insurance?

What is Term Life Insurance?

Term Insurance is the type of Life Insurance. If death occurs of the policyholder during the policy period, then his/her nominee will receive the Sum Assured selected. If the policyholder survives till the end of the policy period, then he/she will not receive any maturity amount.

This is the reason, these policies cost you very less and cover a large amount of life risk. This is the PURE LIFE INSURANCE. Hence, anyone who has financial dependents must buy this product immediately.

However, nowadays there are so many variants in Term Life Insurance. For example, the return of premium, Term Life Insurance up to 100 years of age, a variety of riders, and a variety of claim payable options.

But instead of complicating your dependents, buy simple plain term life insurance. Why you complicate your dependents when you are buying this is that this product’s benefit will come into the picture when you are not here.

What are the advantages of online Term Insurance Plans?

Nowadays all Life Insurance companies offer you online term insurance plans. The advantages of online term plans are as below.

# It is convenient to buy as with the click of a button you can buy it.

# As there will not be any middlemen involved, the price is cheap than offline term insurance plans.

# You fill the proposal form on your own. Hence, an error of margin is LESS.

# Undue influence by agents is not there.

# Those who claim that online buying is RISKY as there are no middlemen involved are those who are representative of some companies and they may get a commission if you buy through them. Hence, they crease such stories.

Top 5 Best Term Insurance Plans in India 2021

Now let us discuss on what basis we can choose our Top 5 Best Term Insurance Plans in India 2021. Few pointers I will suggest which may help you in selecting your term life insurance.

# Claim Settlement Ratio

DON”T RELY ON THIS DATA. The reason is that it is raw data of all life insurance products a company is selling. It will not classify the death claim settlement ratio of term life insurance. This is the biggest reason why you must stay away from concentrating too much on this data.

However, if you are willing to know the current data, then you can refer to my latest post “IRDA Life Insurance Claim Settlement Ratio 2021“. Below are few latest reports from IRDA Annual Report.

As I pointed, few Life Insurance companies claim settlement ratio may be attractive. However, it is not an indication that they are settling your claims. Hence, don’t be get fooled by the claim settlement ratio. As a pointer to validate my saying, refer to the below image.

Notice the average claim settlement of LIC. It is the least compared to all others. This data itself shows that their claim settlement is mainly traditional plans.

However, if you are a fan of the claim settlement ratio, then it is left with you to decide which one to consider.

# Premium cost of Term Life Insurance plans

Even though whatever the features we look for, the premium is what we have to take into consideration while buying our term life insurance. I am not saying that the one which is offering at cheap is the best and at the same time the one which is offering at costly is worst. I mean to say that you have to balance between feature and price.

Hence, consider this point while buying your term life insurance. However, never choose the option like RETURN of PREMIUM. It is a waste feature that these insurers added you to lure while buying. Stay away from this return of premium.

# Features of Term Life Insurance

Term Life Insurance is the simplest product a life insurance company can offer you. However, if you look at the current products, I am sure that you will run away or get confused about which one to buy. Hence, rather than complicating your life, follow the below steps.

The ideal coverage should be around 15-20 times of your yearly income. Hence, buy accordingly. Term of the life insurance should be up to your working age. During your retirement age, Life Insurance is a WASTE product. Hence, don’t go for a term of up to 80 years or 100 years.

Never go for riders like accidental or critical illness. The main reason is that life insurance is required only for a limited period. However, accidental or critical illness insurance is required for you throughout your life. Also, if you buy these riders as a standalone product, then they may offer better features than these riders.

Stick to the yearly payment option rather than choosing monthly or limited payment. Few choose premium payment as monthly. However, these term life insurance products are high sum assured, a single default of premium may be converted to a lapsed of policy. To reinstate the same, life insurance companies may ask you to undergo a medical examination. Hence, to avoid such hassle, better to opt for a yearly premium. To accumulate the same, RD of a year is enough.

These are the main pointers when you look for plan features. Few more are listed at the end of this post which may help you in shortlisting a product.

# Age of the company

As Life Insurance is a long-term contract between you and the company, look for stable companies than the one where the management or takeover happening frequently or the newly entrant.

Go for stable and old companies. However, even if a new company shut its doors, it can’t run away from the responsibility. For a better understanding of this concept, read my post “What if your Insurance Company goes bankrupt?“.

List of Term Life Insruance products available in India

Now, let me share with you Term Life Insurance products available among all 24 companies.

• LIC Jeevan Amar (Offline Plan)
• LIC Tech Term (Online Plan)
• HDFC Click2Protect Life
• ICICI Pru iProtect Smart
• Max Life Smart Term Plan
• Max Life Term Plan with return of premium
• Max Life Online Term Plan Plus
• Kotak e-Term Plan
• ABSLI Life Shield Plan
• ABSLI Digishield Plan
• Tata AIA Maha Raksha Supreme
• Tata AIA Sampporna Raksha
• Tata AIA Sampporna Raksha+
• SBI Life eShield
• SBI Life Poorna Suraksha
• SBI Life Smart Shield
• Exide Life Elite Term Life Insurance
• Exide Life Smart Term Pro
• Exide Life Smart Term Edge
• Exide Life Term with Return of Premium Plan
• Bajaj Allianz Life Smart Protect Goal
• Bajaj Allianz Life eTouch Online Term
• Bajaj Allianz iSecure
• PNB Metlife Mera Term Plan Plus
• PNB Metlife Mera Term Plan
• PNB Metlife Aajeevan Suraksha Plan
• Reliance Nippon Life Protection Plus
• Reliance Nippon Life Digi-Term Insurance Plan
• Aviva Lifeshield Advantage
• Aviva Jana Suraksha
• Shriram Life Smart Protection Plan
• Shriram Life Smart Protection Plan SP
• Shriram Life My Spouse Term Plan
• Shriram Life Cash Back Term
• Shriram Life Family Protection
• Bharti Axa Flexi Term Plan
• Bharti Axa Premium Protect Plan
• Bharti Axa Smart Jeevan
• Bharti Axa Income Protection Plan
• Future Generali Flexi Online Term Plan
• Future Generali Express Term Life Plan
• Ageas Federal Life Insurance MyLife Protection Plan
• Ageas Federal Life Insurance Income Protection Plan
• Ageas Federal Life Insurance Termsurance Life Protection Insurance Plan
• Canara HSBC Oriental Bank of Commerce Life Insurance iSelect Star Term Plan
• Aegon Life iTerm
• Aegon Life iTerm Plus
• Pramerica Life Trushield
• Pramerica Life U-Protect
• Star Union Dai-Ichi Life Insurance Life Abhay
• IndiaFirst Life Insurance Guaranteed Protection Plan
• IndiaFirst Life Insurance Life Plan
• IndiaFirst Life Insurance Online Term Plan
• Edelweiss Tokio Life Insurance Zindagi Plus

You get confused right?? Yes, me too 🙂 This is a classic example know how the financial industry complicates your life. Term Life Insurance is a simple product. But in the mad rush to show that they are the BEST in the market, these life insurance companies are adding one by one feature to the product and made our LIFE COMPLICATED.

Then which one to buy? The answer is IRDAs recent initiative of standard Term Life Insurance called “SARAL JEEVAN BIMA YOJANA“.

It is a standard life insurance product with a standard feature. You can look into this product. However, the default maximum cover is Rs.25 Lakh (however insurers can offer you higher coverage also). Hence, if your opted life insurance company is offering Saral Jeevan Bima Yojana at higher coverage, then the best option is to choose it. Mainly because it is simple to understand and standard basic features are available with this product. Sharing with you the features of the same.

Let me now share my choice of Top 5 Best Term Insurance Plans in India 2021.

1. LICs Tech Term
2. HDFC Click2Protect Life
3. ICICI Pru iProtect Smart
4. Max Life Online Term Plan Plus
5. Aegon Life iTerm

Few points to consider while buying term insurance

# Never rely on Claim Settlement Ratio

Claim Settlement Ratio is raw data. This data will not give you enough picture of what type of products the insurance companies settled. Hence, relying too much on this single data and selecting a product is not a good idea.

# Quantum of Life Cover

Ideally one must have at least 15-20 times of your yearly income. This is the basic calculation.

# Fill the data properly

Sharing data especially materialistic information must be accurate. If you are unable to understand anything, then immediately contact Life Insurer for help. Understand the questions and fill them only when you know what you are filling.

# Never allow someone to take over your decision

Never budge on the decision which is against your wish. If you are fully comfortable, then only go ahead and buy.

# Term of the policy

Ideally, it should be up to your retirement age. Because you retire when you are financially free. Hence, Life Insurance is not required during your retirement age.

# Splitting of Term Insurance

There are few who are apprehensive of relying on a single insurer. Hence, they try to split among few. But in reality, there is no logic in splitting. What is the guarantee that all insurers will accept or reject the claim?

# Stay away from riders

Never combine Life Insurance with General Insurance requirements. You will get better-featured covers from general insurers regarding accidental and critical illness covers. Hence, simply avoid riders.

# Never heed the aggregators choice

Nowadays there are so many online aggregators. You may not know that they act exactly like insurance agents. Hence, never rely on their claim. Do your own research. If you are satisfied, then only go ahead and buy. Refer to my post about the same “Beware of Insurance Comparison portals in India“.

# Know about Sec.45 of Insurance Act

After the recent clarification about Sec.45 of the Insurance Act, the customer became king. It states “No policy of life insurance shall be called in question on any ground whatsoever after the expiry of three years from the date of the policy, i.e. from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later.”

Refer the complete post at “Term Insurance-Claim Settlement Ratio no more a big criteria“.

# Review your life insurance cover

Buying Life Insurance of Rs.1 Cr or Rs.3 Cr is not a one-time affair. You must review your life insurance requirement at least once in 5 years. If required, then you must increase the sum assured.

# Be cautious with premium payment

In case of term insurance, you have to be very cautious when it comes to the premium payment. It is always better to opt for yearly premium payment and also if possible make it automated by the way of ECS. If policy lapses due to your negligence, then you have to undergo medical tests and all kinds of stuff once again. If there are any health issues, then the insurer may reject to renew the policy.

# Never go for Telemedical Examination

Recently one of my blog readers pointed that few Life Insurance companies insisting just Telemedical Examination by questioning about your health details on the phone (Refer-Can I buy Term Life Insurance with Telemedical Verification?).

It may be the easiest process for you and for life insurance companies. However, I feel suspicious of such kind of medical examination. Because in future insurance companies may find 100000 reasons to reject the claim on health ground.

Instead, I suggest you to go for a medical examination. This will really clear the dust or doubt in your mind about future claim settlement.

Final Note:-The list of “Top 5 Best Term Insurance Plans in India 2021” is my personal choice and comfort with insurance companies and by verifying features. However, it does not mean that my selection will be the UNIVERSAL selection.

Hence, if you have a different opinion from my selection, then it does not mean you are buying the wrong product. My only concern here is not to shortlist “Top 5 Best Term Insurance Plans in India 2021”, but to give the gyaan which you must take into consideration before you shortlist your term life insurance.

Note:- From 16th April 2021, LIC is offering a standard term life insurance Saral Jeevan Bima (Plan No.859). Refer the details at “LIC Saral Jeevan Bima (Plan No.859) – Term Life Insurance“.

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• Latest TDS Rates Chart for FY 2021-22 (AY 2022-23)
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• Old Inactive EPF Account – Should you withdraw or continue?
• LIC Saral Jeevan Bima (Plan No.859) – Term Life Insurance

The post Top 5 Best Term Insurance Plans in India 2021 appeared first on BasuNivesh.

Finally, LIC is offering a standard Term Life Insurance for its customers from 16th April 2021. Let us see the LIC Saral Jeevan Bima (Plan No.859) features, benefits, and eligibility.

As I mentioned in my earlier posts “Saral Jeevan Bima Term Life Insurance – Features, Eligibility, and Benefits” and “Top 5 Best Term Insurance Plans in India 2021“, to make buyers life simple, IRDA recently issued Guidelines on Standard Individual Term Life Insurance Product, “Saral Jeevan Bima” vide which all life insurers are directed to offer a Standard Individual Term Life Insurance Product mandatorily. The plan features and parameters under this product have been prescribed by the IRDA.

In view of the above, LIC decided to introduce SARAL JEEVAN BIMA (Plan No.859) with effect from 16/04/2021.

Saral Jeevan Bima (Plan No.859) plan is a Non-Linked, Non-participating, Individual Pure Risk Premium Life Insurance Plan. This plan can be purchased offline as well as Online.

LIC Saral Jeevan Bima (Plan No.859) – Eligibility, Features and Benefits

Let me share with you the Saral Jeevan Bima (Plan No.859) eligibility conditions.

LIC Saral Jeevan Bima (Plan No.859) – Who should buy?

You noticed that even though IRDA gave free hand to set the maximum sum assured, LIC not thought to go beyond the mandatory maximum limit of Rs.25 lakh.

The problem with current LIC’s term plans is that the existing ONLINE term life insurance Tech Term minimum sum assured is Rs.50 lakh and the OFFLINE term life insurance Jeevan Amar is Rs.25 lakh.

If someone wishes to buy an online term life insurance below Rs.50 lakh, then from now onwards they have to satisfy with Rs.25 Lakh Saral Jeevan Bima (Plan No.859). Because LIC Jeevan Amar is an offline plan.

The best advantage of this product is that LIC made it available for both ONLINE and OFFLINE. Hence, if someone is looking for coverage of up to Rs.25 lakh can opt for it by buying online. However, I am not sure why still offering Jeevan Amar OFFLINE.

Saral Jeevan Bima (Plan No.859) plan is best for those who wish to buy up to Rs.25 lakh coverage. Instead of buying an offline Jeevan Amar between Rs.25 lakh to Rs.50 lakh, better either choose LIC Saral Jeevan Bima (Plan No.859) or Tech Term Plan as both are available online and save your premium.

Conclusion:- If someone is looking for term life insurance with a trusted brand and the sum assured is less than Rs.25 lakh, then better to go for this product. Otherwise, better to go beyond Rs.50 lakh coverage with Tech Term than the Jeevan Amar Offline plan. I know premiums may be higher than the other private players. However, it is the best product who are looking for small coverage (within Rs.25 lakh) with a trusted brand.

Recent posts:-

• Sovereign Gold Bond Scheme 2021 Series I – Should you invest?
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• Latest TDS Rates Chart for FY 2021-22 (AY 2022-23)
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• Old Inactive EPF Account – Should you withdraw or continue?
• LIC Saral Jeevan Bima (Plan No.859) – Term Life Insurance

The post LIC Saral Jeevan Bima (Plan No.859) – Term Life Insurance appeared first on BasuNivesh.

During the last week of April 2021, our whole family infected with Covid. It is a horrific time when the whole family infected with Covid. But luckily we all came out from that. During this period, I too learned certain lessons related to Covid and Personal Finance. Hence, thought to share with you all.

My experience of Covid and Personal Finance Lessons

# Cash is KING!!

Yes, we all addicted to online money transfers or UPI-based fund transfers. However, during my hospitalization, I realized the importance of cash. We all three (me, wife, and daughter) went to the hospital in a hurry and admitted with few thousands of cash in my pocket. But later on, I realized that few expenses can’t be payable through UPI or net banking (like paying money to fruit sellers or some small expenses). As we all being patients, we faced a little bit of cash crunch even though money is available in our account. The sad part is that we can’t go out and withdraw the cash nor anyone was allowed to withdraw the cash and give us in the hospital.

My wife and daughter discharged two days earlier than I. When I booked the cab for them, the driver was not ready to accept the money in any online form. Instead, he insisted only in cash mode. For me, no option but I was forced to pay additional money to the staff of the hospital and get the cash from them to pay to the driver.

Hence, these small but during that period most important incidents, made me learn the importance of cash.

Even though we keep a certain amount of cash in our home, but the mistake I have done was that in a hurry, I not took the cash with me while hospitalized.

Moral-Old beliefs of cash still relevance (even though not fully) even though we moved to cashless

# Importance of Emergency Fund

First time, I was in a situation to touch my emergency fund to pay the advance amount during the hospitalization. I felt happy that I no need to worry. I set aside around 2 years of my monthly expenses as an emergency fund. Before Covid, my emergency fund used to be around 6 months of my monthly expenses. However, after last year’s lockdown and Covid, I increased my emergency fund drastically to two years of my monthly expenses.

Getting the bed during this horrific time is the toughest task. Hence, hospitals are in a demanding mode. Because of this many hospitals not accepting the cashless benefits of insurance. Even though it is against the rule, we have no option but to pay the bills and reimburse later from insurance companies.

In such a situation, an emergency fund is handy. Even though I have not utilized my emergency fund, but having an emergency fund during such a crisis will give you great relief.

Moral-Having emergency fund will give you a boost to fight with any uncertainties of your life.

# Park your Emergency Fund WISELY!!

Where you park your emergency fund is also important. Many experts suggest you park in Liquid Funds or other debt funds. But remember in the case of Liquid Funds, few funds offer you instant redemption of up to Rs.50,000 a day. If you need beyond that, then it will take T+1 day. I mean if you request for redemption before the cut-off time, then you will get the money the next day. If unluckily you placed your redemption request on Friday, then you will get money on immediate next working days (maybe on Monday). Hence, even though the name is LIQUID, they are not so liquid to manage your emergencies.

Instead of chasing returns on your emergency fund or thinking too much on taxation, it is wise strategy to follow as below.

• Park around 1-2 months of your monthly expenses in your savings account.
• Park the remaining amount in a Bank FD of your choice of a year.
• While parking emergency fund as FD, make sure to split the each FDs equal to your monthly expenses (like suppose your monthly expenses are Rs.1 lakh, then make sure to split your each FD of Rs.1 lakh value). This will create more liquidity without any premature FD withdrawal penalty.
• Make sure to book FDs using an internet banking facility. So that if you need money in midnight, you can liquidate the FDs instantly.

Moral-Keep your emergency fund SAFELY and where you have highest LIQUIDITY. Neveer listen to the financial industry. They are always ready to SELL something to you. Keep your emergency fund as per your comfort but not as per their comfort.

# I used credit card than emergency fund

Even though I have sufficient emergency funds, I have not utilized them. The reason is, we all three admitted to hospital on 1st of May. My credit card billing date is the 22nd of every month and I have to pay the bill on or before next month’s 10th. So, if I use a credit card to pay the bills in the first week of May 2021, I have enough time to pay the dues on or before the 10th of June 2021.

Hence, instead of utilizing my emergency fund, I have utilized my credit card to pay the bill. Once I was out of the hospital, I immediately submitted the necessary documents to the insurance company. Claims were settled and I have cash now to pay the dues of whatever I have utilized for our hospitalization.

Hence, during the crisis, instead of panic, it is better to use our commonsense and act. I used a credit card not because I don’t have money. But I used it mainly because I will get around 1 month of a window to utilize the money than using my emergency fund. As usual, I will pay all the dues before the due date. Hence, no worries.

Moral-Use commonsense without panic. You always find the ways.

# Cashless benefit of health insurance is not a RIGHT but a FACILITY

Many think that if we have health insurance, then the cashless benefit is our RIGHT. However, because of Covid, many hospitals not accepting cashless benefit options. They are demanding to pay our bills from our own pocket and then approach the insurance company for reimbursement.

You have the options like fight with hospitals, search for a hospital where the cashless benefit is available, or accept the demand of the hospital. In such a horrific situation, where getting a bed is not so easy, I felt paying is a far better option than arguing with them for cashless benefits.

Luckily in my case, my health insurance company settled the claim within few days. Hence, no need to worry. But the learning is that be ready to accept the reality of pay now and receive later than a cashless option.

Moral-Be ready for the BOUNCERS during emergencies.

# 100% Cashless is not possible

No matter how much coverage you have, there are certain expenses that will not be reimbursed by health insurance. Hence, it is always better that you mentally prepare yourself to pay around 25% to 30% of the cost of the hospitalization from your own pocket.

Luckily in my case, I got the reimbursement for almost around more than 90%. Hence, my liability was for just around less than 10%. But you have to be mentally ready to pay the amount which is not reimbursed by health insurance companies.

In such situation, your emergency fund will be handy.

Moral-Never rely 100% on health insurance for hospitalization cost.

# My Corona Kavach Policy turned useless

Considering the way Covid was spreading in Bangalore, I sensed somewhat uncomfortable relying on normal health insurance. Hence, purchased Corona Kavach for our whole family on 21st April for Rs.5 lakh. However, as there is a window of 14 days waiting period and we all three hospitalized within that period, I was unable to use Corona Kavach for my claim.

Instead, I have utilized my family floater health insurance (Super Top Up not came into the picture as the billed amount was less than Rs.5 lakh deductible).

Moral – Sometimes emergency may knock us before we plan for emergency!!

Conclusion- I first time sensed how lucky I am by being in this profession. Because, during this crisis, my doctor clients came for my help and in fact, one of my doctor clients took all the initiative and arranged the bed within few hours for all of us. Even during their busy schedule, they used to reply to me either through Whatsapp messages or calls. Thanks to this wonderful profession and the doctors who guided me and helped.

These are my sharings of Covid and Personal Finance Lessons. If you too have certain experiences, then you are welcome to share your Covid and Personal Finance Lessons here by commenting. It may help many to combat such emergencies of life.

Finally, BE POSITIVE, WE CAN PREPARE BUT CAN’T PREDICT AND BE SAFE WITH YOURSELF AND FAMILY. This too shall pass.

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The post My experience of Covid and Personal Finance Lessons appeared first on BasuNivesh.