[BaCkSeAtDrIVeR]

Originally Posted by prabuddhadg

In 2006, I bought a house with finance from Centurion Bank of Punjab. With the loan I was required to get a Life Insurance Policy from Aviva.

Well, state bank group banks have a single premium policy on housing loans - of course, from SBILife.

[Technocrat]

Ideally you should not go for any insurance policy that the bank makes you to go for with a home loan. Yes you can refuse that as its not mandatory & the only beneficiary is the bank & not you.

[suvi]

Originally Posted by lambuhere1

I believe its a bit high. I might be wrong. I don't know the tenure of yours.

I have one term cover for me for 25 years, 50 lakh cover, annual premium being hardly 16000, equivalent to Rs 40/- per day, well almost (I can skip the visit to the restuarant)

All other investments are in the market and safe instruments of the govt.

Oops! it is 2000 pa

[anonymous]

Originally Posted by Technocrat

Ideally you should not go for any insurance policy that the bank makes you to go for with a home loan. Yes you can refuse that as its not mandatory & the only beneficiary is the bank & not you.

I agree with your point that its not mandatory but disagree that only bank is beneficiary from this. In one has this kind of insurance covered, so in case of the death of the insured person, the insurance company is liable to pay the full housing loan amount to the bank. You never know what may happen to anyone in future and home loan tenure is 15-20 years. So I see it quite useful in a situation like I mentioned before.

[Lalvaz]

[quote=anonymous;881578]So you meant to say that if I invest the same amount of money in PPF account as what I had planned to invest in child insurance policy, I will get the same or more return after 20 years?

Even better, invest the money in your Voluntary Provident Fund. That gives you 8.5% tax free, so if you are in the highest tax slab, your post tax returns exceed 11%. Also, money is absolutely safe. Drawback is low liquidity, although you can get a loan against your VPF too.

As ppl have pointed out, Insurance is a bad Investment avenue. Investments such as FD's, PPF, MIS, MF's will yield far better returns than Insurance policies. Also, ULIP's have some of the highest charges, with the first year agents commission going as high as 30%, so if you pay 1 lac, 30000 is deducted as commission. Then you have mortality charges and insurance admin charges. Does not leave you too much, does it. Benefit of a ULIP is that in a rising market, these charges are offset by the returns, but you could have got those returns in a MF too, without losing 30%. Whats better, you decide.

Also, PPF, VPF, and Insurance comes under Section 80C, so no diff in the tax handling as of now.

Would strongly suggest to all team-bhp'ians to invest max in VPF, then PPF, then MF's. And ofcourse evaluate the need for insurance, you should try and ensure that you have insurance cover such that your dependents can survive for atleast 5 years or so. Anything more is overkill. Anything less is too little. Also bear in mind that if you are really well off with loads of money generating assets and few liabilities, then maybe Insurance is not really for you. Which is why wealthy families do not take insurance at all.

Hope this helps.

[Hurrycane12]

Insurance is not a investment tool as most have suggested. Incase you are looking at growth in finance as a investment alongwith Insurance benefit I suggest you look at Reliance Mutual Funds SIP+Insure scheme; it has a lock of 3, 5 and 10 years, you can choose from 8 different funds; with the insurance calculated based on the monthly SIP payable.

The other option is to look at Kotak Mahindra's Star Kid facility which is again linked to 3 Mutual funds of Kotak which you can choose from.

[Technocrat]

Originally Posted by anonymous

I agree with your point that its not mandatory but disagree that only bank is beneficiary from this. In one has this kind of insurance covered, so in case of the death of the insured person, the insurance company is liable to pay the full housing loan amount to the bank. You never know what may happen to anyone in future and home loan tenure is 15-20 years. So I see it quite useful in a situation like I mentioned before.

I will explain

Say one has 25L loan amount repayable in 20 years

Condition 1- Banks Insurance

The bank will normally charge around 600-900 bucks per month for the insurance.

Condition 2- You go for term insurance

This will roughly cost a person between 7k to 8.5k for 20 years for 25 lacs


Now say at the end of 10th year the person dies & the outstanding loan is 12.5L (roughly)

In case of condition 1 The person's family gets zilch money

In case of condition 2 The person's family get 12.5L cash after repaying the loan amount.

So which one is better?

Also in case you tend to get some cash & pay off the loan before the entire term is done you can simply stop paying the insurance premium.

[given2fly]

Bravo, Techno. With the simplest of the words, you have beautifully explained the crooked business of banking in India. Thanks for saving me and some friends from getting into this stupidity.

PS: I have never considered insurance as investment but this angle was absolutely new to me.

[bharanidharang]

investment and insurance should be differentiated. During the early 80's, due to non-availability of investment options, everybody got themselves a Insurance as an investment.

Now we have different options for both. MF/FD/RD/PF/PPF etc for investment and Term/Life/Pension for insurance. Insurance should mainly be determined and worked out on how much your dependents would require if you are not around. If your investments have grown huge, you can afford to close the insurance policies. But thats a decision which you have to take.

Guys... can you add a poll to see which insurance rate high on customer care and on claim settlement.

[Technocrat]

@given2fly: Thanks, sadly term insurance is something your insurance adviser will never tell you as the commissions are really low. He will always suggest you ELSS based ones as the commissions are high & people get lured easily.

Ideally one should always have term plans worth one's liabilities & close them once liabilities are over & other investment options for money after retirement or for some cause\use.

[kuttapan]

Originally Posted by Technocrat

Ideally one should always have term plans worth one's liabilities & close them once liabilities are over & other investment options for money after retirement or for some cause\use.

Wrong. One should have term policies as long as the companies give it, or at least till 60-65. A full life cover policy(for lesser value) can also be taken, so that ones family does not come to grief(financially) after one's death.

With a term policy, one is able to attach a much larger value to life than what other policies give(for the same amount of money). The mental block people have about term policies is that the money does not come back, so they feel it is not worth it. Dumb reasoning, if you ask me.

[Technocrat]

One should have term policies as long as the companies give it, or at least till 60-65.

Yes but if one has enough investments to safe guard the family they may not feel the need for term plans to continue after the liabilities are done with.

The mental block people have about term policies is that the money does not come back, so they feel it is not worth it. Dumb reasoning,

Totally agree have hard people give such reasons, I try to make them see the *actual* benefit, some agree & some dont so I let it be.

[bill1182]

Originally Posted by Technocrat

Ideally you should not go for any insurance policy that the bank makes you to go for with a home loan. Yes you can refuse that as its not mandatory & the only beneficiary is the bank & not you.

I agree with your comment, but in case of any unforseen envent, Insurance company will pay eitire money to the bank, which will payoff entire loan amount. Your family need not worry to pay for the loan installments and they get the shelter for their life after the death of the Life Assured.

[anonymous]

Has anyone heard of LIC FD. I heard that you get double of the money in 5 years (Bank takes 9 years and PO takes 7.5 years) in this scheme. Please share if someone has taken it?

[Hurrycane12]

Technocrat: Need to know if term Policy can be used as a investment tool or its just for covering your liabilities and safe guarding a person in case of any unseen eventualities