Top LIC Policies of India in 2016

A life insurance is a policy that serves as an agreement between a life insurance company and the policyholder, where the insurer is supposed to pay a pre-decided amount in case of the insured’s loss of life. The amount is paid to the beneficiary or the nominee of the insured individual. Some of the best life insurance plans in India are offered by Life Insurance Corporation of India. However, it offers a wide array of products to choose from and sometimes it may become difficult to choose the right one.

The best LIC policies in the country at present are:

LIC Jeevan Akshay VI:

LIC Jeevan Akshay VI is a non-unit-linked pension plan of LIC that offers annuity payment of a fixed amount. It is a single premium immediate annuity scheme that can be purchased by  one-time payment of a lump sum amount. The annuity can also be extended for a lifetime.

Features:

• It is an immediate annuity plan that enables the plan to start as early as the consecutive month.
• Up to 7 Annuity options available to choose from.
• It is a single premium plan which requires one-time payment for the entire duration.
• Offline, the minimum purchase price for an annuity is Rs.1,00,000, while online, the minimum purchase price for an annuity under this scheme is Rs.1,50,000. However, there is no maximum limit.
• The scheme covers a wide range of ages between 30 years and 85 years.
• The premiums paid under this policy are tax exempted under Section 80C. The pension earned, however, will be taxable.
• Provision of 50% or 100% of the annuity to spouse in case of death of the annuitant. The annuity is provided for the entire lifetime of the beneficiary.
• Rebate of 1% by increasing the basic annuity rate as an incentive for online.
• No medical examination is required.

LIC JeevanAnand Plan

JeevanAnand from LIC is a non-linked participating endowment plan offering dual savings and protection benefit. The plan provides life coverage even after the termination of policy, until the death of the policyholder. It is both an endowment as well as whole life plan.

Features:

• Minimum entry age is 18 years, while the maximum age is 50 years.
• Maximum maturity age is 75 years.
• A minimum sum assured of Rs.1,00,000.
• Policy terms are within the range of 15 years to 35 years.
• In case the policyholder survives until the date of policy term’s completion, the maturity benefit is paid out.
• In case the policyholder dies before the completion of policy term, the nominee gets the sum assured as the death benefit.
• In case the policyholder commits suicide within 12 months from the policy’s commencement, the nominee gets back 80% of the premiums.
• Provisions of death benefit, maturity benefit and bonuses.

LIC e-Term Plan:

It is a pure life cover policy offering financial protection to family of the insured in case of the death of the insured individual. The e-Term Plan from LIC can be purchased online.

Features:

• Different premium rates for smoker or non-smoker individuals.
• The minimum sum assured for aggregate category is Rs.25,00,000, while for non-smoking category is Rs.50,00,000.
• Age group of 18 years to 60 years.
• Policy term ranging from 10 years to 35 years.

LIC Jeevan Sangam:

LIC Jeevan Sangam is a Children’s money back plan offered by LIC. It is a single premium, non-linked plan which guarantees return. The premium for this return is decided by the insured’s age and the maturity of the sum assured.

Features:

• Policy offered to age group of 6 years to 50 years.
• Basic sum assured is ten times the single premiums.
• Loan option and surrender benefit available from the first year itself.
• Provisions of loyalty addition and death benefit.

LIC Jeevan Saral:

LIC Jeevan Saral is an endowment policy categorised under Special Plans. It offers a lot of flexible benefits that are usually available with ULIPs. This plan offers double death benefit of sum assured along with return of premium.

Features:

• Policy is offered to the age group of 12 to 60 years.
• Sum assured is 250 times the monthly premium amount.
• Policy term within the range of 10 to 35 years.
• Provision of loyalty additions after 10 years of policy completion.
• Death and maturity benefits.
• Loan available under the plan.
• Term rider, disability benefit as well as accidental death benefit as optional high cover.

With so much variety available in the market, it is a good idea to choose an LIC policy that fulfills your requirement criteria.

Calculating Returns From Life Insurance

Insurance policies are a crucial part of our financial plan and choosing the right one is very important to gain maximum returns. In order to make that decision, you must make an approximate calculation of expected returns from any Life insurance plan. To calculate an investment return, you are required to know two important information such as the premium amount paid per annum and the final amount at maturity of the insurance plan. This helps you in generating the rate of return on your investment. Apart from calculating manually, you can also choose to use annuity calculators online. These calculators require you to enter the annual premium, the policy tenure and the expected amount at maturity. This helps you obtain the rate of return from your policy.

Every Life insurance policy either provides guaranteed returns or variable returns or both. If it’s a policy with guaranteed return, you can use it to find the rate of return. While if it’s a mix of variable and guaranteed return or variable return, then it requires you to analyse the terms and conditions of the policy to determine the distinctions at different scenarios.

To make a proper calculation of your returns from Life insurance plan, you can follow the steps given below:

• Read The Documents in Detail:

While taking an insurance plan, you must read the policy related documents carefully. Sometimes, there are hidden charges and bonuses that can be missed while calculating. The final amount comprises of the premium after deduction of charges. An interest is applied on the amount, which is added to your account at year end.

• Calculation:

Calculating the return involves applying all charges and bonuses to your premium. The calculation should involve deduction of charges and taxes, addition of bonuses and application of interest rates. You need to be aware if your base amount is the sum assured or your premium.

• Repeat Calculation:

The calculations must be repeated for each year until the policy’s term is complete. The balance from the first year must be added to the final amount for the next year. The same calculation is applied for all the years of the policy tenure. When you deduct the total premium amount from the amount at maturity, you will get your net returns.

• Variable Additions:

Apart from interest and bonuses that are mostly guaranteed, there are some variable additions that are unpredictable. It is advisable not to consider variable additions while calculating the final amount as the Life insurance provider’s advertised figure may not match the real value.

Measurement Of Returns:

After calculation of returns, you must visit the website of the insurance provider and get an idea of the cost of an equivalent pure term plan. This amount should be then deducted from your premium, the balance amount would be the money you saved.

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Reduce your Home Loan Interest Burden

If you have taken a home loan to buy the house of your dreams, then the home loan EMI is the biggest expense you will have each month. Home loan EMI comprises of 30-40 percent of an individual’s take home salary. This is a big chunk of your income and it doesn’t leave you with enough funds to invest in your financial goals. To avoid paying a higher EMI, people take loans for a longer tenure and that makes the EMIs affordable. But what one doesn’t realise is that by extending the tenure you are also paying more interest. you can use loan repayment calculator to make your calculations easy.

When you invest for a longer term, the compounding is in your favour. When you are borrowing for a long term, the compounding works against you. If you have taken a loan for Rs.50 lakhs at 10% interest per annum, and if you choose 10 years for repayment, the EMI will be Rs.66,075 and the total interest paid will be Rs.29,29,044 and the total interest as the percentage of the principal will be 59%. If you choose 15 years for repayment, the EMI will be Rs.53,730 and the total interest paid will be Rs.46,71,446 and the total interest as the percentage of the principal will be 93%. If you choose 20 years for repayment, the EMI will be Rs.48,251 and the total interest paid will be Rs.65,80,260 and the total interest as the percentage of the principal will be 132%. If you choose 25 years for repayment, the EMI will be Rs.45,435 and the total interest paid will be Rs.86,90,511 and the total interest as the percentage of the principal will be 173%. As the loan tenure increases, you pay more towards the interest cost. You pay more towards the interest component because most of the EMI in the initial years goes towards paying the interest and very little principal amount is repaid.

If the loan tenure is smaller, you will repay the principal amount much sooner. If you have borrowed Rs.50 lakhs at 10% interest, with a loan tenure of 25 years, only Rs.2.9 lakh is paid towards the principal loan amount for the initial 5 years. If you take the loan for 10 years, then you will repay Rs.18.9 lakhs of the principal amount in the initial 5 years.

Having established that opting for a smaller repayment tenure is ideal, you must also take into consideration that the EMI is affordable. If not then you will be in a huge debt before you know it.

How can you reduce the interest burden?

If you have already taken a home loan, then you can consider the following two ways to decrease the interest burden:

• Decrease the interest rate. When you lower the interest rate, the interest pay-out is also lowered. This can be done by refinancing the loan at a lower interest rate.
• Repay the principal amount as fast as you can. The faster you repay, there is less principal amount on which you have to pay interest on. Pay more than the EMI whenever you can. The extra amount that you repay will go towards servicing the principal amount of the loan and this will reduce the interest burden.

If you have taken Rs.50 lakh loan at 10% interest for 25 years, then the monthly EMI accounts to Rs.45,435. The total interest will cost you Rs.85.3 lakhs for 25 years. You can consider from the following to reduce the total interest cost:

• Pay one extra EMI in a year:

You can prepay 1 month EMI for a year. You can pay that from your annual bonus or from your savings. By doing this your interest cost will go down to Rs.62.3 lakhs and the loan will be repaid in 19 years and 1 month.

• Increase EMI by 5% each year:

The increase can be lined with the increase in your salary. If your salary increase by 5% every year, increase the EMI repayment accordingly. The loan will be repaid in 12 years and 11 months and the total interest will cost you Rs.44.99 lakhs.

• You can pay one extra EMI in a year and also increase the EMI by 5% every year:

By doing so you will have repaid the loan in 11 years and 8 months and the interest payment will cost you Rs.39.4 lakhs.

• Refinance the loan at a lower interest rate:

The rate cuts are most often not passed on to the existing borrowers. If you are aware of the rate cut, then look out for banks offering you lower interest rate and refinance the loan. If the interest reduced to 9%, the EMI on Rs.50 lakh for 25 years reduces to Rs.41.959. The total interest payment is lowered by Rs.10.42 lakhs. Refinancing a loan means you will have to consider the switching fee, processing fee and legal fees being charged. Once you have refinanced, you can consider the above options to further reduce the loan interest repayment burden.

Every time you take a loan, make sure the EMI is affordable. Before you decide to prepay the loan, also check if it is beneficial for you. You also get tax benefits for repaying the principal loan amount each year. If the interest rate is fixed, then you may have to pay a prepayment penalty, but the interest savings will come down.

The Importance of Retirement Planning

You love reading books, cooking up a tasty meal, walking barefoot on the fresh grass in your lawn and even making small wooden figurines. As hobbies, you indulge in them whenever you get the time. Now that you are working, sometimes you feel that the time you get for these activities is not enough. Your dreams of retirement are filled with the serene thoughts of you being immersed in your hobbies all day long. But wait, what about the funding that is required to support these hobbies? Since you are retired, you no longer have the regular income that used to magically pop into your bank account at the start of every month? Have you planned for that? More importantly, what do you plan to spend when you have a wife, kids and grandkids and no job? The future starts looking bleak, doesn’t it? Well, read on to find how these fears can be allayed.

It’s imperative to understand that retirement planning is based majorly on the amount of savings one can manage to have. Needless to say, one can save better earlier on than later in their life. With financial liabilities lesser in the earlier part of life, even though small, savings can be done effortlessly and in time, they reduce the burden of saving more later on. Savings if properly invested could grow at a compound interest rate of 8% per annum and generate great returns at the time of retirement. Considering that one’s savings alone will be enough for retirement is a myth. Inflation and rising cost of healthcare are the greatest impediments to a hassle-free post-retirement lifestyle. Only a systematic planning and revision of one’s retirement plan will allow one to change with the pace of the market.

The key pointers to bear in mind while planning for retirement are as follows :

1. Using a retirement calculator and finding out the human life value is a great idea here. One should bear in mind points such as increasing medical costs and vacations. But aspects like children's education and rent will be having less of a burden, the last one only if you own your home. Based on that, the HLV will indicate what amount of income you need post retirement
2. No day is better than today when it comes to saving. The more funds you allocate to your retirement corpus, the better. But don’t push yourself so hard that you are stuck between expenses. Save what you have and plan the next month better to save even more
3. An appropriate annuity plan can work wonders for you. Even though you might depend more on your savings and investment, an annuity payout can take care of the rent or sundry expenses for a month
4. The earlier you save, the better rates you get. It is highly unlikely that banks and other institutions will offer better interest rates on deposits as time goes by
5. Investing in a mutual fund through Systematic Investment Plans is a great idea and it really helps build on your corpus, but make sure you keep an eye out for the occasional high tides in the market

Life insurance, health insurance, proper investment and regular savings are keys to having a relaxing retirement lifestyle. Make sure you keep these points in mind before trying to splurge on that new wristwatch