Our day to day life is full of uncertainties which may cause risk for our family, especially in case you are the only wage earner of your family. To prevent such risks one can either start saving on regular basis using different schemes like provident funds, recurring deposits or can start term insurance plans. But there are other whole life plans which give you both in a single bundle.
No doubt those traditional saving plans can do better than whole life plans in term of savings like a regular saving deposit account which is offering a valuable interest rate up to 7%. But are they also covering other benefits like tax rebate, risk cover, insurance riders and loan against deposited money?
There are more than 40 life insurance companies serving whole life insurance plans in India. All plans are designed bundling features mainly investments and risk cover. There are many reasons apart from sales strategy and brand value of insurance companies which are attracting consumers to invest in whole life plans. Here is a one to one comparison of whole life compositions to available top saving schemes in India.
Regular Saving Accounts:
I would like to start with regular deposit accounts because this is most commonly used saving plan and paying good interest rate since Reserve Bank of India has given flexibility to banks over interest rate offered. Banks are providing up to 7% interest and it has also gain a healthy competition among public and private sector banks. Probably it may not give banks a long term asset but this part of investment makes a running base of banks. Many banks are offering death benefits with saving accounts but are not that much successful. Saving accounts have several disadvantages like no tax rebate and no loan against deposited money.
Recurring deposit are likely one of the most popular schemes among service class people with good enough interest rate up to 9-10%. Several Banks in India have started flexible recurring deposit schemes, where a group of people is targeted with variable income. This also lacks tax benefits and loan facility against deposit. Usually schemes are offered no long term deposit and no life cover.
This is top interest paying scheme and popular in business class. But at the same time this scheme lacks tax savings and required lump sum amount to invest. It also does not come with too long term. No tax benefits and no loan facility available. It also does not provide risk cover.
This investment plan strictly challenges to whole life plans due to tax saving benefits and loan against investment with great interest rates. It also competes pension plans by insurance companies but does not have risk cover likely in whole life insurance plans.
What Does Whole Life Plan Covers?
I have explained advantage and disadvantages of several saving schemes available in India. Let us have a look at the benefits in whole life plans which are not completely covered in above arrangements.
• Tax rebates on premiums and maturity / death claim
• Maturity benefits with bonus
• Surrender values
• Loan against policy
• Additional riders for accidental death
• Premiums paid monthly / quarterly / half yearly / yearly
Aditi Sawant is a personal finance and insurance advisor associated with LIC. LIC of India has more than 20 individual term insurance plans, retirement plans, child insurance schemes and special plans like Jeevan Saral and Jeevan Akshay VI. The organization is serving life insurance in rural and urban areas since 1956.