Personal Finance Queries

Vibhu Mishra,Navi Mumbai

I am 35-year-old businessman, married and have a 5-year-old child. I have taken a huge housing loan which helps me save tax. Do I still need a life insurance?

The primary reason for buying life insurance is to protect the family of the policyholder, and to pay out the sum assured in the event of the policyholder’s demise, and not tax saving. Tax saving is an add-on benefit and certainly an important one that is offered to policyholders. Since you have taken a large housing loan, it will be wise to take a term plan with adequate cover, so that your family is not burdened by the loan in case of your absence. You can also look at group credit plans that would protect your family against the burden of an outstanding amount on your loan in case of demise during the loan duration. While tax benefits are available on life insurance policies, it is an additional benefit and should be viewed as an “add-on”. The main purpose of buying life insurance should be its main job, providing protection.

Aalok Bhan,  Director & Chief Marketing Officer, Max Life Insurance

Parimal Kumar, Mumbai

What are the some aspects to take into consideration when buying a child plan for the first time?

The first step when taking a Child Plan is to define the goal as for example, higher education or marriage. The next step is to calculate, based on your child’s current age, the number of years till this goal. Next step is to decide the amount that will be required to meet this goal. For this, keep in mind current expenses of higher education and don’t forget to factor in inflation! Meet your agent advisor or visit online sites to see the available child plan options and choose one that suits your requirements and meets your goals effectively.

Aalok Bhan,  Director & Chief Marketing Officer, Max Life Insurance

Raja, Singapore

I am a 38-year-old NRI holding `95 lakh cash in NRE account, with no fixed deposits. I have no liabilities. What would be the best investment option to create wealth?

Apart from fixed deposits, you can choose to allocate some funds in portfolio management services (PMS) to take an opportunity on equity returns. PMS investments in India starts with minimum of `25 lakh. You can consider PMS schemes from known asset management company (AMCs) allowing NRE investments with good performance track record in past. You can choose Sundaram SISOP PMS or ICICI Flexi cap & Contra PMS.

B Gopkumar, ED & CEO, Reliance Securities

Umesh SADANA, Sonepat

My son is about 9-years-old and a friend suggested that instead of term plans, I should buy a ULIP. What factors should I consider before purchasing it?

Term plans and Unit Linked Insurance Plans (ULIP) serve fundamentally different purposes. A term plan is the most fundamental kind of life insurance whose primary job is protection. It should be at the very base of any financial plan as it protects the policyholder’s family in case of his demise. As you have a young child, it would be recommended to buy a protection plan at the very onset. As a next step, it would be recommended to evaluate your life stage goals and choose a plan that best suits them. As you mentioned about your child, you obviously must think of his future such that you can secure his future and your dreams for him. I would hence suggest that you should study child plans amongst the various offerings by Life insurance companies. Child plans come the ULIP and Traditional platforms alike. I would recommend that you take professional help through talking with a financial advisor and take things forward. If you would like to plan for your son’s higher education, a child plan would be good to evaluate.

Aalok Bhan,  Director & Chief Marketing Officer, Max Life Insurance

Anusha, Vijayawada

Sir, I am investing through monthly SIP related to mutual fund of franklin templeton small company fund, Franklin templeton high growth companies fund, franklin templeton tax shield and franklin templeton prima plus of `1,000 each. Total amount invested Rs1,16,900. Now the value is Rs1,19,300. Small companies fund is showing return of 8 per cent and high growth companies fund -0.6 per cent. Only tax shied fund is showing return of six per cent on my investment. Kindly suggest if there is anything wrong in my investment portfolio and any suggestions for  better investment other the above mentioned plans.

Generally, SIP investments gives better returns in the long run which can be anywhere between five to seven years. Currently, equity markets are going through volatility and are in discounted phase than past highs. Your investment returns are still beating absolute returns due to rupee cost averaging in last two years. You could continue investing in these SIPs to get better returns in the future.

B Gopkumar, ED & CEO, Reliance Securities