Despite its popularity among the masses, life insurance has a problem - many people are not buying it for the right reasons, owing to some incorrect perceptions about this financial product. And when people buy it for the wrong reasons, they often end up getting the wrong type of insurance plan, which prevents them from fully utilizing the many benefits of a great life insurance plan.
So what is the right way to look at Life Insurance?
Life insurance should not be seen as a windfall when someone dies. Let us explain. A windfall is when you receive a substantially large amount of money out of the norm, more often than not, when you’re not expecting it. Somewhat like winning a lottery. A life insurance payout on the other hand is more like a financial cushion to soften the blow of lost income, due to the loss of life of someone who, had they been still around, would have generated some form of income to keep the financial security of their family stable. So we can say that while a windfall can be seen entirely as profit, a life insurance payout is a replacement for a loss, strictly speaking in monetary terms.
Insurance as an Investment Vehicle
A financial portfolio of an individual should ideally have both - a life insurance plan and passive income generating instruments such as SIPs, and maybe even a Demat account for trading in stocks. They all serve specific purposes but the core difference between a life insurance savings plan like HDFC Life Sanchay Plus and SIPs is that with the latter is totally subject to market risks, while the former guarantees you a return - either in the form of a maturity benefit, or as a payout in the event for the insurer’s passing.
Life Insurance Savings Plan to the rescue
To understand how a Life Insurance Savings Plan can help replace lost income, let us take the example of one of the best ones in the market - HDFC Life Sanchay Plus. It is a non-linked non-participating savings plan, which helps the individual to achieve their financial goal while safeguarding their family’s future against any type of eventualities. HDFC Life Sanchay Plus is a comprehensive life insurance product that offers a guaranteed return to the insured and his/her family.
HDFC Life Sanchay Plus offers four different plan options - Guaranteed Maturity Option, Guaranteed Income Option, Life-Long Income Option and Long Term Income Option. And depending on whether you avail of the death benefit or the maturity benefit, here’s how they benefit you and your family’s long-term financial stability goals.
Maturity Benefit
With the Guaranteed Maturity Option, maturity benefit offered by the policy is equal to the guaranteed sum assured amount on maturity plus accumulated guaranteed additions. The maturity benefit offered by the policy as a guaranteed sum assured is the total yearly premium paid under the policy during the tenure of premium payment.
With the Guaranteed Income Option, the maturity benefit is paid as a guaranteed income for a fixed tenure of 10 years-12 years, provided all the premiums of the policy are duly paid till date. The guaranteed sum assured on maturity should be the present value of the future payouts, discounted @9% p.a.
With Life Long Income Option, the maturity benefit is paid to the insured as guaranteed income up to the age of 99 years and a return of total premiums is paid at the end of the payout period of the policy.
With Long-Term Income Option, the maturity benefit is paid to the insured as guaranteed income for a fixed tenure of 25-30 years and a return of total premiums is paid at the end of the payout period of the policy.
Death Benefit
With all of these options, in case of demise of the insured person, the beneficiary gets a death benefit equal to the sum assured amount.
On top of these, HDFC Life Sanchay Plus offers the benefit of tax exemption to the insured. The maturity process and premium paid towards the policy up to the maximum limit of Rs.1.5 lakh are eligible for tax exemption under section 10(10D) and 80C of Income Tax Act 1961.
To know more about how HDFC Life Sanchay Plus works, reach out to one of their advisors.
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