Do you think by Having LIC policies you have planned well to achieve your goals and dreams? Think Again..!!! - Ram Valia

Being A financial planner I see that there are many mistakes my clients make with their money. Before you make a mistake I thought I should inform you on this. In case you have already committed this mistake then at least after reading this you will not make it again and help other avoid it too.

To start off with, Investing and insurance cannot go hand in hand. in fact using the words investing and insurance in the same sentence is 'Wrong English'.
Though it has been preached and practiced in our families that insurance is a very good way for saving for future financial requirements and that too through LIC only, It has been proved with substantial evidence that it's a big mistake to mix the two concepts of Insurance and Investing which have a completely different background, framework and application in your financial lives.

Insurance is only meant to cover the risk any unforeseen happening that can temporarily or permanently incapacitate a person from earning the expected income over his/her working life.

Insurance is an expense and not an investment, but due to the nature of humans that asks for returns on every penny that they spend, manufacturers make such products that portray to satisfy the persons need of getting returns. But these products don't come cheap, they have a high amount of admin expenses. Most of them have no guarantee of future returns too. Though the agent trying to sell you that product says that there is a guarantee, as there is on written evidence of the same it is not true.
The maximum capacity of that non guaranteed return is not even sufficient to beat baseline inflation. but only as it satisfies people's mindset of generating some return, even if its meaningless, it is largely sold to almost every urban household.

Being a planner I advice you not to buy any form of insurance except term insurance as it is the cheapest product in the market and does a fantastic job of reducing the financial risk on your family in case of an unfortunate event to the family's earner.
Term insurance can help you save money while not compromising on covering the risk on your family and also save enough money on your premiums so that they can be invested separately in a way that ensures the achievement of your goals and dreams

The following example should explain the difference very clearly
Mr. Narayan is 35 years
His annual expense is Rs. 10,00,000/-
His insurance requirement is Rs. 1,00,00,000/-
Term of life insured should be till retirement, which in this case is at age 60 years. so its 25 years of term

An Endowment will cost him Rs. 2,00,000/- and give him a return of Rs. 1,27,00,000/- assuming a rate of 7% return which is not guaranteed

On the other hand a term insurance cover of the same amount will cost him Rs. 20,000/- on an online term insurance from any leading insurer.
This saves him Rs. 1,80,000/- per year for 25 years. As the horizon is so long an Aggressive portfolio with an equity to Debt exposure of 80:20 should be created. Assuming the Equity and Debt to generate an after tax returns of 14% and 7% respectively. The return on this portfolio will be 12.6% p.a.
This portfolio will generate a value of Rs. 2,64,00,000/-

So now you need to decide whether you want to stay with the old, outdated and mundane endowment policies where your agent earns more than you and you get only Rs. 1,27,00,000/- or do you want to accept the new modern and planned ways of managing risks and generating wealth for you and your family by earning Rs. 2,64,00,000/- as in this example

The power is yours.

Happy Planning
Think before you Act
It's All in the Mind