Can an insurance policy be terminated early?

[pr0ing]

after reading it, i still have this to say. Life insurance you say is for dependents in case of death. ok. lets say i die in last year of my life cover, and my dependents get the 4.5lacs +bonus amount. problem is that, since they are dependents and may not be working, would that 5-6 lacs be enough for them to live their lives for next 2-3 years?

I am not advising you to keep these policies. You mentioned closing these and investing in MFs/shares. My suggestion was to get at least some amount of Life Insurance (term cover is the cheapest) and plan your investments with the rest of savings.

From the example in my earlier post, you will easily get 50 lacs of cover for less than 8k yearly premium. The premium decrease as you decrease the sum insured.

Later on in your life when you have substantial savings you can even think of skipping insurance altogether. I am guessing you are around my age, this is not the right time to skip life insurance.

 

[edge111hussain]

6pack, look, if you have dependents and are worried abt them, the best you can leave em is a truck load of cash. Now if you have 50 lacs lying around, no issues, but if not, you need the life cover. As proing mentioned, if 8k annually gives you a 50 lac cover today and if it takes care of ur needs, take it. That leaves you with the peace of mind, tht if something happens to you, your families immediate future is taken care of in terms of monetary value. As your life increases, you get promoted and salary goes up, you can always up the life cover. The premium paid is not a waste either since you can claim tax benefits.

My prob with this discussion right now is that, u dont seem to kinda follow both me and proing here. What the both of us, directly or indirectly are trying to tell you is that, you cant take ur money and put it into 1 avenue. Fine, mutual funds today prolly are getting you a 25% annualized return, but what if things slow down? equity could crash and so can your hard earned money. Ten yrs later with a mkt crash, you could literally be back to what u started (considering future monetary value). In that situation you would think that even a 5% guaranteed return is good enough for you.

Bro get your priorities straight here,

First think of whats the most essential for you today (eg, short term planning or long term or securing future for dependents etc etc...)

Secondly think of whats the amount of money you can shell out. (if ur talking about long term planning, and you want to do it all today, You need a good 25-30 lacs or more today in hand). This will narrow down your options to product types.

Your risk appetite and investment duration comes next. This will help you know the product class, type and risk/time horizon.

There is no easy ans to this. But dont go blindly after equity. DO UNDERSTAND AND REMEMBER, EQUITY IS BY FAR THE MOST RISKY ASSET CLASS FOR AN INDIVIDUAL INVESTOR. When markets are good, everyone thinks he is an expert. That surely is not the case..

PS- Since we are talking money here, let me tell you a bit about me. Before i started my own business, i was an AVP in a private banking company. I know my shit and hence im telling you 6pack, dont just jump from 1 product to another.

Patience is the key here. Understand every product class and type. Then take a well informed call.

 

[logistopath]

Can't add much more than the post above. Do not confuse insurance with investment. You are trying to justify ignoring insurance because you think you can invest better. Not right. To build a corpus of the magnitude you have in mind (say 50 lakhs or 1 crore) you will need to invest your savings for at least 20 years (my math may not be right, but you get the general idea). What happens if something unfortunate happens to you in the next 3 or 4 years.. A term insurance for 50 lakhs or 1 crore costs less than 10k per annum. Take a term cover. Period.

The second thing that you will need for sure is a health insurance. A family floater plan for two adults and a kid with a cover of upto 3 lakhs should cost around 3 to 4k per annum.

The third requirement would be an emergency fund. You will need some amount of cash ready in hand, for some dire needs. Put it in a separate savings account or in any other means.. but it should be accessible pronto. No point in putting this contingency fund in FDs or MFs or gold etc.

Lastly, the rest of the savings, you can invest. However, you need to have a balance of risky and safe investments in your portfolio. Putting up everything you earn in equity will be a bad decision. At present, when you are still young, you can put up to 80% of your earnings in equity; the rest in FD or PPF or something similar. As you become older, and as more responsibilities and commitments become part of your life, you can decrease the amount of high risk investments gradually.

This is the general plan that I suggest people who come to me for advice or suggestions (I call it ISI - Insure, Save and Invest) . Of course, you can tweak it to your needs, but in general, you will need all four of the above. There is no real justification skipping one for the other. Hope it helps.

 

[6pack]

My prob with this discussion right now is that, u dont seem to kinda follow both me and proing here. What the both of us, directly or indirectly are trying to tell you is that, you cant take ur money and put it into 1 avenue. Fine, mutual funds today prolly are getting you a 25% annualized return, but what if things slow down? equity could crash and so can your hard earned money. Ten yrs later with a mkt crash, you could literally be back to what u started (considering future monetary value). In that situation you would think that even a 5% guaranteed return is good enough for you.

Like i said i will put it into shares, mf's and looking at other options of investment too. its not going to be in mf's alone.

In 10 yrs, bank fd's will be at 1% rate or so. not 5%. rate of interest on bank fd's has fallen consistently over the years. that leaves us with govt bonds. thing here is in case of economic instability, govt will not give the promised returns. getting back invested money first would be a problem. ex: the UTI MF fiasco. it was in govt hands when things took turn for the worse. i lost half my invested money in that.

Bro get your priorities straight here,

First think of whats the most essential for you today (eg, short term planning or long term or securing future for dependents etc etc...)

Secondly think of whats the amount of money you can shell out. (if ur talking about long term planning, and you want to do it all today, You need a good 25-30 lacs or more today in hand). This will narrow down your options to product types.

Your risk appetite and investment duration comes next. This will help you know the product class, type and risk/time horizon.

short term planning. i'm not thinking of long term planning. 25lacs - i dont earn that much money nor do i have that kind of money to invest in long term planning.

i have just 2 lacs in mf's that are locked in elss schemes from 2.5yrs back. the additional income from these policies would help me invest properly.

my risk profile would be moderate i guess. investment duration like i said is short term of around 1-5 yrs, not longer than that.

if you people still think i've not understood anything then think of me as a noob.

--- Updated Post - Automerged ---

Can't add much more than the post above. Do not confuse insurance with investment. You are trying to justify ignoring insurance because you think you can invest better. Not right. To build a corpus of the magnitude you have in mind (say 50 lakhs or 1 crore) you will need to invest your savings for at least 20 years (my math may not be right, but you get the general idea). What happens if something unfortunate happens to you in the next 3 or 4 years.. A term insurance for 50 lakhs or 1 crore costs less than 10k per annum. Take a term cover. Period.

ok will take a term cover. if i feel like it. the fact is everyone else in my family is much much wealthier than me, so...no need for that.

The second thing that you will need for sure is a health insurance. A family floater plan for two adults and a kid with a cover of upto 3 lakhs should cost around 3 to 4k per annum.

The third requirement would be an emergency fund. You will need some amount of cash ready in hand, for some dire needs. Put it in a separate savings account or in any other means.. but it should be accessible pronto. No point in putting this contingency fund in FDs or MFs or gold etc.

already have 4lacs health insurance cover. its got 1lac as bonus cover till now cause havent taken any claims on it in years.

already have emergency fund. lying unused since long time (years actually). bank just gives 2.5%? interest on that amount every 3 months i guess. havent touched it, but feeling i should put those in the 90 day fd's.

Lastly, the rest of the savings, you can invest. However, you need to have a balance of risky and safe investments in your portfolio. Putting up everything you earn in equity will be a bad decision. At present, when you are still young, you can put up to 80% of your earnings in equity; the rest in FD or PPF or something similar. As you become older, and as more responsibilities and commitments become part of your life, you can decrease the amount of high risk investments gradually.

This is the general plan that I suggest people who come to me for advice or suggestions (I call it ISI - Insure, Save and Invest) . Of course, you can tweak it to your needs, but in general, you will need all four of the above. There is no real justification skipping one for the other. Hope it helps.

nice advice.

 

[edge111hussain]

If you dont like fd's, consider liquid funds of 15 days or 1 month rotations(lesser taxation).

If you dont like fd's rate of return, you can always put your money into company fd's or ncd's. The alst ones from mahindra and tcs offered me a rate of 10-10.5-11% respectively annually.

If you are hell bent on equities, pick up some balance funds which will soften d mkt falls. To consolidate the returns, buy blue chips which have fallen the most with every mkt fall (advising since you said your risk profile is moderate).

Since capital is limited, only invest into blue chips when the markets are bleeding. Also sensible would be to take up a SIP or STP. OR . you can get into very short term trading into mid-caps to get short markets gains. (you need to have a good grasp of market and time for this strategy).

With an investment horizon of only 1-5 yrs, insurance cum investment plans should have never been your product class. These products are supposed to be atleast 20yrs and above.

LAStly, there is no point in calling yourself a noob. If you want things sugar coated, i sure wouldn't mind giving you another sales pitch, but then see where that has led you to.

Anyways, wish you d very best with your investments,,, Cheers.