Dreamzunlimited...

 Should I add up Riders in pure term plan (or) take up stand-alone policies from Health Insurers?  Keeping the term plan simple to its only objective of providing guaranteed amount to the nominee in case of any unfortunate death (by any means & across the globe) is the simplest & cost-effective way to protect our life.    There are lot of riders available in a term plan like Accidental death benefit, Disability benefit, Critical Illness benefit, etc. Though the premiums are almost the same in comparison to stand-alone personal accident plans & critical illness plans offered by health insurance companies, the benefits-wise, health insurance companies score better. The stand-alone policies from health insurers offers more comprehensive coverage & more flexibility.

Should I Invest in New Fund Offer (NFOs)? Simple Answer  -  “99% AVOID” Detailed Answer : Anything NEW catches the buyer’s attention & hence NFOs are not an exception. But it is a avoid in almost 99% of the cases. Reasons being:     ·        Myth of 10/- cheap NAV – NFOs are not cheaper as they are launched at 10/- NAV. Neither are 100/- NAV funds costlier. They are both investing in stocks & based on the returns they get, the NAV increases. A 10% increase of 10 NAV will make it 11 & the same in 100 NAV will make it 110. Click this link to understand this better .   ·        Nothing New to Offer : Most of the cases, the fund will just be a duplicate of the funds already available in the market. We would have been invested already in them, but NEW always catches our attention in the fear that we are not missing out something great.   ·        No...

Should I Invest in Sectoral / Thematic Funds?  Simple Answer  -  “AVOID” Detailed Answer : Sectoral funds invest only in stocks belonging to a particular sector, say Housing, Infrastructure, Defense, Pharma, etc. or themes like rural consumption. While they may give huge returns, they also tend to be riskier due to the below reasons : ·        Impossible to time the entry / exit - Returns from a sector would be cyclical in nature. No one can time the entry at the correct inflection point from Worst to Good & time the exit again at the correct inflection point from Best to Bad. The sector may remain dull due to many factors for many years too . ·        We tend to buy at higher prices : Typically, a sector fund will gain our attention only after the sector had already given huge return in the last 1 year or so. Since many investors will now chase the sector, the fund houses too will launch NFOs (N...

Till what age should I opt for term plan - Till Active earning period (or) till the max. term allowed?   Simple Answer  -  “Till the active earning period” Detailed Answer : Many of us prefer taking up a term plan till the maximum permissible age (currently 85 years). Reason being, there is more probability to die after 60+ years & hence the amount will surely be given to the nominee & the premium paid is not going as a waste! But it is preferable to take it either: 1) Up to the active earning period (Planned Retirement Age) as by then you should (must) have accumulated enough corpus for retiring comfortably & hence the corpus itself will serve as insurance for the family (or) 2) Till the liabilities are present – be it physical liabilities in the form of loans or emotional liabilities in the form of children getting settled. Reasons to suggest this way are as below: 1) Premiums increase in term plans as the policy term increases : # Pre...

 Should I opt for Return of Premiums in a pure term plan?   Simple Answer - “NO” Detailed Answer : A pure term plan doesn’t provide any return if one survives the end of the policy term. So many of us think it is a waste of money & hence prefer at least the total premiums paid to be refunded back (ROP – return of premiums option). We will look at the reasons with an example of 40-year-old purchasing a 1 crore term policy for 25 years term & pays the premium for just 10 years only. 1) Premiums are too costly, if we opt for ROP #   Premium for pure term plan: 43,100/- for 10 yrs. # Premium with ROP option: 62,400/- for 10 yrs. # Premium Difference: 19,300/- more p.a. for 10 yrs. 2) You don’t get the GST paid back which is included in the premium payable. 3) Value of money received at the end of the term is too low . # Return of premiums after 25 years: 6.10 lakhs # Value of 6.10 lakhs @ 6% after 25 years: 1.40 lakhs. But we would argue that at least...