It is natural for a person to try to avoid any difficult task. This is the tendency when it comes to deciding how much insurance cover should be. Deciding how much insurance should be taken is not too complicated, but people tend to delay it. One of the main reasons for avoiding buying an insurance policy is – “I got insurance from the office. Why do I need another insurance? ” This is to say that there is usually an insurance term plan from the company, which is taken by the company keeping in view the general needs of all.
Virtually every person has different insurance needs. There are also several types of life insurance policies that we talked about in the last article. Thus, when a person takes out a policy himself, he can choose different types of policies according to his need. Only term plans are available from the company, the risk cover of which can be much less than the needs of each person.
Also, the group policy taken by the company is applicable as long as you are employed in that company. The policy does not work after leaving the job. At the time of leaving the job, you get a new policy according to your age, which has a higher premium. If you have already taken the policy from your own funds, you will not have to pay any higher premium. It often happens that life insurance or health insurance claims come only when the job is gone and there is not a single policy at the same time. Thus, the hard work of years goes by in a jiffy.
Another important issue is post-retirement. Even if you have worked in one place till retirement, your policy will be gone as soon as you retire and you will not be able to take a new policy at that age. All types of policies are very expensive at that age. Some companies take out policies under the owner-employee scheme. This scheme is different from group policy. In this case the policy is taken in the name of the employee, even if the proposer is the owner. This policy also applies to employees as long as they work for the company. If the employee dies, the nominee gets the amount. If the employee leaves the company, they can continue the policy with the same premium and risk cover and with the same policy terms.
The employee can assign the policy in his own name and appoint any of his family or legal heirs as a nominee. At this stage the policy becomes an individual policy and the company has no liability. The advantage of this type of policy is that the policy remains the same even after leaving the job and the employee gets the benefit when the policy matures.
Some companies are taking super annuity plans, while some are taking group gratuity and group annuity plans. Here, the employee gets a fixed amount of annuity for life. As per the guidelines of the insurance company, every employee is required to submit a Life / Existence Certificate to the insurance company for obtaining annuity. In case of death of the employee, his nominee gets the benefits as decided in the plan. The group gratuity is taken for the purpose of getting the amount easily when the companies go out to give gratuity to the employee.
Whether the policy is taken by the company itself or not, you need to keep in mind the type of policy, the coverage received in it, the amount due to the nominee, etc. If the nomination has not been made then it should also be done and the nominee should have all the relevant information. Details of who can contact the nominee in case of emergency should also be given to the nominee.
What is the benefit of a lifelong endowment plan? Is it reliable?
Answer: Pension income is taxable in a pension plan, but income in an endowment plan is generally tax-free. You can surrender the policy in the middle of the annual income endowment plan. In that case, you can get a lump sum by cutting off your regular annual income. The lump sum is also tax free. Normally there is a loss in surrendering the policy, but in this type of policy you benefit as the premium is paid in full. However, before taking this policy, check the revenue flow, taxes and options.