Insurance Blog

Insurance for people in their early 40’s

            In this fast paced world, everything is being done either earlier or late. In 20th century, jobs were provided only by government sector by which all educated people struggled till late 30’s to get a government posting. This has changed and led by a mushroom growth of private sector jobs, and opening of markets to foreign investments. Graduates were settling in early 20’s itself. People who have invested in different financial products and failed to realize benefits from them, finally give a try with insurance products. It may take a little more time to realize the importance of insurance. But, if you reach 40’s and then realize that insurance is important, choices will be limited, but not exhausted.

Pension plans will provide optimum results for people who want to start investing in their 40’s. This pension funds will provide pension as monthly salary after the vesting date of the policy. Pension plans are necessary as they will keep life style intact even after retirement.

We will understand this by an example.
Mr. Gaurav Arora
Age: 42
Annual Income: Rs. 10 Lacs
Marital status: Married
Children: 2
Retirement age: 58 yrs

Based on his requirement he can invest only for 16 years and need monthly pension for his future needs.

Given below is the recommended plan for pension.

Plan: New endowment plan

Policy term: 16 years
Sum Assured: Rs.18 Lacs
Monthly premium: Rs. 10,035

This policy will provide a lump sum of Rs. 36 lacs after 16 years of policy completion. This amount can also be used to generate a monthly pension.

Monthly pension: Rs 21,240
Pension: Till death of policy holder

After the death of policy holder the whole lump sum amount of Rs. 36 lacs will be given to their nominee.

The above policy will have tax exemptions for the premiums being paid and also the lump sum being received. Pension received was not tax exempted and it will be added to the income of the policy holder.

Jeevan Nidhi was promoted as flagship pension plan by LIC. But, it has many cons compared to New endowment plan. The amount can’t be taken as lump sum, only pension option can be opted. Tax exemption is unavailable for pension which we receive, which will result in huge tax cuttings. The premiums paid and returns will be less compared to New endowment plan. Taking all the advantages into consideration, endowment plan is a breather for late enrollers of insurance, which can still provide great returns without huge investment and risk being involved.

Taking insurance in 40’s is not late, if sufficient funds are being allocated and right product was selected.