Life Insurance: Deepak Sood

I am 45, and plan to retire by 55. I already have two pension plans. Do I still need to take the New Pension Scheme (NPS)? What is the difference between the two products?
As a thumb rule, one should provide for post-retirement income at around two-third of pre-retirement income (net of tax and accounting for inflation) to lead a comfortable retired life. It is good to know you already have two pension policies. However, it is not clear whether they will, along with your other resources, be able to generate sufficient income for your retired life. Retirement provision may be made through NPS or through various pension plans offered by life insurers. NPS is likely to have a low charge structure, compared to life insurers’ pension plans. However, pension plans offered by life insurance companies are more flexible, compared to NPS. For example, NPS has a fixed retirement age of 60, whereas life insurers’ pension plans have wider choice between 40 and 80.

NPS also offers more points of presence (PoPs), fund managers, central record keeping agency (CRA) and so on, whereas a life insurer is the only touch-point in case of insurers’ pension plan. There are other differences of guarantees and fund choices as well. So, you need to evaluate these points and then decide on whether you need additional provisioning for pension. If yes, see whether you should invest through NPS or with one of the life insurers.

I am 28, and earn Rs 35,000 a month. I am yet to buy a life cover. I would like to know whether I should buy a unit-linked insurance plan (Ulip) because a friend said it covers life and help with investments, too. Which type of Ulips would you recommend?
Given your age and income, we would suggest a combination of term policy and a unit-linked plan. While a term plan provides maximum life cover at a lower premium (so that you can have a cover of say, 10 to 15 times your current annual income). Ulip will provide life cover along with the scope for wealth creation. Ulips provide a wide choice of funds and transparency of charges. Do not invest in a Ulip if your objective is short-term returns, as Ulips are best suited for long-term wealth creation. Choose the Ulip that suits you based on your requirements of funds (time frame) in relation to product construct, fund objective, the fund and fund manager’s trackrecord in its peer group and its charge structure.

In Ulips, the investment risk is borne by the policyholder. Hence, it is suggested you should keep your risk profile in mind (essentially, if you are a risk-averse, moderate risk taker or risk taker) and age (the older you get, the safer your investments should be), while selecting the Ulip that is best suited for your unique needs. Contact your insurance advisor for a need-analysis and then decide.

The writer is the MD & CEO of Future Generali Life Insurance. Views expressed are his own.
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