PVS (Prashant V Shah)

– Authorized Education Provider of FPSB Ltd. (CFP Coaching and Study Material)

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    Prashant V Shah
    Ahmedabad.

    Ph: 92274 08080

    Email: pvs.cfp@gmail.com

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    Tax Planning and Estate Planning

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Archive for the ‘My Articles’ Category

Here you can find some of my articles. They have been published in saveral journals. I am putting all those here for value addition.

Insurance is a must!

Posted by Prashant Shah on May 10, 2011

I am presently 30 years old, my current income is 3 lakh , I have insurance of Rs.5 lakh. Is my insurance adequate?

India is a country where 90% people see insurance as an investment and only 10% people see insurance as a tool for protection.

I say if you have a family or dependents in life you need a life cover.  Most of our financial decisions come from Fear, Now; I don’t want you to buy insurance cover inside of any fear but as your responsibility towards your loved ones.

Looking at your current insurance cover you need to get that having Life cover is one thing and having adequate life cover is different. People say financial sector is complex when it comes to buying insurance, no it is actually not if you are opting for a term plan, each insurance company has a simple term plan in their kitty.

Insurance need can be found out by many ways such as Human Life Value, Need Based Insurance method, Percentage Method. Assumptions to identify your insurance need:

Method adopted Human Life Value
AGE 30 yrs
Years to retirement 30 yrs
Current income 3 00,000
Monthly Expense 18000 pm
Your Income is growing @ 8%
Returns expected if insurance money is invested 9.5%
Any liability (Home Loan ,Car Loan) In your case No
Other goals like children marriage or education In your case No
Insurance required 40,00,000
Available Insurance 500,000
Additional Insurance required 35,00,000

Now looking at your insurance requirement we are assuming that you have no other liabilities, no children.

At the age of 30 buying term assurance for 30 years is a good bet. Hence there is no need to worry till the time you reach 60 and that’s your retirement age.

Several times people do have question in their mind that what if I die after my term assurance gets over. This is indeed a good question. Term assurance should be taken in such a way so that your entire earning life is covered. And once you are retired priority is not insurance but its income stream.

Normal endowment plans can be taken up if your psyche is not supporting the concept of term assurance but in that case be ready to pay better premiums because endowment plans are the combination of a term assurance and pure endowment assurance. (If possible avoid them)

For the contemporary issues of having adequate insurance cannot be met with normal endowments so our suggestion is go ahead with a term assurance.

Let’s have a peek at Term Plans?

As an investor these are plain vanilla insurance policies (you don’t get anything back, zero return policies). If you don’t want to make a huge one-time payment, go for this option You can pay the premium every year till the end of the insurance term.

Let’s take the same example as above but for a 30-year policy.

Insurance Company Product Approximate annual premium
Aegon Religare Level Term Plan Rs 9,690
ICICIPrulife Pure Protect Rs 8,879
Aviva Life Insurance Life Shield Rs. 10,037

 

In a Nutshell:

  • Never see insurance as an investment vehicle.
  • Always go for a pure term plan, as your responsibility towards family.
  • While buying insurance cover be honest with the insurance company, never hide facts.
  • Incorporate inflation, Liabilities and other key goals while calculating your insurance need.
  • Read the Terms and conditions before signing any document of any insurance company.
  • If any riders are attached, have understanding about it.
  • Once the insurance in bought, create a master file and keep it at a place where your family can find it easily.
  • Buy the term plan online , which saves money.

Posted in My Articles, Xtra | Tagged: , , | 1 Comment »

Auto Insurance- Don’t Worry, Drive Happy!!!!!

Posted by Prashant Shah on May 10, 2011

My vehicle is old and I don’t want to buy insurance any more for the same.

In India car is perceived to be a status symbol which means if you own a car then you receive a lot of respect and acceptance in the society. It is one of the measures of success in Indian Society. These days some of the Car Dealers are providing free car insurance with the purchase of car. But as the machine (car) gets older most of the time, car insurance might be far from the top of your Mind. But there are certain pivotal moments that elevate it to critical importance.  

Now, we Buy the Car, Look at the monthly EMI’s that we are liable to pay each month to own the vehicle but a small mistake or negligence of not having vehicle insurance of your old vehicle may grind down your LIFE. Let us see how?

The Question you have asked is about motor insurance hence the applicable Act is Motor Vehicle Act, 1988. This Act says that

  • The insurance of motor vehicles against damage is not compulsory
  • Insurance of third party liability is compulsory if the vehicle is used at public places

Here we define public place as any place which is just out of your home. As per Act it is a legal requirement to have third party insurance to drive the vehicle.

This Act further says that the insurance is compulsory for

  1. Death or bodily injury of any person including owner 
  2. Damage to any property of a third party
  3. Death of bodily injury of any passenger of a public service vehicle
  4. Liability arising under Workmen’s Compensation Act,1923 in respect of death or bodily injury of Paid driver, Conductor, Workers carried in a goods vehicle

In your case as the vehicle is old hence the Insured’s Declared Value (IDV) will be very less cause year on year depreciation is deducted. So you can retain the risk pertaining to your vehicle. But you must buy the third party liability insurance. Just consult your general insurance advisor he will guide you for that. And stay away from lots of probable legal issues.

You can visit www.myinsureclub.com to buy and compare Vehicle Insurance Online; it will help you to compare the car insurance amongst various insurance companies.

I believe that you realize the importance of car insurance no matter how old it is, get it insured.

Posted in My Articles, Xtra | Tagged: , | Leave a Comment »