Buy fiscal planning, not financial plans

Buy fiscal planning, not financial plans
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First Published: Mon, Jul 30 2007. 12 03 AM IST
Updated: Mon, Jul 30 2007. 12 03 AM IST
The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
I do not want to buy products only for tax benefits, as my PF and other investments take care of that. How should one go about purchasing insurance plans, without taking into consideration tax benefits?
A financial plan purchase should always be based on a well drawn out financial planning exercise, and tax planning should be treated as a subset of the financial planning. Buy financial planning and not financial plans.
Insurance, being a long-term financial solution, requires an even more in-depth and detailed financial planning exercise and hence it also becomes your very first step towards the purchase of the right insurance plan. The financial planning exercise would help you in clearly articulating your financial needs and also the way to fulfill your financial objectives.
So whether you need a retirement savings product or a product for your child’s future planning or for protecting any of your assets, you can decide on that based on your requirements and circumstances.
Additionally, your risk profile would determine the type of investment options that you should opt for. Identifying your risk profile is also a part of the financial planning exercise.
While purchasing a child plan, which one is better, making the child as the life assured or the parent as the life assured?
A child’s future is dependent on the parent’s income till the time the child becomes independent, and therefore any unfortunate incident on the parent’s life will have significant adverse impact on the child’s future. It therefore appears more logical that for a child plan, the insurance be taken on the parent’s life which will ensure that in case something were to happen to the parent, the child’s future is not jeopardized.
Readers are welcome to write in with their queries to askmint@livemint.com. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is Rajesh Relan, managing director, MetLife.
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First Published: Mon, Jul 30 2007. 12 03 AM IST