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Ask Mint Money | Having too many insurance plans can hurt earnings rate

Ask Mint Money | Having too many insurance plans can hurt earnings rate
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First Published: Thu, Oct 27 2011. 08 35 PM IST

I am 45 years old and my net monthly salary is Rs 30,000. I have a daughter aged 15 years. I have taken a flat. I have systematic investment plans (SIPs) of Rs 2,000 each in ICICI Infra Growth, DSP BlackRock Top 100, HDFC Top 200, Reliance Growth and Sundaram Select Growth since 2008 and plan to switch from ICICI Infra to ICICI Discovery Growth. I have invested lump sum of Rs 50,000 in Reliance Regular Saving Growth Fund and Rs 80,000 in Tata PE Growth Fund. I have been paying an annual premium of Rs 50,000 for a unit-linked insurance plan (Ulip) since 2009 for a cover of Rs 20 lakh. I pay an annual premium of Rs 15,000 for Tata AIG Life Mahalife, which is in my daughter’s name since 2005 for a cover of Rs 2 lakh. I pay Rs 17,000 in annual premiums for traditional plans. I pay Rs 12,000 premium for a family floater policy of Rs 6 lakh and accidental cover of Rs 10 lakh. I contribute Rs 70,000 each year in Public Provident Fund (PPF) since the last five years. I have Rs 7 lakh in PPF and Rs 1.5 lakh in Employees’ Provident Fund. I have Rs 2 lakh in a savings account and Rs 1 lakh in a fixed deposit. My goal is to build a corpus of Rs 25 lakh for my daughter after 10 years and my retirement.
—Sanju Saralkar
Your goal of having Rs 25 lakh corpus for meeting your financial needs is possible. However, there is a concern. You could have done better than the corpus you are aiming at. If you look at asset-wise allocation, your savings are currently 44% in equity mutual funds, 26% in debt and 30% in insurance (excluding general insurance). This insurance is hurting your earnings rate and growth. But you are not adequately insured. You have a sum assured of Rs 22 lakh.
You need to evaluate both your Ulips and check their performance and costs. You can consider surrendering the same. In case you plan to do it, then before executing it, you should first go for a term insurance with a Rs 30 lakh cover; the balance amount after surrender can be reinvested in SIPs or systematic transfer plans.
You already have two good large-cap funds—DSP BlackRock Top 100 and HDFC Top 200 fund. However, you need to change the remaining three funds. Add a diversified fund; HDFC Equity, Fidelity Equity are good picks. Also, consider a hybrid fund—HDFC Prudence and HDFC Balanced are consistent performers. You can also add gold to your portfolio through an exchange-traded fund or gold fund. Lastly, add a dynamic/short-term debt fund; Templeton Short Term Income Fund and Birla Sun Life Dynamic Bond funds are good options. Your existing saving in funds needs to be monitored. It is prudent to consider moving the savings to existing SIPs as you will have less funds to track. Continue saving in PPF. Your medical cover is also in order.
Surya Bhatia is a certified financial planner and principal consultant, Asset Managers
Queries and views at
mintmoney@livemint.com
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First Published: Thu, Oct 27 2011. 08 35 PM IST