Life Insurance Vs Other Financial Instruments

What are the parameters to compare Financial instruments

• Protection of Financial goals

• Disciplined savings, reinvestment risk

• returns post tax, liquidity

• all of the above

Protection of Financial Goals:

• Other Financial Instruments does not provide risk cover.

• On the other hand LI protects your financial goal from day 1.

• Both a and b

• none of the above

Disciplined Savings:

• A Tax Saving Bond (TSB), Fixed Deposit is a one-time lump sum investment which can be done whenever funds are available

• LI on the other hand calls for compulsory savings once started. If not adhered to strictly, then one loses on the benefits

• This helps in following a disciplined savings pattern, viz. Income – Savings = Expenses.

• all of the above

Re-Investment Risk:

• A Tax Saving Bond (TSB) or a Fixed Deposit TSB has the tenure of 5-10 years. So while saving for a long term goal of more than 10 years, one has to look at reinvesting the maturity proceeds into new one.

• The interest rate is witnessing a downward trend. This will account for lesser returns in the long run.

• On the other hand, customer can make a choice to take Life Insurance plan for a period of 40 yrs without any re-investment risk

• all of the above

Returns Post Tax:

• Tax Saving Bond, Fixed Deposit for more than 5 years is eligible for deduction U/S 80C, 80CCF but interest earned is taxable

• Profit earned in Equity and Mutual Funds are taxable if withdrawn before a year.

• On the other hand, Life Insurance policy holders can avail Tax benefit under Section 80C for the premiums paid. And all Claims, maturity proceeds/ death claims are exempted from tax under Sec 10(10D).

• none of the above

Liquidity:

• The liquidity aspect in Bond, FD, Mutual Fund or Equity poses a threat to the long term financial goal for which it was started.

• Fore- closing a Life Insurance policy will always result in heavy losses because of withdrawal of all the benefits

• So the individual is compelled to think of long term & this enables him to achieve his long term financial Goal.

• None of the above

Financial Protection is provided by all instruments except Insurance policies

• True

• False.

• False. Only life insurance provides financial protection

• none of the above

Life insurance vs other financial instruments is available in Mlearn under which category

• Process

• concept

• product

• skill