Mar 10, 2005 09:59 AM
7886 Views
(Updated Mar 10, 2005 10:00 AM)
If there is a product range that needs lot of marketing change and consumer perception change after this budget, it is insurance. All these years the insurance companies were selling their products by pointing out the tax benefit feature.
In India most of us go for insurance policies to save tax. You would have seen them setting up road shows, sales campaigns etc towards the financial year end, with banners and pamphlets all having the Save TAX written in bold.
What is the change in this budget?
PC has removed section 88 benefits and instead came up with 1 Lakh maximum investment clause. Please refer the budget analysis elsewhere for details.
How does it affect?
Now onwards you need not invest in Insurance policies for getting tax benefit. But you can choose to invest in various other investment products like Mutual funds, bonds, PPF and some other gov. saving schemes etc to get the same benefit.
Advantage Customer!
A financially educated person can now choose his portfolio of investments without much constraints. He/She has to find out their risk profile first. How much you want to invest in highly volatile market, How much in safer but less yield bonds. Suppose you are one of those who can take some risks at this age then you can go for equity based Mutual funds and put less in bonds and less yield instruments. If you belong to a moderate risk taker category, you should go for balanced MFs more and the rest of the Investments could be in bonds etc.
Where does insurance stand?.
Insurance is just for insurance is what I believe. It is not for investments. May be the Long term Pension Plans could be a good investment. ICICI prudential's Market linked Pension plan is doing very well in urban market. But rural and semi urban markets still consider Insurance= LIC. I remember some had asked me'So you have taken your LIC from ICICI prudential is it?
One should decide how much insurance he or she needs. They should have their own mix of products that includes a Term plan(pure risk), a pension plan and one good endowment plan. More than that is unnecessary. It is wise to invest higher amount in a pension plans if you are below 30 since this is a long term plan and the multiplier effect will increase your investments many folds.
Future of Insurance products.
It is a good opportunity for the think tanks in insurance companies to reposition their products and market it on the basis of the benefits their products offer. No one is going to go for insurance plans for saving tax. But they are going to choose insurance plans for their insurance needs. I am not denying that there will be some uneducated customers who could be convinced to invest upto 1 lakh in some insurance plans. I hope our insurance agents will not try such kind of short term tactics.
