Query on Life Insurance and Equity linked savings scheme

POSTED BY prudhvirazz ON January 25, 2015 3:48 pm COMMENTS (7)

Hello all,

I am 26. Single. Salaried.

I would like to get your advice on Life Insurance and  Equity linked savings scheme. Please let me know if I am missing something or if I am wrong at any point.

After (re)searching a lot  I have come to below conclusions

1. One should never mix life insurance and investment. Be it ULIPs, endowment plans or whatever the cover provided is very less when compared to term insurance for the same premium. what is the use if cover provided is not adequate, right?

2. I have also come across some theories saying one should go with increasing cover to adjust the cover for inflation. I don’t agree. As your age increases, your need for insurance decreases as you would have acquired assets (financial or physical). So you are less dependent on insurance to cover your family expenses.

3. One should not blindly go for a plan cheaper premium. One should “ideally” look at the claim settlement ration not the price. Hardly the premiums differ by 2000 to 3000 per year. So I am planning to go for LIC plans.

4.  One should go for online plans as they are cheaper than the regular plans as it bypasses the commissions paid to the agents etc.


1. How much should the cover be? How do i decide? some say it should roughly be around 20 times my current salary.  Please suggest.

2. Should I for accident disability rider or critical illness disability rider? I am of the opinion that this should be a part of my health insurance plan not life insurance. I have no idea about Health insurance. So Suggestions are most welcome.

Now after my PF and Term insurnace there is about 1 lakh to be invested for tax saving purpose. I have the appetite for ELSS. I thought about MF retirement funds but I think it’s too early to plan for retirement sincei t’s long term investment. I am looking for short term investments. So I think ELSS is best for me.

Is there any guide about choosing ELSS? I don’t know much about ELSS. I have lot of questions. Any suggestions are wleocme.

Sorry for the long post and thanks in advance for your suggestions.


7 replies on this article “Query on Life Insurance and Equity linked savings scheme”

  1. prudhvirazz says:


    1. You need to know few things before you invest in ELSS

      1. They have lock in period of 3 yrs from the date of investment . So if you are investing on date X , then you cant withdraw it before X + 36 months . Each SIP investment will have its own lock in period

      2. The investment will happen in diversified equity fund . You money will be in shares of various companies choosen by mutual fund, so be ready to see the volatile movement, but that only brings the chances of higher return . If you are weak hearted person when it comes to money – ELSS is not for you. Make sure you have are clear that at the end of 3 yrs, there is a POSSIBILITY that you have less money in your funds compared to what you invested.

      3. Less people invest in ELSS compared to FD/PPF etc, but then less people are RICH in this world too .. see which side you want to be in


  2. prudhvirazz says:

    I do understand about MFs or Equities very well.

    What I want to know is anything that I need to know about ELSS before I invest.

  3. S T says:


    ELSS mutual funds are no different from other equity based mutual fund, except for lock-in period and slight change in asset allocation (I have read some guidelines on how much mandatory equity should be part of it, but not able to identify the source). I suggest you go through old blogs from JI to understand more about MF or you can also visit Freefincal.com, where Pattu sir has detailed out the step by step guide to select the mutual fund.

    If you still have questions after reading that, do post it here / freefincal to get an response.

  4. prudhvirazz says:

    Thanks manish. realy appreciate your suggestions.

    so there are stand alone policies for accidental disabiliteis / critical illness disabilities? Yes I think I should take it.

    If I want to learn more about ELSS, which would be a good starting place?

  5. Your observations are correct . Let me now answer your questions

    1. 20 times your annual salary is a good approximation . Add your liabilities if any to that number, then see if its near 50 lacs, 1 crore or 2 crore. Choose that number

    2. It can be part of any (insurance or health) , but first see if you personally need it or feel the requirement or not . For accidental, you can also take the stand-alone policy for that.

    3. Reliance Tax Saver is a good option . You can go for it .


  6. prudhvirazz says:

    anyone out there?

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