Annuity products can help secure regular income. You can also choose frequency of payouts.
Indians have spread to virtually every part of the globe and have made their mark. But as an Indian living abroad, it makes good financial sense to make investments back home.Here is how an NRI can use insurance products to meet financial goals.
Let’s take Ashok, a 40-year-old NRI based in London. He works as a senior project manager in a software company. He has two children aged 5 and 9 years and his wife Asha is a home-maker.
His parents are retired and live in Pune. They have no source of income and rely on him for their regular expenses.
Ashok can build a portfolio of insurance products that can help address the following important financial goals — life cover for the financial security of his family; provision for his children’s education; regular guaranteed income for parents and wealth creation for himself and his spouse.
LIFE COVER
Ashok has five dependents and therefore it is crucial that he is adequately covered. Pure term insurance plans are ideal for this purpose.
Currently, online term plans that are available are competitively priced and convenient to purchase.
A term insurance plan will ensure that Ashok’s family is financially secure and that their financial aspirations are not compromised in the unfortunate event of Ashok’s death.
CHILDREN’S EDUCATION
Provisioning and creating a corpus for children’s education must ensure wealth creation over the long term to ensure cash payouts at key educational milestones of his children and two, financial security to ensure that the education of the child does not get compromised in case of an eventuality to the family’s bread winner.
In case anything happens to Ashok, the investment for his children’s future should continue and they should get the benefits when required.
Investing in child plans designed by insurance companies will ensure that the financial plan for the child remains unhindered even in the face of an eventuality. In such plans, upon the death of the parent, the family gets a lump sum amount and the life insurance company pays all future premiums on behalf of the policy holder.
GUARANTEED INCOME
Ashok’s parents need a guaranteed income to meet their day-to-day expenses. One product that addresses this goal is the Immediate Annuity plan.
Ashok can purchase an Immediate Annuity product which will then generate regular income for his parents in India.
Additionally, he has the option of choosing the frequency of the payouts. Upon the death of the last surviving parent, Ashok will get the entire investment amount back which he can repatriate to his country of residence.
WEALTH CREATION
Long-term wealth creation requires Ashok to systematically save and invest in avenues which provide superior long-term, risk-adjusted returns. As an emerging economy, India has exhibited a robust rate of growth in the recent past and has potential for sustained growth in the future as well.
Given this, investing in equities in India would help augment long-term wealth creation.
Unit-linked plans offered by insurance companies are options which allow the customer to structure his exposure to the debt and equity markets depending on his/her financial goals and risk taking appetite.
To conclude, insurance can play a critical role in ensuring the long-term financial security of the NRI, his family as well as his dependents residing in India.
(The writer is Chief Distribution Officer, ICICI Prudential Life Insurance)
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