Thursday 28 January 2016

How to get security in an era of high inflation?

Ever-rising inflation rate is one of the topmost concerns of the consumer today. Financial planning loses its purpose if inflation is not considered in it. Therefore, investment today does not only revolve around increasing the base amount, but to increase it at the rate at which it can overcome the inflation.
This is the most important element taken into account by those who do not invest their funds in government securities and debt instruments. The rate of inflation is mostly same with the rate of interest offered by the banks for the fixed deposit. Keeping your funds in fixed deposits also helps significantly because it at least does not devalue the fund amount instead increase it each year as per the rate of inflation, which is equitable to hedging against inflation. However, you are not able to earn returns on them. Comparing investment plans with fixed deposit schemes can help you to differentiate between them and you will be in a position to pick the best for you.
Let us see what you can do to hedge your invested funds against inflation as well as earn a decent amount of return on it.
Insurance plans: Insurance plans are known as the most efficient ways to invest your savings in a secured way and you are able to get long term protection for your loved ones. You will find numerous kinds of insurance plans in the financial market. But if we broadly categorize them, there are two kinds of insurance plans that is, traditional endowment plans and unit linked insurance plans, in short ulips.
Traditional endowment plans are procured basically to get shield against the potential unfortunate financial crisis. The policyholder is also able to get a pre-fixed amount called as the sum insured after a definite period or at the stage defined in the policy documents. The basic objective of these kinds of plan is to get the protection, therefore the rate of return is not given much importance. Still, it enables a person to earn a decent amount of bonus and accumulated interest on his funds.
Unit linked insurance plans, on the other hand, do belong to the insurance plan, but the motive of investing funds in these kinds of plan is different. Many people do not give preference to plan insurance plans, but to those plans which can provide them a good return on their investments. Ulips are linked to equity funds and therefore these kinds are plan are categorized under risky investments. This is the reason why buying ulips should be considered only by keeping the longer horizon in view. Prices of ulips can fluctuate the way equity market fluctuates, however it has the potential to grow your funds by many folds if invested with due care. It is always advantageous to buy ulips as it allows you to save tax on your invested funds up to a certain limit.

Systematic investment is more like a method than a product. There are a wide variety of investment and investment insurance plan in the market. You can create a product by choosing the instruments that best suit your budget and future financial plans. This way you will be able to develop your own procedure of acquiring wealth. You can also consider money back plans which let you get the invested amount back in certain portions at regular intervals and you are able to earn good returns at the same time.

Wednesday 27 January 2016

Term Plans Are Becoming Popular Again

Increasing awareness for insurance policies for protection has resulted in renewed interest in term insurance plans. Earlier term plans used to be the important part of the life insurance companyĆ¢€™s business but as Unit-Linked Insurance Plan (ULIPs) became popular term plans lost its importance.
Term insurance policies are those policies in which benefit is provided only in the case of demise of the insured and if the insured survives the term then he has to forgo the premium.
Term policies are different from endowment policies as in endowment policies lump sum is given to the policyholder at the end of the policy term where in a term policy policyholder does not receives any capital. But premium rates of term policies are much lower than that of endowment plans as there is no guarantee of insured getting money back because there is no survival benefit as in a case of motor insurance where you dont get back your money at the end of the year if you dont meet any accident during the year!! Motor insurance is a type of pure protection product.
Increase in the sales of term policies is driven by two major factors. First major factor is the online term policies have witnessed a robust growth in the sales of term policies; the companies who were selling less than 100 term policies a month earlier now they have started to sale around 1,000 term policies per month through internet.
Second factor which has contributed to the increased sales of term policies is the group term policies through banks. Banks have begun to provide cover to their consumer loans and saving bank accounts.
Drop in the share of ULIPs in the portfolio of the companies from 80% to 50-60% as sales of ULIPs declined due to the lowered commission for the agents; it has helped other money back plans and term insurance.
However insurers says that ULIPS, term plans and endowment plans are different plans as ULIPs should be bought for investment purpose while term plans and endowment plans are meant for coverage; hence both segments should not influence each other.

Customer who need just coverage  than he should opt for Term Plan as they provide high coverage at lower costs and investor who want protection with flexibility in long term to meet their financial goals can buy ULIP.

Monday 25 January 2016

How to Choose the Right Term Insurance Plan for You?

The life insurance industry offers many options to individuals. The discerning individual is particularly interested in term insurance plans, so how does he choose the right term insurance plan?
Selecting the right term insurance plan involves focusing on the key features that can make a difference to you and your dependents.
We have shortlisted some of the more important features for you:
1.       Human life value
The main reason for taking life insurance is to offer financial cover to your dependents in your absence. They expect the insurance policy to provide financial cover to the dependents in their absence. That is why they must make sure the life insurance cover is adequate. Or like they call it in insurance – the insurance must cover the individual’s human life value (HLV).
Simply put, the HLV is the individual’s income / salary plus liabilities like loans. This forms the basis for the life insurance cover and the right plan for the individual is the one which provides for at least the HLV.
2.       Cost
We have all heard that term insurance plans are the cheapest. But that does not mean they can’t get cheaper. Go for term plans with the lowest expenses since this translates into lower premiums for the same cover. Also give preference to insurance companies that offer discounted premium rates – like for instance to non-smokers.
3.       Riders
The best term life insurance plan for you is the one that has all the angles covered. One way to achieve this is through riders. What is a rider? A rider is an add-on to the primary policy, which offers benefits over and above the policy subject to certain conditions. The policyholder can attach riders to the term plan. So if let’s say there is a critical illness rider, he is entitled to receive the sum assured on being diagnosed with the critical illness. .This is in addition to the death benefit of an equal amount on death over the term of the policy. Likewise there are other riders like disability cover, loss of employment cover, waiver of premium cover, among others. The policyholder should select riders based on individual and family needs since they can add considerable value to the life cover.
4.       Enhanced cover Term Insurance Plans
A feature offered by term plans of certain insurers is the flexibility to enhance the life cover during critical stages of the policyholder’s life. For instance, an insurer may allow policyholders to enhance the life cover by 50% at the time of marriage and by 25% at the time of turning a parent. This allows policyholders to start with a modest cover and enhance cover as responsibilities increase as also their ability to pay higher premium.
5.       Convenience
Across the gamut of life insurance plans, one finds term life insurance seeing the maximum innovation. For one, costs and by extension premium rates have been reduced considerably and this process is on. Buying a term plan has been made easier thanks to the internet. It is now possible for a healthy individual, as defined by the insurer, to buy a term plan on the company’s website without taking a medical test.

Thursday 21 January 2016

Buy Term Plan to Keep Your Family Financially Secure

It is essential to buy a term insurance for whole life for you and your loved ones because of volatile markets and sinking economy. Today, insurance companies in India offer policyholders with a wide range of benefits apart from the insurance coverage which will help their families financially during the time of unexpected demise of the family’s breadwinner.
 However, selecting the right insurance plan for you and its advantages for your dear ones is of high importance. Below are some helpful tips to purchase the right term insurance covers:
First of all, you need to analyze that why you need a life cover. In case person has dependents such as spouse, kids and other family members, then term insurance India is necessary as it provides a strong financial support to policyholder’s family after his or her demise. Hence, the best choice is to assess your financial requirement which is nothing but estimating the total amount which insured’s family would require fulfilling their needs in his or her early death.
Select the insurance cover based on the money required to survive policyholder’s family. Insurance experts suggest policyholders that buying a term insurance policy online are not only necessary, they also have to look for the cover which gives right combination of benefits and features.
Finalize the term period that considers to a certain number of years of cover depends on your needs. Some plans have fixed term like 15 years; while some will give insured a lifelong security. The face value of the term insurance India is the amount which policyholder’s dependents will get in case of insured’s sudden demise.
Select face value greater than the financial requirements of family. Some face value is enough to pay all debts of insured and offers all the required expenses to policyholder’s family for many years. Check term insurance advantages and disadvantages to understand more about the product.
Ensure that the Term Plan service provider is legal and you get the right policy. Always select a company which is highly rated and have less chance of going out of business. Compare all shortlisted products to find the best which suits you. Choose a plan that fulfills your financial needs and is paired with investments.

Tuesday 19 January 2016

Things To Consider When Buying A Term Insurance Plan

All of us understand how important having a life insurance plan is and appreciate its role in securing the financial future of our loved ones from the various uncertainties of life. However, when it comes to taking the final step and purchasing a term insurance plan online, we do face some difficulty. We often end up a bit confused on aspects such as the amount of life insurance we should buy, what are the various requirements that should be looked at, which company to buy from, etc. Here are a few quick tips that should be of help when you are buying an online term plan.
Determining the coverage you need
There are multiple elements that influence the amount of life insurance coverage that you would need. Right from the life-stage that you are in to the responsibilities that you have to shoulder to the liabilities that you carry, everything matters.
Life-stage and family members:
We buy life insurance not for ourselves but for our loved ones so that they have a secure financial future in our absence. Therefore, we need to consider who all are there in the family that we would like to secure. The financial responsibilities of a married person would vary from that of someone who is single. A person having kids would have more financial responsibility and so would a person whose parents live with him or her.
The income factor:
Whether the family has a sole earning member or there are other members and sources to contribute to the collective income also has a bearing on the amount of life insurance one should purchase.
Liabilities:
Individuals often have a range of liabilities which could be in the form of outstanding loans home loan, car loan, etc.) to higher education of children, their marriage plans, etc. The higher this amount the greater the coverage that would be needed.
Determining your needs and requirements
Having assessed the coverage requirements is one part of the story. The other crucial part is looking at the different needs and requirements that you have and finding ways to address those.
Capability of family members to handle finances:
Term plans often give a lump sum amount of money on the unfortunate demise of the life insured. However, it's quite possible that the family members who receive such a lump sum might not be adept at handling finances and may face difficulty in managing huge funds. Hence, one should look at alternatives that negate or reduce such a risk.
Steady income support:
Another factor that one should consider while buying an online term insurance is to try and provide the cushion of a regular income to take care of their everyday needs. In addition to a lump sum amount, try and provide for a fixed monthly income for your family.
Maintaining lifestyle:
Rising costs are now an everyday affair. Hence, providing a shield against inflation becomes imperative. So, while you are evaluating your options, do try and make sure that your loved ones' needs and aspirations are taken care of despite increasing costs and expenses.
Choosing the right Insurer
With multiple companies offering online life insurance plans, deciding upon which one to opt for can be difficult. Here are a few things that you should look for when you are zeroing in on an insurer
Claims Settlement Ratio
Life insurance is, in the ultimate analysis, a business of paying claims and providing support to the customer's family when they need it the most. To be true to this their promise to policyholders, life insurers must have an effective claims settlement process, making it simple, quick and hassle-free. This is especially important because claimants, who are dealing with an unplanned incidence such as loss of some loved one, need reassurance and support, not the pressures of complicated follow-ups.
Strong Financial Track-Record
It is always a good decision to opt for a firm with a strong financial track-record. A company with solid financial track record gives you a sense of stability and security. After all, when choosing a company to secure your financial future you want to make sure its future is secure as well. You want it to be rock solid!
Service Standards
Customer service is critical in a business that depends so much on trust and credibility. Providing service excellence to its customers should be a key priority for any organization. The life insurer must strive to be customer centric and establish well laid out processes for customer service. The life insurer must try and provide a positive experience to the customers at every touch point and have constant focus on nurturing long-term relationships with customers.
Market Reputation
The reputation of the Life Insurance Company is an important factor to consider while taking a decision on which life insurer to go for. The company that you finally choose must have a good standing in the market and people should mention it in a positive light. Much of this reputation is created through products, distribution and customer service and one must research about these before making a decision. These days, one can also check online forums and social networks to get an idea of a life insurer's reputation. If a brand has built its equity over time through positive customer experiences at all touch points, there will be people who will be saying positive things about that brand.
Corporate Governance

Corporate governance refers to the structures and processes for the direction and control of companies. Corporate governance concerns the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and other stakeholders. Good corporate governance helps companies operate more efficiently, improve access to capital, mitigate risk and safeguard against mismanagement. It makes companies more accountable and transparent to investors and gives them the tools to respond to legitimate stakeholder concerns such as sustainable, environmental and social development.

Thursday 7 January 2016

What is Term Insurance?

Imagine a situation where you have to pay a nominal amount as a premium and you get to walk away with life insurance cover that can ensure that your family is well taken care of in case the worst should happen. This is going to be a policy where there are no strings attached and the insurance cover will not depend on the performance of the markets. The insurance cover will also not require you to pay premiums that can burn holes in your pocket, thus making it a very affordable policy. The premiums that you pay will also be eligible for tax benefits. This, in a nutshell, is what a term insurance policy is all about.
A term insurance plan is a plan that is sometimes referred to as the most basic form of life insurance. Under such plans, applicants enter into a contract with an insurer that states that the insurer will provide life insurance cover for a fixed period of time to the insured and the insured will pay a premium for such facility. In case the insured dies while the policy is still in effect, the beneficiaries of the insured are paid the sum assured. However, if the insured person survives the policy then, in most cases, no maturity benefits are paid.
How does Term Insurance Works?
A term insurance policy can be considered one of the most traditional forms of insurance. To understand how it works, you can look at it in these three situations:
Buying the policy: To be able to buy a term insurance policy you don’t need to put aside tens of thousands of rupees every year. Many of the insurance policies can offer you a sum assured of up to Rs. 1 crore for a premium that could be as little as about Rs. 10,000 per annum (These are indicative figures. The actual premiums may differ depending on the sum assured and the insurance providers).
Keeping the policy: Just like any other insurance policy, you pay the premium towards these policies at a frequency chosen by you. These premiums can be paid every month, every quarter, every 6 months or once a year. They can also be paid as a lump sum instead of being paid at regular intervals.
Redeeming the benefits: Term insurance plans don’t typically come with any maturity benefits, except for term insurance with. Their main objective is to provide life insurance cover and that is exactly what they do. In case the policy holder passes away, the person who is named as the beneficiary of the policy will receive the sum assured.
The way it works is also one reason why you will notice that a lot of the time insurers refer to these plans as pure protection plans. There are no frills attached to the plan. You pay the premium and you get a fixed sum if case something happens to you.
Why should you buy Term Plans?

It can be argued that term insurance plans do get overlooked when compared to other types of life insurance policies. This could happen as a result of the assumption that term insurance plans don’t offer as much in terms of returns as compared to other plans but these policies can be used to form a great safety net. They are also very affordable which makes them easier to take and offers higher sum assured for lower payments.

Monday 4 January 2016

Does it Make sense For Senior Citizens To buy Term Insurance?

 Term insurance replaces the income lost due to the sudden demise of the bread-earner by offering financial aid to his family. This brings us to a thought-provoking question: “Does it make sense for senior citizens to buy term insurance?”
Well, mostly NO, however there are circumstances where buying life insurance by a senior citizen will make sense.  Remember buying a term insurance at this late age will require high premium. Also, age acts as a deterrent for companies who are not forthcoming in offering insurance. So, you must take the decision of buying a term insurance at this age prudently. Think it through.
There is a table at the end to help you exactly understand the financial implications of a term insurance at various age brackets.
Let’s see those scenarios closely wherein buying term insurance (irrespective of high premium) will be useful thereby weighing its pros and cons.
Scenario 1= Your kids are financially dependent on you
Term insurance is imperative if your kids are financially dependent on you. These days, this is a common scenario owing to late marriages and having kids late in life. By the time you cross 60, your kids are most probably still studying and financially dependent on you.
Scenario 2= You want your wife to be self-reliant
 If your wife depends on your pension and you don’t have provision of a family pension then buying term insurance will make sense. If there is no other source of income then to keep her self-reliant post your death, a term insurance is needed.
Scenario 3= You are working post retirement
You need a term plan if you are working post retirement owing to financial liabilities. It would give financial protection to the family by replacing your income after the death.
Scenario 4= You have liabilities and unpaid debts
Usually major loans, like home loan stretch till 50-60 years. However what about the money which you owe to a friend or relative? In that case, opting for a term insurance makes sense. If something untoward happens, proceedings of term insurance may be utilized to pay outstanding debts.
The purpose of term insurance is to ensure that your dependents are not left in the lurch after your death. But if you don’t have dependents or have a steady retirement income, you can go without a term cover. Similarly, individuals who are not working don’t need to opt for a term cover. 
Keep a Check on High Premium Rates
Buying term insurance at the ripe age is not an easy task. First, your age will make it difficult for you to find a good term insurance plan. Second, if you do find one, you would have to undergo stringent medical tests to prove you are fit for that plan.
Above all, premiums of term plans shoot up after you cross the 40 mark. (Refer to the table below.) For instance, a married man at the age of 60- year has to spend Rs 76,224 to seek Rs 1 crore life cover under HDFC ‘Click 2 Protect Plus’ plan of 15 years’ tenure. This term period is the maximum tenure given to a 60-year old person. However, a married man at the age of 50- year has to spend Rs 34,529 to seek Rs 1 crore life cover for the same plan. Similarly, premium rates of the same plan for 30- year and 40- year married men are Rs 7617 and Rs 13792, respectively.
So think before acting. Opt for a term plan only if it is unavoidable and no other option is left.

Source: http://www.policybazaar.com/life-insurance/term-insurance/articles/does-it-makes-sense-for-senior-citizens-to-buy-term-insurance/