Invest-Inn

January 21, 2010

Know Your Life Insurance

Life insurance in India made its debut well over 100 years ago.

In our country, which is one of the most populated in the world, the prominence of insurance is not as widely understood, as it ought to be. What follows is an attempt to acquaint readers with some of the concepts of life insurance, with special reference to LIC.

It should, however, be clearly understood that the following content is by no means an exhaustive description of the terms and conditions of an LIC policy or its benefits or privileges.

For more details, please contact our branch or divisional office. Any LIC Agent will be glad to help you choose the life insurance plan to meet your needs and render policy servicing.
Insurance Vs. Other Savings
Contract Of Insurance:
A contract of insurance is a contract of utmost good faith technically known as uberrima fides. The doctrine of disclosing all material facts is embodied in this important principle, which applies to all forms of insurance.

At the time of taking a policy, policyholder should ensure that all questions in the proposal form are correctly answered. Any misrepresentation, non-disclosure or fraud in any document leading to the acceptance of the risk would render the insurance contract null and void.
Protection:
Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

Aid To Thrift:
Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy installment' facility built into the scheme. (Premium payment for insurance is monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one's salary.
In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.
Liquidity:
In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan.

Tax Relief:
Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force.
Assessees can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.

Money When You Need It:
A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time.
Children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies.
Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).

KNOW YOUR LIFE INSURANCE

Insurance Vs. Other Savings

Contract Of Insurance:
A contract of insurance is a contract of utmost good faith technically known as uberrima fides. The doctrine of disclosing all material facts is embodied in this important principle, which applies to all forms of insurance.

At the time of taking a policy, policyholder should ensure that all questions in the proposal form are correctly answered. Any misrepresentation, non-disclosure or fraud in any document leading to the acceptance of the risk would render the insurance contract null and void.

Protection:
Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

Aid To Thrift:
Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy installment' facility built into the scheme. (Premium payment for insurance is monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one's salary.
In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.

Liquidity:
In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan.

Tax Relief:
Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force.
Assessees can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.

Money When You Need It:
A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time.
Children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies.
Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).

October 25, 2009

How to rebuild an investment portfolio after recession

Don't swing for the fences. To get even after a 28% loss, you have to gain 37%. But that doesn't mean you should load up on risky funds to make up for lost time. You'll just increase the odds that you'll lose more money.

Two important statistical measures will help you get a handle on risk. The first, beta, tells you the fund's relationship to an index, such as the Standard & Poor's 500-stock index. A fund with a beta of 1 rises and falls in lockstep with the index. A fund with a beta of 1.1 will rise 10% more and fall 10% more than the index. Conversely, a fund with a beta of 0.9 will rise 10% less and fall 10% less than the index.

Another useful measure is standard deviation, which tells how much you can expect a fund to vary from its average. The higher the standard deviation, the more volatile the fund. The standard deviation of the S&P 500 the past three years is 19.6. AIM China fund has a standard deviation of 37.6, so you can expect that its performance will be roughly twice as volatile as the S&P 500. You can find a fund's beta and its standard deviation by putting the fund name or ticker into any Get a Quote box at money.USATODAY.com. Scroll down to Risk Measures.

•Don't go to cash After taking a mauling from a bear market, many investors want to give up on stocks and bonds and move to money market mutual funds or bank CDs. But savings rates are so low that you'll earn close to nothing: The average money fund yields 0.05%, or $5 on a $10,000 deposit. Factor in inflation and taxes, and you'll earn less than nothing.

True, a 0.05% return is better than a big loss. But you have your best chance of getting back to even in stocks. Recovery time for a bear market depends on the severity of the downturn, says Jeff Hirsch, editor of the Stock Trader's Almanac. Hirsch thinks the market won't make new highs until 2011.

•Don't give up. Unless your retirement plan is to keel over at your desk, you need to lick your wounds and keep going. Even if you have a pension and Social Security, you'll need savings to maintain your standard of living.

How do you recover from the market's drubbing?

•Save more. The only sure-fire way to make up losses is to increase your savings. For example, suppose you earn $50,000 and contribute 5% of your salary to a 401(k) plan. You get 3% raises every year. If you earn 6% a year, you'll have $260,500 after 30 years. Bump up your contribution to 7%, and you'll have $364,000.

If you're investing in a 401(k) plan, bumping up your savings by a percentage point or more could be surprisingly painless, because your contributions are before taxes. For example, suppose your gross salary is $50,000. You pay 25% in federal taxes and 5% in state taxes, and you contribute 5% of your salary, or $48 a week, to your 401(k). Increasing your contribution 2 percentage points, to 7%, will decrease your take-home pay by just $13 a week.

•Make a plan. If you want a reasonable shot at retirement, you'll need to know how much money you'll need when you retire. Fortunately, you can find plenty of help estimating your retirement needs. Fidelity (www.fidelity.com), (www.troweprice.com) and Vanguard (www.vanguard.com) all have excellent online programs for figuring out how much you'll need to save for retirement.

If you feel you need a financial planner, consider a fee-only planner — preferably one that charges you by the hour, not by commission. You can find fee-only planners at www.napfa.org. You can also buy financial planning by the hour at the Garrett Planning Network at www.garrettplanningnetwork.com.

•Don't ignore dividends. Although red-hot growth stocks make the headlines, it's the stodgy dividend payers that do the heavy lifting over the long term. The S&P 500 has gained 867% the past 30 years without dividends. With dividends reinvested, the index has soared 2,200%.

•Keep expenses low. If your plan offers two similar funds, choose the one with the lowest annual expenses.

•Find an asset allocation plan. Once you've figured out how much you need to save, figure out how much of your money should be split between stocks, bonds and money market securities. The more time you'll have before you need to spend your money, the more you should have in stocks. If you have 20 to 30 years before retirement, for example, you should have 70% or more of your investments in stocks.

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NRI CENTRE

Welcome to NRI Centre. We have made an attempt here to furnish important features applicable to Non-Resident Indians (NRI) and People of Indian Origin having foreign nationality and residing in foreign countries. (PIO).

Before entering to technical part of the subject we wish you to know the concept of insurance clearly; to identify the proper type of policy; to know the premium structure of the policy and to get the doubts, if any, on our different insurance plans clarified through your agent or LIC Branch Office.

Concept of insurance and different types of plans:

Life risk cover i.e. financial protection to the family in case of an unforeseen event- say death, illness, disability on account of accident, etc –is the main purpose of insurance. But, it is also seen as a ‘compulsory savings’ leading to creation of wealth which can be utilized for education/marriage of children; for old age provision; for construction of house; etc. Policies are taken to get exemption from Income Tax and to assign these to financial institutions as collateral security while availing different type of credit facilities including housing loan. In order to meet various socio-economic needs of different people, LIC has designed more than 40 types of plans which include whole life policies, endowment policies with a definite term, joint life policies, money back policies having provision for periodical lump sum payments called survival benefits, term insurance policies which have low premium but high risk cover, pension plans, children plans, Unit Linked Plans which provide an opportunity to invest in capital market, etc. etc.

Each of our plans has distinct features covering certain type of benefits. The selection depends on your needs. Details of plans are available under the option ‘products-insurance plans’. Each plan is given a table number for identification purpose. e.g. Table 14 refers to Endowment Plan which is most popular in India.

Calculations of premium:

Once short listing of two to three plans is made, you would proceed to know the premium rates & calculations. For this, you should decide the term of policy, Sum assured, Mode of payment of Premium ( Yearly, Half yearly, Quarterly or Monthly ) and whether you require additional benefits like accident benefit. You may go to the option :‘tools - premium calculator’ for knowing the premium amount to be paid for the policy of your choice. Thereafter, you would be required to know the formalities to be completed for obtaining the desired type of policy.

Requirements to take a policy of insurance:

Submission of prescribed proposal form ( Form No. 300 in majority of the cases )is the basic requirement. Medical report may be required to assess the health of the proposer. Proofs of age and income, agent’s recommendations, special reports in case of any deformity or history of major illness, etc. would be required to evaluate the risk. This process is called ‘Underwriting’ and it is done in India based on the facts appearing in proposal form and allied papers. If the proposed life is acceptable and sufficient amount is received towards the First Premium, acceptance letter would be sent to the proposer and policy bond would be issued in due course.

December 6, 2008

Jeevan Saral

Jeevan Saral Plan 165 and Jeevan Saral Plan 185

Plan Details:

This plan is appropriate for employees seeking life cover through Salary Savings Schemes. This is an Endowment Assurance plan where the proposer has simply to choose the amount and mode of premium payment. The plan provides financial protection against death throughout the term of the plan. The death benefit is directly related to the premiums paid. The Maturity Sum Assured depends on the age at entry of the life to be assured and is payable on survival to the end of the policy term. It also offers the flexibility of term and a lot of liquidity.

Eligibility:

Minimum Age: 12 Yrs (completed) Maximum Age: 60 Nearest Birthday Term: Minimum 10, Maximum:35 Age at maturity: Maximum 70 years

Premium:

Minimum premium: Rs 250 per month for entry age upto 49 years and Rs.400 per month for entry age 50 years and above. The premium shall be in multiple of Rs.50 per month.
Premium Mode:Yearly, Half yearly, Quarterly and Monthly under Salary SavingScheme.

Survival Benefits: The sum payable at maturity however differs for different entry ages and terms. On Maturity the individual will receive maturity sum assured, plus Loyalty additions, if any.

Death Benefit: 250 times the monthly premium together with loyalty additions, if any, and return of premiums excluding first year premiums and extra/rider premium, if any, is payable in lump sum on death of the life assured during the term of the policy.

Maturity Benefit: The Maturity Sum Assured plus Loyalty additions, if any, is payable in a lump sum. Accidental Death and Disability Benefit

Supplementary/Extra Benefits: These are the optional benefits that can be added to your basic plan for extra protection/option. An additional premium is required to be paid for these benefits.

Surrender Value: Buying a life insurance contract is a long-term commitment. However, surrender values are available on earlier termination of the contract. The surrender value will be the greater of the guaranteed surrender value and special surrender. The plan also allows for partial surrenders.

Guaranteed Surrender Value: The policy can be surrendered after it has been in force for at least 3 full years. The Guaranteed Surrender value will be equal to 30% of the total amount of premiums paid excluding the premiums for the first year and all the extra premiums and premiums for accident benefit / term rider.