Thursday 21 July 2016

Insurance - Basics

Insurance is a promise of compensation for specific potential future loss in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss.
We all know about insurance but many times we ignore some basic features of insurance policy.
Here we will try to explain some of the words which your agent normally use while explaining any insurance policy.
By explaining the below terms we want to make you familiar with your insurance policy.
Sum assured (also known as Cover) - This refers to the amount paid out on a policy if you die within the Term of insurance plan. In case of an endowment policy Sum Assured can be paid out on maturity along with the bonus and in case of Money back policies a part of Sum Assured is paid out on regular intervals and on maturity along with the bonus. On regular intervals. Endowment policy It is the guaranteed amount to be paid out at maturity with or without Bonus (Depend upon the policy).
Premium - The owner usually pays a fixed premium amount in exchange for the insurance company's guarantee to cover any economic losses incurred under the scope of the agreement of insurance.
Bonus - It is the amount added to the basic sum assured under a with-profit life insurance policy.
Surrender value - The amount payable by the insurer to the owner of an investment-based plan in case he opts to terminate the policy after three years (the mandatory lock-in period) but before its maturity date. The surrender value will be the premium paid till date minus surrender charges and any outstanding loans due.
Endowment Policy - In this plan the amount is paid to a policyholder if he lives survives the term even after the tenure of the insurance contract or to the beneficiary if the insured person dies before the date on which the policy matures.
Term Insurance - Term life insurance is a life insurance plan in which person can get the huge insurance coverage with fewer lower premiums. In this plan beneficiary will get the cover amount only if the insured person dies within the policy term. Unlike Endowment policy policyholder don't get any amount if insured person lives even after the policy expires. One should have at least one Term Insurance policy. One can consult a financial planner for the best possible insurance solution.
Whole Life Insurance - A life insurance policy where benefits are payable to a beneficiary on death of the insured, whenever that occurs. The premium payment can happen for a specified number of years or throughout life.
ULIP - It is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. Some part of the amount invested in Best Ulip Insurance plan is used to provide the insurance cover and the remaining is invested in equity and debt investments and denoted as units.
Money Back Plan - A plan in which part of the sum assured is paid back to the policyholder at regular intervals and a part of sum assured is paid at maturity along with bonuses.
Rider - An add-on benefit available at the option of the policyholders that may alter certain features of a policy by increasing or restricting benefits.
Survival benefits - The amount payable to a policyholder under an investment-based plan if he survives the policy term. Typically, it is the sum assured plus returns (guaranteed additions / bonus) accrued.

Source:
https://bestulipinsurancepolicy.wordpress.com/2016/07/21/insurance-basics/

Monday 18 July 2016

Unit Linked Insurance Policies - Advantages and Disadvantages

In this world, every person wants to secure his family. He can invest money in PPF, Mutual funds, insurance plans and many more.
There are numerous insurance policies provided by various insurance companies. So we cannot easily decide the perfect policy for ourselves. There is a short description of some life insurance policies that may help you in choosing the right plan.
Term Life Insurance: - Term life insurance is an insurance which gives coverage for a particular time of period. After this period, the policy holder can continue his policy or can drop his policy. If the policy holder dies in the term period, nominee will get the death benefit. This insurance plan is very affordable. The policy holder can pay a low monthly premium that is based on the term length and amount of the coverage you choose.
Whole life insurance: - Unlike term insurance, a whole life insurance policy gives the coverage for the entire life not a particular time of period. In this insurance policy, the policy holder gives the insurance premium amount from the date of issue of policy until he completes 100 years. If he dies in this period, then his dependent will get the face value of the policy. This policy can also use as an asset. A person can also take loans from the cash accumulation with the help of policy. If the person reaches at the age of 100, he will get full amount immediately.
Money back insurance: - In money back insurance plans, the policy holder will get periodic payments of partial survival benefits during the term of the policy. The main feature of this policy is that if the insured person dies during the policy term, the death claim will be given to his nominee with sum assured without deducting any of the survival benefit amounts.
ULIP insurance plans: - ULIP plans are the combination of investment and insurance. This is a long term, systematic and goal based investment plan. One can get tax benefits under section 80c of the Income Tax Act. The two key features of this product are flexibility and transparency. Many ULIP plans provide options to increase or reduce premiums after three years.
Riders: - Riders are additional benefits that one can opt to include in one's policy over and above what the insurance policy provides. These add-ons come with extra premium charges that depend on the rider you have opted. One cannot buy these riders separately.
To summarize, there are details of some insurance policies that may help you to select the right plan for you. Before purchasing any insurance policy, an individual should compare all the policies and choose the policy that meets his requirements.
This article provides the information about various insurance plans. As we know that "insurance is a contract between the insurer and the insured person". So each person wants to choose the correct insurance policy.

Source: http://ulipinsuranceindia.weebly.com/ulip---blogs/-unit-linked-insurance-policies-advantages-and-disadvantages

Friday 15 July 2016

Investing Hard Earned Money in ULIPs in India

Until recession struck and the stock markets saw a steep fall, these used to be one of the widely sold products by insurance companies in India. However, a crashing stock market shattered the hopes of investors who were pained to see the NAV of their policies plunging down and putting them into losses.
Fundamentally, these plans remain a good investment vehicle but the extraordinary returns that the stock market offered in the bull time had raised expectations of the investors to wildest levels. These investment plans are actually intended to be investment for a long term; hence buyers should avoid making judgment by observing its performance over a short term.
ULIPs in India are now more attractive and safe
In the year 2010, with a view to protect the interest of the consumers, IRDA had introduced a few changes in the ULIPs. IRDA made it mandatory for such plans to have a 5 year lock in period. It also revised the structure of charges.
The way to go about investing your hard earned money
If your past experience with ULIPs has not been pleasant, it is wise that you rather not be biased. You can hope for good investment returns from your unit linked saving plan by being disciplined and prudent.
1) Allow your money to remain invested for a longer term - In case, the markets fall, do not panic to liquidate. Rather continue with your premium payment and be assured of decent return rates.
2) Plan your premium payment as a systematic investment plan - Rather than paying your premium in one shot, opt for the systematic investment option under which you can stagger the payment of the premium over a 12 month period.
A few ULIPs also offer the investor an option of switching between investment plans. Currently, if you have invested in a 100 percent equity saving plan and you have a sense that the equity market will be underperforming during the year, you can switch your investment into a saving plan that primarily comprises debt. A unit linked investment plan will allow you a free number of switches every year.
These days, some insurance companies are offering new versions of these investment options for money back policy in order to get back customers
Buy a ULIP online
It is preferred that you buy Ulip Insurance India online as it can save you the cost of agent commissions. In fact, some insurance companies in India are offering these saving plans only as an online offering in an attempt to save on the distribution cost and pass on the benefit to the Policyholder in terms of lower policy charges. Moreover, when you buy a policy online, you also get the facility to compare various plans whilst sitting in the comfort of your home, so that you may buy a policy that fits your needs as well as your pocket.
Investment plans comparison can save your time and money. Easy policy helps to compare saving plans by providing free quotes online.

Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/07/15/ritikashah11998-42/

India Insurance - Unit Linked Insurance Plan (ULIP)

In India, Unit Linked Insurance Policies (ULIPs) are insurance policies that combine risk coverage with investing in the stock/debt markets. In effect, they are designed to behave as normal insurance policies plus mutual funds.
An investor's contribution to ULIPs gets invested in specific types of portfolios that he/she chooses. The policy typically pays back based on market returns on investments at the end of the insured period. Therefore, it forms an interesting savings instrument that can get good risk cover.
Features of ULIPs include:
1. Units allotted under ULIP schemes have Net Asset Values (NAV) declared regularly, like a mutual fund
2. Investors can invest across types of portfolios similar to mutual funds - growth equity, balanced, debt funds, etc. Investors can move across portfolios, typically at nominal costs
3. Investors can invest as a lump sum (single premium) or make premium payments on an annual, half-yearly, quarterly or monthly basis. Premium amounts can be changed over the course of ULIP's life
4. Investments qualify under Section 80C of the Income Tax Act. Maturity proceeds from ULIPs are tax free. There are no long term capital gains tax and 10% short term capital gains tax on equity portfolios within ULIP. For debt funds, long term capital gains tax is 10% while short term is at the investor's marginal tax rate.
5. However, charges charged by insurance companies can be quite confusing - therefore, investors should compare them with similar mutual funds to see if charges quoted are reasonable.
Despite their interesting structure and potential benefits, investors are better off clearly understanding portfolio types offered, performance of fund managers and expenses/fees before investing in ULIPs.

For more details visit: Best Ulip Insurance Policy

Tuesday 12 July 2016

ULIP: Invest the Smarter Way

ULIPs - Unit Linked Insurance Plan (also known as wealth insurance plans) is a package of financial solutions that include the safety of insurance cover with wealth enhancement possibilities. In a ULIP, a part is reserved for life cover and the rest is invested in stocks and bonds as funds. This investment is dependent on the performance of the underlying fund that is chosen by the investor. ULIPs with its two in one arrangement keeps the protection and savings elements distinguished. ULIPs are very flexible and transparent which enables the investor to customize the plans as per the need and unlike other plans once invested, the plan remains unchangeable.
Types of ULIPs include Retirement, wealth, children's education and health plans. Depending on the priority, investment in ULIPs can be done accordingly. Best ULIPs are the ones which have the appropriate life cover, right fund option and a long term investment. In ULIP insurance plans, the charges applicable are well bifurcated. The ULIP charges usually include Policy administration charges, ULIP premium allocation charges, mortality charges and fund management charges. Policy administration charges are deducted on a monthly basis, premium allocation charges are deducted from the premium amount that the investor pays and is used for medicals, cost of underwriting and distributor's fees. The amount that remains is invested in the fund that is chosen by the investor.
Mortality charges are also deducted on a monthly basis. It is the sum assured for providing a life cover to an individual and will vary as per the fund value selected. Depending on the fund chosen, fund management charges are also deducted by the insurance company for the maintenance of these funds. Best ULIPs are the ones which will mention all the deductions clearly before the investment and flexibility options after investment.
Choosing the Best Ulip Insurance Policy rates is very easy provided certain criteria are considered before investing. Understanding the plan, ULIP charges implied, comparing different products offered by different companies and going for the best ULIPs that fits the need will work well. One can buy ULIP online if they are clear about the kind of investment they want to make. Top ULIP plans are usually the ones with favorable ULIP premiums, long term investment and a good life cover with a decent mortality charges. Understanding the peculiarities of the ULIP rates and their growth rates and making the investment in life insurance wealth plan especially in a ULIP will give the best results. 

Source:  http://ezinearticles.com/?ULIP:-Invest-the-Smarter-Way&id=5895265  

Insurance Basics Part IV - Unit Linked Insurance Plan - ULIP

A person, 40-year-old investor, was disgruntled with his investments in Unit-Linked Insurance Plan (ULIP). While the equity markets have been rolling, he realized after some research that he was yet to recover the money he had invested three years ago. This, he realized, was not on account of poor fund performance but because of higher initial fund costs. While the people crib is about the non intimation of such expenses by his/her broker, insurance regulator IRDA has come to his rescue, making it mandatory to disclose all charges upfront to the buyers.
Basic rules have to understand the cost structure of a fund before buying into ULIPs. And a basic understanding would save them from heartburn. So how are the cost structured for an ULIP?
COSTS OF OWNING A ULIP:
1) Premium Allocation Charge
The cost structure of ULIPs is such that it starts working to your benefit only after 5-8 years of investing. A part of your premium payment goes into Premium Allocation Charge, which is calculated as a percentage of the premium. This percentage is generally higher in the first few years-the main reason: it takes years to break even on investments. It could be as high as 40% of each year's premium.
2) Policy Administration Charge
A monthly fixed amount that usually rises every year with inflation or as a percentage of the sum assured.
3) Mortality/Rider Charges
The mortality charge per Rs 1,000 of the sum assured varies from 1.3 for a 30-year-old to 6.4 for a fifty-year-old.
4) Fund Management Charge (FMC)
Then you have the fund management charge, an adjustment to net asset value (NAV) on a daily basis. Usually, insurers charge it as a percentage of funds under management. ULIPs could have a fund management charge between 0.5%-2.0percent per annum.
So with so many chargers around what should be the strategy to get good retuns from ULIPs
STAY LONG TO REAP THE BENEFITS:
If you are ready to cool your heels for 10 years, ULIPs will be a viable financial option. If you anticipate some liquidity need in one to three years from now, ULIPs are not for you. You should look at this investment product only if you leave your money untouched for beyond five years. A good time horizon would be around five years to 30 years. ULIPs are meant for disciplined, regular and systematic investment towards a goal.
The reason is that if you invest the same amount in a mutual fund as well as a ULIP, the former gives better returns than the latter because of the cost structure. There is a point of inflexion at six years, then on the Ulip Plans begin to give better returns than mutual funds.
THUMB RULES FIR ULIPS:
Start Early: If you start at the age of 30-35, you can create a 20-year long-term investment by investing in SIP route.
Invest Regularly: Do not get deterred by market swings. A systematic long-term periodic investment will help you go a long way.
Choose your fund:
Depending upon your age and risk profile. Use the switches effectively.
You may have opted for a mix of 75% equity and 25% debt on your ULIP. But when you inch closer towards maturity, minimize your exposure to equity as low as 20%. If the market turns bearish, it may slash your assets at the time of maturity. It's better to bet safe as you are close to retirement, also have a rein on the number of switches though they come free of cost. Frequent change in asset allocation might not be a wise move after all.
You should always have a balanced approach to your investments in your middle age. It protects you better from risks. Now, even if you go for a long-term ULIP, it works to your advantage as it isn't adversely affected by the vagaries of the equity market.
Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/07/12/ritikashah11998-41/


Thursday 7 July 2016

ULIP: Invest the Smarter Way Comparison

ULIPs - Unit Linked Insurance Plan (also known as wealth insurance plans) is a package of financial solutions that include the safety of insurance cover with wealth enhancement possibilities. In a ULIP, a part is reserved for life cover and the rest is invested in stocks and bonds as funds. This investment is dependent on the performance of the underlying fund that is chosen by the investor. ULIPs with its two in one arrangement keeps the protection and savings elements distinguished. ULIPs are very flexible and transparent which enables the investor to customize the plans as per the need and unlike other plans once invested, the plan remains unchangeable.
Types of ULIPs include Retirement, wealth, children's education and health plans. Depending on the priority, investment in ULIPs can be done accordingly. Best ULIPs are the ones which have the appropriate life cover, right fund option and a long term investment. In ULIP insurance plans, the charges applicable are well bifurcated. The ULIP charges usually include Policy administration charges, ULIP premium allocation charges, mortality charges and fund management charges. Policy administration charges are deducted on a monthly basis, premium allocation charges are deducted from the premium amount that the investor pays and is used for medicals, cost of underwriting and distributor's fees. The amount that remains is invested in the fund that is chosen by the investor.
Mortality charges are also deducted on a monthly basis. It is the sum assured for providing a life cover to an individual and will vary as per the fund value selected. Depending on the fund chosen, fund management charges are also deducted by the insurance company for the maintenance of these funds. Best ULIPs are the ones which will mention all the deductions clearly before the investment and flexibility options after investment.
Choosing the best Ulip Plan Comparison rates is very easy provided certain criteria are considered before investing. Understanding the plan, ULIP charges implied, comparing different products offered by different companies and going for the best ULIPs that fits the need will work well. One can buy ULIP online if they are clear about the kind of investment they want to make Top ULIP plans are usually the ones with favorable ULIP premiums, long term investment and a good life cover with a decent mortality charges. Understanding the peculiarities of the ULIP rates and their growth rates and making the investment in life insurance wealth plan especially in a ULIP will give the best results.
For more information please visit: Ulip Plan Comparison

Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/07/07/ritikashah11998-40/

Tuesday 5 July 2016

ULIP: Invest the Smarter Way

ULIPs - Unit Linked Insurance Plan (also known as wealth insurance plans) is a package of financial solutions that include the safety of insurance cover with wealth enhancement possibilities. In a ULIP, a part is reserved for life cover and the rest is invested in stocks and bonds as funds. This investment is dependent on the performance of the underlying fund that is chosen by the investor. ULIPs with its two in one arrangement keeps the protection and savings elements distinguished. ULIPs are very flexible and transparent which enables the investor to customize the plans as per the need and unlike other plans once invested, the plan remains unchangeable.
Types of ULIPs include Retirement, wealth, children's education and health plans. Depending on the priority, investment in ULIPs can be done accordingly. Best ULIPs are the ones which have the appropriate life cover, right fund option and a long term investment. In ULIP insurance plans, the charges applicable are well bifurcated. The ULIP charges usually include Policy administration charges, ULIP premium allocation charges, mortality charges and fund management charges. Policy administration charges are deducted on a monthly basis, premium allocation charges are deducted from the premium amount that the investor pays and is used for medicals, cost of underwriting and distributor's fees. The amount that remains is invested in the fund that is chosen by the investor.
Mortality charges are also deducted on a monthly basis. It is the sum assured for providing a life cover to an individual and will vary as per the fund value selected. Depending on the fund chosen, fund management charges are also deducted by the insurance company for the maintenance of these funds. Best ULIPs are the ones which will mention all the deductions clearly before the investment and flexibility options after investment.
Choosing the best ULIP rates is very easy provided certain criteria are considered before investing. Understanding the plan, ULIP charges implied, comparing different products offered by different companies and going for the best ULIPs that fits the need will work well. One can buy ULIP online if they are clear about the kind of investment they want to make Top ULIP Plan are usually the ones with favorable ULIP premiums, long term investment and a good life cover with a decent mortality charges. Understanding the peculiarities of the ULIP rates and their growth rates and making the investment in life insurance wealth plan especially in a ULIP will give the best results.
Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/07/05/ritikashah11998-39/


Best Ulip Insurance Policy


Saturday 2 July 2016

ULIP Plan


The Simplest Way to Choose the Best ULIP Plan!

Dear Readers, this article will help you in choosing the best of the best ULIP Regular premium plans available in the industry as of now. The parameters needs to be considered while choosing a ULIP are explained below so that you should not be miss-leaded or cheated by any insurance agent or sales person. Also, I advise all my readers to have an eye on all these parameters based on the information provided on the company printed brochure only, as the chances of agents or sales people printing their own sales support promotional materials which normally talks only about the benefits but not the demerits of the product.
Basic Parameters to Compare:
1. Premium Allocation Charges:
This is the very basic thing to be considered as the premium allocation charges in different plans vary from 2% to 100% of the first premium. There are plans of few companies where they project that the premium allocation charge is nil, but the fact is they would be charging equal amount or more than that through policy administration charges or initial management charges or surrender charges. Therefore you should be more cautious about such products where sales people claim that the premium allocation charges are nil.
Premium allocation charges are levied on an insurance product primarily to cover the cost involved in paying the commission to agents or sales people and the huge marketing expenses involved in acquiring every insurance policy. Normally an Insurance agent or a broker or a sales person earn between 2% to 80% of the first year premium as his/her part of commission apart from the regular renewal commission he receives thereafter.
The reason for any insurance company to take out so much of money from the hard-earned investment of an innocent customer is "Competition". Yes the competition in Insurance industry is completely pushing away the ethical side of the insurance business and today almost 60-80% of the insurance business is been done in unethical way. Indian Insurance market is completely driven by sales people as buying insurance still remain as a luxury than a very basic need for Indians. Even after 10 years of privatization of insurance industry there is very little effort been put forth to promote term insurance plans as the profit to a insurance company by selling term insurance plans is very less more than that selling a term insurance plan is certainly an uncertain commitment for the insurance companies.
Therefore, I advise all my readers to be very cautious while comparing the premium allocation charges levied on different products of different companies and As I mentioned earlier the premium allocation of ULIPs starts from as low as 2%.
2. Policy administration charges:
Policy administration charges are those charges that the company takes out from the fund value available in customers account to meet various administrative expenses incurred while managing the policy during the whole tenure of the policy. This charge is been deducted normally on a monthly basis. This charge is not covered under premium allocation charges or the fund management expenses. Most of the time this charge is been deducted as a percentage of the fund value or a fixed amount or a percentage of the premium or a percentage of sum-assured.
Policy administration charges in most of the products ranges from Rs 30/month to Rs 200/month. But in few plans it goes up to 40-50% of the first year premium, up to 35% of the second and third premium and up to 10% of the premium paid thereafter.
Normally this charge is levied at the beginning of each policy month from the policy fund by canceling units for equivalent amount. This could be flat throughout the term of the policy or vary at a pre-determined rate. Normally these charges are higher during the first few years and can come down to zero latter.
3. Fund Management Charges (FMC)
Fund Management Charge is levied as a percentage of the value of assets and shall be appropriated by adjusting the Net Asset Value. This is a charge levied at the time of computation of NAV, which is usually done on daily basis.
If the fund management charge in a particular fund is 2% pa then the average fund management charge per day would be 2/total number trading days in a year. Fund management charges vary from 0.25% to 2.5% as it depends on different companies, depend on different products, and depend on different funds.
Normally fund management charges in ULIPs are comparatively lesser than the fund management charges levied by mutual funds.
4. Surrender Charges
Surrender Charges are levied on the total fund value available at the time of surrender of insurance contract or at the time of partial withdrawal before the planned maturity date. This charge is usually expressed either as a percentage of the fund or as a percentage of the annualized premiums. Some companies do not charge anything after first three years but some companies charge till the end of 10th year or before till the date which is any time before the maturity. Now, IRDA has made it compulsory for every ULIP plan to have 5 year minimum lock in and a customer can take out money from his ULIP account only after completion of the 5th policy year. The surrender charges levied on a ULIP plan normally varies from 0% to 70% depends on the product and the tenure chosen by the customer. But few insurance companies have designed such plans where the premium allocation and policy administration charges are very nominal as they take a bigger chunk of the fund value during the time of surrender. In this case, insurance companies normally makes money from the fund management charges if a customer stays with the fund for long time and from the surrender charges if he withdraw from the fund before the maturity date.
5. Switching Charges
These charges are levied when you shift your investment from one fund to another during the time of market crash or economic imbalance to protect your fund value. The charge will be usually a flat amount per each switch and it is always nominal in almost all the companies.
6. Mortality charges
Mortality charge is the cost of life insurance cover. This will be levied either by cancellation of units or by debiting the premium but not both. Mortality charge may be levied at the beginning of every policy month. The method of computation will be explicitly specified in the policy document.
I am sure that all of you will be able to choose the best ULIP Plans for yourself if you cautiously compare all the above mentioned parameters.
Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/07/02/ritikashah11998-38/


Thursday 30 June 2016

Should you go for ULIP?

Insurance, apart from being an instrument of financial security for the future of your loved ones, is also considered as a good option for investment. Insurance, unlike stocks, is a safe form of investment. While you might be wary about investing in shares directly, there are options that let you invest in the stock market while simultaneously providing the security of an insurance cover. Unit-Linked Insurance Plans or ULIPs are exactly what you’re looking for.
When you buy ULIP plans, a portion of your money is invested across assets like stocks, bonds, and so on, similar to investing in mutual funds. The remaining money is used to buy you a life cover, valid for a certain period of time. This way, you earn a cool return on your money and remain insured at the same time.
What is the concept? Best Ulip Insurance Policy is simply a combination of insurance and investment. You buy a policy and pay a premium like you do for your other insurance policies, however part of your premium is as insurance premium(for the cover) while remaining is invested in various equity and debt schemes.(like mutual fund investments).
Investment part: As an investor you have the choice of selecting what type of fund you need to invest (debt or equity or a mix of both). This is same as Mutual Fund investment (if you have done MF investments earlier you would know). So, you will have units allotted and you can check its value based on current NAV - if they are making profits or running in losses. NAV - Net Asset Value - which you could say in simple terms net rate of return on current date. This varies from one ULIP to another and is purely based on market conditions.
Which almost all financial players forayed into ULIP business - which also saturated the market and ULIP lost its sheen, very soon. Also, investors learnt all the tips and tricks of this plan, over the time and turned their back on it.
Which almost all financial players forayed into ULIP business - which also saturated the market and ULIP lost its sheen, very soon. Also, investors learnt all the tips and tricks of this plan, over the time and turned their back on it.
When and why you need it, because based on your requirements - there are various other options in the market for investment. For example:
A.if you need pure insurance - best is to go for term insurance, where you can get a high life cover for minimal premium.
B.if you need pure investment - do not go for ULIP, invest into other high return products.
C.Decide when you need returns (This is called Investment Horizon in financial terms), early? For marriage? For kids’ education, for retirement? Based on that select a product.
D. Find out how much of risk can you take? (This is called risk appetite in financial terms)- are you 23 and just started working - which may mean, you can take bigger risks and invest into something, which even if it fails, you would not be hurt, financially so much, are you 45 and now thinking of investing - plans/policies changes accordingly.
Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/30/ritikashah11998-37/



Tuesday 28 June 2016

ULIP the best investment program

Top up premium in ULIP is the amount that the plan owner spends in a ULIP over and above the normal premium. The key purpose is to benefit from the lower Premium Allocation Cost that may be as little as 1% as opposed to individuals levied about the regular top quality which presently is as high as 25% in the 1st year and decreases to 3-5% consequently.
This benefits of UILPs comes from the fact that top ups might be made whenever unlike normal rates that have to be paid out at fixed durations. For instance, the current economic depression, when the market segments had decreased almost 70 %, was a great time to invest in trading stocks and also everyone sitting on a extra could do so through top ups.
Top ups also relish tax advantages beneath section 80 C of the Income Tax Act giving exemption up to a utmost of Rs. 100,000 p.a. committed to life insurance policies.
Nevertheless, the entire amount of top up expense is generally allowable till 25% of the regular premium paid up to the time of trading. The minimal quantity required will vary for each insurance provider, but is usually Rs 2000. Also, many insurance companies allow the option of top ups only after a few payments of the normal premium have been made with no payments are impending or have been defaulted.
Under current practices the whole top up money is used for investment purpose without any part percentage towards mortality cover, but this is set to alter according to new IRDA guidelines. Top up premiums will lose a few of their sheen after the new directives on insurance policy by IRDA come into force through.
So far top up premiums happen to be an excellent selling point for ULIP. With the intro of recent guidelines, the insurance coverage sector will become more transparent and also accountable to the insured, which usually in effect will motivate more and more people to opt for ulip investment.

Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/28/ritikashah11998-36/

Monday 27 June 2016

All about Unit Linked Insurance Plans

What are Unit Linked Insurance Plans?
A Unit Linked Insurance Plan is an insurance plan that offers you a life cover and is also an investment.
How does a ULIP work?
In a Unit Linked Insurance Plan, part of the premium that you pay goes towards mortality charges, similar to regular insurance policies. Here’s how it is different. The remainder of the premium is invested for you by the insurance company.
Personalized Investments
You can choose the investment units and the distribution of funds to match your needs. Don’t fancy high-risk investments? Take a deep breath. You can vary the levels of risk for your investments.
Demystifying Unit Linked Insurance Plans
We’ll banish some popular myths about Unit Linked Insurance Plans for you.
Unit Linked Insurance Plans are costly in comparison to other investment products.
Unit Linked Insurance Plans were costly some years ago because of the high premium and fund management charges. In recent years, ULIPs have seen several changes with respect to the charges and fund management fees.  and there has been a decrease in costs. You can get Unit Linked Insurance Plans that are competitively priced.
ULIPs are invested only in equity markets. They are risky.
Don’t be so hasty to dismiss Unit Linked Insurance Plans. With a ULIP you can decide the level of risk for your investments. There are different types of funds that you can choose from. You can also change funds to suit your evolving lifestyle.
Unit Linked Insurance Plans offer extraordinary returns.
Remember, a ULIP is not only an investment product. A ULIP Plans gives you an insurance as well as investment options. A part of the premium is allocated to the life cover and other fees. The remaining premium amount is invested.
Life cover decreases with market volatility.
Many investors have the wrong idea that, because ULIPs are linked to the equity market, the sum assured amount would decrease if the market dips. Not true. Despite market volatility, your life cover will remain unaffected. In case of the policyholder’s demise, a ULIP pays the entire life cover or the fund value, whichever is higher.

Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/27/ritikashah11998-35/

Saturday 25 June 2016

Ulip Plan


All about ULIP

Should I invest in ULIPs?
UNIT Linked Insurance Plans (ULIPs) are policies that club insurance with investment.
Besides getting your basic insurance cover, ULIPs offer between four and six options when it comes to choosing the investment mix.
These range from funds, which invest in 100 per cent equity to those that invest in 100 per cent debt securities.
Wealth offers pointers on ULIPs to help you make a well-informed decision before investing in this product.
Higher charges
ULIPs have something called the ‘premium allocation charge’. This means, the company charges a percentage of the premium towards the premium received. For instance, if you are paying a premium of Rs 45,000 per annum, you are charged a premium allocation charge of approximately 15 to 71 per cent on this amount. The net premium, after deducting this charge, gets invested.
This charge, usually, depends on the Best Ulip Insurance plan chosen. and remember: your per annum return is calculated on the money invested and not on the premium paid.
A significant proportion of this charge is passed onto an insurance agent as commission. From the third year onwards, most ULIPs have a premium allocation charge anywhere from two to five per cent.
Choosing the best ULIP
When it comes to mutual funds, you can find the best performing schemes through research.
But this is not possible with ULIPs because each plan will differ in terms of the expenses you need to pay upfront. This means that you have to go with what an agent tells you.
ULIPs: When its okay to switch
WE are a cautious species. We pray before every important event, we look at auspicious factors when we name our children and we consider broken mirrors a bad sign. It’s no wonder then that when we make a killing in the stock market, we first think about how best to preserve it.
People book profits or switch to a safer option in a bid to play safe. But while that makes sense for those dealing in shares or with mutual funds, does it make sense for those having equity unit linked insurance policies (ULIP)? ULIPs allow you to switch from equity fund option to debt, usually without any fees. But there is a key difference between ULIPs and other stock market investments. ULIPs are a combination of insurance and investment. Since it is your protection cover that you would be tampering with, your decision to switch needs to be well thought out before you exercise it.
ULIP is a combination of insurance and investment. Of the total premiums paid, some of the money is set aside for the insurance cover and the rest is invested in a fund.
This involves the cost of insurance or life cover that is allocated for the plan. Age, health of the policy holder, and the amount specified for coverage determines this charge. The basis of this charge depends on the type of ULIP. That is, this charge is initially deducted from the entire sum assured. At the final stage, it is charged on the difference between the sum assured and the fund value. In some ULIPS the mortality charge is levied on the sum assured for the whole term.
Should I close the policy?
The cost-structure in ULIPs varies significantly, not only across different insurance companies, but also across different ULIPs from the same insurance company.
So, each policyholder will have to work out the final exit/retain strategy based on his/her specific policy terms. However, there are three factors to be considered:
— Performance
— Entry Charges or allocation charges
— Annual Costs or fund management charges
The focus, here, is on equity-based ULIPs. the basic idea is to check whether it is better to continue paying premiums or instead start investing.

Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/25/all-about-ulip/

Thursday 23 June 2016

ULIPs : A good investment?

Benefits of ULIPs
Meanwhile, I was recently evaluating Unit Linked Insurance Plans (ULIPs) – the idea here is that you put in your money and it “grows” with time. So you also have life cover (i.e. your family gets money if you die) and money also grows at the same time. You get “units” like in mutual funds, and the value of these units grows because the company invests it for you. You also get a tax benefit under section 80C.
Unit Linked Plans offer unique opportunity to combine protection with investments. Some special features of Unit Linked Life Insurance Policies (ULIPs) are:
Provides flexibility in investments
ULIPs offer a complete selection of high, medium and low risk investment options under the same policy. You can choose an appropriate policy according to your risk taking appetite, coupled with the opportunity to switch between fund options without any additional expense for specified number of switches. ULIPs provide the flexibility to choose the sum assured and investment ratio in the annual targeted premium. It also offers the flexibility of one time increase in investment portfolio, through top-ups to avail investment opportunity offered by external environment or own income flows.
Transparency
The charge structure, value of investment and expected IRR based on 6% and 10% rate of returns, for the complete tenure of the policy are shared with you before you buy a product. Similarly, the annual account statement, quarterly investment portfolio and daily NAV reporting, ensures that you are aware of the status of your investment portfolio at all times. Most companies publish latest ULIP NAV on their respective websites on a daily basis.
Liquidity
To cope with unforeseen circumstances, ULIPs offer the benefit of partial withdrawal; wherein after 5 years you can withdraw funds from our Unit Linked account, retaining only the stipulated minimum amount.
Disciplined and regular savings
ULIPs help you inculcate a regular saving habit. Also, the average unit costs tend to be lower than one time investment.
Multiple benefits bundled in one product
ULIP is an outstanding solution for risk cover, long term investments with the benefit of various investment opportunities, coupled with tax benefits.
Spread of risk
ULIPS are ideal for those investors who wish to avail the benefit of market linked growth without actually participating in the stock market, with the added benefit of risk-cover.

Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/23/ritikashah11998-34/

Ulip Plan



Tuesday 21 June 2016

ULIPS - To invest or not to?

The economy was booming. India was termed as the next big thing. Real estate peaked. Subprime crisis was at its nascent stage and i-bankers brushed it aside citing bloated 'strong' fundamentals. Signs that the economy was heating up were ignored by investors. Everyone wanted to ride the boom wave and make lots of money. In the middle of all this, an interesting phenomenon was happening in the Indian insurance circle. Its termed as ULIPS (Unit Linked Insurance Plan). Wiki defines it as "A unit-linked insurance plan (ULIP) is a type of life insurance where the cash value of a policy varies according to the current net asset value of the underlying investment assets" It was gaining popularity in this period as liquidity was too high, FIIs were pumping in lots of money into a bubble that would eventually burst a year later. The idea of ULIPs in India brings back memories of UTI launching a mutual fund with tax cover in 1960s. UTI played around with double benefit of Insurance and Returns. It crashed big time once liberalization came into force and others took over. The rest is history
I remember every second friend/acquaintance/relative doubled up as an agent selling ULIPs. I used to get nonstop calls from them promoting the promoting the product as 'never like before' / 'best of both worlds' et al. What was not disclosed is the sky-rocketing charges which would be hidden from you. Let’s dissect and see what this product is all about and why one should look at better options.
Every investment of a prudent investor should always be tied to an objective. Eg. "To generate wealth for my children's' education". ULIPS are meant to be an Insurance product that invests in equities. This violates the very basic principle of investing that "Insurance and wealth generation cannot and should not be mixed". Each objective should have a specific instrument that serves only that purpose.  Insurance is something that should be taken considering the well being of the near and dear after ones' gone and not for the attractive returns. It should not be a hasty decision purely based on investment myopia or some mis-selling pitches. As ULIPs would be the product that would be pushed the most by agents (for higher commissions), be well informed about the instrument and its features
Be wary of the following things before deciding on ULIPs
1. Your agent says that you can exit the product n 3 years and stop all your premium payments and still enjoy the Insurance cover.
Truth- Though it’s true that the policy would be in force, be ready to see your capital erode in lieu of mortality charges/admin charges. Once the corpus is eroded by these charges, only then the policy ceases to exist. You won’t be even able to recover your capital. Also your agent would insist you pay your premiums once a year. Though this doesn’t constitute mis-selling, it increases risk of reduced persistency as paying bulk once a year maybe taxing for the investor that he may stop paying premium. The agent would get his commission anyway :)
2. Promise of Guaranteed returns - Your agent may say that the product returns are guaranteed.
3. Lack of history- As we know, ULIPs are fairly new in the market. There is no proven track.
4. Best Ulip Insurance plan work best only when invested in a time period of 15 years and above. Don’t try to short any ULIPs and expect sky high returns.
5. Be very clear on the admin and other charges. ULIPs typically are front loaded, in the sense that most of charges are upfront. For the first year, the typical allocation would be 50%. Be ready to face it! Read the offer document carefully. Typical premiums break up looks like the one below
This implies that ULIPs may lose its tax shield. Even if it comes under the umbrella of 80C, the sum assured should be atleast 20 times the premium paid, which sadly is not the case with many ULIPs.The typical ratio for ULIPs is 1:5
As we speak, ULIPs today contribute close to 80% of premia in life Insurance sales. Though it’s an encouraging sign that investors look at equity as an investment avenue, it’s disturbing to see the lack to investment discipline that is the heart of investing.

Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/21/ritikashah11998-33/

Monday 20 June 2016

Unraveling the ULIPs: 5 Secrets You Should Know About

Since their introduction in the Indian market a few years back, unit-linked insurance policies (Ulips) have become a lot popular, but for all the wrong reasons. Here, I am not commenting on whether Ulips are good or bad as an insurance/investment product but trying to highlight the fact that among all the financial products Ulips are the most mis-sold (hawked as short term investment and tax saving product). Why? Because we are too pre-occupied either with earning more money or blowing away our hard earned money -- buying that newly introduced iPhone -- that there is hardly any time left for managing the money already earned (which is left at the mercy of the insurance agents or so called financial advisors).
In addition to rampant mis-selling, unit-linked plans are the most complex financial product. So let’s make an attempt to understand some of the unique but little known facts associated with them.
But, first the basics. Ulips are similar to traditional insurance products like money back and endowment policies because they also offer insurance-cum-investment but with one major difference. Ulips offer you market linked investing as opposed to assured returns offered by traditional policies. Put simply, in case of money back and endowment plans, investment risk lies with insurance company whereas in case of Ulips, insured have to bear the investment risk. There are lot many other aspects also (like transparency, liquidity, complexity and control) where Ulips differ from conventional insurance products. Besides, there are many hidden features which are unique to Ulips.
Here is a list of five such closely guarded secrets of ULIPs:
1. Minimum Premium
If you want to invest more than the minimum premium required for a particular sum assured, go for top-ups (additional investment over and above the regular premium) where the allocation charges are usually 1-2 per cent and thus work out to be cost-effective. Furthermore, unlike regular premium, there is no commitment on your part to pay it on regular basis.
So, what’s the way out? You should still go for the minimum premium only and if you would like to invest more, put up to 25% of your regular premium in Ulip as top-up and go for mutual funds for any amount over and above that.
Believe me, it can make a huge difference to your insurance costs and consequently to your returns and no insurance advisor is ever going to tell you about this well-kept secret because your loss is a direct gain to the agent and the insurance company.
2. Asset Reallocation Tool
ULIPs not only offer you to choose your equity exposure (from 0% to 100%) but through the option of fund switches also provide you the flexibility to shift between various fund options as per your convenience.
Thus, it is an ideal instrument to manage your asset allocation between debt and equity. Unlike mutual funds Ulips allow you to do asset reallocation at a click of button with no hassles, minimal/no cost and without any tax implications. Having selected an investment option, say 100% equity, you always have an option to shift to various other plans, say with 50% equity or 100% debt or any other combination.
In my opinion, this flexibility in altering the asset allocation is the best benefit ULIPs offer over mutual funds. Therefore, make the most of this tool but be wary of timing the markets.
3. Expense Ratio/IRR
The best way to compare ULIPs is to look at their expense ratio. It is arrived at by deducting IRR (also called net yield) from gross returns.
Gross Yield/Returns -------------10%
Less Actual returns / IRR ---------7%
Expense Ratio ---------------------3%
4. Type I vs Type II ULIPs
There are basically two types of ULIP plans. Type-I plans pays the higher of the sum assured and fund value to the nominees upon the death of life assured whereas in case of Type II plans both the sum assured and fund value are paid.
It is always preferable to opt for Type 2 policies which are more protection (the core aim of insurance) oriented -- although a bit expensive then Type-I policies due to high mortality charges -- because in case of Type-I policies risk exposure/sum at risk (sum assured minus fund value) keeps on decreasing in the later years as your fund value increases which amounts to having inadequate insurance coverage.
5. Termination/Surrender before 5 years
Like all insurance products, ULIP NAV are long term instruments and therefore it is better not to make an early exit.
As stated earlier, expense ratio is too high (in other words, IRR/net yield is too low) in the initial years. Furthermore, exit costs called surrender charges are applicable in case of early exits. Thus, you should let the ULIPs run their full term unless you are in financial crises.
Although most ULIPs allow full fund value if you surrender it any time after five or six years, it is better not to exit even after the 5 years and to let them run for at least 10 years because longer the policy runs, better the returns.
Furthermore, most ULIPs allow partial withdrawal any time after 3 to 5 years. But it is better not to opt for it unless you are hard pressed for funds.
Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/20/ritikashah11998-32/

Wednesday 15 June 2016

Life Insurance – Look at the BIG Picture!

Here’s a short case study basis the experiences I have had while talking to clients about their thoughts on Life Insurance.
To begin with, let me explain these two terms I have generously used in the article:
ULIP: A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that gives you the benefits of both life insurance and market investment under a single integrated plan.
Term Insurance: Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid to the insured
Case 1: ULIP Boom and Bust
None of us can forget the era when the so called ULIP Boom happened. It was at its peak during the year 2010.
In this period life insurance agents had a field day making promises to clients like- “the money that they invest would automatically get doubled in 5 years” , “all you need to do is pay your premium for 5 years and for the rest of the policy term, the insurance company will pay the remaining amount and still give you huge returns” – the false promises continued so on and so forth.
Was it the fault of the life insurance agent or the customer? I would say both.
It is shocking to note that the customer, who probably haggles with every other vendor in the neighborhood to give him discounts on everyday goods,  never asked any questions when buying a very important thing like Life Insurance and blindly believed whatever the insurance agent told them.
He should have at least asked basic questions like-
Whether they were surely going to get said amount after 5 years, could the agent show the proof?
What charges would be levied on this investment?
Does the plan really guaranteed returns or not?
ULIPs sold like hot cakes in this period, but unfortunately customers who were sold with the dreams of getting double money and other false claims, were hugely disappointed and felt cheated.
Result : Customers stopped believing in ULIPs.
Now days, with the fall in customer’s positive sentiments for ULIPs, life insurance companies have tilted the scale towards Term Insurance Plans.
Case 2: Life Insurance Companies Focus on Term Insurance
A new insurance agent presents a good“Term Insurance Plan” to the same customer who earlier bought ULIPs; but things have changed now.
Customers, who had blindly chosen Ulip Insurance India products without a single question, are now ready with their list of questions. Alas! Only if they understood life insurance and asked pertinent questions.
Instead of asking questions relevant to Term Insurance, the customers asks questions like –
How will I be benefited if the money is received after my death?
If I survive will I get anything?
We often forget that the real meaning of the word “life insurance” is to build an emergency fund for one’s family and support them in case one meets with any unforeseen mishap in life.  It is surprising to note that not only people misunderstand term life insurance but also are reluctant to pay relatively lesser amounts of premium for higher life coverage when compared to other market linked insurance schemes.
Source: Here’s a short case study basis the experiences I have had while talking to clients about their thoughts on Life Insurance.
To begin with, let me explain these two terms I have generously used in the article:
ULIP: A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that gives you the benefits of both life insurance and market investment under a single integrated plan.
Term Insurance: Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid to the insured
Source: http://blogs.rediff.com/bestulipinsurancepolicy/2016/06/15/ritikashah11998-31/