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Bursting the myths about insurance


There are several myths shrouded around insurance that it is difficult to peel off these myths even today and people often shy away from insurance because of the misconceptions and prejudices that are either non-existent or may once have plagued insurance field but not in the present digital world.

“No one wants to think about dying or how it will affect your loved ones, but a policy could mean that no one else ends up encumbered with your debt,” Feldman says.

We understand that insurance may not be the most exciting financial topic and few people who have all their financial needs sorted out may not need insurance, but this post is to make sure that your decision on insurance is a well-informed one and not based off a myth about insurance. Below are some of the common myths about insurance:

1.      I’m single as pringle. Why would I need insurance?

If you’re single and don’t have any mortgages to leave unpaid if the worst happens to you, you probably won’t need insurance. Even if that is the case, putting together a simple funeral may cost a lot, given that even a coffin costs anywhere from 3,000 to 30,000 rupees. You may also want to consider the credit cards debts and unsecured loans that might fall on your next of kin’s shoulders if you’re not around to pay them back. Besides, it may be wise to purchase insurance when you’re young, when it’s easy and affordable, rather than getting insured when you’re old when it becomes pricier and sometimes uninsurable due to medical issues.

2.      Insurance is expensive!

Expensive is a relative term. What might be affordable to you, can be expensive to many. So, depending upon your income, you are sure to find an affordable insurance from the numerous options available. There’s no one-size-fits-all insurance. You can skim through the dozens of insurances available and choose the one that cater to your needs at policytray.com.

3.      Choices, choices everywhere!!

One could easily get baffled at the sheer number of options available. One might not have the time and expertise to read through all the insurance ever available and choose the perfect one. Instead you can opt for platforms such as ours which makes your job easy and gives you the best options for you.

4.      It is difficult to claim insurance

Unless you’re making a fraudulent claim, you’ve nothing to worry about when it comes to insurance claims.

5.      Old people won’t need insurance

The primary purpose of life insurance is to replace the future income of a primary breadwinner. Two groups most likely to need it are middle-aged couples saving for retirement and parents of minor children - Forbes

Probability of dying is even greater when you’re old and insurance is almost vital when you’re an aging primary breadwinner of the family. Also, with increase in age, you’re more susceptible to health problems.

6.      I am a stay-at-home parent. Why would I need insurance?

A stay-at-home parent plays multiple role at home, serving as housekeeping, cook, laundry and grocery shopping – in short functioning as CEO at home. It can be very easy to overlook the financial contributions of a work-at-home spouse—that is, until the person is gone.  If you or your spouse decides to remain at home to take care for your children, don't forget that the contribution of the stay-at-home spouse can equal tens of thousands of dollars a year. The loss of value that accompanies upon losing a parent is irrevocable, but the financial hardship that entails the loss can be prevented by purchasing insurance.

7.      Investing is better than insurance

Some of the benefits of getting insured over investing are: you get a tax deferred growth; you can borrow against the cash value to buy a house or marry off your kids, without paying taxes; you will be covered in case you fall terminally ill; you will be covered till your death or as long as you pay the premiums.

8.    Insurance coverage at work is enough. Don’t need no more!

You may not be satisfied with the employment coverage due to many reasons: the plan may not cover your spouse enough, you may have had an increment which doesn’t carry on with the insurance or you may want a much higher or a cheaper insurance than the one that is being currently provided. Most importantly, it is wiser to go for an individual insurance over employment coverage as you’ll lose the insurance once you employment situation changes.   

Various modes of Digital payment


As India is moving towards a cashless economy, many developments are being made to promote digital payments. To achieve this we need to reach out to rural areas, where the knowledge of using digital transaction is lacking. Indian economy can become completely cashless, if and only if the rural India gains knowledge to use digital payments.

Now the question arises as to what different types of digital payment modes are there? Let’s look into the different types of payment modes:

1.     Aadhaar enabled payment system (AEPS): You only need your Aadhaar card or the aadhaar number for AEPS. This type of payment can be done in micro ATM or bank. You need to select the type of transaction and the bank and give your finger print for authentication and get the slip on completion of payment. With AEPS you can do

a.      Account balance

b.      Aadhar to Aadhar fund transfer

c.      Cash withdrawal

d.     Cash deposit

e.     Purchase at Fair Price Shops with AEPS

 

2.     Unified Payment Interface (UPI): You need a SMART phone with internet facility for UPI. Download the APP (bank or third party). Choose your unique id (aadhar, mobile no.) as virtual payment address (vpa) and select the bank. Give the bank details (for the first time). Set the M-PIN for transaction. Now you can send money and collect money on demand. You can pay your bills through UPI by scanning QR code provided by your retailer or accepting the demand request sent by your retailer. To know more on AEPS and UPI click here.

 

3.     Credit cards/Debit cards: This is one of the easiest modes for payment. You can buy anything anywhere and how much ever you want, within the card limit. How to use it? Simple! You just need to swipe-in the card in the swiping machine or the EDC or the POS machines.

Credit card varies from debit card. Debit card allows you to spend the money which you have in your bank account. Whereas credit card allows you to borrow money, up to a certain limit from your card provider. The only problem is the safety of the card. Anyone can use the card if lost.

4.     Payment banks: Payment banks were authorized by RBI and are effective from November 2014. These are just like banks but restricted to receiving deposits only. From these payment banks you can pay for your bill, do recharge, etc. They also give interest for the money deposited. You can only deposit up to Rs. One lakh in these payment banks and not more than that. To know more about payment banks click here.

 

5.     Internet banking: Payments through internet banking is also one of the ways. Here you are redirected to your online banking portal and from there you can pay the bills or recharge, etc.

The only offline method for digital payment is through the usage of credit/debit cards. But why is this not widely used?

The reason being the requirement for using the card that is, you need EDC or POS machine for swiping the card. Can a roadside/platform vegetable vendor afford to have POS machine? Or other small scale business men afford the POS/EDC machine?

Paytm has come up with an idea with which even a small scale vendor can go cashless!! Paytm has introduced a new payment method which does not require internet connection.

6.     Through toll free number: Paytm has introduced payment through toll free number. How can this be done? First you need to be registered with paytm. This can be done through mobile APP or in the paytm website. Second, after registering your mobile number with the paytm, call 1800-1800-1234 from the registered mobile number and set a 4 digit paytm PIN which will be used for the transaction.

            Now for payment, you need to enter the recipient’s mobile number, amount and your Paytm PIN to successfully transfer the money from your Paytm wallet to another Paytm wallet.

Where does your Tax money go?


Many of the people don’t know the use of paying taxes. The people don’t know how or where are these collected tax money goes? Also they wonder as to why they should pay tax when they do not get any direct benefits. Do they get or do they not?

Many of us have a gist as to what happens when we don’t pay tax and thus many try to exploit the loop-holes present in the tax payment system. Now the next question is who are the people refraining from paying necessary tax? Is it the common man or a business man or the corporate! What are the odds of these people paying the exact tax amount for their actual earning?

Do these people realize the consequence? Maybe, Maybe Not! Do you know of the consequence? To sum up the consequence we can say that the government may go into debt for spending more than what they receive. They may think why should they care if the government goes into debt? It’s not their concern is what many think. But on a long run they will be forced to make it their concern. How so?

Well for that we need to understand why and how the tax money is been spent?

The expenditures made by the government are:

1.     NON-PLAN EXPENDITURE

a.     Revenue expenditure



b.     Capital expenditure


2.     PLAN EXPENDITURE

a.     Revenue expenditure



b.     Capital expenditure


What does the expenditure cover? It mostly covers the need for Social Services like Education, Health, Broadcasting etc., Economic Services like, Agriculture, Industry, Power, Transport, Communications, Science & Technology, etc. , pension, police, defence services, loans to state and union government, etc.

Some of the expenditure in the year 2015 on

A.    NON-plan expenditure are:

1.   Interest Payments and Prepayment Premium – Rs. 4,42,620 crores

2.     Defence Services – Rs. 1,43,236 crores

3.     Subsidies –Rs. 2,57,801 crores, Etc.

B.     Plan expenditure

1.      Central Plan – Rs. 1,33,245 crores

2.     State Plans – Rs. 1,96,051 crores

3.     Union Territory Plans- Rs. 5,708 crores, Etc.

For detailed Expenditure of the government Click here.

To know the expenditure in a gist Click here.

The revenue receipts shows how much the government got for that financial year from the tax. It differs from the budget plan outlaid. To know more on Revenue receipt Click here.

These are expenditures for the development of our nation and thus we develop along with the nation.

From these documents what we can see is that the government spends more than what it receives. Pretty obvious huh! So to reduce the debt, the government is trying it’s hardest to bring out the unaccounted money and is making plans and rules to fill in the loop-holes of tax payment system. So let’s help the government and ourselves by paying the exact tax amount for our true income.

JAI HIND! JAI BHARAT!

Airtel Payment Bank – How is it different from a conventional bank?


Airtel became the first payment bank to be operational in India. RBI has announced licenses for 11 entities in July 2015 as payment banks. Airtel started its operations from Rajasthan through its customer support center’s Airtel Express. Airtel will spread the operations, phase by phase to pan India by March 2017.

What are Payment Banks?

RBI has formed a committee headed by Nachiket Mor in September 2013, for recommendations to ease banking system and make banking system more convenient. Recommendations included formation of “Payment Banks”.
Payment banks work similar to banks, but without assets. Payment banks were authorized to take deposits, but restricted from giving loans. Initially payment banks can take maximum of Rs.1 Lakh as deposit from a customer. The limit will be revised after 18 months of operations.

 

Key Takeaways:

1.     Any individual with Aadhar number can open a payment account, even if the customer is not an Airtel Subscriber.

2.     Account enrollment being paperless, customer need to provide Aadhaar number with finger prints to open an account.

3.     Account will be opened within an hour based on the facility limitations.

4.     Payment banks can issue ATM, Debit cards for withdrawal of money. But, Airtel Payment bank initially abstained from issuing them.

5.     Max limit of Airtel payment bank is Rs.1 Lakh. Deposits and withdrawals can be done from any Airtel Express showroom. Currently operational only in Rajasthan.

6.     Current accounts along with savings accounts can be taken.

7.     Airtel payment bank provides 7.25% interest rate on deposits which is very high compared to conventional banks. Most of the Public sector banks pegged interest rates to 4%, which private sector banks like kotak offering 6% with deposits more than Rs.1 lakh.

8.     Loans and credit cards are restricted to be issued from payment banks.

9.     11 firms were announced eligible as payment banks out of 41 applicants. Out of these, three have surrendered their licenses. First one being "Chalomandalam Distribution Services", then "Dilip Shanghvi, Sun Pharmaceuticals" and the latest, "Tech Mahindra".

List of entities with payment bank license:

1.   Aditya Birla Nuvo

2.   Airtel M Commerce Services

3.   Department of Posts

4.   FINO PayTech

5.   National Securities Depository

6.   Reliance Industries

7.   Vijay Shekhar SharmaPaytm

8.   Vodafone M-Pesa

Where shall we use Old 500 and 1000 notes?

While 1000 Rupee old notes are restricted from usage everywhere, only 500 Rupee old notes can be used to avail necessary services. This usage will be applicable till 15th December 2016, until new set of rules were announced.


Given below is the list of services availed by Old Rs.500 notes:

1.     Mobile pre-paid recharges up to Rs.500 per transaction.

2.     Consumer Cooperative Stores for purchases till Rs.5000 at a time.

3.     Government hospitals and Pharmacies.

4.     Government run Milk booths.

5.     Petrol pumps

6.     State and central government bill payments.

7.     Utility bill payments like water and power bills, along with arrears payments are acceptable.

8.     Toll gates from 3rd Dec 2016 to 31st Dec 2016. Toll gates are free for usage till 3rd Dec.

9.     Railway/Metro rail/Air ticket booking at the counter.

10.   Railway Catering services

11.   LPG gas cylinders

12.  Seeds at state-owned outlets

13.  Entry tickets of monuments under Archaeological Survey of India

14.  Payment of School fees up to Rs.2000 per student in Central Government, State Government, Municipality and local body schools.

15.  Foreign citizens can exchange up to Rs.5000 per week

16.  Payments towards court fee.

17.   Crematoria and burial grounds

List of RBI counters where left out Rs.500 & 1000 can be exchanged


Below are the list of RBI offices where you shall change the left of Rs.500 and Rs.1,000 notes which are available with you:

RBI Zonal offices: 
1. North Zone – Delhi
(6, Sansad Marg, New Delhi - 110001, India. Tel: +91 11 23710538 to 42)
2. East Zone – Kolkata (
Netaji Subhas Road, Kolkata-700001, India. Tel: +91 33 22312121)
3. West Zone – Mumbai (
Dr Ambedkar Rd, Railway Chawl, Parel, Mumbai, 400012,  022 - 22603000)
4. South Zone – Chennai (
Fort Glacis, No - 16, Rajaji Salai, Chennai – 600001. 044 – 25399222)

RBI Regional offices:

1.     Ahmedabad (Near Gandhi Bridge, Ahmedabad. Tel: 079-27543057)

2.     Bangalore (10/3/8, Nrupthunga Road, Bengaluru - 560001. Tel: +91 8022212789)

3.     Bhopal (Hoshangabad Road,P.B. No.32, Bhopal - 462011. Tel: +91 755 2550233)

4.     Bhubaneswar (Pt.Jawaharlal Nehru Marg, P.B.No. 16, Bhubaneswar - 751001. Tel: +91 6742391070)

5.     Chandigarh (Central Vista, Sector 17, Chandigarh - 160017. Tel: +91 1722784103)

6.     Chennai (Fort Glacis, No - 16, Rajaji Salai, Chennai – 600001. 044 – 25399222)

7.     Delhi (6, Sansad Marg, New Delhi - 110001, India. Tel: +91 11 23710538 to 42)

8.     Guwahati (Pan Bazaar, Station Road, Guwahati - 781001. Tel: 91 3612540256)

9.     Hyderabad (6-1-56, Secretariat Road, Saifabad, Hyderabad - 500004. Tel : +91 (40) 23237982-87)

10. Jaipur (Rambagh Circle, Tonk Road, Jaipur - 302052.Tel: +91 1412563794)

11. Jammu (Rail Head Complex, Jammu - 180 012. Tel: +91 1912472451)

12.    Kanpur (Post Box No. 82/142, M.G Road, Kanpur - 208001. Tel: +91 5122305949)

13.    Kochi (Ernakulam North, Kochi - 682018. Tel: +91 4842400985)

14.    Kolkata (Netaji Subhas Road, Kolkata - 700001. Tel: +91 33 22312121)

15.    Lucknow (8-9, Vipin Khand, Gomti Nagar, Lucknow - 226010. Tel: +91 522 2307950)

16.    Mumbai (Fort, Mumbai - 400001. Tel: +91 22 - 22603000)

17.   Nagpur

(Main Office Building: Dr. Raghavendra Rao Road, Civil Lines, P.B.No.15, Nagpur - 440001. Tel: +91 712 2806300.

Additional Office Building: East High Court Road, P.B.No. 118, Nagpur 440001. Tel: +91 712 2806600 ).

18.    Patna (South Gandhi Maidan, Patna - 800001. Tel: +91 612 2323291)

19.    Thiruvananthapuram (Bakery Junction, P.B No.6507, Thiruvananthapuram - 695033. Tel: +91 471 2329676)

 

RBI Sub-Offices:
1.
Agartala (Old Municipal Road, 2nd Floor Jackson Gate Building, Tripura West, Agartala. Tel: +91 381 2381071)

2. Dehradun (74/1, Rajpur Road, GMVN Building, Dehradun - 248001. Tel: 0135-2742455)

3. Gangtok (Tseyang Dzong, Amdo Golai, NH-31 A, P.O. - Tadong, Gangtok -737102. Tel: +91 3592281118)

4. Panaji (7th Floor, Gera Imperium-II, Patto, Panaji - 403001.)

5. Raipur (Subhashish Parisar, Satya Prem Vihar, Sundar Nagar, Raipur - 492013. Tel: +91 7712242321)

6. Ranchi (R.R.D.A. Building, Pragati Sadan (4th Floor), Kutchery Road, Ranchi - 834001. Tel. No: 0651-2210509)

7. Shillong (Apphira Building, Fruit Garden, Shillong-Jowai Road, PO - Laitumkhrah, Shillong - 793003. Tel No: 0364 2501835)

8. Shimla (40, SDA Complex, Basement - 1, Kasumpti, Shimla - 171009. Tel: 0177-2629108)

9. Srinagar (Srinagar office, Amir Manzil, 1-C, Rajbagh, Srinagar - 190008. Tel No. 0194 2312685)

10. Aizawal (F. Kapsanga Building (3rd Floor), Opposite Assam Rifle Gate, Dawrpui, Aizawl, Mizoram – 796001)

     11. Imphal (Opp. Manipur Legislative Assembly, Lilashing Khongnangkhong, Imphal (Manipur) – 795001)

Backdating life insurance policy


“Backdating” is a concept of changing policy start date to earlier date than current date during policy inception. This is allowed with most of the insurers along with LIC. This was not illegal. Take auto insurance, for example: if you backdate your car insurance policy so that it says you were covered for an accident you had the month before you actually bought the policy, you’ll be committing fraud. You do not want to backdate your auto insurance policy.

Life insurance is different because by making your policy retroactive by a short period, the insurer isn’t taking on any more risk. It’s unlikely that you actually died last month and are faking being alive today so you can cash in on a death benefit.

Backdating the policy has its own benefits.

1.     The policy will mature earlier than normal policy.

2.     Tax savings can be covered without paying lump-sum amounts. Moreover the backdating charges will be nominal in nature.

We will understand backdating using simple illustration:

Consider, Mr. Ramesh wants to take LIC New endowment plan in Dec 2016.He is looking for investment plan, which can also give tax savings. LIC New Endowment plan would be best fit according to his requirement.

Consider the below details.
Sum Assured: Rs. 10Lacs
Policy term: 20 years
Monthly premium: Rs. 4200

If he purchases plan without backdating, he can get Tax exemption for 4 months (December-March) for Rs. 16,800 (Rs.4,200*4).

Now, if he backdates policy till April 2016.He can get tax exemption for Rs. 50,000(Rs.4,200 * 12).

Remember that backdating can be done only till start of current financial year (i.e. April). For backdating till April 2016, Ramesh needs to Pay last 8 months due as one-time payment with nominal backdating charges and resume the policy in his preferred payment mode either monthly, yearly, half-yearly or annually.

By backdating the policy, he will save the tax and policy will get matured in April 2036 rather December 2036. By this the bonus amount added will also be higher compared to normal policy.

LIC and most of the insurers have standard procedures and nominal charges for backdating, Most of the insurers encourage customers especially, during last quarter (Jan-Mar), which constitutes of majorly tax planning customers.

Factors to be considered before purchasing Investment Plans

Investment policies need a lot of study before purchase unlike term insurance products where we shall arrive at the purchase decision by just taking a few factors into consideration. Any investment policy has to be selected based on our requirement. This requirement can be identified by profiling. Profiling is listing out the financial details such as annual income, investment, other sources of income and loans. These details need to be kept side by side with the financial goals for the next 15 - 20 years. Now, a conclusion can be drawn on how much investment to be made and what is the required corpus.

After deciding the premium and corpus required, we can start browsing for investment plans which will fit our requirement.

Key elements to be considered, while purchasing investment Plans
1. Premium payment term:
Premium payment term, will decide the maturity returns that we would receive at the end of the investment period. Longer payment period is advised for people looking for high returns with low premiums. Otherwise, lower premium payment term with high premium rate is recommended for short term investors.

2. Policy term:
Policy term is to be aligned with the future goals. A 35 year old person who wants to retire at 55, needs to take a policy for 18 year only. This 2 years will give a chance to modify his plans or plan for next 10 years, if any contingency occurs.

 
3. Bonus rate/ Loyalty addition:
Bonus or loyalty addition will constitute the major chunk of returns. So, bonus/ loyalty addition should be high in order to yield better returns. These additions are generally announced every year, which will vary based on company’s performance. The bonus/ Loyalty history of the respective insurer have to be checked to get a fair idea of bonus rates further.

4. Money backs:
Some policies offer money backs, which will be given in regular interval of time till the policy term ends. Money back plans are good option if your financial status is instable. These plans will give less returns compared to other plans, as returns are being provided in multiple trenches before policy term ends. Still these policies are worth purchasing considering “Time value of money” (Value of money today is higher than value of money tomorrow).

 

5. Insurance cover:
All the investment plans from insurance companies will have life cover as their default feature. As the target is insurance, most people bat an eye for insurance part. But, insurance coverage part should be considerable enough to cover family financial security.

6. Lock in period:
Lock in period is the time the premium needs to be paid before the policy can be surrendered. This will be 3 years in most of the products, but will vary. Lock in period needs to be as low as possible, in order to close the policy if case of contingency.

7. Surrender value:

Policy when surrendered after lock in period needs to get high value rather than ending up with minimal returns. Agents won’t specify these details, because agents are not co-operating in surrendering policies, due to commission they are lose if a policy is surrendered. To check this issue policies can be purchased online from platforms like insurance web aggregators. This will simplify the process, make it transparent and provide hassle free customer service. 

By taking into account above factors, purchase decision of investment policy has to be done. This will ensure successful purchase and better returns.


Things to be noted before buying Insurance

Insurance is a complex product - this is perception of insurance illiterates. But, a little study about insurance products will help you overcome this perception. Still some health insurance products are complex due to long list of terms and conditions. Investment products are as simple as banking products, adding insurance part to it.

Insurance is an ocean, which takes different rivers into it. Insurance had different type of products based on customer’s requirement.

Most sold products are term insurance and investment products (tax saving).

Here are the things to be checked for term plan:
1. Insurance Company vintage

The insurance market was opened for private players only in the year 2001. The first private player in insurance was HDFC Life. The companies which had survived for longer period have obviously performed well. So, choosing an older company will give heads up due to wider network and better service.


2. Settlement ratio
This is the most crucial point to be noted to make a purchase decision. Settlement ratio defines the no. of death claims successfully settled by the insurance company out of 100 claims. HDFC has 96% of claim settlement ratio, which is the top most in private segment and Aegon life has 95%, which means out of 100 claims due to death, HDFC have made payments for 96 and Aegon life has made payments for 95 people respectively. It is advised to choose companies which has minimum 94% settlement ratio.


3. Premium rate
Premium rate is to be considered after taking features into account. If two or more products are matching our requirements, then premium rates should be given preference. Some insurers provide multiple payment modes, this will help in refining out insurance company.


4. Settlement time
This is not specifically mentioned by any insurance company. This needs to be understood by speaking with agents and existing customers of the respective insurers. This will hold the key, as death of a policyholder will lead to a financial distress which needs lump sum to clear out the issue. If the settlement is faster, things can be sorted out immediately. But, if the settlement is late, chances of a family suffering financially are high.


5. Exclusions

Customers go forward signing up with websites without reading terms and conditions. Purchasing Insurance needs attention. Terms and conditions needs to be read carefully or should be clarified by agents in detail. Exclusions will puzzle you during the claims, if this exercise was not carried out while purchasing the policy.


6. Channel of purchase
Many won’t consider this as a crucial part for purchase decision. But, this will make a huge difference in case of service request. Insurance purchased from a bad agent or wrong channel will start effecting when you need any change in payment mode, address change and nominee change. Insurance should be purchased only from a channel which ensures 100% customer support throughout your policy term with a clause “no questions asked”. 

If you are an insurance novice, Check this !

LIC has been modifying their portfolio aggressively since the last decade due to fierce competition from private insurance companies. This has lead to unavailability of policies, even when they are successful. Jeevan Saral was one of the most successful LIC products in the last decade, which was shelved by December 2013 due to product restructuring as the new guidelines from IRDA. People who get an idea to purchase an insurance product, will immediately have a word with their relative or friend who already have an insurance policy with them. If the response is positive about the product, we try to purchase the same product, even without checking our requirements. This is the very common mistake most of naive insurance enthusiasts commit.

To avoid this, consulting an agent or online insurer would help which will give you an insight based on your profile.

Before consulting an insurance advisor, prepare a profile sheet with following details:
1. Age of self, spouse, children and parents.
2. Annual income of self and spouse.
3. Investments or EMI’s being paid.
4. Existing Loan details
5. Targeted retirement fund
6. Financial targets with timeline.

This will be useful for a genuine insurance advisor to gauge your current financial status and give a clear idea over your financial goals. Most of the insurance agents unilaterally go for few policies such as Jeevan Anand, without understanding customers’ profile. Any insurance agent suggesting a product without asking details need to be avoided, as the products he/she suggests may not meet your requirement. An expert insurance agent will interrogate for a minimum of 5 minutes, which will give him idea what customer is expecting through policy. Only then, he/she will be able to suggest products that will suit us and our family.

ULIPs, the new way of investing

General population has a wrong perception about insurance. This wrong perception is – NOT to take an insurance policy until something seems life threatening. Insurance is a product which is sold mostly on word of mouth rather than expensive marketing. The benefits of an insurance product will be invisible till some mishap occurs. So, marketing would not create a compulsion to buy an insurance product. But the reference from relatives or friends will have a major impact on the purchase decision. This will lead to enquiry of products, but the inclination will be towards the product purchased by the friend or relative. This inclination will lead to purchase of a wrong insurance product, as the person ignores his requirements and go with a wrong product.

                To make the right purchase of insurance products, a better study of insurance products available in the market based on our requirements is a must. But with 54 life and non-life insurance companies available in India with 1000+ products, this decision making will be tedious and tiresome. The friend or relative who had referred you will be helping you handy in this situation. Contacting the insurance agent and explaining your requirements will boil down your decision to a specific insurance product. The segment indicated by the insurers like Investment, Children, Pension or Term insurance should be enquired in multiple companies. This might be time consuming but not an indefinite task and the result is worth the effort.

                ULIPs (unit Linked Insurance Products) are new breed of insurance products, which combine investment objective and insurance for high risk profile customers. Initially, customers will face issues in understanding these products, as it is a typical financial product. This is a mutual fund which gives an option of equity, debts in which a minimum of 1/8th of the premium needs to be invested. This investment decision of proportioning into equity, debt or balanced funds has to be decided by the customers. Fund managers will be available with all ULIP sellers to help the customer in making these decision. Customers will feel this investigation as time expensive. But the returns from most of the ULIPs are worth the time spent.

Why investing in insurance is a Smarter Choice?

Many youngsters after settling down in their late 20's or early 30's, start thinking over investment options. With increase in the upper middle class, the investment segment got a huge push in the last decade. This segment is set to grow multifold in the next 2 decades with India’s GDP growth rate expected to be at 8% for a minimum of atleast next 5 years. Our previous generation started evaluating their investment options only in late 40's because of their settlement age being the late 30's. But with raise in service sector, the settlement age of individuals got pushed down to late 20's of early 30’s. This early settlement gave extra buffer to carefully evaluate various available options before investing.

Buffer time gave raise to investing in riskier segments like stock markets which were handled only by full time investors earlier. Financial sector which used to be a rich class affair, now has become a middle class part time job due to hybrid financial products like mutual funds and ULIPs. The wider financial portfolio to park their income has led them to greater confusion. This needs to be solved by carefully examining the available funds, risk, target of investment and available investment options.  All the earning class need to invest in insurance not only to secure their family from financial instabilities but also to gain better returns based on their risk appetite. For a low risk taking customer, fixed deposits and recurring deposits would be luring. But insurance can provide them better returns with assured financial security for family. In a developing country like India, the GDP growth rate should be constantly clocking 7% plus to make it a developed nation. To attain this status, RBI needs to cut bank rate constantly so that economic activity gradually improves. To keep the growth rate intact, base rates will be reduced and Fixed Deposit (FD) rate may reach as low as 4% within 5 years. From January 2016 to October 2016, base rate of banks were down from 7.75% to 6.25%. This will be directly reflecting in banks’ lending and borrowing interest rates. This will also impact the FD and RD rates of customers who are opening new FD & RD accounts. Though the FD and RD rates won’t be changed for the existing customers, customers will face the heat during renewal. The reduction of interest rate by 1.5% within 10 months is just a starting point for rate cuts and it would continue. The customers who think of investing in FD’s or RD’s which are poised to provide you only 5.5% to 6.0% will be a concern even for the low risk customer segment. But most of the insurance products deliver 7% interest rate along with life cover. People who invest in FD’s have the money locked in it only for 5 years. Those who open new FD accounts in future would get less than 4%. This is only half of the returns provided by most of the traditional insurance products. Insurance has become a smarter choice over banking to investment due to base rate cuts which is being done every quarter since 2014.