Why Insurance and what is difference in new and old Policies?

Evasai Resources

Tax Benefits in Insurance plans

What is Life Insurance?
Life insurance ensures that your family will receive financial support in your absence. Put simply, life insurance provides your family with a sum of money should something happen to you. It protects your family from financial crises.
In addition to serving as a protective cover, life insurance acts as a flexible money-saving scheme, which empowers you to accumulate wealth-to buy a new car, get your children married and even retire comfortably.
Key Benefits of Life Insurance
Life insurance, especially tailored to meet your financial need. Need for Life Insurance: Today, there is no shortage of investment options for a person to choose from. Modern day investments include gold, property, fixed income instruments, mutual funds and of course, life insurance. Given the plethora of choices, it becomes imperative to make the right choice when investing your hard-earned money. Life insurance is a unique investment that helps you to meet your dual needs - saving for life's important goals, and protecting your assets.

The core benefit of life insurance is that the financial interests of one’s family remain protected from circumstances such as loss of income due to critical illness or death of the policyholder. Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The customer therefore benefits on two counts and life insurance occupies a unique space in the landscape of investment options available to a customer.

Goal based savings: Each of us has some goals in life for which we need to save. For a young, newly married couple, it could be buying a house. Once, they decide to start a family, the goal changes to planning for the education or marriage of their children. As one grows older, planning for one's retirement will begin to take precedence.

Clearly, as your life stage and therefore your financial goals change, the instrument in which you invest should offer corresponding benefits pertinent to the new life stage.

Life insurance is the only investment option that offers specific products tailormade for different life stages. It thus ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage, and hence ensures that the financial goals of that life stage are met.
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Remember: As your doctor gives you the right medicine, in a same way your Financial Consultant suggest the right financial plan for you.
So Before You invest Consult Your Local Financial Consultant authorized by irda
who work To protect the interests of the policyholders.
Contact Authorised Financial Consultant
+91 9823403494
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Importance of Nomination

A nominee is the person who receives the benefits when the policyholder, or the person who buys life insurance, dies during the term of the policy. The nominee is to be appointed at the time of buying the policy and the beneficiary can be changed at any time during the term of the policy.

Life insurance policies are long-term contracts and the benefits are more complicated as they depend on the occurrence of pre-defined insured events. Nomination is the tool by which the policyholder can effectively manage the benefits accruing under a life insurance policy. It is the right given to the policyholder to appoint a person or persons to receive the benefits if it becomes a death claim.

For women, the selection of a nominee is especially difficult and is compounded over the different stages in their lives. For instance, before marriage, a woman is most likely to appoint one of her parents as a nominee. After marriage, she may change the beneficiary to her husband and later to her children.

It is not necessary for the nominee to be a relative. Also, the fact that he may or may not have any insurable interest means non-relatives can be appointed as nominees as they are not likely to suffer any financial loss if the policyholder dies. The role of the nominee comes into play only after the policyholder’s demise, thereby reducing his influence over the latter.

A policyholder can appoint multiple nominees and can also specify their shares in the policy proceeds. The details of the nominee typically include his name, age, address and his relationship with the policyholder. To change the nomination, all that a policyholder needs to do is fill up a standard form, cancel the name of the existing person(s) and replace it with the new one(s).

For women, this is an empowering tool as it helps ensure that the proceeds reach the rightful person after their demise and serves the purpose for which the policy was bought.
Source
Nomination vs Assignment

ULIP investors are still going strong.

Have you invested in the funds through unit-linked plans? If yes, then it's about time to make use of the 'switching' feature, which the plan offers.
Now, if you have been under the impression that ULIPS have been badly hit because of the negative performance of the stock market then you are probably wrong. You might be surprised to know that such has not been the case with market-linked plans. ULIP investors are still going strong.

Advantage of Ulips is the switch feature. This enables the policyholders to adjust their asset allocation between debt and Equity depending on their life stage, risk appetite and the Market conditions.
These swaps can be made any number of times at zero or nominal cost. For instance, if you have just started your career and have 30-40 working years till you retire, a higher exposure to Stocks is good.
But as you approach retirement, your risk appetite may decrease and so should your Equity exposure.
To help the customers, especially housewives who are not financially clued in, understand the complexities of Ulips, Irda, the life insurance regulatory body, has laid out strict guidelines

Allocation of funds to equity and debts

Allocation of funds to equity and debts

Two methods:

1) Weighted average PE Ratio of Nifty or Sensex,

At higher PE Ratio levels, Reduce your exposure to equity and at lower PE Ratio levels increase your exposure to equity.

We have more exposure to equity when the market is cheap.

2) Term of the policy.

The longer the term to maturity in years, the higher the exposure to equity.

PE is price to earnings ratio

EPS is earnings per share

PE of a company = Market price / Earnings per share

Find PE Ratio of Nifty or Sensex at bseindia.com or nseindia.com

Donot leave it to the insurance agent to identify the product that best suits your needs. I have come across many insurance agents who are more interested in thier commission than your interests. So do your home work before buying a policy.

No one product will suit the needs of every person

No one product will suit the needs of every person. One will need to identify what his priorities/needs are and then select a product that will meet his needs.

1) If ones priority is mainly investments(return on investment) with insurance cover, then one needs to opt for a good ULIP with less charges and good returns.(Recommend: SBI, HDFC)

2) Guaranteed Returns: Recommend: Traditional endowment plan from LIC.

3) Maximum Insurance Cover with Returns: Regular ULIPS. (Reliance, Bajaj Allianz, ICICI which offer sum assured of 100 times the premium.)

4) Maximum Term(Whole Life): If your priority is to have insurance cover for the rest of your life without any age restrictions, then "Whole Life" ULIPS should suit you best.

5) Childrens Education: Childs Education/Marriage" (Recommend Children's ULIPS. IHDFC Young Star and ICICI Smart Kid or a children's ULIP from any company.) In my opinion, these are very well designed ULIPS which offer excellent security for your kids future. Incase anything unfortunate happens to the proposer, these plans offer immediate "Sum Assured" to the beneficiary. If it is for your Children's future, please donot go for anything less than a Children's ULIP.

6)High Sum Assured with small premiumP: Recommend "Term Plan" of companies like LIC, ICICI and HDFC and checkout which term plan works out to be the best.

ULIPS OR MUTUAL FUND

ULIPS are best suited for those who seek insurance cover. If a person is not interested in "Insurance" and is mainly interested in "Investing", then he is better of investing in "Mutual Funds". This will help him avoid unnecessarily paying the "Mortality Charges" associated with ULIPs. You might run across insurance agents who might project ULIPS as a very good avenue for investment based on the last two to three year returns. But before you fall into the trap of an insurance agent, always ask yourself "Do you need Insurance Cover". Invest in ULIPS only if the answer to the above question is "YES". ULIPS are a good avenue for investment ONLY for those who also seek "Insurance Cover".

Financial predators or financial advisors

Avoid becoming a victim of financial predators

(Victims of misselling)

Understand the PRODUCT:-

Prior to investing anywhere, I always advise everyone to first understand the PRODUCT. Be it mutual funds, ULIPS, traditional endowment plans, shares, futures and options, post office Small Saving Schemes, one needs to understand how these products work. Spend as much time as possible in understanding the product. Do your home work, research on the internet and use any other source that is available to you.

Understand RETURNS and RISK:-

Once you have narrowed down on the product, evaluate the returns that can be expected from the product. Next understand the RISK associated with the product. Evaluate if your stomach can digest the risk associated with the investment product.

Understand the CHARGES and BENEFITS:-

Once you have decided on the product to invest, the next step is to evaluate the benefits and charges of the product. One needs to have the patience to read the product brochure to understand the benefits and charges. Evaluate if you are willing to pay the charges for the benefits provided. Not evaluating the charges is one major reason for discontent.

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Not understanding either the product or the risk or the returns or the charges or a combination of all of the above is one major reason why one ends up buying the wrong product.

Fund Management charges are the most important charges for long term investments

Impact of the following charges on overall returns in insurance
1• Loading Charges
2• Admin Charges: This is the charge for handling paper work and other miscellaneous back office expenses.
3• Fund Management Charges: This is a fee charged for managing your investments. It is usually in the annual interest range of 0.75% to 2.25% depending on the fund you choose to invest in.

Comparison of these three policies
• Bajaj Allianz Unit Gain Plus
• HDFC Unit Linked Endowment Plus
• ICICI Lifetime Plus

Loading Charges
HDFC - 60% first year
Bajaj- 24% first year
ICICI- 25% first year

Admin Charges
HDFC - Rs.240 per annum
Bajaj- Rs.240 per annum
ICICI- Rs.720 per annum

Fund Management Charge
HDFC - 0.80%
BAJAJ- 1.75%
ICICI- 1.50%

For an Investment amount of Rs.24,000 per annum assuming an annual return on investment of 10%, the following is how the returns look like

Investment Time Frame - 5 Years
Best Returns - BAJAJ (7% more than ICICI)
Second Best - HDFC (2% more than ICICI)
Last - ICICI

Investment Time Frame - 10 Years
Best Returns - HDFC (5% more than ICICI)
Second Best - BAJAJ (3% more than ICICI)
Last - ICICI

Investment Time Frame - 15 Years
Best Returns - HDFC (8% more than ICICI)
Second Best - BAJAJ (1% more than ICICI)
Last - ICICI

Investment Time Frame - 20 Years
Best Returns - HDFC (12% more than BAJAJ)
Second Best - ICICI (0.5% more than BAJAJ)
Last - BAJAJ

Investment Time Frame - 25 Years
Best Returns - HDFC (16% more than BAJAJ)
Second Best - ICICI (2% more than BAJAJ)
Last - BAJAJ

For an investment time frame of 5 years, Bajaj Allianz Unit Gain Plus seems to offer the best returns. For any investment time frame of 10 years to 25 years, HDFC seems to offer the best returns.

Regarding charges, on the long run, Fund Management Charges have the most significant impact on performance. You will notice the gap in returns between HDFC and other widening as time passes(inspite of 60% loading charge). This is because it has the least FMC. Even ICICI which offer slightly better fund FMC than Bajaj has been able to surpass the returns of Bajaj Allianz Unit gain plus on the long run.

CONCLUSION
Fund Management charges are the most important charges for long term investments. Chose a ULIP product that has the least fund management charge to maximize your returns.