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Insurance etymologically and historically has been a byword for risk sharing and management with people assailed by and facing the same risk contributing a premium that is a minuscule fraction of the potential loss arising out of the risk to the insurance company.The premium is fixed in such a way that the insurer made some profit at the end of the day after meeting claims which itself is in the realm of probability based on past experience and aggravating risk factors.In a way, therefore, insurance and mutual fund investments have at least one thing in common — sharing and spreading of risks — although on different sides of the income statement with mut
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The proposal to cap surrender charges may ensure buyers get back some — just some — of their investment.Last week, the Insurance Regulatory and Development Authority (Irda) put up draft proposals fixing surrender charges for unit-linked insurance plans (Ulips) and the revival period for lapsed polices on its website.Irda proposed that surrender charges be capped. For policies of less than 10 years, the charges might be capped at 2.5-12.5 per cent of the fund value in the first five years. For policies with tenures of more than 10 years, the charges could be fixed at 2.5-15 per cent of the fund value for the first six years. After the fifth (for policies
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Private life insurers in the country are lucky that the recent Sebi ban on unit-linked insurance plans (ULIPs) was cancelled. They would have lost almost half their businesses if the market regulator’s ban on 14 insurers from raising funds through the investment-cum-insurance product.That is because Ulips constitute 46% of the total business in the life insurance space. “Ulip has taken a prominent place in the global insurance market and India is not far behind. It has become the growth engine over the years in the Indian insurance market,” said Rajesh Relan, MD of Metlife India.Of Rs 2,00,000 crore-plus life insurance premium collected in the firs
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Insurance companies have traditionally offered guarantees on their products through bonuses or loyalty additions. But the market correction of 2008 has opened the gateway for “guaranteed NAV” products under unit-linked insurance plans. These plans typically guarantee the investor the highest NAV (the guarantee is not on returns) on the fund in the initial seven to eight years and manage to deliver this through a hybrid structure that uses debt and equity investments.LIC's Wealth Plus is the latest entrant to this genre. It guarantees the highest NAV over the first seven years or the NAV at maturity, whichever is higher. The policy term is eight years
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One reason why individuals are reluctant to buy pure-term insurance cover is the thought of shelling out premium and not earning any return on the ‘investment’ . Then there are investors who are keen on building a retirement corpus, but do not have the resources to buy an endowment plan.Such policyholders could possibly look at convertible term plans that can act as the middle ground between pure protection and investment objectives. Such policies necessitate premiums that could fall somewhere between that of pure protection plans and endowment policies.Convertible term plansUnder such plans, a policyholder who has signed up for a simple term insurance c
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Taking extra caution, insurance regulator, Insurance Regulatory & Development Authority (Irda) based upon the insurance related data as of year ending March 31,2010 and related discussions, has issued clarifications on guidelines on unit linked products (Ulips).All life insurers are advised that only the Ulips which conform to these revised guidelines shall be permitted to offer sale from July 1, said circular issued all CEOs of the life insurance companies on Monday.Irda has reiterated that in case of individual products, the minimum policy term shall be five years and group products will continue to be on annually renewable basis. All linked products inclu
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You have welcomed your new bundle of joy in this world with a lot of enthusiasm. You intend to give them the best of everything. In order to help you achieve this objective, you start investing in various instruments on your child's behalf. To capitalize on the parents' intentions about giving the best for their children, many insurance companies have introduced children's plans. These plans have enticed many parents to invest on behalf of their children, under the impression that their child's future is secure. But is it true? Are they worth investing? Is this the best investment option for your child? Let's take a look at what these plans are a
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submitted by Amit Kumar (28 m) on 23 Apr 2010 14:42:38 IST
The recent regulatory spat over Unit-Linked Insurance Plans (ULIPs) has projected insurance companies and their sales force as the villains of the piece. However, financial experts say there is another central character in the plot who is equally to blame for: The average insurance buyer in India who always wants "something" from the insurance policy on maturity.They say this rigid mindset of earning some return from an insurance plan is the main reason why insurance products with investment component continue to sell the most in the country. Irrespective of the outcome of the ULIP controversy, this mindset is unlikely to change quickly, experts add."
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The dispute between regulators over unit linked insurance plans (ULIPs) marketed by insurance companies has left many investors confused. Here's an FAQ to address some of the doubts that investors may have:What is the status of my existing ULIP after the SEBI ban? Should I continue to pay my renewal premium? Will it be accepted?With both the regulators agreeing to jointly seek a binding legal mandate from a Court in this matter, there is as of now no change in the status of your ULIP.If you have taken the ULIP to meet any of your financial goals, you should not stop paying the annual premium. The insurance companies will continue to accept the renewal premium.SE
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Insurance and investment are two different needs. Then, there are Ulip pension plans with no sum assured. No wonder, there is confusion.For three action-packed days, the Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority (Irda) have been engaged in a tussle on unit-linked insurance plans (Ulips). And the battle rages on with the Sebi issuing a statement today that new launches post-April, 9 will need its nod.Sebi’s main grouse: Since Ulips are investment products as well, they should follow its guidelines. But Irda Chairman J Hari Narayan says there is no case for dual regulation of Ulips.Between the two regulators
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Stocks of Indian companies may take a knock in the near term unless the government steps in swiftly to resolve the stand-off between the two regulators Sebi and IRDA on the issue of selling unit linked insurance plans (Ulips), as a large chunk of funds raised through such plans are invested in equities. Brokers and fund managers expect share prices to fall on Monday considering the growing flow of insurance money into the Indian stock market. Local insurance firms invested close to Rs 62,000 crore in equities in fiscal year 2009-10, of which unit linked insurance plans accounted for roughly Rs 50,000 crore, according to insurance industry estimates. These
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In today's world of uncertainties, life insurance policies act as a safety net to guarantee adequate financial security for many families. A priority for most working members of the family, insurance penetration levels in India are, however, low at around four per cent. While many in urban areas are unprotected for the future, the bulk of the rural population also remains unaware. Thus, the spread of awareness about insurance becomes a major task for the industry. For a while now, the Government has been promoting a culture of insurance with incentives such as tax rebates for those who buy such cover, but for their part, companies too have been invest
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After a road accident, when an insurance surveyor assessed that Ashwin Trivedi should get 75 per cent of the claim for damage to his car, he was satisfied. But, the insurance company wasn’t happy. So, it sent a second surveyor, who reduced it to 60 per cent. Then, a third brought it down to 40 per cent, which the insurer agreed to pay.After three sessions with surveyors, Trivedi was exasperated. “My car’s bonnet has been completely damaged. Yet, the insurance company has been unwilling to pay,” he said.For those like Trivedi, there is some good news. “If one is not satisfied with the assessment by the company-provided surveyor, he/she c
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submitted by Amit Kumar (28 m) on 1 Apr 2010 14:07:53 IST
Policyholders have become cautious and want to ensure that their capital is secured, even though the returns may be low.As equity markets stay volatile, customer preference has moved towards guaranteed products from plain vanilla unit linked insurance plans (Ulips). During the financial year 2009-10, though the equity market bounced back from its lows, insurers saw an increase in income from traditional plans. Insurance companies launched equity-linked products but with an element of guarantee. Most insurers launched Ulips that guaranteed the highest net asset value (NAV) for a particular year.Insurers say that equity markets are unpredictable and there is always a
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As another fiscal year-end approaches, and we celebrate the resurgence of India's economy and new opportunities for national and personal wealth creation, here are a few points on how you can protect your hard-earned wealth.There are a few insurance policies that you should have if you seek protection through risk transfer. These are life, mediclaim, homeowner's protection, personal accident, and overseas travel. Here are a few guidelines to help you decide limits and extensions.Life insuranceAll of us are going to age, marry, start a family, educate our children, buy a home and other large assets, and probably assume debt. Should God need us before we'v
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Saving for children is the top-most priority for parents across the country. They are even willing to cut on expenses on shopping and outings to save for their children's education, according to 'Young Scholar Insights', a survey by insurance major Aviva. The survey was conducted by IMRB India on behalf of the insurance major. According to the survey, parents start saving when the child is less than 5 years. In places like Chennai, the process is initiated as soon as the child is born. When it comes to investment instruments, insurance has been perceived as the most relevant instrument for children. Most people believe in insurance and child plans to sec
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submitted by Amit Kumar (28 m) on 20 Mar 2010 14:06:19 IST
What is a good investment? This question comes every time in our mind whenever think about Investment. We can spend hours defining that but to me, a good investment protects the value of the investor's principal. But, then, if you just tuck money away in a mattress, the principal is protected. Is that a ‘good investment'? Not really. A good investment must also ensure that inflation does not make inroads into your portfolio. The threat of inflation, especially consumer inflation, is looming large across the globe. Food prices, in particular, have been rising from April 2009 and India is no exception. In this context, inflation is not about
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We often read or hear about insurance claims being rejected by insurers on flimsy grounds. Sometimes, however, the insured is also to be blamed simply because he/she is found to have made false declarations while taking the policy or failed to go through the fine print before buying one. On a few occasions, complaints about insurance policies are also the result of confusion over the wording of policies and the way the claim was made.Here, therefore, we take a look at a few things to be taken care of while lodging an insurance claim:A delay in submission of documents or filing a claim will give the insurer less time to verify the facts and also send a wrong si
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submitted by Amit Kumar (28 m) on 8 Mar 2010 13:05:34 IST
In the last few months, insurance has become an integral part of financial planning for many households. It is being considered as a necessity more than earlier.While India continues to be one of economies with low insurance penetration, the anomaly is fast getting corrected in urban India.It is no more considered an investment made because of the push factor. Instead, families are actually getting down to calculating their insurance needs.The biggest challenge for many is arriving at the exact insurance cover. There are different methods to arrive at the cost though the basic job of an insurance policy is to provide liquidity comfort to the family in the event of d
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A bond is a debt security, similar to an I.O.U (I Owe yoU) .When you purchase a bond; you are lending money to the issuer which may be a government, municipality, corporation, federal agency, corporate or other entity. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to pay back the face value of the bond or the principal when it “matures,” or comes due.Among the types of bonds you can choose from are: government securities, municipal bonds, corporate bonds, mortgage and asset—backed securities and foreign government bonds. Types of Bonds Zero coupon bonds do not pay
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