life insurance

The following post is a sponsored post.

Technology has developed and the Internet is used by millions of people for various reasons. This has even affected the insurance industry and a greater number of individuals are now opting to purchase insurance using this advanced technology.

When investors opt for purchasing life insurance policies, investment plans or retirement plans online, they eliminate the agents and brokers. This makes the entire procedure faster and less cumbersome. Moreover, most insurance providers offer excellent in-house support to assist clients in case of any difficulties.

Here are seven reasons to buy insurance online

1. Cost

The cost of availing insurance online is at least 50% to 70% cheaper than the expense of acquiring coverage using the traditional method. This is because intermediaries are eliminated and clients directly deal with the insurance companies, thereby reducing the expenses. In addition, insurers consider people opting to buy insurance online as having less mortality risk, which means the premiums for such buyers is lower.

2. Sum assured

Investors tend to choose higher coverage sum assured because online term insurance plans are cheaper. A reason for availing higher coverage through online is the marketing strategies adopted by the insurance companies providing low per day costs for these policies. Moreover, most online insurance policies do not have mandatory medical tests, which make it more convenient for people to avail higher coverage.

3. Premiums

Compared to insurance coverage acquired offline, the premium on online plans is significantly lower. This lower premium is available only for investors who choose to acquire the insurance coverage online. Insurance companies are willing to pass on the benefits of reducing their overheads and intermediaries’ expenses to online policy buyers.

4. Comparisons

Several websites are available, which make it easier for potential buyers to make intelligent comparisons. Using a single resource, individuals are able to compare the terms and conditions, coverage, premiums, and other factors of policies offered by different insurance companies. Such comparison makes it easier for users to make the right choice as per their personal requirements ensuring maximum benefits.

5. Transparency

Availing insurance includes several factors and each policy comes with a long list of terms and conditions. Understanding these before signing the dotted line is crucial to avoid any problems in the future. The online term plan is completely transparent and provides all details related to riders, features, and tenure. Riders are additional covers that may be chosen by paying extra premium. Moreover, potential buyers have access to customer testimonials and comments, which makes it simpler to understand the overall experience while dealing with a particular insurance company. Another transparency feature is that every policy buyer receives text and e-mail confirmations on their transactions that allow them to track their application status and rectify any errors that may have occurred at the time of submission.

6. Easy access

If the policy has been purchased in the traditional manner, the possibility of being able to access related information at all times is often difficult. This difficulty is easily overcome when individuals choose to buy term insurance online. Investors can log in to the insurance company portal from any place at their convenient time to access the required information.

7. Flexibility

Online policy purchase allows users to make modifications as and when required before submitting the form. Therefore, if the buyers make any mistake in entering the information, they can edit or delete it before making their application. This prevents the insurance company from rejecting their applications because of providing inaccurate information ensuring insurance coverage is easily available to the investors.

It is easily seen that buying insurance online has several benefits. However, individuals must research about the different options because they do not have the option to rely on an insurance agent or broker. Investors must know the coverage, terms and conditions, and all the inclusions and exclusions before buying the policy to prevent any nasty surprises in the future. Several online resources are available, which provide beneficial information and taking guidance from these will ensure investors are able to acquire the right policy that maximizes their benefits at the lowest possible costs.

About HDFC Life

HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.

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Riders in Life Insurance

by Vinaya HS on June 18, 2016

in Finance

The following post is a sponsored post.

Riders in insurance policies facilitate the allocation of personalized benefits to the consumer at a nominal additional cost. Riders help convert standard policies into more attractive ones so that consumers can use them to meet their specific life requirements.

Let’s take the example of an accelerated death benefit rider. This rider ensures the insured receives a payout while he/she is still alive (in the event of an unfortunate terminal illness). There are many riders associated with insurance policies. The list below provides a clear picture to help you choose a policy with the right rider.

1. Accidental Death Benefit Rider: This rider will increase the death benefit in the scenario of an accidental death.

2. Accelerated Death Benefit Rider: This rider pays out the death benefit in advance if you become terminally ill. It ranks among the most popular riders.

3. Term Rider: This rider allows the insured to add any kind of term insurance to his/her policy so that the family received additional sum assured in case of an unfortunate death.

4. Waiver of Premium Rider: This rider ensures you don’t pay premiums on your policy in the event of a disability. In case of child plans, these riders waive of the future premiums of the policy in case of death of the parent or the premium payer.

5. Disability Income Rider: This rider allows you to collect payouts in case of total disability.

6. Return of Premium Rider: This rider ensures refund of premium if you live past the duration of your policy. This is usually associated with term plans.

7. Critical Illness Rider: This rider ensures you receive payouts if you are diagnosed with any of the illnesses mentioned in the policy.

Choose the right policy after going through the life insurance riders featured in this list. The decision on choosing the rider should be based on your priorities. Consider your income, dependents, spending and debts while going for a rider.

Hop online and explore different providers for the right policy and rider. Seek online advice from the sites you visit to choose the perfect term plan with riders.

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Why does claim settlement ratio matter?

by Vinaya HS on May 27, 2016

in Finance

The following post is a sponsored post.

There are many factors that help consumers choose the right insurance policy. One of the most important among them is the claim settlement ratio. This is a term most people find difficult to understand. The purpose of this article is to help people understand claim settlement ratio better so that they can choose the most ideal insurance policy.

What exactly is claim settlement ratio?

Claim settlement ratio indicates the total count of death claims settled by a life insurance provider. The claim settlement ratio is arrived at by taking the total number of settled claims as a percentage of the total number of death claims received.


Let us use an example to understand this concept better. Let us assume an insurance provider received 1000 death claims. Let us also assume the provider settled 920 of these claims. The claim settlement ratio will be 92%. Ideally, you should look for a provider who offers a consistent claim settlement ratio above 90%.

Why is claim settlement ratio important?

Claim settlement ratio provides a glimpse into the insurance provider’s reliability in settling claims. It helps you understand how willing the insurance provider is to part with money in times of crisis in the future.

A couple of insurance providers are notorious for holding back payouts by providing flimsy excuses. They either state that the claim isn’t genuine or the personal data provided by the consumer isn’t right. Explore different insurance plans and make queries about each provider’s claim settlement ratio. Use their insights to choose the right plan.

Duration and consistency of claim settlements

It is also important to understand the average duration for settling a claim. A lot of reputed insurance providers settle claims within 30 days. You should also give importance to consistency. Claim settlement ratios vary from year to year. Make sure you study different ratios before purchasing a policy.

Choosing an online life insurance policy

A lot of insurance providers allow consumers to purchase policies online. The process is simple, quick and efficient. Count on this article and use claim settlement ratio to pick the right policy. Explore various options online before choosing the right policy. You could opt for a term plan that offers maximum benefits for your family.

You will then be able to safeguard your future while providing loved ones with financial solace when there is an unfortunate casualty or accident.

All the best in choosing the right insurance for your needs!

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Should You Increase Your Life Cover?

by Vinaya HS on March 12, 2016

in Finance

The following post is a sponsored post.

Buying life cover is one of the most important decisions of an individual’s life. In the Indian market, companies provide two kinds of covers namely term plans and non-term plans. The second type of plans are also known as money-back policies or endowment plans.

While most experts recommend acquiring term plans due to their affordability and higher coverage, buying non-term plans must also be considered. Deciding the kind of cover to acquire is only the first question. The larger decision is determining how much life insurance is needed to cover all kinds of possibilities. Most people have the tendency to acquire lesser coverage to save premium costs. Continuously reviewing the coverage and making necessary modifications when major events happen in your life is crucial.

Wedding

When you first start working, you have no liabilities and responsibilities, which means lower life insurance is sufficient. But when you marry, there is an instant increase in your responsibilities and you need provision for the adequate care of your spouse. At this stage, reassessing the insurance coverage need and increasing it to ensure that your partner receives sufficient money to live comfortably in case of any eventuality is important.

Child birth

The birth of a baby is one of the most important events that occur in the life of any individual. Providing a comfortable and good upbringing to the child is your responsibility. Securing his or her future by making adequate provisions for their education and marriage later in life through insurance plans must be considered.

Major debt

One of the biggest debt burdens you will assume in your life is purchasing your dream house. Having procured home mortgage to purchase your home, it is now your responsibility to ensure it remains with your loved ones in case of any untoward incident. Most lending institutions now insist on insurance coverage to protect such mortgage loans. In case something happens to you, it is important to prevent your family being harassed by your lenders and in a worst case scenario; being evicted from the house. This is when you need to reassess your insurance coverage and increase it to meet any such eventuality.

Having understood some instances when increasing the coverage is crucial the important question remains on how much to increase. Additionally, you need to decide between term life insurance and non-term plans. Finding answers to such questions is no easy task. A recommended and much used option is for people to take the help of comparative websites to make an intelligent comparison among different policy offerings to make the right choice.

About HDFC Life

HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.

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Importance of Medical Test in Term Insurance

by Vinaya HS on January 25, 2016

in Finance

The following post is a sponsored post.

Insurers put out advertisements that say “no medical tests needed” to entice prospective buyers. However, before you get taken in by these advertisements, just ask yourself if buying insurance without medical tests is really plausible and worth the risk?

The primary reason for undergoing medical tests is to check the health condition of the applicants. Depending on the results, insurers provide customized plans to buyers. If you avail term coverage without medical tests, there are many risks with negative repercussions in the future.

  • Higher Probability of Rejection: Just because you do not have to take medical tests when buying the policy, does not mean that existing conditions have been successfully hidden. You will need to declare your current health condition while filling the application form. Even if you are able to hide existing conditions, there may be consequences when making claims. Approximately between 2% and 3% of claims each year are rejected for this reason.

  • Higher Premium: Insurers base the premium on the perceived risks and undergoing a medical examination before availing online term insurance can help reduce the premium. If two applicants apply for the plan without a medical examination, the premium is the same. However, if with medical tests the result is favorable for one while unfavorable for the other, the healthy person is rewarded for good health with a lower amount. With medical fitness certificates, applicants can reduce the cost of availing term plans.

  • Lower Risk Coverage: Quite often, term insurance policies that require no medical tests are of a lower value. Even for applicants who are healthy and young, insurers will not provide insurance cover exceeding INR 5 lakhs. Therefore, if you want to procure higher insurance coverage, you will have to undergo the medical examination.

A full medical report includes blood pressure tests, echocardiogram, blood count, and fasting blood sugar. Some insurers may also require liver and kidney tests. These tests are aimed at determining current health status and presence of any conditions in the applicants. When the test reports are normal, insurers are able to lower the premium rates because the perceived risks are lower.

Moreover, if there are any existing conditions, these are known to the insurance company and accounted for with a higher premium charge. If the conditions are not known while availing the policy and the insured was to pass away due to the disease, there is a high possibility of the death benefits not being paid to the beneficiary. Therefore, individuals are strongly advised to not avoid or ignore medical tests before they avail term life insurance plans.

About HDFC Life

HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.

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5 Myths Surrounding Term Insurance

by Vinaya HS on January 25, 2016

in Finance

The following post is a sponsored post.

Financial concepts pertaining investments can be quite confusing to the lay person, and as is the case with any complicated subject, a lot of misinformation and myths begin to take shape. This is true for term plans, as well, and it can be problematic, as many people simply avoid buying these types of policies.

The difference between what term plans are perceived to be and what they actually are is huge. Even though such policies are the purest kind of insurance, term plans are not popular due to a lack of understanding among potential buyers.

Here are 5 common myths about term life insurance plans. Hopefully, access to such information will help dispel any rumors and myths, allowing you to make better-informed decisions about your investments.

1. Single individuals do not need term plans

This is completely inaccurate and single individuals are also advised to avail term plans. These kinds of insurance policies offer protection against debt obligations like home, personal, or auto loans. You would not want your family members to be burdened by such outstanding debts in case of your sudden demise. Moreover, in single-income homes (with dependent parents); you must ensure financial security, in case of your death.

2. Coverage only for current income

In reality, you must acquire coverage for future income too, because coverage for present income will be inadequate to provide financial security to your family in the long term. The amount of coverage depends on your income and liabilities. Term insurance plans in India are based on human life value (HLV), which tries to financially estimate the value of your life. You must acquire coverage equivalent to your present income (inflation-adjusted) to ensure continued lifestyle for your survivors after meeting outstanding debt obligations.

3. Not available beyond age 50

One of the most common term insurance myths is that these policies cannot be purchased if you are over 50 years of age. In reality, these policies are available up to 65 years and some insurers offer term plans providing coverage until the age of 85 years. However, availing these insurance plans for more than 50 years is not recommended, as the premiums are steep.

4. Expensive insurance plans

Contrary to belief, term insurance is the most affordable way to acquire life cover. Term policies are pooled risks where the premiums are paid by pooling the perceived risks for several buyers of the insurance company.

5. Limited to death benefits

This will actually depend on the insurance plan and the add-on features you include within the plan. Certain riders can be included with the term plan for more benefits. Some of the possible riders could include accident cover for permanent or temporary disability, critical illness cover, and others.

When considering term plans, you need to remember that these are meant to provide financial security to your loved ones in case of your untimely demise. With an accurate investment objective, you will be able to make the right choice of availing a term policy that suits your needs.

About HDFC Life

HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.

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Given life’s vagaries each of us would like to save and invest our hard-earned money to tide us through the rainy days, and the occasional black swan, when they come. Where we err though is to jump headlong into “investments” just because we need to be seen with the “crowd.” Someone in the next cubicle made a neat killing on that small-cap stock…so investing in small-cap stocks is the way to go. Let me invest all of my money there. Wrong! Did you stop for a minute and think about any of the following: “Do I have a BIG fat emergency fund in place?”, “Have I planned for those annual expenses (they are investments, vehicle insurance, gym fees, et al.) that seem to popup each month?”, “Have I planned for all those expenditures that I know will happen within the next 6-months?”.

Investing before saving is akin to building the first-floor of a house before the foundation and ground-floor. Looks nifty but is a house of cards eagerly waiting to collapse at the first wind. You should never plan your finances to be this house of cards. Remember this mantra: Savings are for short-term goals. Investments are for medium and long-term goals. Savings always come before investments. I like to think of anything less than a year away to be short-term, between a year to three years away to be medium-term, and more than three years away to be long-term. Get this simple formula right and you’re well set for a bright and prosperous financial future.

With a myriad of savings and investments options available at your fingertips today how do you decide where to save and where to invest. Short-term goals require instant access to your money and full safety of principal for which bank savings accounts and liquid mutual funds are perfect options. Medium-term goals require safety of principal and a small amount of growth for which money-back life insurance policies, recurring deposits, fixed deposits, and debt mutual funds are typical choices and some of these choices such as insurance are tax effective too. Long-term goals require a large amount of growth for which, endowment and unit-linked (equity-oriented) life insurance policies, and equity mutual funds are great choices.

Insurance deserves a special mention. To those of us who are too busy to manage our finances insurance in various forms serves as the perfect vehicle for meeting our savings obligations and investments goals. From money-back insurance policies that return cash back to us at regular intervals, to traditional endowment insurance policies that accumulate money over the long-term, to unit-linked insurance policies that have a growth component (and not to forget, should something happen to you, all life insurance policies come with an automatic payout benefit to your near and dear) insurance can help meet your savings and investment targets. I view health insurance as an investment too – just think of it as a future investment into your own health and into your family’s health.

Once you’re on this path to financial prosperity, the very next question that comes to mind is “Am I saving and investing enough?” Really a tricky question to answer because as John C. Bogle would perhaps ask you: “How much do you think is enough for you?” My advice to everyone who asks me this question: Clearly write down your short, medium, and long-term goals. Then write down how much money you specifically need to set aside each month for each of these goals. Got any spare cash left? Save it. Or invest it. Or splurge it. The choice is fully yours to make. And that to me is enough!

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The following post is a sponsored post.

Buying insurance is often perceived as time-consuming and difficult. Although most of us agree with the importance of having a life insurance, the formalities can be a big turn-off. Such a cumbersome task can sometimes cause policy buyers to postpone their decision.

Let us be appreciative that we are in an age where almost no task is time-consuming or cumbersome. All thanks to the Internet. You can now look for insurance companies on the internet and buy online term insurance plans. Buying life insurance online is growing popular with every passing day where people now prefer this medium for buying and selling term insurance products.

Why buy Term Insurance?

Who needs a Term Insurance? Well, almost everyone who is earning and has dependent(s) needs a term plan. Term insurance is the most basic kind of life insurance. Here, in case the policyholder faces demise during the policy period then the family members get the sum assured as death benefit. However, if the policy holder luckily doesn’t come across such unfortunate events, and is still alive, then the insurance company wouldn’t remit any money back. Which effectively means that the nominees would earn no benefit on maturity of the policy. However, the most exciting feature of opting for a term insurance plan is it guarantees a very high sum assured for a really low premium.

Online Term Plan

For a customer who is comfortable using the internet and has some experience of having made online purchases, buying life insurance online is definitely the most convenient and most logical option. It’s fast, easy and secure – just fill in the details and make the payment through Internet Banking. Apart from the convenience, online policy is comparatively cheaper compared to the offline version and offers a very high sum assured compared to the premiums.

Every month around lakhs of people in India search for online term plans. The market of online term insurance has witnessed a constant rise since 2010. Approximately 25,000 policies are sold online every month in India. One such popular online term plan is the HDFC Life Click 2 Protect Plus offered by HDFC Life. According to a report by Boston Consulting Group and Google India, it is projected that, by 2020, three out of four insurance policies sold would be via digital channels. Sensing a growing demand for online term policies, almost all private life insurance companies have started focusing on this segment.

Benefits of Opting for Online Term Plans

Some of the advantages of buying term plans online using the website of insurance companies are:

  1. Lower premium rates
  2. Faster policy issuance process
  3. Less paperwork
  4. Crystal clear process
  5. No health / medical checkup for certain age groups

Due to high awareness levels amongst the youth, the outcome is better. In case of offline plans, there is always a possibility that the policy buyer has just signed the form, while the agent enters all the data. Online term insurance ensure that the insured himself fills in all the details accurately leaving no scope for the information could be sketchy or mistaken resulting in better quality of information.

About HDFC Life

HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.

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The following post is a sponsored post.

The life insurance industry in India is the largest in the world. The collective amount of people from about 200 countries across the world is less than the total amount of people insured in India. Don’t be surprised after reading these statistics, India still is under-insured.

The penetration of life Insurance in India, the ratio of premium funded in a year to the GDP was hardly 3.17% in 2012. This still doesn’t mean that the life insurance space in this country is stagnating. Life Insurance remains one of the fastest growing industries in India as is expected to grow at a compound annual growth rate of about 12-15 percent by 2020.

Why Invest in Life Insurance Post Budget 2014-15?

Life insurance is one of the most important tax saving instrument that provides various plans like term plan, savings, investment, as well as retirement plans which could be the most feasible tax saving options.

After the 2014 budget, it is expected that with an enhanced flow of foreign capital and international expertise, we could see a growth in the development of the insurance industry. This acceleration could be triggered by increased access to global insurance products, distribution channels and top-notch business practices. The 2014-15 budget is expected to have a positive impact in the overall development of the insurance sector in India as well as the fast growing health insurance sector.

The existing Income tax rules allow for an annual exemption of Rs. One Lakh in investments and expenditures including life insurance and home loan repayments. This rule hasn’t seen much of a change for about a decade now. Such investments, along with public provident funds (PPF), employee provident funds (EPF), term deposits and equity-linked mutual funds are most suitable investment tools for people that help in keeping the economy on a strong footing.

Investing in Life Insurance. Does it Really Help?

Sure it does. But, raising the Rs. One Lakh limit and improving the number of ways to invest it in exchange for a tax credit would be more beneficial as people could save more money. It would also allow people to invest this amount in ways that would indirectly benefit the economy, even if it were to hit government revenue in the beginning.

HDFC Life, one of the leading life insurance companies in India, offers a range of options to suit different requirements, all serving one purpose, securing one’s family’s wellbeing and financial stability. Choosing one of the HDFC Life’s life insurance plans serve to be the best way to save tax. As per section 80C, you could save upto Rs. 46,350/- on investment of Rs. 1,50,000/- on all life insurance plans provided by HDFC Life. For people with very high tax bracket, such tax benefits offered by a life insurance policy would be more valuable.

Life Insurance is no more just a tool to save tax; it is a necessary financial instrument. After all, the whole point of insurance is to ensure your dependents have enough to sustain financially if something were to happen to you. Today, policy holders are more knowledgeable than ever and more aware of their rights as consumers. Each policy is different; it is upto the customers to decide what works for them before they buy it.

About HDFC Life

HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.

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Oops!

It’s been close to 3-months now since I last wrote — it’s the usual “life just got busy” excuse and I pick-up all the blame for letting things slip. We’ve also just entered a brand-new financial year and I wish each of you a prosperous year ahead. Lot’s of stuff did happen in between including some new investments and having to let go of the Swift in lieu for what I personally think is its perfect replacement. More on that in the coming weeks — I promise!

But first, guess what nudged me over the edge and back here?

A “Unit Account Statement” for LIC’s Market Plus scheme that turned-up in the post box. Now this happens to be one of D’s legacy mis-investments and upon opening the statement we discovered to our horror that a secret [off-market?] Rs 20 was being happily deducted each month under the guise of “Admin Charges.” I guess this has been happening each month since the investment was first made quite a number of years back. Don’t even ask me about it’s Market Value — it’s deeper than the Titanic’s depth of sink!

There’s a whole bunch of other columns for various other off-market charges — which thankfully were zero in our statement.

Here’s a sample –

  • Allocation Charges

  • Mortality Exp/FY Renw(*) [WTH?]

  • Accident Charges [WTH? I hope I'm not charged for meeting with an accident!]

  • Switching Charges

  • Ser Tax Rsk Prm Chrgs [WTH?]

It’s time to cut the flab including another mis-investment — Money Plus!

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Capital Multiplier…Really?

by Vinaya HS on January 4, 2013

in Finance

A colleague asked for my opinion about a certain Capital Multiplier Plan that he’d been investing in since a few years. I looked up the plan and the details turned out to be as scary as a horror show. A few samples –

[From the brochure]

This plan is best suited for you…

– If you are looking for an investment plan for your child and want a flexible money-back plan that gives you the power to decide the amount and time of withdrawals.

– If you are planning for your retirement and require a plan that allows you to withdraw any amount as per your need and at the same time invest your money prudently to get you bonuses on the balance in your account.

– If you think that from time to time you will have extra cash, which you would like to invest in an instrument which is safe and which will get you attractive returns.

Quite hilarious — an investment that can solve all financial problems in your life.

And how does the capital get multiplied?

There would be sales and administration expense charges of 3.5% and 1% respectively.

There you go. The capital multiplication isn’t meant for you at all.

Clever!

Perhaps “Capital Divider Plan” would be a more appropriate name? After all, your hard-earned capital is being divided amongst the insurance company and the insurance agent.

High charges. Low insurance cover. Overly complicated features. All toxic ingredients.

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A Reference AEGON Religare iTerm Plan Quote

by Vinaya HS on December 31, 2012

in Finance

A reader of this blog shared an actual quotation that they received for the AEGON Religare iTerm Planhere’s my review of this online term life insurance plan. The reader also gave me permission to publish this here so that it’d help serve as a reference for other readers.

Image of AEGON Religare iTerm Quote Breakup

Rs 13,600 per annum for a cover of Rs 15,000,000 (1.5 crore) is pretty grab-worthy in my opinion.

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This post was updated on December 25, 2012

By chance, I happened to read in a financial newspaper that the Bharti AXA Life eProtect Online Term Plan had some updated terms and conditions. Previously, I’d said that I like the simple and no-frills approach of this plan. I take that statement back now because in an attempt to extend the maximum age at maturity parameter, Bharti AXA has managed to kind of mess-up the plan and has made at more confusing. Take a look at the new terms –

Image of Bharti AXA Life eProtect Illustration Updated

I tried to interpret the meaning of the term “To Age XY” but couldn’t. What’s the difference between “Entry Age 50 + Policy Term 10-Years” vs. “Entry Age 50 + Policy Term ‘To Age 60′”? I tried to download the product brochure but the file seems to be corrupted. Not a good experience at all and does nothing to get to the top spot.

The original post below was published on July 18, 2012.

So finally, I am coming around to reviewing online term life insurance plans. I’ve lost track of how many requests I have received through Capital Advisor over the past few months asking for my thoughts and perspectives on purchasing term life insurance plans online. I’ve also been meaning to buy one for myself from quite some time now, but you know the whole ere-thing has me totally consumed reading up on strategies and ways and means.

I thought I’d keep my reviews a bit different by simply jotting down quick notes on whatever plans I happen to review. Each quick note will compare an online term plan against the one from the previous quick note and then pick my choice from the two. That way I hope to emerge with the one online term plan that looks like the best bet.

I’d be delighted if you could participate in this process by offering your own thoughts, perspectives, and experiences as well as suggesting other online term plans that you’d like reviewed in subsequent quick notes.

So here’s the first one inspired by an email ad that I received for the Bharti AXA Life eProtect online term plan.

Quick Notes on Bharti AXA Life eProtect

  • Maximum age at maturity is 60. But the maximum policy term is only 30 years. So, if you’re some bits below 30, you will be left uncovered (!) for a few years before you retire (taking the traditional retirement approach and when you’d typically not need life insurance anymore due to your retirement corpus kicking in).

  • I like the Family Care Benefit clause that promises an initial payout of Rs 1 lac within 2-business days of claim submission. Immediate cash is always useful in such situations.

  • I also like the simple and no-frills approach of this plan. For a 30-30-1 plan (30-year old buying a 30-year plan for Rs 1 crore cover), the indicated premium is Rs 7,300 excluding service tax.

  • I’m also comfortable with the Bharti AXA brand but this is extremely subjective and also subject to bias. You might have experienced otherwise. But when in doubt, simply go by your gut feel and you will do fine. I’ll also stick my limb out and say that all those arguments about claim ratios and payouts shouldn’t bother you if you’re honest when filling up the forms. Plus with IRDA cleaning-up it’s own act and that of the industry, things would only get better.

That takes us off to a good start.

Again,

I’d be delighted if you could participate in this process by offering your own thoughts, perspectives, and experiences as well as suggesting other online term plans that you’d like reviewed in subsequent quick notes.

I’ll pick the next one based on your comments.

Note: To help you to keep up with new term plan reviews, to go back and refer to past reviews, and to share all of this content with your friends, I’ve created the following easy to remember link — http://bit.ly/termplans. So, go ahead, bookmark and share.

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So, I came across this life insurance plan that provides the twin benefit of comprehensive protection and guaranteed additions [on the cumulative premium] of up to 10%. I was really intrigued. On the face of it, a 10% guaranteed addition each year on the cumulative premium is something that you just can’t scoff at and ignore — it’s as good as earning a 10% rate of return on your money. But when it’s a life insurance company extending such an offer, there has to be some magic in the math.

And indeed there is!

Take a look at the below illustrations for an idea of the kind of money the life insurance company would make off you. Even if the life insurance company’s rate of return on your money was exactly 10%, they’d still be walking away with a sizable stash while you’d be left with some chump change.

Analysis at 10% rate of return –

(Click on the image for a larger version.)

Image of analysis at 10% rate of return

Analysis at 15% rate of return –

(Click on the image for a larger version.)

And with some good investment strategies, if the life insurance company’s rate of return on your money was 15%, they’d run all the way to the Bank with huge gobs of money while you’d be left wondering what happened in those 20 years.

Image of analysis at 15% rate of return

But then again, you don’t get to see this part of the calculation in the Sales Brochure do you?

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That was quite a hiatus from the world of personal finance. A number of you wrote in asking if I was away on work-related travel again — since whenever the blog goes silent it’s usually because I’m traveling. This time though, I was helping D venture into the fascinating world of entrepreneurship. The past couple of weeks have been a roller-coaster ride as we’ve had to significantly evaluate quite a number of things in our life. (Should D leave her job or not? Should we discuss this step with family members or not? Should we even get into all this at all? What if everything fails? How would people around us react? And quite a number of other such, generally pessimistic, thoughts.) I’ll probably compile all of this into a series of articles — I’ve seen a good number of people having similar thoughts and ultimately failing to take even a single step forward. But all of that for a bit later. It’s back to the world of personal finance for now.

So, here’s this headline that recently caught my attention –

A Life Insurance Plan where you pay for 12 years and get double of what you’ve paid every year for the next 12 years, guaranteed.

It’s got to be good right?

But take a look at these charts –

Chart that shows how the life insurance company can afford such claims purely off the interest earned from the premiums that you pay! (Click on the image to see a full-size version.)

Image of a chart showing how much an insurance company can earn off the premiums you pay

Illustration that shows just how profitable you can be for the life insurance company. (Click on the image to see a full-size version.)

Image of a spreadsheet illustration showing how much an insurance company can earn off the premiums you pay

Illustration that shows how, in general, you’re generally very profitable for the life insurance company. (Click on the image to see a full-size version.)

Image of a spreadsheet illustration showing how in general you can be very profitable for an insurance company

After seeing all this, why would you even want to invest in such a plan? Oops! See there you go — we subconsciously used the word “invest” when we’re actually looking at a “life insurance” plan. Stay away whenever you even get a whiff of such a thing.

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September’s Book Giveaway is fun to participate in and your comments could prove extremely helpful to one of our fellow readers.

Continuing the story from where I left it last, a Capital Advisor reader wrote in –


My husband, aged 35, has a Jeevan Anand policy for a sum assured of Rs 15 lacs for which the annual premium is Rs 82,524. The policy inception date is 23-November-2009 and the maturity date is 23-November-2030.

I, being a housewife and aged 30, also have a Jeevan Anand policy for a sum assured of Rs 10 lacs for which the annual premium is Rs 51,510. The policy inception date is 26-November-2009 and the maturity date is 26-November-2030.

I honestly don’t understand why the agent sold us a policy in my name. The premium for this year is soon due in November, 2012, but having read your past articles I’m not sure if we should continue these policies at all. I’d like to know which Jeevan Anand policy should we surrender and what our overall loss would be upon surrendering.



Image of Wealth Insight MagazineRs 134,034 per year as premium for two Jeevan Anand policies! I am speechless! But here’s your chance to speak up and advise this reader about what they ought to do with those useless policies.

The best answer wins a full year’s subscription (12-issues; postal delivery) to Value Research’s Wealth Insight magazine. I read this magazine each month and I find it quite insightful (!).

To participate, simply leave a comment explaining what you believe the reader should do about their Jeevan Anand policies. Remember, the more insightful your answer is, the higher are your chances at winning. And don’t forget to leave your email address along with your comment.

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I simply love coffee. You can hook me up permanently to a Coffee-IV and that would be a debt which I can never hope to repay.

Jokes apart, there’s this coffee bean grinding place near D’s place that dishes out some exceptionally aromatic coffee powder. I’m hooked to that coffee powder but unfortunately the owner of that place also happens to sell LIC policies on the side. You can almost predict what would happen in such a volatile situation!

Yeah!

After a few visits and chit-chat that confirmed my status as a “prospect”, I was pitched a “Jeevan Anand” life insurance policy — the once-in-your-lifetime saving-plus-investment-plus-insurance opportunity.

Seriously.

I’m beginning to think that “Jeevan Anand” is almost as good as God (not Gold). It’s invisible, omnipresent, and will have you begging for mercy each morning.

What do you think?

I’ll tell you another day about this email I just received where both the husband and wife have individual Jeevan Anand policies (for a total annual premium of about Rs 1.35 lacs) and they don’t know why they took the policies (“the agent sold it to us” is what I read).

So, coming back to my story, here’s how I escaped with just my coffee powder –

“I already have a Jeevan Anand policy for Rs 5 lacs for which I am paying a premium of Rs 25,000-odd each year. I’m already finding it difficult to pay that annual premium given all of my other EMIs (car loan, personal loan, etc.).

So, unfortunately, I will not be able to buy another policy at this time even though I know that my insurance cover is abysmally low. But once my EMIs are over in a few years’ time, I will definitely buy another Jeevan Anand policy from you.”

That did the trick.

And since I’m in a jokey-mood, here’s another one.

A business model for Starbucks in India — A Jeevan Anand “To-Go” with Your Espresso.

Brilliant?

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I walked into my sister’s house the other day only to find my brother-in-law with one hand on his head, some insurance documents scattered all around him on the floor, muttering away to glory in frustration.

I peeked at the insurance policy lying on the floor. It was an HDFC Children’s Plan. I think my brother-in-law has invested close to Rs 2 lacs (200,000) of his hard-earned money in this plan and it’s current worth is somewhere in the region of Rs 1.2 lacs (120,000).

A couple of days later, a senior developer in my team walked-up to my desk and asked me if the Public Provident Fund plus a term life insurance plan was a better savings tool for his child’s future than the — you guessed it — HDFC Children’s Plan.

I almost choked. Whoa!

Seems an Advisor (?) at the local HDFC Bank dished out advise that the HDFC Children’s Plan was the better option of the two. It’s honestly a better option — albeit for the Advisor and HDFC Bank and most certainly NOT for you. Thankfully, my colleague said he’d need to rethink and came straight to me for advise. You can guess what my advise to him was — to run away as fast as he could in a direction that’d take him far far far away from HDFC Bank and the Advisor. He’s now burning the midnight oil reading up on articles from the Capital Advisor archives.

I’m really glad that Capital Advisor is meeting its stated objectives.

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Quick Notes: Aviva i-Life Online Term Plan

by Vinaya HS on August 2, 2012

in Finance

As I’d promised in one the comments on a previous post in this series, I’m picking up the Aviva i-Life online term plan for review. In the most recent review, I was super impressed with the flexibility offered by the AEGON Religare iTerm plan. So let’s see if the Aviva i-Life plan has got what it takes to get to pole position. (One of my regular readers of this blog has purchased this plan and he was impressed by the responsiveness of the company as well as the smooth buying process.)

So here’s what I read of this online term plan –

  • The direct information on the website for the product and the downloadable product brochure available on the same website seem to differ in illustrating the specifications for the product. The brochure talks about an optional Accidental Death Benefit rider being available but the website seems to have no mention anywhere about this option. So which one’s correct? My guess would be to trust the website and that’s what I will base this review upon. But surely not a good omen to begin this review with! In a highly competitive market, an insurer cannot afford even the slightest slip-up. Compare this what I said about the AEGON Religare iTerm Plan –

That’s what I am generally liking about AEGON Religare — the portal is very well designed and everything seems to be stated up-front and in a very visible way.

Aviva i-Life product specifications as seen directly on the website (note the absence of any rider options) –

Image of Aviva i-Life Product specifications as seen directly on the website

Aviva i-Life product specifications per the downloadable brochure (note the rider options) –

Image of Aviva i-Life product specifications per the downloadable brochure

  • The maximum maturity age is 70-years which is a good thing since it extends well into traditional retirement but because the maximum policy term is 35-years you might end up without cover for a few years before traditional retirement were you to buy this policy in your very early twenties. But does anyone even buy life insurance policies at that early age? I don’t count this as a significant limitation. But again, the AEGON Religare iTerm plan is one-up because it offers a maximum policy term of 40-years.

  • Otherwise this plan is pretty simple and straightforward.

  • For our usual 30-30-1 benchmark plan (30-year old buying a 30-year plan for Rs 1 crore cover), the indicated premium is Rs 8,279 but this includes service tax. Excluding service tax, the premium works out to around Rs 7,300, the same as our incumbent.

Premium calculations for our 30-30-1 benchmark –

Image of Aviva i-Life premium calculations for our 30-30-1 benchmark

  • I think I also like this approach of telling you upfront the overall cost of buying insurance — other plans that I’ve reviewed so far give an impression of lower cost with the service tax clause put underneath usually in fine print. There’s also an additional rebate for female lives of 5% on the tabular premium rates for male lives.

So, for this particular plan, if we consider a female life, premium calculations for our 30-30-1 benchmark would be –

Image of Aviva i-Life premium calculations for our 30-30-1 female-life benchmark

Given all this, does the Aviva i-Life plan have what it takes to beat the incumbent AEGON Religare iTerm plan?

Nope. I continue to keep the AEGON Religare iTerm plan in top position, because I believe with its flexibility it’d address the term insurance needs of a much wider audience.

But, what do you think?

A quick reminder: To help you to keep up with new term plan reviews, to go back and refer to past reviews, and to share all of this content with your friends, I’ve created the following easy to remember link — http://bit.ly/termplans. So, please go ahead, bookmark and share — I see that many of you already are. Thanks!

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Quick Notes: AEGON Religare iTerm Plan (Online)

by Vinaya HS on July 25, 2012

in Finance

For the third review in this series, I decided to pick-up the AEGON Religare iTerm Plan (Online) — perhaps the most popular online term insurance plan out there. What stood out and immediately cried for attention on the portal was that the claims statistics are openly published for everyone to see. Impressive. The company also provides an explanation behind the one rejected claim. Supports my hypothesis that if you’re brutally honest when filling up the policy form, you really would have nothing to worry about.

Image of statistics for Aegon Religare iTerm Plan

A quick reminder: To help you to keep up with new term plan reviews, to go back and refer to past reviews, and to share all of this content with your friends, I’ve created the following easy to remember link — http://bit.ly/termplans. So, please go ahead, bookmark and share — I see that many of you already are. Thanks!

  • The plan offers some optional riders — Accidental Death Benefit, Waiver of Premium on Critical Illness, and Women Critical Illness. I’m not too impressed by the features offered by the latter two, so the only useful rider seems to be the Accidental Death Benefit. But I couldn’t find a way to customize the coverage offered under this rider — the premium calculator seems to automatically pick a coverage based on the other factors such as policy term, your age, etc. and in some combinations the rider option seems to disappear.

  • I also like the built-in Terminal Illness clause, which, on diagnosis of any Terminal Illness, 25% of the base sum assured will be paid (maximum of Rs 100 lacs) & the base sum assured will be reduced by an amount equal to the benefit paid under this clause. In my opinion, large cash infusions into your savings account in such situations would directly benefit you.

  • Maximum maturity age is 75. So, unlike the current incumbent Bharti AXA Life eProtect plan, you’ll be very well covered even into traditional retirement. The policy term is continuous rather than being restricted to blocks of years (5-years, 10-years, 15-years, and so on).

  • Medicals are not required up to a coverage of 25 lacs, seem to be optional up to a coverage of 50 lacs and are compulsory beyond that. The great thing is that all of these are stated upfront. That’s what I am generally liking about AEGON Religare — the portal is very well designed and everything seems to be stated up-front and in a very visible way.

  • For our usual 30-30-1 benchmark plan (30-year old buying a 30-year plan for Rs 1 crore cover), the indicated premium is Rs 7,300 excluding service tax which happens to be exactly the same as that for the Bharti AXA Life eProtect plan.

  • I’m also comfortable with the AEGON Religare brand.

So, do we have a new winner?

I believe we do. In my opinion, the AEGON Religare iTerm Plan offers you a lot more flexibility than the Bharti AXA Life eProtect Plan (the current title holder) at the same benchmark premium. That now puts the AEGON Religare iTerm Plan in pole position.

What do you think?

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