Still confused with where to park your investments. Has the myriad of saving options put you in a fix? To help sail you through your investment pick, take a glance at what can work better for you.
Today there are many investment tools available like Insurance, Mutual Funds, ELSS, Small Savings, etc. With Sensex crossing the 10,000-mark, it has attracted a lot of investors. But no matter what, do not rush into anything till you have studied the market thoroughly. There are many options on hand; all you have to do is make a correct pick. One of the options that you can consider is insurance- a tool that provides financial protection throughout your life.
Before taking a dip into understanding this concept, there is a question that needs to be answered quite honestly. How many of us devotedly contribute the required amount towards the payment of insurance premium.

There are so many instances of lapsed policies; some of them even surrender their policies since one has to squeeze that extra amount from the monthly expenditure in order to keep the policy alive. One needs to break the glass that you have built where you mistake insurance protection for an unneeded expense. Instead develop a rational understanding towards it. Large chunks of the population use insurance products to cushion the heavy tax payments, sometimes completely overlooking the advantages and reducing it to a mere investment product.

Globally, insurance is a well-learnt concept unlike in India where the picture becomes grim when the awareness rate is taken into account. Could one draw the inference that no reason has been strong enough to draw the attention of the masses towards insurance?

In fact we should count ourselves lucky since the new firms selling life and non life insurance products have added a plethora of products and services to their kitty. These range right from term to pension plans. With every dawn there is a new policy hitting the insurance market.

It all began with privatization when the insurance sector was thrown open to private companies. This move is viewed as a giant step towards insurance and the potential of the market has increased tremendously thereafter.

With so much to choose from, to pick one particular policy might be difficult but the individual should keep in mind that the policy should be taken based purely on one’s need. With 14 life insurance companies, the number of policies available in the present day has more than doubled. Today, insurance has become a financial product that ranges from pure term, child plans, pension products, Unit Linked Insurance Plan (ULIP) and many more. There is a need on the part of the customer to widen their horizon and perceive it beyond just a tax saving instrument. Micro insurance products that are a new innovation were not available earlier. But now they are. This shows that the insurance industry is embracing changes.

The other benefit of investing in insurance is its consistency in returns. The returns promised on an insurance product are passed on, come what may unlike a stock market, which are unsure. One cannot accurately judge the market. For instance if you have picked up a policy say, ‘with profit’ plan with ‘guaranteed additions’, the returns that has been promised will be in your wallet irrespective of the Corporation’s performance.

Apart from this, Insurance offers liquidity, transparency and flexibility. Policies suiting to any type of your needs are available. When a comparison has to be made, dating five years back, the customer would know that the options available today are so varied in nature than it was in the past.

Like for example, ULIPs, which today is a hot selling product came into existence only a few years ago. The Life Insurance Corporation of India was the first one to offer, which was ‘Bima Plus’. Other private insurance companies followed it.

Undoubtedly, ULIPs direct relation to the market makes it a hot favorite among investors. Other reasons like regular net asset value provided by the company, switching between funds, varied choice in funds; makes ULIPs a popular investment option. Most private players offer an option to invest up to 90-95% in equities with ULIP products but ideally the exposure for a customer should not exceed 70%.

There have been so many options made available this year. This should help you out in making your choice simpler.

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You shell out cash and you get what you want, sometimes paying more than the actual worth of the product. A rise here and a drop there, has left everyone hoping for new changes to work in favour of the layman. This time the new change to hit is on Interest Rates. If you are planning to take a loan, get ready for a higher rate of interest. Yes, cough up a bit more on home loans and mortgages that have got affected due to the hardening of interest rates. This change has come in, with the Reserve Bank of India’s (RBI) decision to increase both its Repo and Reverse Repo Rates by 25 basis points (0.25%).
The existing home loan takers may not feel the brunt of increased interest rates, as the Equated Monthly Installments (EMIs) to be paid will be same for them. However, the new borrowers will feel the pinch more as they will form the new lot of the hiked increased rates. The interest rate on home loan is likely to go up from 8.75 per cent to about 9.25 per cent. Those with a floating interest rate will now have to pay more. The same applies for car loans. Your EMI will either rise or else your repayment term will increase if you already have opted for a floating interest rate loan. If you are going to take a home loan, you will have to choose between a fixed and a flexible interest rate loan. If you do not want to take any chances considering future rise in interest rate you can opt for a fixed rate loan. With this choice the interest rate will remain constant throughout your repayment tenure. Interest rates on fixed home loans are higher than those on floating home loans.
The RBI’s decision to hike its Repo rate and Reverse Repo rate has affected the overall interest rates, which are the base rates for borrowing and lending money in the economy. If these rates are raised, all the other rates get relatively affected. You have a reason to smile if you plan to invest in bank fixed deposits, as these rates will also increase.
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The type of policy that suits you best depends on many factors like income, monthly expenditure, number of dependent members, etc. The policy that you choose should completely depend on how much risk you would want to secure. If you are the sole breadwinner of the house and you have more number of dependants then you would need to choose the insurance coverage that is sufficient enough to take care of your family expenses in your absence. In such a case a ‘term policy would suit you.
Term policy-it is the purest form of life insurance. The policy keeps you in the protection net for a specific term. If anything had to happen to you, your nominee would receive the insured amount assuming, you have insured yourself for Rs 20 lakhs. Should the insured person pass away, the family is protected by a certain amount insured by you.
Incase you survive the term; the premium paid is not received. But one should not look at it from ‘expense’ point of view. An insurance policy be it a term, whole, endowment or ULIP are good with their own unique features. It is recommended to opt for a term policy when you are in your teens.
Whole life policies- covers the insured for life. On attaining the maturity age, the insured would receive the due amount along with the bonus. Whole life policies offer the highest bonus and cost less compared to endowment policy. If you want insurance protection that extends throughout your lifetime, whole life policy is the ideal one for you. However the premium paid is throughout till the maturity age (80-100 years).

Endowment policies- these policies offer cover for a specific term that has been opted by the insurer. On surviving the term, the policyholder receives the insured amount hence the premium payment is more with endowment policy. The returns are topped with bonus. Endowment policies are broadly classified into two types - With-profit and Without-profit.
‘With-profit’ policy comes with the bonus declared by the Life Insurance Corporation. It is paid at the time of maturity of the policy. In a ‘Without-profit’ plan, the due amount is paid without any bonus announced by the Corporation, which otherwise is applicable with ‘With-profit’ plan. The premium rate charged for a ‘With-profit’ policy is therefore slightly higher. In a ‘Without-profit’ policy only the sum assured is offered.

Money back policies- a part of the sum assured is received by the policyholder by the insurance company at regular intervals, which can be put to use for various purposes. Pension schemes - are policies that offer money to the insured at the retirement age. If the insured dies during the term of the policy, his nominee will get the insured amount either in lump sum or every month.

If you feel, you need more benefits, there are optional add-ons called as ‘riders’ that can be attached to the base insurance policy. You can get riders with the additional premium payment. The benefits are worth the extra premium paid. Double Accident Benefit Rider will offer your family double the sum assured should anything happen to you in an accident. Say if your cover were Rs 10 lakhs, your family would receive Rs 20 lakh. Critical Illness Benefit Rider-on contracting illnesses such as cancer, kidney failure, heart attack, etc, the insurance company pays the insured amount. It has a maximum limit of Rs 10 lakh. Disability Benefit Rider-if you become permanently disabled and are unable to support yourself, the insurance company will provide you with an income up to a specified amount till the term end of your policy.

However, the payment of the premium may vary from a person to a person. The premiums calculated depend on various reasons. Say a person has contracted a particular disease or has undergone by pass surgery; the premium payment would increase thereby. One shouldn’t look at a policy only from the premium point of view. Always choose a policy with the features that suits your needs.

At times it becomes difficult to say which policy is the ideal one. As days go by, there are new changes and with that arises new needs. At such times you would need to choose policy that would aptly fit into your then wants. A single policy cannot meet all your needs hence it is advisable to own couple of policies, which will have varied benefits suiting your needs.
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