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ISSUE
III - APRIL 2005 |
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Unit linked
covers continue to be the flavour of the season. And with
more and more individuals going for them insurers have
also launched unit linked pension plans.
The latest to latch on to the bandwagon in case of pension
plans is LIC. Future Plus, LIC’s unit linked pension
plan, say insiders, is doing roaring business mobilizing
business of around Rs 500 crore.
But is the Indian customer matured enough to understand
the nuances of a unit linked product? And should individuals
opt for such products that combine investments with insurance?
Opinions differ.
While some opine that these products are not as complicated
as they are made out to be few others think otherwise.
For one, unit linked products do have an element of risk
attached. Since they are linked to the stock market, the
returns may vary as per the ups and downs associated.
It is easy for the young to dabble in such products. But
think of varying returns especially during the sun set
years and not all are convinced. However, research says
that stocks have outperformed all other avenues over a
long period. That said, should one go for these?
If its growth that you are eyeing, what better than the
stock market. But then, keep the following points in mind
before you take the plunge: |
Investment
and insurance together: Know that unit linked
plans offer you returns with an element of insurance thrown
in. What would you prefer? A product that combines both
or would you choose to park your funds separately? Decide
Fund choice: You have around four
funds to choose from depending on your risk preference.
Whether its security of funds, growth or a balance between
both - take your pick.
Switching:
Most plans allow you certain number of free switches a
year. Switch from a fund if you think attractive returns
are elsewhere. Check out the amount you need to shell
out for extra switches. You could switch between Growth,
Equity, Balanced Debt.
What is Fund
Value: The fund value is the value of your investment
as on a given date. This is influenced by the ups and
downs in the sensex. So Fund Value = Unit Price x Number
of Units
Benefits: The individual
receives the fund value as on a given date as survival
benefit. In case of death benefits its either higher of
the sum assured or the fund value.
Last but not the least, which ever investment avenue you
choose - Do not Invest all your Eggs in One Basket’.
Diversify always - it helps you spread your risk. |
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By now
you are done with your tax liabilities for this year.
And for the coming year the equations are bound to change
thanks to PC and his Union budget that has shifted the
competition between insurance, mutual funds and other
investment avenues to a different level altogether. Which
means no more will insurance be bought with an aim to
save taxes and mutual funds too will not cry hoarse about
insurance companies selling financial products masqueraded
as risk products.
In short you’ll buy insurance if you need it. But
then, isn’t it a little strange that for most of
us, its saving maximum tax that holds more importance
to having a well worked out personal financial plan in
place? Give it a thought. Would you invest as much time
and effort in charting out a financial plan for yourself?
A well structured financial plan gives you a fair idea
of your savings, liabilities, the avenues you have invested
in, the returns you can expect and the tax benefits you
can claim there from. In other words, you know your worth
and how much more you need to do to reach a level where
you would feel secured.
That said, be informed that with the changing times there
are a number of attractive avenues that have sprung up
today. How about investing in commodities - wheat rice,
soya, groundnut, tea, coffee, jute, rubber, spices, cotton?
Baffled? The Indian commodity market is estimated to be
around Rs 11,00,000 crore and is expected to be the next
big thing for small investors especially to make fast
money.
Watch out for this space till we bring you more on how
to make the most in the commodities market. |
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The British
during their reign brought the railways, the telegraph,
and would you believe it even Insurance to India. It was
launched way back in 1818, by setting up ‘The Oriental
Life Insurance Company’ in Calcutta. However as
can be expected it was influenced by imperial prejudices.
They initially only insured European widows and native
Indians were kept out. Later they eventually started insuring
Indian lives, but at a premium that was 15-20 percent
higher than was charged to a European.
It was only in 1870 that the discrepancy was corrected.
Six Indians, angered by this second-class treatment, set
up Bombay Mutual Life Assurance Society, and started insuring
Indian lives at the same cost as British lives. Social
discrimination, as such, actually helped to push Insurance
in the Indian context. In 1909, the great reformer, Ishwar
Chandra Vidyasagar founded the Hindu Family Annuity Fund.
This was the first instance of a pension based investment
scheme targeted at Indians.
As had happened in England earlier, a flood of new players
and patchy regulations snowballed into a crisis. Several
Insurers defaulted on their contractual obligations to
policy-holders, mentioning investment losses. Some even
closed down. As a forerunner, the Insurance Act of 1938,
introduced state controls on insurance, but unfortunately
even this failed to safeguard policyholder interests.
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Next
edition:
Independence brings a new dawn…. |
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