Investment-linked insurance: Is it right for you?

An investment-linked insurance plan is basically a life insurance plan with an investment component. It provides both a life insurance cover and a return on the portion of your premium that was invested in a sub-fund, a feature that you can enjoy while you are still alive and well.

Why choose an ILP over a traditional life insurance plan?

It’s easy to see why many consumers prefer ILP. ILPs provide the possibility of investment growth, since its underlying assets are linked to stocks and bonds. In fact, depending on the performance of the sub-fund to which a portion of premium is invested, its returns may be higher than that of your investment insurance policy dividends and accumulation rate.

ILPs are also convenient to own, in that you simply speak with one person to get both your protection and earning potential needs. For those people who do not have the time to manage their own funds, the ILP is a big time saver.

ILPs also allow for the easy transfer of one’s investment funds to beneficiaries in the event of death. That’s because when you pass away, all your bank accounts and investment funds are frozen, and your surviving relatives will have to go through the legal and administrative process to access these funds. The only exception will be your insurance plan, and funds in your ILP, which immediately becomes available to your intended beneficiary upon your demise or disability.

However, there are some differences between an investment-linked plan and a whole life or term life insurance plan. In the traditional life insurance plan, the premium is guaranteed to be the same throughout your whole life. In an ILP, this guarantee may or may not be there.

Since there are so many forms of insurance products now available in the market, both traditional and investment-linked, it is necessary to understand exactly what each product offers.

Here are five questions to ask before deciding that an ILP is right for you:

1. What are your investment requirements? Depending on their financial status and life stage, people have different investment needs. For instance, senior or very young people who have no dependents might be better off going for a traditional investment fund placed in an asset that dovetails with their financial goals. Conversely, if all you want is insurance coverage, then just consider a basic whole life or term life insurance plan.

2. How much risk can you take? ILPs are not risk-free products, and returns are not guaranteed. The value of an ILP varies, depending on how its investment portion performs. In contrast, a traditional life insurance would have both guaranteed and the non-guaranteed benefits. The guaranteed benefits are known to you from the moment you sign up for the policy while the non-guaranteed benefits could vary.

3. What is your time horizon? If you are in a hurry to realize a return, remember that investment insurance require a long investment horizon. In fact, they are primarily meant for your beneficiaries in the event of your demise. Even if you choose to go with an ILP, you should not expect returns from its underlying investment assets to be heavily substantial, as these are mostly designed for long-term gain.

4. What are the fees involved when you surrender or encash the plan? Do you see yourself encashing the policy sometime in the future? Do take note that when you surrender any insurance policy, the cash value will be less than the money you have put in. There may also be withdrawal fees and penalties when you encash your policy. Ask your selling agent about policies on encashment and fees and penalties before you make a decision.

5. What are your financial goals? If you choose to get an ILP, it is important to understand the nature of its investment component to ensure that these are aligned with your personal financial goals. If you aim for high growth, then make sure that the sub-fund is invested in an asset class that can deliver on your expected returns.

As with any other investment product, you should thoroughly discuss your concerns with a financial planner before signing up for an ILP to know if it is right for you and understand how it can help you achieve your financial goals.

[Source: https://investmentinsurancepolicy.wordpress.com/2015/09/29/investment-linked-insurance-is-it-right-for-you/]

Taxercise - Ensuring your Financial Health

We go for walks, take part in marathons, lift weights in the gym, turn vegan and swear of sweets and fried goods, all with an aim to improve our physical health. But what about our financial health? What are we doing to improve that?

Your financial fitness depends on the growth of your personal wealth. There are a number of factors that will help you determine this, but it is primarily dependent on your assets and debts. Factors like housing expenses, credit card payments, car loans, mortgages etc form the first half of your assessment. They help you determine where you are losing your money and how you can curb it.

Factors like saving for an emergency fund or retirement form the next half of your assessment. These are, in many ways, your investment for the future and an absolute necessity.

One major aspect of financial planning is saving on your taxes. But that doesn’t just involve opting for a few insurance at the end of the year. It is a complete process, just like physical exercise, that requires us to take stock of our situation and invest wisely throughout the year, in order for us to see any difference in our personal wealth. It’s called taxercise – a disciplined way of exercising taxes in order to maximize tax savings & benefits.

Insurance goes a long way in saving your taxes, but not many people are aware of this. Different policies offer different tax benefits. In order to take advantage of that, it makes sense to be covered from all respects. Just like how we take stock of our debts and assets, we should also make sure our insurance policies are up-to-date and haven’t become redundant.

What are the tax benefits available?

Under Section 80 C of the Income Tax Act, 1961, life insurance premium paid by an individual for keeping insurance on the life of himself or his family can be claimed as deduction from the total income. The overall limit is Rs.1.50 lakhs. The deduction will be only amount to so much, if the premiums are not in excess of 10% of the actual capital sum assured.

As per section 10 (10D) of the Income Tax Act, 1961, any sum received under a life insurance policy  and investment insurance policy(other than sum received under section 80 DD (3) or section 80DDA (3) or under a Keyman Insurance Policy) will be exempt provided the annual premium payable under any of the years during the term of the policy does not exceed 10% (20% in the case of polices issued till 31-03-2012) of the actual capital sum assured.

When it comes to health insurance, Sec 80D of the Income Tax Act, 1961 provides that you are eligible for a deduction of up to Rs. 15, 000 paid towards health insurance premium for keeping insurance on the health of you and your family, in a financial year. If you have taken out a health cover for your parents, you will be eligible for an additional amount of Rs. 15, 000. If even one of your parents is a senior citizen, the amount will become Rs. 20, 000. The health insurance premium is to be paid on any mode other than cash to avail this benefit.

These limits can include expenses of up to Rs 5,000 on preventive health check-ups. Cash payments for health check-ups are eligible for income tax deduction. Sec 80CCC of the Income Tax Act, 1961 makes you eligible for deduction of pension contributions from the total income. Sec 80CCD (2) of the Income Tax Act, 1961 gives you additional tax benefits for the contributions paid by the employer to National Pension Scheme (NPS) subject to 10% of the salary.

How does taxercise work?

Every time you opt for one of the above covers, a weight is lifted from your tax burden and you are that much closer to a good financial fitness. If you plan it out, instead of rushing it in the last moment, you will realize how much you have saved and the difference it makes to your personal wealth. We moan and groan about taxes and how we are robbed of our hard-earned money. But the truth is that the government has given us enough avenues to save. We just need to read the fine print and plan.

What to watch out for?

Due to a false assumption that all insurance policies offer tax rebates, in a hurry, many people tend to opt for covers that do not offer any. This leads to a person, more often than not, getting saddled with unwanted and unnecessary insurance products. Be aware of the following exceptions.

In the Budget 2014-15, the Government introduced a new provision with respect to tax deduction at source (TDS) on the payouts made from life insurance policies. The provision states that all life insurance policies that are not eligible for tax exemption under Section 10 (10D), will have 2 per cent tax deducted at source on the sum paid to the policyholder.

[Source: http://blog.hdfclife.com/how-to-improve-financial-health-532630]

Investment Insurance

Among the different types of life insurance that banks offer us we have one that we can, at the same time have a life insurance and invest our money. They are called investment insurance, and are those that allow a family to be covered events such as the death or permanent disability.

So far this insurance does not differ at all from that we all know, but insurance investment also enables us to achieve a given savings will allow us to fund various needs, from the studios of our children, the acquisition of financial assets or fund our retirement.

Although this is an investment product that offers a high yield, as it varies between 2% -5%, has the appeal that we guarantee the receipt of 100% of the capital that we have provided, apart from what has been renting our investment over the duration of the life insurance.

Moreover, unlike other plans, insurance investments have the advantage that, if we are in a financial trouble, we can withdraw the money before the insurance expires. We can also adapt to life insurance contributions to our financial capacity at all times, or can perform them regularly or extraordinarily, so we would not entail extra financial burden.

There are three types of investment insurance:
– Traditional Life Insurance
– Flexible Life Insurance
– Annuities

Normally Best Investment Plan is managed through an individual account, open only for insurance, in which the entity with which we have signed we paid the premiums and interest and we will deduct the cost of insurance and other costs it accompanies it.

Such insurance should hire them when you are young and still being young is assumed that you still have many years of life ahead and then the insurance company charges a premium very cheap because you will be paying for many years while if you do it with 50 years for example the premium paid will be quite high because you’ve already entered an age of risk in which there is already a high mortality rate.

In short, is a sure must have for any and all his family and that death is unfortunately something that none know when we will come and be prepared.

[Source: http://www.theinsuranceblog.net/investment-insurance/investment-insurance-2/]

Investment Insurance

Investment Insurance from Mihir Shah

Investment Insurance

Investment insurance products are ideal to use for most savers to save his money and keep away from the dangers of the market.

Normally, if we want to get a good return on our savings products need to hire that impose long delays, tying up our money for a substantial amount of time. However, to obtain an attractive return is not always necessary to tie ourselves to a long-term investment.

Spanish Insurers have new products that customers can save with all the guarantees, enjoy a great interest within one year. We’re talking about investment insurance, a more economical product that used to put their money safe and keep away from market swings.

Characteristics of investment insurance

Then we will discuss the main characteristics of investment insurance policy. On the one hand, flexibility in contributions and in saving money are the values that are taking advantage of banks and to promote their products and thus, win more customers.

This is reflected in investment insurance to offer the possibility to temporarily suspend payments, change the amount and timing of the premiums for each semester, or total or partial disposal of accumulated capital, besides being able to make extraordinary contributions at any time .

The distinguishing feature of the investment insurance is that they allow one hand to make extraordinary contributions that fatten up the investment and the ultimate benefit and, secondly, also allow you to withdraw money before maturity: in general, after six months insurance for one year.

Curiosities

In recent years, the risk-free investment has gained momentum in all areas as a result of the crisis. This fact was also felt in the market for investment insurance, now focused on products with guaranteed capital at the expense of offering low returns (between 2% and 5% APR). It is also useful to know that since January 1, 1999, contributions are made to secure savings and investment are not entitled to any deduction in income tax, and benefits which are paid in case of survival or rescue is considered fiscally investment income, which is 18% tax. However, while not release the money not taxed.

[Source: http://www.theinsuranceblog.net/insurance-tips/investment-insurance/]

India’s Insurance Reform will Benefit Insurers and Society

Since Narendra Modi’s government has been in power, significant changes have been made to boost India’s economy and society. One major change was implementing the Indian Insurance Act, first proposed by the previous government.

The Act enables global reinsurers to enter as 100 per cent owned branches and increases overall foreign direct investment (FDI) in the insurance industry from the current limit of 26 per cent to 49 per cent. While there are many aspects of insurance, the most significant opportunity not only for insurers but also for Indian society, is the health insurance sector.

India is one of the fastest growing health insurance markets in the world. It has grown rapidly since the industry opened to private and foreign players in 1999 with the establishment of the Insurance Regulatory Developments Authority. In 2014, the health insurance market grew to $2.7bn from just $150m in 2004. It is on track to hit $8bn by 2020.

There are a number of factors driving this growth.

From a workforce perspective, just 10 per cent of India’s 300m working population work within formal sectors such as government, the public sector or in large private companies, which often offer health insurance perks. The rest work in the informal sectors, meaning they are self-employed or working in family businesses and, therefore, without corporate health insurance cover.

It is this end of the market that is most dependent on financial security during ill health. Yet, in the absence of health insurance plans, many are liable for medical bills and loss of potential income during treatment.

Demographically, the population boom, rising life expectancy and increased incidences of lifestyle-related diseases means that total healthcare expenditure is growing rapidly. It is expected to rise from $70bn to $280bn by 2020.

Despite this, there is a low spend per capita compared with countries where healthcare is largely funded by the government, meaning that some 62 per cent of total expenditure on health is paid for out of pocket.

India has one of the lowest penetration rates of pre-paid health coverage and medical insurance in the world. This is due to its geographical size, the capital required to invest in developing the distribution network and the current lack of focus from insurers in the individual health insurance sector.

The limitation on foreign Best Investment Plan rules in insurance did not give much incentive for a lot of foreign experienced players to participate in this market. There are just five standalone health insurance companies and 17 private sector insurance companies offering health insurance. So there is low consumer choice, coverage and competition. Compare this with the UK, which has 911 general insurers. India itself had over 100 players in general insurance before the market was nationalized in 1972.

Active foreign participation is critical for the sector, bringing better standards and driving competition, with better quality products, customer coverage and choice. The increase in the FDI limit will create significant opportunities for foreign players to enter the market through joint ventures, mergers or acquisitions.

Yet there are some significant challenges that remain, such as finding the right acquisition target or a partner with the right balance of local knowledge and cultural compatibility in the boardroom between the two organisations. Successful firms will be those that are comfortable with local regulatory requirements and have working knowledge of India’s business environment.

Modi’s government has promised to revamp India’s healthcare sector and make services more affordable and accessible for all walks of society. With the doors opening to India’s insurance industry, the health insurance sector will play an increasingly important role in delivering this commitment to its citizens from all walks of life.

[Source: http://blogs.ft.com/beyond-brics/2015/03/30/indias-insurance-reform-will-benefit-insurers-and-society/]