Wednesday, August 31, 2016

#Sovereign #gold bonds make a comeback for Indian investorswith 5th tranche on Sep 1, 2016

What is on offer

Govt.of India announced launching of 5th tranche of #sovereign #gold #bonds,hitting the market, issue opens on 1st September and closing on 9th Sept, 2016. The offer is strictly for Indian residents, institutions, university, charitable institution etc. The gold bonds are priced at Rs. 3150/- per unit, signifying 1 unit is equivalent to 1gm of #gold. One can apply for 1gm and maximum of 500 gms. The tenor of the bonds is 8 years with exit option 5th year option. It also earns interest of 2.75% on the initial capital investment payable semi-annually. The investment amount is protected upto the no of units and the eqivalent amount of the gold prices.

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Why invest in Sovereign gold bonds?

1. It's a paper form of gold, no issues of storage and safety
2. It earns you interest on the capital invested.
3. It can be used as loan collateral (Loan to value ratio to be maintained as guided by RBI)
4. It can be traded on demat format
5. Long term tax exempted on redemption

Disadvantages

1. Unlike GOLD ETF, it has moderate liquidity (cannot be sold as easily as GOLD ETF)
2. The premature transfer will attract capital gain tax
3. Only demat format can be traded, paper format will not be available for trading in stock exchanges.
4. Your bonds will be redeemed on maturity, while  in case of GOLD ETF, you can keep it as long as you want.
5.There is no guarantee of capital protection on the amount invested, only the units which will be protected, the redemption amount will be based on the prevailing gold prices.
6. Interest earned will be taxable as per taxation laws in india

Tuesday, August 30, 2016

Term Life Insurance in India – essentials

Term insurance is the pure form of life insurance, wherein the policyholder pays a premium to cover his/her death risk for a particular sum of money for a particular term i.e.15, 20, 25, 30 years and so on . On demise of the policy holder within the term, the nominee (the beneficiary) is entitled to get the sum assured in lump sum or deferred manner as mentioned the policy contract. If the policy holder survives the term he is entitled to no payment/ #maturity benefits. This policy is highly recommended for the earning members of the family with dependants.

What is an ideal life insurance amount for you?
While choosing an ideal #insurance product, one need to do basic calculation of future monetary requirements based on the laid out financial goals, it cannot be a guess work.
Please write down the present costs you would incur for the following purpose
  • Elderly parents to look after
  • Present age of children and their future needs for education
  •  Do you have a working spouse? If not, her lifelong expenses on health and living

Though exact cost you may not be able to arrive at, please click to find the future costs (inflation) and expenses of education, marriage, living standards etc.Adding up these costs would help you arrive at the right amount, your ideal insurance cover. Still, if you are confused, multiply your yearly income with 10. This should be your ideal sum insured.
Ex – If your yearly income stands at 10 lakh, sum insured should be Rs. 1 crore.

What is the premium you need to pay for this insurance product?

The premium of a term insurance is calculated on few factors.
1. Age of the applicant – With each passing birthday you would need to shell out extra money as premium to buy a new policy, however, it remains the same through the term. So, early entry gives you a good deal. Buy a term plan before your next birthday to save on premium
2. Health of the applicant - It plays an important role too. Two persons of same age may get different quotes for premium depending on the medical history and current health of the applicant. 
3. Lifestyle – For example there shall be significant difference in premium for Smoker and a non-smoker of same age and health.
4. Policy term – You may chose the policy term depending on the offer and your needs, usually 10 -40 years, higher the policy term , higher will be the premium

The reasons why you should buy term Insurance is peace of mind. It buys you a adequate protection at a very low cost.

Parameters to chose the right insurance plan

For the same amount of sum assured, different insurers would quote different pricing. The points we should look at –

1. Inclusions and exclusions – This means, what are the exact conditions to be satisfied by the policy holders to receive the claim amount. Reason of death is one point insurers look at very closely for the payment of claims. Insurers may not cover unnatural deaths, suicide, death due to drug/alcohol etc.
2. Claim settlement ratio of the insurers – While comparing premiums, one must not ignore the CSR. It indicates the percentage of claims honoured on death of the policy holders in the particular year. A high percentage makes the insurers more dependable
3. Additional benefits – In addition to the basic life cover, insurance companies have added many additional features like accidental death benefit, permanent disability benefit, critical illness cover and deferred payment options to ease the burden of the policy holders

Tax Benefits on term insurance
On premiums paid and benefits received as per section 80C and 80D of Income Tax Act,1961.

Disadvantages of term plans
1. No maturity benefit on survival
2. Policy may lapse on not honouring 30days grace period for premium payment. And ou have to buy  new policy all together

Top insurance companies based on claim settlement ratio 2015-16
Insurance Provider
Death claims received
Claim settlement ratio
Death claims paid
Claims pending
Per  claim average value (Rs)
LIC
755,901
98.19%
742,243
0.5%
120,654
Max Life
9,223
96.23%
8,804
0.1%
278,816
ICICI Prulife
12,309
96.20%
11,546
0.8%
305,612
HDFC Std
12,189
95.02%
11,031
2.3%
238,890
SBI Life
14,876
95.70%
13,303
3.2%
229,572
Tata AIA Life
3,873
94.47%
3,659
1.0%
241,241
Star Union Daichi
1,266
94.08%
1,191
0.3%
285,306
PNB MetLife
2,466
92.90%
2,290
1.5%
448,821
Bajaj Allianz
20,661
91.30%
18,978
3.0%
183,291
Kotak Mahindra Life
2,686
90.73%
2,437
3.2%
296,143
AegonReligare
460
95.30%
413
0.2%
744,068

Top 5 basic online term insurance plans in India for #non-smoker, healthy female, age 30 years, Cover for 1 crore based on CSR, term and premium cost


Insurer
Policy Name
Policy Term
Premium
Max life Insurance
Online Term Plus plan
35 years
Rs. 8970/-
Aegon Religare
(No. of policies claimed is very less)
Aegon Life iTerm Insurance Plan
35 years
Rs. 8395/-
ICICI Prudential
iProtect Smart Lumpsum Plan
35 years
Rs. 11,900/-
HDFC Life
Click 2 Protect Plus
35 years
Rs. 11,630/-
PNB Metlife
Mera Term Plan-Full Lumpsum payout Plan
35 years
Rs. 9258/-

The chart data source: Policybazaar

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