Life insurance is many different things to many different people. For some, it is a premium to be paid on time. For others it offers liquidity since cash can be borrowed when needed. For the investment-minded, it denotes a constantly growing capital account and numerous other benefits.
Life insurance is nothing but the creation of capital funds on an installment basis. Only here, the results are guaranteed. Life insurance is basically a property that is bought under a contract, accompanied by contractual guarantees that ensure large sums of money at the death of the insured.
The contractual guarantee is the promise to pay, backed by one of the oldest and most stably regulated financial industry operating in the Indian sub-continent today. Insurance Buys Time and Money People like to refer to life insurance as time insurance, the reason being that life insurance proceeds are paid to the insured's beneficiaries in case of death.
The money proffered by life insurance helps buy time to adjust to the change of circumstances. Insurance provides large amounts of cash that will keep the lifestyle for the survivors the way it was before the insured's death.
Insurance Offers Peace of Mind For the person who buys an insurance policy, it offers absolute and complete peace of mind. He or she knows that the decision made by him will provide sound benefits in the future, whether or not the individual may live to see it. The life insurance policy will subsequently prove this in the future if and when funds are needed. This is the guarantee of the insurance contract. Multiple Applications The future is uncertain for each and every one. No one knows how long he or she will live.
The investment benefit is paid to the insured's beneficiaries after his death or it can be used during the life as well. Life insurance policy owners can turn to the cash value of the policy in case of a financial emergency when all avenues are either blocked or denied. They know that they can avail of loans based on their insurance policies. Insurance policy owners can use the cash value of their policies to meet their long-term financial needs as well. They may have purposefully invested in insurance to use the cash in the policy for their children's future marriage expenses or higher education fees.
Enduring Elasticity Since life insurance is flexible enough to serve several needs, the insured can keep several long-term goals in mind once he or she invests in the insurance plan. The cash value of the policy can be allocated towards augmenting the monthly income during the retirement years. Leisure years should be turned into pleasure years. Permanent life insurance is designed on the concepts of long-term flexibility.
Financial Security The insurance policy offers contractual guarantees to people looking for peace of mind when they buy life insurance. Life insurance offers complete financial security. The purchase of life insurance demonstrates concern for a family's future financial well being. Regard for Family The purchase of life insurance clearly displays care and concern for the people the policy owner loves. Insurance is Safer No financial institution can do what life insurance does. No industry can back its products with reserves and surplus as sound as those of the insurance industry. The proof of strength and safety that insurance companies have ensured even under the most adverse of conditions is a matter of pride for the entire insurance industry. For generation after generation, life insurance has been acclaimed as the very benchmark of security against which the other industries are measured.
When it comes to Life Insurance, many of us will tell that we don't need any insurance, and ever some people say why we need life insurance, lets me explain you about why we need life insurance cover. Once after completion of reading this article please put your comments/recommendations in the comments section. Thanks in advance for your comments/recommendations.
A well-planned life insurance fund can clear the pending debts of the insured after his or her imminent demise. At times, this can mean the difference between retaining the family house & heirlooms and losing it by default to the creditors.
It can also avoid the possibility of a distress sale where by an item might have to be sold at a much lower price owing to the urgency of funds. Insurance can also pay for the cost of higher specialised education. Education in certain specialised fields can cost a staggering amount and owing to the intense competition in the job market today, not many people have the liberty of choice. The need of education is clear. Parents who want to provide for their ward's education must carefully save money to provide for their future. Scholarships are not easily available either.
Life insurance can easily provide for expected educational costs even if the insured dies before his children's education is complete. At times, after the death of the sole-earning member of a household, the surviving spouse may need a secondary qualification current to the prevailing employment market situation.
This additional education is critical since only one parent has to bear the responsibility of the entire family. A life insurance policy can provide the funds required to stabilise the family situation until the pending tension has eased off.
-- Do you need life insurance?
Every person has an economic value in life, which is connected to the income potential of the individual. So every income provider or producer has to be properly insured against any shortfall that might result from his or her death when some one else will be dependent on that person's income for financial security. Without proper planning, a sudden financial emergency can force a family to act in a manner that would be inconceivable or unthinkable for most parents. They might have to halt children's education and/or have to sell the house and/ or the car and/ or fall deep into debt.
Life insurance does not replace the intrinsic value of a person's metaphysical self. Nothing and no one can. What it does attempt to provide is solid and tangible security to weather the storm that might befall the individual's family and dependents after his demise.
Greetings from Ram Financial Consultancy, We are best in serving your needs from long time, we would like to give some idea about the whole life cover plans, first i would like to tell you one thing there are so many types of insurance plan, either it is endownment plan of unit linked plan it should match our requirement and it should yield good returns for us. There are lot of comments about the comparison of Endownment plan and Unit Linked Insurance Plan, but our ultimate goal is to identify the best plan which suites for us. Lets start our discussion, There are so many companies products which will provide while life cover (typically 100years insurance cover) , i would like to address hear about how to select best out of the available products in the market. Lets start with comparison of two plans, one is Jeevan Anand form LIC (Life Insurance Corporation) and Other plan is Flexi Life Line form Biral SunLife Insurance Company Pvt. Ltd. Off course i will agree that Jeevan anand is endownment plan and Flexi Life Line is Unit Linked Insurance Plan, If you select Debt funds in the Unit Linked Insurance Plan, where there is 0% dependence on the equity markets, then you can expect a fixed returns on your investments with very less risk ( less risk means, your fund performance depends on the interest rate in the debt market ), In Endownment plan the bonus is also depending on the performance of the company which is again with less risk involved over ther.
Let go through the Details:
Jeevan Anand :
These details are taken form LIC web site, source from Jeevan Anand This plan is a combination of Endowment Assurance and Whole Life plans. It provides financial protection against death throughout the lifetime of the life assured with the provision of payment of a lump sum at the end of the selected term in case of his survival.
Benefits in case of death during the selected term: The Sum Assured along with the vested bonuses is payable on death in a lump sum.
Benefits in case of survival to the end of selected term: The Sum Assured along with the vested bonuses is payable in a lump sum on survival to the end of the term. An additional Sum Assured is payable on death thereafter.
Accident Benefit:
An additional Sum Assured (subject to a limit of Rs.5 lakh) is payable in a lump sum on death due to accident up to age 70 of life assured. In case of permanent disability of the life assured due to accident this additional Sum assured is payable in instalments.
Supplementary/Extra Benefits: These are the optional benefits that can be added to your basic plan for extra protection/option. An additional premium is required to be paid for these benefits.
Surrender Value:
Buying a life insurance contract is a long-term commitment. However, surrender values are available on the plan on earlier termination of the contract.
Guaranteed Surrender Value:
The policy may be surrendered after it has been in force for 3 years or more. The guaranteed surrender value is 30% of the basic premiums paid excluding the first year’s premium. Any extra premium(s) paid and premium(s) towards Accident Benefit are also excluded.
Comments: This seems to be not a good one in this plan, if a person want to quit the plan after paying the premiums for few years ( example @ 15th year) then he will lose lot of amount. we will see this illustration @ the end of this article. in the example case study
Corporation’s policy on surrenders:
In practice, the Corporation will pay a Special Surrender Value – which is either equal to or more than the Guaranteed Surrender Value. The benefit payable on surrender reflects the discounted value of the reduced claim amount that would be payable on death or at maturity. This value will depend on the duration for which premiums have been paid and the policy duration at the date of surrender. In some circumstances, in case of early termination of the policy, the surrender value payable may be less than the total premium paid.The Corporation’s surrender value will be reviewed from time to time and may change depending on the economic environment, our experience and other factors.
Case Study :For Example a per son with age 25 years take a jeevan anand policy for 21 year and coverage term as 100 years (whole life), let see hear how it works. You can calculate your premium from the URL : calculator
In this example the premium is coming to be around 49,522.00 per year but if you pay your premium half yearly you are premium per half year will go to 25,162.00 means which is higher than yearly by 802 Rs/-. in the same way this will go up if you pay Quarterly or monthly. this is for a cover of 10lakh.
we will take 49,522.00/- and see how it works out.
In case of survival:
Policy holder would be paying 49,522.00/- per year and for 21 years and survived then he will get 10lakh + Bonus ( this is uncertain which depends on the company performance this may works out to be less than 3% to 4% per year as per the information i got for the customer service representative of LIC), but in this case you are paying 1039962/- means you all ready loosed 39962 /- out of what you payed in this plan.
In case of surrender:
If the person is not able to pay the premium in regular basis then if he want to surrender this plan in 15th year (this 15th year is an example), then what is the Guaranteed Surrender Value he can expect is 30% of the basic premiums paid excluding the first year's premiums. in this case you are surrender value in 15th year is 193135.8/- means out of 693308 paid in 14 years you are going to lose 500172.2 (5lakh).
In case of death:
The Sum Assured along with the vested bonuses is payable on death in a lump sum.
Flexi Life Line Plan:
This plan is a combination of Unit Linked Investment Plan and Whole Life plans. It provides financial protection against death throughout the lifetime of the life assured with the provision of payment of a lump sum at the end of the selected term in case of life insured survival.
Benefits in case of death during the selected term:
Higher of ‘Fund value’ or ‘Guaranteed Fund’ or ‘Sum Assured’ less all applicable Partial Withdrawals in the 24 months preceding the death of the life insured.
Benefits in case of survival to the end of selected term:
A minimum guaranteed return of 3% p.a. applies on premiums and top-up premium, net of policy charges and survival benefits. This total will constitute the Guaranteed Fund Value. In case of survival higher of the ‘Fund Value’ or the ‘Guaranteed Fund Value’ (based on 3% net returns)
Accident Benefit (Accidental death and Dismemberment Benefit Rider):
There is option to add additional options like accidental death benefit in this plan, along with lot of other riders(riders means additional coverages).It provides 100% of coverage in case of death due to accident; loss of more than one limb or sight in both the eyes or in case of loss of one limb and loss of sight in one eye; 50% coverage in case of loss of one limb or sight in one eye. The coverage amount can go upto 5lakh depending on your requirement with the small amount of extra premium.
Supplementary/Extra Benefits:
You can further customise Birla Sun Life Insurance Plan by adding riders to the base plan at a marginal extra cost.
Term Rider:It provides additional amount of cover in the event of death of the life insured. ...Know more Critical Illness Rider:It provides a cover in the event of life insured being diagnosed as suffering from any of four illnesses specified under the Critical Illness Rider. ...Know more Critical Illness Plus Rider:It provides a cover in the event of life insured being diagnosed as suffering from any of the seventeen illnesses specified under the Critical Illness Plus Rider. ...Know more Critical Illnesses Woman Rider: It provides a cover against several critical illness including woman specific illnesses. Pregnancy complications and congenital anomalies in a new born child. ...Know more Waiver of Premium:This rider waives payment of future premiums on the happening of any of the unforeseen events as covered under this rider. ...Know more
Surrender Value:
The policy can be surrendered any time during the tenure of the policy. The surrender charges will be zero after the 4th policy year. In case of surrender in the first 3 policy years the benefits will be paid out only after the 3rd policy year. 0% Surrender charges are really good option for the people how can't continue the policy because of unexpected financial problems.
More details how surrender charges are calculated: The Surrender Charges are levied in the first four years and varies based on the duration of the Policy. During the first 24 months of the Policy, the charge will be an amount equal to the annualised Life Insurance Coverage Premium payable for this Policy. For the purpose of Surrender Charges only, annualised Life Insurance Coverage Premium is defined, as the amount that is payable if the Coverage Paying Period is equal to the Coverage Benefit Period. In the 25th month, the Surrender Charge is 24 percent of the annualised Life Insurance Coverage Premium. The Surrender Charge per cent reduces by one for every month thereafter. If the Policy is surrendered at any time after the 49th month, the Surrender Charge is zero.
The Surrender Value is calculated after deducting the Surrender Charges from the Fund Value.
Fund Options:
Individual Life - Protector : The equity component in Individual Life -Protector is 0% –10%. which means fund manager can invest upto 10% of money in equity depending on equity market conditions this could be 0% also.
The asset allocation for fund is given below: Debt(G-Sec, Corp Bond & MMI)* : 90%-100%
Equities : 0-10%
*Includes Money Market Instruments upto maximum limit of 40%
Individual Life - Enhancer: The equity component in Individual Life -Enhancer is 20% - 35%. The asset allocation for fund is given below: Debt(G-Sec, Corp Bond & MMI)* : 65%-80% Equities : 20%-35% * Includes Money Market Instruments upto maximum limit of 40%
Individual Life - Builder: The equity component in Individual Life -Builder is 10% – 20%. The asset allocation for fund is given below Debt(G-Sec, Corp Bond & MMI)* : 80%-90% Equities : 10%-20% * Includes Money Market Instruments upto maximum limit of 40%
Fund Switches: Policy holder can switch between the fund twise between the funds for free in a policy year after that they will be charged with 100/- per switch between the funds iresepective of the fund value.
For Example a per son with age 25 years take a jeevan anand policy for 20 years and coverage period as 100years ( which is whole life), let see hear how it works. If a person opts for 10 lakh as insurance coverage, then in that case the annual premium is 36000. In this plan policy holder can opt for any one fund option depending on his risk profile, low risk fund Protector can generate a fixed returns because of its debt fund investment options.
The following table is a part of an example of the illustartion generated.
* for clear image click on the table to view it as large image
In case of survival:
Policy holder is paying 36000 Rs/- per year, for 20 years he would have payed around 7,20,000/-. @ the end of 20th year this fund value is around 941092/- ( if your fund is growing @ 6%), 1476778/- if your fund is growing @ 10%. but there is one more option in your policy Guaranteed Policy Fund which is 767294/- (higher than what every you payed). the maturity value will be higher of all these.
Fund Performance is : NAV as on 1st Jan 2002 is 10.9688 and NAV as on 1st Jan 2008 is 17.5906 which means this fund gave a returns of 65.8129% from 2002 (10.9688% average growth per year after adjusting the fund management charges).
In case of Surrender:
Lets go with 15 years as i explained in the first example of the case study. In 14th year Guaranteed Policy Fund is 474472/-, if your fund is growing @ 6% CAGR then surrender value is 544377/- and if your fund is growing @ 10% CAGR the surrender value is 734398/-, lets go with the Guaranteed Policy Fund its 474472/- in 14 years you payed 5,04,000/- means you are loosing around 29528 which is less than your 1 year premium. but if i consider the fund value in that case you are not loosing any thing you are all ways getting more than what ever you payed, fund is growing with a fixed growth so policy holder can get more than what ever he payed in while surrender also.
In case of death:
Higher of ‘Fund value’ or ‘Guaranteed Fund’ or ‘Sum Assured’ so minimum amount nominee will receive is 10lakh.
Now lets make some table comparison of the plan:
values used in this table are used from the above case study.
Any individual who is seeking life insurance policy want to get the good insurance coverage for less premium and want his money to grow with less risk and more transparency. So i will recommend the Flexi Life Line Plan as the best one out of these two plans.
Regular and prompt payment of premiums is the single most important requirement of maintaining your policy in full force at all times.
After all, all your plans for the protection of your near and dear ones as well as your investment for your old age could be nullified due to your policy lapsing due to non-payment of premiums. Yet, thousands of policies issued by most of the insurance companies do lapse after a few years as a result of negligence and carelessness of the policyholders in making regular premium payments.A grace period of 30 days is allowed for payment of yearly, half-yearly and quarterly premiums and fifteen days, in case of monthly payment of premium.
Please do NOT wait until the last few days of the grace period.
The safest way to pay your premiums is on a yearly basis. Even if your policy has commenced on a quarterly premium basis, it is advisable to change it to yearly payment later on. The lesser your transactions with the insuring company, the better. Besides it is easier to remember the due date in a year. The more frequent the payments, the higher are your chances of the policy lapsing.
for more information mail us @ sriram.adviser@gmail.com
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