Know about Type of life Insurance Plans

Ever wondered why most of us end up paying insurance premiums in the last few months (January to March) of each financial year. Well, that's because, insurance polices are often bought during that time span i.e. when the tax-planning 'season' is at its peak.

The trouble with such an approach is that tax-planning becomes the cornerstone for buying insurance and the 'insurance' aspect is sidelined. Sure, tax-planning is an important factor (premiums paid towards life insurance policies are eligible for deduction under Section 80C of the Income Tax Act), however, it should never be the mainstay. While doing so, the individual could well land up with the wrong insurance policy.

The right approach to buying insurance is to evaluate one's insurance needs and then narrow down on the most appropriate policy type. Given that there are multiple players in the life insurance segment, choosing the right insurer is vital as well.

For example, a term plan could make an apt fit for a financially well-placed individual, who has no insurance cover and doesn't expect the insurance policy to generate returns.

Simply put, a term plan is a pure risk cover plan without any maturity benefit. The next step would be to scan through the various term plan offerings and to select a term plan that best matches the insurance seeker's needs.

Another element which could put a spanner in the works is the insurance advisor. For instance in the case above, the insurance advisor is unlikely to recommend a term plan, since he generally makes the least earnings on it as compared to unit linked insurance plans and endowment plans.

As a result, most advisors prefer to 'peddle' the latter, which are big commission earners, irrespective of the client's needs or risk profile. Hence it is imperative to be associated with the right insurance advisor i.e. one who accords greater importance to the insurance seeker's needs over his own.

Buying insurance should never be a rushed affair either. In such a scenario, prospective insurance buyers often end up playing into the hands of their insurance advisor. The outcome - they land up with policies, which are more beneficial (read big commission earners) to the insurance advisor. Hence it would pay to commence the insurance exercise, well before the tax-planning season kicks in.

In this article, we discuss the various options from the insurance segment that are available to insurance seekers and identify the key factors to be considered.

Term plans
Term plans offer pure risk cover and merit inclusion in most portfolios. In fact, a term plan should be the first insurance product that insurance seekers should opt for. Term plans represent the most economical form of insurance i.e. they offer a high insurance cover at a relatively lower cost.

This is because only mortality charges and administration expenses are covered in the premium amount; there is no savings element. Hence, if the insured were to survive the policy term, there will be no maturity benefits i.e. the policy holder will not receive any returns when the policy matures.

Unit linked insurance plans (ULIPs)
ULIPs merge market-linked investments and insurance into a single product. In line with their mandates, ULIPs invest in equity and/or debt instruments in varying proportions. With equity markets on a surge over the last few years, ULIPs have been sold rather aggressively. It should also be mentioned here that perhaps the most instances of mis-selling have also been reported in this segment.

The expense structure of ULIPs tends to be quite unconventional; a large portion of the premium (as high as 40 per cent) during the first couple of years is deducted towards expenses and the balance invested in line with the stated mandate.

However, the expenses do even out over longer time frames.reveal that ULIPs work out to be more economical vis-a-vis comparable mutual funds over longer time horizons (like more than 15 years). Hence it is imperative that policyholders continue with policy for the entire tenure.

Another advantage ULIPs offer is the flexibility they afford to the policyholder. The policyholder can "manage" his corpus by maneuvering it across different plans. For example, when equity markets are on the rise, he can shift a part of his corpus to a debt-oriented portfolio. Hence it would help to be associated with an expert and qualified insurance advisor who can help select the right ULIP and manage it as well.

Endowment plans
Traditionally, endowment plans ranked as the most popular option from the insurance segment. Endowment plans typically invest a major portion of their assets in government securities and corporate bonds; a smaller portion can also be held in equities.

Endowment plans are geared to offer returns to policyholders on maturity. By virtue of the same, they are often perceived as investment avenues. Child plans and money back plans are variants of endowment plans.

Although they might be structured uniquely (for example, they offer returns in installments during the policy's tenure), in essence, they are endowment plans.

Pension plans
For far too long, Rs 10,000 was a defining amount for pension plans. The reason being, that was the maximum contribution (premium paid) to a pension plan, eligible for deduction under Section 80CCC of the Income Tax Act. Yet again, a case of tax-planning scoring over insurance needs.

Union Budget 2006-07 corrected this anomaly. The Rs 10,000 limit on contributions to pension plans was removed i.e. contributions upto Rs 100,000 towards premiums paid for pension plans are now eligible for a deduction. This should encourage individuals to conduct their retirement planning with the right perspective.

In conclusion, we reiterate our view that individuals must let their needs determine the insurance products in their portfolio. Each product has its unique set of characteristics and should find a place in the portfolio based solely on the same. Notwithstanding the importance of tax-planning, the same should be treated as secondary, where insurance is concerned.

For Best Insurance

Dear readers,

If any one are looking for, investments in best ULIP or insurance products with less charges please contact SRIRAM Phone No: 09986128592.
Small example what kind of insurance product we can give to a person of Age 25 is....
By paying 25K per year, the person can get insurance cover of 30lakh(death benefit) + 5lakh (accidental rider) and @ the end of 25 years we can get our money (premium payed + returns @ 10% approximately per year). if this seems to be the best deal Contact our sales person SRIRAM (Phone No:09986128592 Email id: sriram.adviser@gmail.com)

Regards,
Ram Financial Consultancy.

Comparison of ULIP funds Vs Mutual Fund

Dear Readers, In to days volatile market every one are thinking about which is the best beet for investment. So i did a comparison of ULIP Fund Vs Mutual Funds , Hear i am comparing two cases:

case 1:
ULIP Fund (100% equity) Vs Mutual Fund (100% Equity)



case 2:
ULIP Fund (90% equity) Vs Mutual Fund (100% Equity)



Now this graphs gives us a clear picture that the best ULIPS (This means only few ULIPs not all) are all ways safer than Mutual funds( the returns are same in both cases). There are lot more advantages in ULIP.
For better Planning feel free to contact : Sriram, Email ID: sriram.adviser@gmail.com, Phone No:09986128592

Portfolio Creation

What is a Portfolio? We have all heard the word used when talking about finance, but what actually does the word mean? The actual definition of Portfolio is:

“The combined holdings of more than one stock, bond, money market instrument, commodity, collectible, or real estate investment.” When creating a Portfolio, our advisor's split the creation process into six key points, all of which need to be considered and discussed and the Clients’ requirements taken fully into account – this process allows our advisor's to tailor-make a Portfolio to meet any specific and exacting need.

These key areas are:

Access and Flexibility – How liquid should the portfolio be from the outset and what access is required? Timescales Involved – Are there pertinent timescale parameters within which the Portfolio has to perform? Are there any target dates for encashment? Are there any key goals in the future that this Portfolio is linked towards?

Risk Profile – For us this is probably the most key point, how much risk is the Client prepared to take in order to meet their goals? Has the Client completed an Investor Profile Questionnaire? Does the Client fully understand the meaning of Risk?

Asset Classes – Ascertain whether Client wants any particular asset classes to be included in the Portfolio, are there any that they particularly want or do not want? Explain the differences between the asset classes in relation to risk.

Strategy – Given the time frames, risk profile, flexibility requirements and decided composition, discuss a strategy that suits the Clients needs and implement this strategy. Ensure the client understands the strategy and how it is being implemented in order to meet their needs.

Management – Decide through discussion what type of Investor the Client is and whether they wish to be ‘hands-on’ and actively manage this portfolio with the advisers, whether they wish to be ‘hands-off’ and allow the adviser to track the Portfolio or use a Discretionary Fund Management service.

All of the above six points are crucial when creating a Portfolio and our advisers cannot place enough emphasis in covering these points when helping to create a Portfolio. The key to making a Portfolio work, is reciprocal communication between Client and adviser at the outset, allowing the adviser to fully understand what is required by the Client and this enables the adviser to tailor-make a specific Portfolio to match the Clients’ needs.

Our advisor's will also gladly review any current Portfolio and offer impartial advice in the form of a Portfolio Appraisal.

By:- Ram Financial Consultancy
SriRam
Email Id: sriram.adviser@gmail.com
Phone : +919986128592

5 steps to selecting the right ULIP

Here's a 5-step investment strategy that will guide investors in the selection process and enable them to choose the right unit-linked insurance plans(ULIP's).
But before we get there, let's understand what ULIP's are all about?
For the generation of insurance seekers who thrived on insurance policies with assured returns issued by a single public sector enterprise, unit-linked insurance plans are a revelation.
Traditionally insurance products have been associated with attractive returns coupled with tax benefits. The returns part was often so compelling that insurance products competed with investment products for a place in the investor's portfolio.
Perhaps insurance policies then were symbolic of the times when high interest rates and the absence of a rational risk-return trade-off were the norms.
The subsequent softening of interest rates introduced a degree a much-needed rationality to insurance products like endowment plans; attractive returns at low risk became a thing of the past. The same period also coincided with an upturn in equity markets and the emergence of a new breed of market-linked insurance products like ULIP's.
While in conventional insurance products the insurance component takes precedence over the savings component, the opposite holds true for ULIP's.
More importantly ULIP's (powered by the presence of a large number of variants) offer investors the opportunity to select a product which matches their risk profile; for example an individual with a high risk appetite can shun traditional endowment plans (which invest about 85% of their funds in the debt instruments) in favor of a ULIP which invests its entire corpus in equities.
In traditional insurance products, the sum assured is the corner stone; in ULIP's premium payments is the key component. ULIP's are remarkably alike to mutual funds in terms of their structure and functioning; premium payments made are converted into units and a net asset value (NAV) is declared for the same.
Investors have the choice of enhancing their insurance cover, modifying premium payments and even opting for a distinct asset allocation than the one they originally opted for.
Also if an unforeseen eventuality were to occur, in case of traditional products, the sum assured is paid along with accumulated bonuses; conversely in ULIP's, the insured is paid either the sum assured or corpus amount whichever is higher.
Insurance seekers have never been exposed to this kind of flexibility in traditional insurance products and it would be fair to say that ULIP's represent the new face of insurance.
While few would dispute the value-add that ULIP's can provide to one's insurance portfolio and financial planning; the same is not without its flip side.
For the uninitiated, understanding the functioning of ULIP's can be quite a handful! The presence of what seem to be relatively higher expenses, rigidly defined insurance and investment components and the impact of markets on the corpus clearly make ULIP's a complex proposition. Traditionally the insurance seeker's role was a passive one restricted to making premium payments; ULIP's require greater participation from both the insured and the insurance advisor.
As is the case with most evolved investment avenues, making informed decisions is the key if investors in ULIP's wish to truly gain from their investments. The various aspects of ULIP's dealt with in this publication will certainly further the ULIP investor's cause.
How to select the right ULIP
For a product capable of adding significant value to investors' portfolios, ULIP's have far too many critics. We at Ram financial consultancy have interacted with a number of investors who were very disillusioned with their ULIP's investments; often the disappointment stemmed from poor and inappropriate selection.
We present a 5-step investment strategy that will guide investors in the selection process and enable them to choose the right ULIP.
1. Understand the concept of ULIP's
Do as much homework as possible before investing in an ULIP. This way you will be fully aware of what you are getting into and make an informed decision.
More importantly, it will ensure that you are not faced with any unpleasant surprises at a later stage. Our experience suggests that investors on most occasions fail to realize what they are getting into and unscrupulous agents should get a lot of 'credit' for the same.
Gather information on ULIP's, the various options available and understand their working. Read ULIP-related information available on financial Web sites, newspapers and sales literature circulated by insurance companies.
2. Focus on your need and risk profile
Identify a plan that is best suited for you (in terms of allocation of money between equity and debt instruments). Your risk appetite should be the deciding criterion in choosing the plan.
As a result if you have a high risk appetite, then an aggressive investment option with a higher equity component is likely to be more suited. Similarly your existing investment portfolio and the equity-debt allocation therein also need to be given due importance before selecting a plan.
Opting for a plan that is lop-sided in favour of equities, only with the objective of clocking attractive returns can and does spell disaster in most cases.
3. Compare ULIP products from various insurance companies
Compare products offered by various insurance companies on parameters like expenses, premium payments and performance among others. For example, information on premium payments will help you get a better picture of the minimum outlay since ULIP's work on premium payments as opposed to sum assured in the case of conventional insurance products.
Compare the ULIP's performance i.e. find out how the debt, equity and balanced schemes are performing; also study the portfolios of various plans. Expenses are a significant factor in ULIP's, hence an assessment on this parameter is warranted as well.
Enquire about the top-up facility offered by ULIP's i.e. additional lump sum investments which can be made to enhance the policy's savings portion. This option enables policyholders to increase the premium amounts, thereby providing presenting an opportunity to gainfully invest any surplus funds available.
Find out about the number of times you can make free switches (i.e. change the asset allocation of your ULIP account) from one investment plan to another. Some insurance companies offer multiple free switches every year while others do so only after the completion of a stipulated period.
4. Go for an experienced insurance advisor
Select an advisor who is not only conversant with the functioning of debt and equity markets, but also independent and unbiased. Ask for references of clients he has serviced earlier and cross-check his service standards.
When your agent recommends a ULIP from a given company, put forth some product-related questions to test him and also ask him why the products from other insurers should not be considered.
Insurance advice at all times must be unbiased and independent; also your agent must be willing to inform you about the pros and cons of buying a particular plan. His job should not be restricted to doing paper work like filling forms and delivering receipts; instead he should keep track of your plan and offer you advice on a regular basis.
5. Does your ULIP offer a minimum guarantee?
In a market-linked product, protecting the investment's downside can be a huge advantage. Find out if the ULIP you are considering offers a minimum guarantee and what costs have to be borne for the same.


Email Us : sriram.adviser@gmail.com
Contact us: 09986128592