I have taken a loan of Rs 20 lakh from ICICI home finance. I want to insure my property and my life. Kindly suggest me which insurance company shall I look at for property and life insurance. Currently ICICI Prudential is offering me Life insurance which they claim is especially for the home loan applicant. Should I go for it?

http://economictimes.indiatimes.com/Personal_Finance/Insurance/Insurance_news/Insurers_set_to_park_funds_in_VC_firms/articleshow/3429548.cms

Insurance Regulatory and Development Authority of India (IRDA) gave the green signal to insurance companies to invest in venture capital funds (VCs). Investing in VCs will expose the insurance companies to a huge amount of risk as VCs are high-risk high-return. The insurance companies will have to work out which VC they should invest and how much. The objective of the VC in which they would be investing should be very clear as it would be the deciding factor on the investment returns. The things to be checked are solvency ratio, percentage share in the venture capital, exit clause, and the management track record.

With the world economy facing a recession and economic giant USA adopting the fetal position, the VC concept that has been the driving force of the dotcom boom, has burst. Result: Nightmare for VCs.

Insurance companies will have a large corpus to invest in VCs. In which case, they should have decision-making rights in the VC. This is important to protect the insurer’s insurance customers.

http://economictimes.indiatimes.com/articleshow/3418711.cms

The Insurance Regulatory and Development Authority (IRDA) has given permission to insurance companies to invest in mortgage-backed securities (MBS). LIC however, is more comfortable lending directly to housing finance companies (HFCs).

LIC will earn about 11.50% from bank deposits and short-term papers.

If LIC is successful in doing this, it could help banks reduce their prime lending rate (PLR). In addition, the funds lent out will be securitized by the property of customers taking home loans.

LIC has many policies in which policy holders participates in the company’s profit. More importantly, the above mentioned initiative could mean that LIC passes these profits to their customers in the form of bonuses. This will lead to an increased benefit along with the sum insured to policy holders.

While those of you who are wondering what does F.D have to do with life insurance…Beware…you could be a victim of it.

As it happened with Mr. Mangesh Pai who went to the largest private sector bank to rollover his F.D maturity into another F.D; he landed up rolling over his maturity amount into a life insurance policy instead. He was told by a bank officer that this would be like a F.D with life insurance cover and 10% interest minimum. Mr. Mangesh found it attractive and signed the papers.

Being a busy heart surgeon, he didn’t get time to go through the papers he got after few days until to his surprise he got notice from insurance company intimating payment for renewal premium after a year. He started wondering “when did he buy this company’s insurance policy, that too with such a huge premium?” (his F.D maturity was huge). While digging through all his financial papers in his file, he found that he was cheated and been sold a life insurance policy instead of F.D which he wanted. Moreover the policy has annual premium paying term of 20 years. He further found out that it was a ULIP with 35% charges and very low life cover. He has filed complaint with RBI and is fighting against the bank.

With thirst of earning huge commissions, bank hire people mostly young who have inadequate knowledge and experience on insurance. These people with tag of “Financial Advisor” or “Relationship Officer” are given targets and incentives. On the verge of achieving those targets and earning incentives, they tend to mis-sell in a big way. Same is the case with “Relationship Managers” of most broking firms. They are trained for aggressive sales and thus have only one thing in mind…sell insurance to anyone anyhow and achieve targets. The ultimate losers? Consumers. Beware…

In another case, Mrs. Priya Arora got call from a MNC bank where she holds a credit card. Despite showing no interest in an insurance product being pitched to her, she found insurance premium being debited in her credit card bill. Mr. Ahmed who went to a public sector bank for opening a savings a/c was asked to take an insurance policy. “You need to take this product along with a/c opening,” said an officer at the bank.

While the advent of private life insurance companies have definitely increased insurance penetration in India which is still very low, it has also definitely increased mis-selling of insurance products. With increasing number of insurance companies so are increasing number is insurance agents. Companies are hiring agents very aggressively to boost sales as a result of which you will find many college students, housewives, doctors, teachers, and people with part time jobs as insurance agents who sells insurance part time merely to earn some extra buck. These people lack knowledge, skills and experience; result of which – wrong product being sold or mis-selling. Insurance agents merely push the product which is earning them higher commission irrespective of weather such product meets your needs and requirements or not. As is happened with Mr. Kamlesh the only earning member in the family who ended up paying 70000 p.a merely for 5 lakh of insurance cover, most of them are ULIPs with high charges. Being bread earner of the family he should have been given much higher life insurance coverage at a lower premium.

Most of the agents typically are trained on only two or three ULIP products and they sell only those products. If you ask such agents about an endowment or term plans most of them don’t know much about it and they will try to convince you that this or that ULIP product is better, that it has given 30% returns in last 5 years.

It is recommendable to avoid buying insurance from part time agents primarily because you may be victim of the wrong product which may not meet your needs, you would suffer from bad service from the agent and secondarily this is their part time work, they would be out of it anytime and then you would be all lost.

So shouldn’t we buy insurance at all? If we have to, where do we get it from?

While life insurance cover is one of the most important things to have for an earning member of the family, we need to determine goals, requirements and how much insurance do we need. Typically, when we think of buying insurance we ourselves don’t know how much cover we should take. Most of us decide it on the premium. We opt of whatever Insurance cover we get on lower premium. Some of us just opt for whatever cover the agent says. Most of us land up being underinsured. You need to look upon various aspects such as cost of living, expected cost of living, your income and increase in your earnings, your dependents etc. before taking a cover.

“It’s a complex process, I don’t have time, skills, and expertise to access all these factors and determine my insurance need!”

You need not - hire a Certified Financial Planner (CFP). The role of a qualified Financial Planner is to look at all aspects of your lifestyle, goals, and requirements and develop a financial strategy suitable for you. The recommended strategy should help you reach your goals effectively and efficiently. Insurance Planning is a part of it in which they would recommend you how much insurance you should have and what mix of products you should opt for viz. term plans, ULIPs etc which would make you financially secure and help you meet your requirements and goals. Once you have a plan designed by a CFP, you can buy various kind of insurance products as recommended by him/her. This will help you getting what you actually need and not what actually an insurance agent needs.

Do not fall in pit of aggressive insurance agents or bank officers who may sell you a ULIP with high charges and low cover. It would be very difficult for you to get out of it!!

Get a strategy and plan developed by a CFP and be financially secure.

Happy Financial Freedom!

The word ‘LIFE’ has a big IF in it, which means uncertainty.

IF you live, you will provide for your family -

Pay the mortgage, provide food and clothing, and pay for education.

But there is only one way known that will remove this big IF out of LIFE:

LIFE INSURANCE

Life insurance is nothing but the replacement of financial income of the breadwinner.

For…when a breadwinner dies, not only a husband dies, not only a parent dies, but the INCOME dies as well.

Mr. Shah started saving through a bank. He diligently saved for 4 years. In the 5th year he succumbed to the desire for a motorbike. He spent all his savings plus some loan on the new bike. Shortly afterwards he had a bad accident. A long hospitalization…and his family lost him.

A legitimate saving and a very normal desire.

But at his death all he left for his family was a badly damaged bike, unpaid medical bills and a bank loan.

First things first. Were his priorities right?

Should he not have invested in life insurance first? Time would not have limited his capacity to save. His family would have received a sizeable amount at his death. He would not have fallen a victim to the temptation to spend.

A person, who does not insure his life adequately, gambles with the greatest of all values. And if he loses the gamble, he is making the loved ones pay for the folly through their lives.

How much do you love your family members?

Enough to sacrifice your small pleasures of today for a better tomorrow for them?

Life insurance covers two basic risks - the risk if dying too early and the risk of living too long. It is security today and savings tomorrow.

A young person always feels that he should have insured for less. But every old man feels he should have insured for more, because the heaviest burden he carries in his old age is his empty purse! They say when there is silver in the hair there should be gold in the pocket, otherwise silver loses all its value.

Life insurance is compared to the spare tyre of a car or a parachute or a life-saving pill. It is peace of mind.

Either you buy it with money today, or your wife and children buy it with sweat, toil and tears tomorrow.

That insurance is a hedge against risks is still not clear to the masses. The possibility to eradicate or reduce the financial risk as a result of loss of life, against illness, theft of your vehicle or belongings at home, against your house being destroyed due to fire or riots or any other things is still not understood by the majority. Financial literacy has picked up in India in the last decade and people have started becoming aware, but we are still far away compared to the maturity achieved in developed nations.

Consumer movement of the past decade has strengthened and even small homes today are cramped with expensive gadgets.

Is insuring your house an important thing in your financial plan? If it is not, it definitely should be. For the average Joe, the house comprises almost 40-50% of his net worth; even more to many others. Just imagine a natural calamity or a collapse of the building you live in due to some structural problems? Who is responsible to repay you the losses that have occurred? Insuring one’s house against theft, fire, and riots should not be considered a waste of money anymore, as losses far outweigh the nominal premium that such policies demand. Let’s look into the important points needed to be considered before purchasing householders’ insurance.

Scope of Cover

The structure of your house and its contents like personal belongings from financial loss in case of damage or destruction. It covers your precious possessions and can provide you with compensation for liability claims, medical expenses, and other amounts that result from property damage and personal injury suffered by others. Most lenders require you to own householders’ insurance if you apply for a mortgage.

Usually covers against natural calamities, such as fire, lightning, earthquake, landslide, rockslide, flood, inundation, storm, tempest, typhoon, hurricane, tornado, or cyclone also manmade calamities like damage caused by aircrafts, riots, strikes, malicious or terrorist acts, domestic gas explosions, overflow and bursting of water tank or pipes, and other risks covers also.

Personal property like furniture, clothing, electronic gadgetry and outdoor items like sports gear and gardening tools are also included in the coverage. Property insurance protects your home, any structures attached to your dwelling as well as other tools like sheds, indoor pools, etc.

Some policies insure at actual cost of the property while others do it at the replacement cost of such property. Unless the policy specifically states that property is covered for its replacement value, coverage is for actual cash value.

Precautionary Measures

Make a detailed list of all the belongings in your house and preserve it. This should include the quantity details, description, cost and the amount of loss associated with each item. The inventory list must be updated on a regular basis every six months.

Copies of bills, invoices etc should be kept along with the inventory list. If you add any improvements to your house then they should automatically be included in your coverage. Even if the improvements are still in progress, it is better to insure them just in case they are irreparably damaged before they are complete.

The purchase date, serial number and price of all the electronic items should be kept in order for quick verification.

Make sure you include component parts and the contents of drawers, shelves, closets, storage boxes and built-in cabinets. Remember that you may be covered for things that are included in your policy.

When you are selecting an insurance policy, do not go by the amount of premium alone. Get lots of quotes from various companies and then decide. The insurer should not only offer good service but also be known for paying the claims.