Year 2011- Insurance Sector under Domino Effect

One customer centric initiative triggered another and created a domino effect in the insurance sector. More and more online term plans launched; even ULIP’s were made available online. IRDA- the regulatory insurance body introduced the much awaited health insurance portability which came into effect from October 2011. Here is a look at the top 5 insurance news that made headlines in 2011:

Cheaper Online term plans:

Online term plans became a success story. AEGON Religare was the first insurer to launch online term plan.  The premium of the new online term insurance is relatively quite less than regular term plan and hence there is strong demand for the product. Many online term plans were launched and at cheaper price. Aviva launched i-Life in May 2011 and has done pretty well. HDFC Life became the latest insurer to join the foray and introduced online term plan Click 2 Protect. Even LIC announced that it would be coming with online term plan soon.

Online term plans are readily being accepted by the netizens. Apart from being cheap, the process is completed within 15-20 minutes. The required documents are collected by the insurer at later stage and medical tests are also scheduled if necessary.

Online ULIP’s:

After the success of online term plans, unit linked insurance plans were also introduced online. Since the product is available online, the distribution costs reduce for the insurer and hence the insurer passes this benefit to the customer.  The amount invested is maximized when charges are low and hence more returns.

Traditional Insurance Comeback:

For last few years, the focus of insurer’s was on ULIP’s and not on traditional life insurance. After the cap on ULIP charges and volatile market, traditional plans are again being pushed by the insurers. Despite guaranteed returns in traditional life insurance plans, they are very vague and provide limited returns.

Pension Guidelines:

In 2010, pension guidelines by IRDA dictated that the pension plans should have minimum guaranteed return of 4.5%. No product that conformed to such norms was launched by the insurers. However in 2011, new guidelines on pension plans have been issued which allow insurers more flexibility.  The new guidelines dictate that insurer should provide guaranteed maturity benefits to the customer. Though the customer will be assured of maturity benefit, this limits insurer’s ability to take risks and might affect returns. Also annuity will be provided by the same insurer who had issued the policy. IRDA also asked insurers to be overtly clear to the customer about assured returns on vesting, death and surrender. These guidelines will apply from December.

Health Insurance Portability:

This feature which came into effect from October 2011 allows customer to shift from one health insurance plan to another without losing time bound benefits.  The waiting period spent by the customer will be considered by the new insurer. Despite few gray areas like no clear guidelines on loading, health insurance portability seems to be an excellent initiative.

The road ahead could be aligned towards more innovative online insurance products removing the intermediaries and hence offering the benefit directly to customers.

Unit Linked Insurance Plan- ULIP  

Unit Linked Insurance Plan (ULIP) are the market linked insurance plan which also provide life cover. In an ULIP, the premium amount (after deduction of charges) is invested into different funds. The fund could be equity based, debt based etc. The performance of the fund will depend on the market. A growing upward trend in market will increase the fund value.

What ULIP is not?

A short term high return low risk product.

What is ULIP?

It is a long term investment product with combination of insurance and investment. Every unit linked insurance policy has risk and that’s why it is called market linked. In a ULIP, the investment risk is borne by the policyholder.

Depending on the death benefit, ULIP’s are categorized into two broad categories:

Type I ULIP: The death benefit is equal to higher of Sum Assured or fund value.

Type II ULIP: The death benefit is equal to both Sum Assured and fund value.

Depending on the objective, ULIP are divided into the following categories:

Wealth Plan: These plans are usually of shorter time frame around 10-15 years and focus on getting higher returns to create a good maturity amount.

Child Plan: These plans are for securing child’s financial future. The money is invested to ensure that the child’s future financial goals like education are secured. Along with it, death benefit in most child plan is very comprehensive so that child’s future is not compromised.

Pension Plan: These plans focus on creating a corpus amount so that life insured gets regular pension after retirement.

Compare ULIP plans now!

How does ULIP work? Why initially fund value is lower than invested amount?

It should be absolutely clear that Unit linked insurance policy is not a pure investment product but a combination of insurance and investment.

Often when you check the fund value, you observe that the fund value is less than the amount invested by you. It is expected.

The reason depends on the working of ULIP. Here’s how ULIP works.

Unit linked insurance policy has two parts- life cover and investment. That is you get life cover and your money is invested into different financial instruments to provide returns on investment.

The premium paid by you is not the amount that gets invested. There are some front charges and other charges. The following charges get deducted, some initially and some during the policy term.

Premium Allocation Charges: These are deducted from the premium amount paid.

Policy Administration Charges: These charges are for policy maintenance and deducted from units in the policy.

Fund Management Charges: For managing the fund, these charges are also deducted from the units.

Cost of Guarantee: In ULIP which offer minimum guaranteed amount or NAV, there is cost of guarantee which is deducted from the total units.

Mortality Charges: These charges are for the life cover and deducted from total units in the policy.

After the charges are deducted, the premium will be used to buy fund units. The returns will depend on the performance of chosen fund.

Example: Suppose you pay Rs 30,000 annual premium. After charges are deducted say Rs 5,000, the amount left would be Rs 25,000. Now suppose a fund XYZ has NAV of Rs 10. So you will get 25,000/10= 2500 units of the fund. Depending on the market performance, if fund NAV increases it will reflect on your fund. If after 9 months, the NAV increases to Rs 11, then your fund value will 2500 units x Rs 11= Rs 27,500. This amount is lower than Rs 30,000 which was invested. If NAV has fallen, then the fund value would have been lesser.

So when you invest in a unit linked insurance policy, be ready to stay with the policy for as long as possible. The returns increase if the policyholder stays invested for longer term because of decrease in charges and market averages itself if time frame is longer.

Should I invest in ULIP?

You should invest in ULIP if you are comfortable with the notion of taking risks on the equity, debt market etc. ULIP’s are transparent and flexible. Unlike traditional plans wherein you have no clear information on how the amount is getting invested, ULIP’s are very clear on the same. Also since ULIP is market linked, the growth could be much more.

You have to regularly monitor the fund and switch to other funds if required. Many new ULIP products have automatic investment allocation which automatically transfers the amount from risky to secure fund once the objective return is realized.

You should invest in ULIP if you are willing to take market associated risk. Also it is not advisable to buy ULIP at later stage as mortality charges are high when you are above 50.

How risk prone is ULIP? Can I lose all my money?

ULIP is as risky as the market performance. Suppose your money is invested in equity based fund; when the markets tumble the fund NAV will suffer too. On the other hand, if market shoots up, your NAV will increase resulting in good returns. The best possible method is to continue the ULIP for entire policy term because even if you suffer a setback because of fall in market, there is sufficient time to recover from them and make profit as well.

What are the things to consider before buying an ULIP?

Buying a Unit linked insurance policy could be tricky. There are many things you should consider before buying ULIP which are listed below:

Investment Option: ULIPs allow to self manage the investment by choosing among the different funds available. ULIP’s also have different investment strategies which transfer the funds from equity to debt once the return objective is realized or you are close to end of policy term. Before buying ULIP, check out the investment options available.

Charges: IRDA put a cap on ULIP charges. Since then insurers are introducing ULIP with very low charges. Many zero allocation charge ULIP’s have been launched. However do not be misled by marketing gimmicks. Many ULIPs have zero allocation charges in the plan but also no loyalty additions. Also such plans have charges for switches, premium re-direction and partial withdrawal facility.

Loyalty Additions: ULIP have loyalty additions which are added to fund value and help in increasing overall maturity fund value.

Features: These could be limited premium term, single premium options, flexible Sum Assured, premium payment modes available, revival conditions etc which should be checked in ULIP. You might feel the need for decreasing Sum Assured at later stage and if there is no such option; you will be stuck with it.

Riders: Riders make an essential part of life insurance plan. They carry nominal cost but are very useful since they pay additional amount on the occurrence of events like accidental death, critical illness etc.

How to discontinue the ULIP?

Before 5 years: There is lock in period of 5 years in a ULIP. That is if you cancel ULIP, the amount will be provided to you only after 5 years from date of commencement of life insurance policy. If you cancel ULIP within 5 years, then the fund value will be shifted to discontinued fund which will grow at 3.5% compounded annually. After 5 years, the fund value will be provided to you.

After 5 years: You can withdraw complete amount after 5 policy years.

Buy new ULIP or revive old policy?

Because of miss-selling and other reasons, many customers end up not continuing premium and hence the policy lapses. Before going for a new ULIP, consider reviving the old policy. It is possible that major charges have already been deducted in the lapsed policy and reviving the policy could be more beneficial. At the same time, new ULIP policies have cap on charges and are also available online and as such are quite cost effective.

Best ULIP Plan

A best ULIP plan should not only be the one which provides comprehensive cover but also good returns. There is tight competition among the insurers and as such new ULIP’s launched carry lower charges than the earlier ULIP’s. If the charges are low, more amount will be invested and therefore more returns.

Furthermore, a best ULIP depends upon your requirement. If you require a comprehensive death cover, go for a Type II ULIP where death benefit is equal to total of fund value and Sum Assured. Add riders to increase financial security.

For a person looking for higher returns, best ULIP would be Type I ULIP which has less comprehensive death cover and hence less charges relatively.

Comparing ULIP Online

There are many unit linked insurance policies in the market each promoting its features- some have no allocation charges, some have loyalty additions, some allow you flexible Sum Assured etc. It is hard for customer to choose after being presented with so many ULIP’s. Instead of relying on agents or sales executive (commission biased), you should go online and compare the different ULIP’s online. You will end up saving money and also get the features which you need rather than the features that lure.

Insurers also have many ULIP’s which you can buy online.

Compare ULIP plans now!

Term Life Insurance Plans- Protect Loved Ones

Term life insurance plan provides life cover to an individual. In simple terms, a lump sum amount (Sum Assured) is paid to the family members on demise of life insured. For the life cover, the life insured has to pay relatively low premium. The life cover is for certain policy term after which life cover ceases.

Anyone aged above 18 years can buy term life insurance plan. The maximum policy term is usually 35 years. The average maximum age till which life is insured is 65 years.

Should you buy term insurance plan?

Term insurance plan is without doubt the most essential life insurance policy. You should buy life insurance policy if there are people (family members) who depend on your income for their daily needs.

Joint life Term Life Insurance

Some term life insurance plan can be bought jointly. What that means is two lives can be covered under a single plan. This could be in the case of husband and wife. The advantage of joint life insurance is that the risk cover extends to more people. If anything happens to any of the life insured, claim amount will be payable.

How much cover?

The cover is an integral part of term life insurance plan. It will determine the amount which your nominee will get in case of death of life insured. Before randomly choosing the cover, take into account the following factors:

- Outstanding debts like home loan, car loan etc

- Your Annual Income

- Future financial needs like children’s education and marriage

- Inflation

There are many human life value calculators available online which can assist you in arriving near the approximate life cover amount.

Compare term plans now!

Do I get premium back in term life insurance plan?

There are two types of term life insurance plan- pure term plan and return of premium term plan. The former has no survival benefits while the latter will return the base premiums.  However under the same conditions, you will have to shell more money for the return of premium term plans.

What types of deaths are covered in term life insurance plan?

Term life insurance plan pay the Sum Assured in most cases. The death caused could be natural, accidental or as a result of critical illness. Term plans even cover death outside India as long as you have updated insurer with the same information.  You can add riders as well which will ensure additional payouts as per the death cause.

Can term life insurance claim be rejected?

If claim is made within 1^st year or so, there is possibility that term plan was bought intentionally for making the claim and as such insurance company will investigate to make sure that claim was not fraudulent.

There are a few other instances when death benefit will not be paid. These typically include suicide in the first policy year, self-inflicted injuries, participation in dangerous hobbies, natural disasters etc.

The new term plans have terrorist coverage which can be verified from the insurer.

What if I hide material facts?

No important information should be withheld and proposal form should be filled honestly. For instance- if you hide that you are a smoker and it is later determined that death caused was result of smoking, insurer has the right to deny the claim.

Online Term Plan

After the first online term insurance was launched, the trend was followed by other insurers. Online term plans are cheapest among the lot. Since the product is directly sold to the customer, costs involved are less and that’s why online term plans are cheap.  Online term plans presently available in the market are Aegon Religare iTerm, Aviva iLife, ICICI Pru iCare, HDFC Life Click 2 Protect, Kotak e-preferred, IndiaFirst Anytime, MetProtect and Future Generali Smart Life.

Should I buy term plan online?

Recently, many term life insurance products have been launched online. That is, you can visit the insurer’s website and buy the product online. The benefit being that online term plans are very cheap compared to regular term plans since there are less costs involved in the former. If you are looking for just life cover with no riders, online term plans are certainly a cheaper option. However, term plans are not available in all cities.

Best Term Life Insurance Policy

The objective of a term plan is to pay the Sum Assured in case of death of life insured. Every term life insurance policy does that as long as the claim is genuine. The major issue faced by most people is that insurers reject claim or they take too much time to solve the claim. So in order to determine the best term life insurance plan, one should look at the claims data like claim settlement ratio , claim ageing etc which is available on insurer’s website. The other things that should be looked upon are the coverage, riders’ availability, revival conditions etc.

Term Insurance Comparison

With so many term life insurance plans in the market, it becomes hard to choose a single term plan. You should compare the term insurance plans online (website portals). The term life insurance comparison will help you determine which term plans have similar features, whether any term plan has additional features which suit your requirement. Then you can do cost to benefit analysis and buy the term life insurance policy accordingly.

Compare term plans now!

Personal Loans:  A price too steep?

Jaswant Das needs amount of Rs 5 lacs to fulfill a personal financial obligation. He is uncomfortable about setting up collateral. The only way he could manage to raise some money is Personal loan.

Whenever there is talk about personal loans, alarm bells begin ringing in anyone’s head. The upper ceiling for personal loan interest rates could go beyond even 25%. Despite such deterrents, Personal loan are becoming the most popular loans. The reason behind the celebrity status of such loans is there is no need to set up collateral or security to get the loan. You can get loan amount ranging for paltry INR 50,000 to mammoth INR 50 lacs for tenure from 1 year to 5 years. You need not disclose the reason for applying for personal loan. You need the money and that’s it.

However you cannot just walk in bank and demand a loan. You have to meet personal loan eligibility criteria before the loan is sanctioned. The loan amount required and interest rate charged would depend on your ability to repay the amount in the given time frame.  Annual salary is the first determinant of the loan amount you could possibly get. A stable profile eases the process. A good credit rating from CIBIL could result in reducing the interest rate. Being in a government job or employed with top firms also helps in loan process. Some banks even contact your employer about your employment status. Taking personal loan with your regular banker also fastens the process.

Being an unsecured loan, personal loan is anything but cheap. The interest rate on a personal loan usually ranges from 14% to 25%. There are two types of personal loan interest rates available: flat interest rate and reducing interest rate. Flat interest rate has constant interest rate on the full amount whereas in reducing rate, interest is charged on the outstanding amount. Apart from interest rate, there are other charges like processing fees, documentation charges, pre-payment, late penalty etc.

Before applying for personal loan, be sure to go through the finer details to avoid getting ripped. If you need personal loan in hurry, check the turnaround time (TAT) taken by bank to process your application. Also check the pre-payment clause, most banks do not allow partial pre-payment and others do not allow any pre-payment before specified period.

You should improve your credit rating; opt for joint loan if necessary. A lesser tenure will mean you pay less interest amount. You can also compare personal loans available from different lenders online to get the best deal.

Apart from personal loans, you can also think of breaking some investment or selling company shares if you have. The interest rate earned on investment would most probably be less than paying interest on personal loan.

Personal loans are an expensive option and you could easily be snared in the quagmire of terms and conditions.

Life Insurance: Beginner’s Guide

In simplest terms, life insurance is a financial product which provides risk cover to human life. That is, on demise of the individual within the policy term, a lump sum amount is made available to the family members of the individual for their future financial needs.  Over the years, life insurance has evolved into a much broader product with investment options and riders to increase financial security.

Life Insurance is a mutual agreement between two parties- insurer and the insured. Insurer is the financial company which is providing the risk cover and insured is the individual whose life is covered. The insured pays a stipulated premium amount for the life cover provided to the insurer. On payment of premium, insurer issues a life insurance policy. The contract is legally binding though there are some clauses (suicide exclusion etc) which limit insurer’s liability.

In India, life insurance falls into many categories which are listed below:

Protection Plan: Better known as term plans, the objective of these life insurance policies is to provide life cover only. They are of two types- pure term plan and return of premium term plan. The difference being that the latter returns the base premium paid on maturity of the policy if life insured survives the policy term. These plans are cheapest among life insurance plans. Many insurers have launched online term plans which can be bought online directly by the customer and are very cheap because of fewer costs involved. The only limitation is that online term plans are available in few cities only.

Savings and Investment Plan: These life insurance policies include unit linked insurance plan and traditional endowment plan.

Both of these plans provide life cover and investment options.

Unit linked insurance plans (ULIP’s) invest the premium in equity, debt etc. ULIP are flexible, transparent and usually provide good returns over long term but are risky. The investment risk is borne by the policyholder.

Traditional endowment plans provide guaranteed returns on maturity. The downside is that returns are low. Traditional endowment plans come in following broad options:

- Pure endowment: These are traditional plans with limited policy term and provide guaranteed returns on maturity.

- Whole Life Insurance: These are traditional plans which continue for entire life. The individual gets life cover usually till the age of 100.

- Money Back Insurance: These are traditional plans which provide periodic payouts and also lump sum maturity amount.

Traditional endowment life insurance policies are usually “with profits” which implies that bonuses are declared which are added to the policy amount. However there are few “without profits” endowment policies as well.

Pension Plans: Also known as retirement plans, these life insurance policies help you build corpus amount over the years. After the policy term, the amount can be partially withdrawn for immediate needs and the rest is used to buy annuity. The annuity provides regular pension over the years. There are two types of pension plans- with life cover and without life cover. The current regulations dictate that insurer should specify the guaranteed maturity amount on inception of policy to the policyholder. Also, on maturity of pension plan, you can withdraw one-third in lump sum and rest of amount will be used to pay you periodic pension amount.

Health Plans: These life insurance policies provide with medical expenses incurred during hospitalization. Many health plans also pay lump sum amount regardless of actual hospitalization expenses. New health plans provide with a combination of health cover and investment options.

Which life insurance to choose?

The most essential life insurance policy is term plan. Term plans will make sure that your loved ones get a lump sum amount so that the amount covers your liabilities and they do not have to make financial compromises in the future. Term plan provides you peace of mind.

Term plan provides relatively large Sum Assured as compared to premium. A 30 year old person can get a cover of INR 50 lacs for merely 5k bucks through online term plan.

The other life insurance policies are more aligned towards investment and less towards life cover. If looking for high but risky returns, you can go for ULIP’s. Among ULIP’s, you can go for wealth plans, child plans, pension plans etc.

Traditional plans provide guaranteed returns but the growth on traditional plans is very low.

Riders: Additional financial security

Riders are add-ons that can be added to base life insurance policy to provide additional financial security for the insured and family members. Major riders are:

Accidental Death and Disability: This rider pays additional lump sum amount if the life insured suffers from death due to accident or sustains permanent and total disability like loss of limbs etc.

Critical Illness: If the life insured is diagnosed with critical illness, lump sum amount is provided to manage the financial difficulties. This amount is paid regardless of actual hospitalization expenses.

Waiver of Premium: In certain situations like disability, waiver of premium implies that there is no need to pay future premiums and the policy will still continue.

Family Income Benefit: This is usually an additional monthly benefit which will be paid to the family members on the death of life insured.

Tax Benefits in Life Insurance

Life insurance plans also provide tax benefits. The premium amount paid towards life insurance is deductible from taxable income subject to maximum of INR 100,000. This tax deduction is as per Section 80C of the Income Tax Act, 1961.

The maturity proceeds or death benefit amount is completely tax free under section 10 (10D) of the Income Tax Act, 1961.

Premium Payment

You can pay life insurance premiums through online by different payment modes like internet banking, credit or debit cards. You can also make the premium payment through cheque or cash. For premium amount above INR 50,000, PAN card is mandatory requirement.

The mode of premium payment in most life insurance policies is- annual, semi-annual, quarterly or monthly. Quarterly or monthly payments are usually done through ECS. Direct salary deduction option is also available with few insurers.

Many life insurance policies have single premium payment also where you pay lump sum amount once and there is no need for further payment.

LIC or Private Insurers

It is clearly the biggest concern among Indian customers. LIC is the oldest and well known established insurance company. LIC is also the market leader in life insurance. There is lack of trust among people for private insurers.

However all insurers are tightly regulated by Insurance Regulatory and Development Authority (IRDA) - the government body regulating insurance industry.

A genuine claim will never be rejected by the insurer.

Life Insurance Policy Comparison

Product innovation and strong competitive marketing has made choosing a life insurance policy very difficult. Instead of being carried away by products features, one should always do a “need analysis”. Choose a life insurance policy based on your requirements. There are many website portals (insurance aggregators) where you can make comparison of life insurance policy. Be sure to check comparison of products as you can end up saving quite a good amount of money.

Buying Life Insurance Online

Many life insurance policies are available online. There are very cheap term plans which can be bought online and less costly than regular term plans. Many insurers have also launched wealth plans online as well. By making life insurance policy online, it benefits both customer and insurer since distribution costs reduce by selling life insurance policy online. As such, insurer forwards the same benefit to the insured.

Life Insurance Terminology

Life Insured: The person whose life is covered by the insurance company

Insurer: Any one of the 24 insurance companies who provide life insurance

Fund Value: The accumulated amount in the life insurance policy

Sum Assured: The lump sum amount for which insured is covered for

Premium: The amount paid by the insured for the life insurance policy

Policy Term: The total number of years for which life insurance policy continues

Health Insurance Portability- The Blindside 

After health insurance portability came into effect from October 1, 2011 there has been much debate about the pro and cons of the same. Health insurance portability lets you shift to the new insurer without losing the credits gained with the previous insurer. The credits are the time bound benefits which you become entitled to after the waiting period is over. For example- there is 2 year waiting period for medical ailments like cataract. If you have health insurance policy for continous period (without break) and you want to shift to new insurer using health insurance portability, the two year period will be considered by new insurer. Thus health insurance portability has been hailed as excellent initiative by many industry experts.

However, there are many issues which are as of now remain unresolved. There are many complex things involved and before you jump on health insurance portability bandwagon, keep the following things in mind:

• Pre exisiting diseases are the medical conditions which insurer has before taking health insurance. There is standard waiting period of 2-4 years before these are covered. The new insurer will consider the waiting period with your old insurer. However the complexity involved here is that if the insured contracts medical ailment after getting health insurance, he will be covered by insurer. But when he shifts to new insurer, that medical condition will be considered as pre-existing with the new insurer and waiting period will apply.
• Also there is always a possibility that insurer will not risky cases. If a person has claim history or belong to higher age group, it is possible that new insurer might not accept the portability case.
• Even if insurer accepts the case, there could be loadings and co-pay clause with the new insurer. So before migrating to new insurer, find out about these.
• If you do not make claims, many insurers offer no claim bonus which results in increase in base Sum Assured. When you shift to new insurer, the premium amount will be charged on the basis of increased Sum Assured.

Health Insurance- Claim Settlement Ratio

There are many health insurance plans in the market. Most of the health plans are very comprehensive with many benefits including no sub limits on room rent, maternity benefits, lifelong renewal etc. There are very few things which sets them apart. The basic premise of health insurance is to provide financial assistance in times of need. It could be cashless or reimbursement  and as smooth as possible. However there has been regular complaints about the delay in services on the part of TPA or health insurer.

Therefore before randomly choosing a health insurance plan, one should always check the claims data. The claims data will apprise you of total number of claims, how many claims have been settled and rejected. Some claims remain outstanding as well.

The health settlement ratio determines the % of claims solved by the insurer. For instance- claim settlement of 80% implies that out of total of 100 claims, 80 claims have been accepted by the insurer. The rest 20 claims have been denied or remain outstanding.

Health insurance claim settlement has been calculated as the following formula-

Health insurance claim settlement ratio = claims settled/ (total claims-claims rejected)%

The health insurance claim settlement ratio of the insurers for the Quarter 2,  2011 is given below:

Along with health settlement ratio, you should keep in consideration number of claims outstanding and claims rejected. If your claim is always stuck in paperwork, it would not make much sense. Hence try to find out the time taken by the insurer to solve the claim as well.

Insurer: Sahara Life Insurance

Category: Unit Linked Insurance Plan

Objective: Financial protection of family and good return on investment

Maximum Entry Age: 55 Years

Maximum Age at Maturity: 70 Years

Policy Term: 10, 15, 20 Years

Premium Paying Term: Policy Term, Single Premium

Minimum Premium: Rs 15,000 (Annual Mode), Rs 45,000 (Single Premium)

Premium Payment Frequency: Yearly, Half Yearly

Returns in Sahara Shikhar

Any ULIP’s performance is directly dependent on the performance of the fund which in turn depends upon equity and debt market. If the market is rising, it will automatically reflect on your returns.

Sahara has 5 funds available ranging from conservative to aggressive. If you have higher risk appetite and are for long term you can opt for aggressive fund. On the other hand, if you have limited investment period, you should go for conservative fund.

In a typical scenario, you will be able to get at least 10% return on investment. The investment risk is borne by the policyholder.

Premium Allocation Charges: These charges are deducted as percentage of premium. Insurer deducts these charges on account of expenses incurred by the company – medical examination, policy issuance, underwriting bills. Premium allocation charge varies from 7.5% to 5% of annual premium over the policy term.

Fund Management Charge: Charge ranging from 0.65% to 1.00% is deducted from the units for fund management.

Policy Administration Charge: These are monthly deductions which start from first month and are for maintaining the policy- paperwork, work force etc.  The monthly policy administration charge is Rs 30 per month and increases at 5% per annum thereafter.

Mortality Charge: These are charges deducted as a part of life cover provided and are recovered through cancellation of units.

Under Section 10(10D) death claim is completely tax free.

Partial Withdrawal: If policyholder is above 18 years partial withdrawal can be made and the minimum partial withdrawal amount is Rs 2,500. There is no charge for partial withdrawal.

Grace period: Shikhar can be renewed within 30 days from the premium due date.

What to do?

To Cancel Policy: Shikhar plan can be cancelled within 15 days of receiving the policy contract. A written application can be submitted to any branch for the same. The premium will be paid back minus some charges like stamp duty, medical reports.

If you want to cancel policy after the initial period of 15 days, you can do it but the amount will be paid only after lock in period years. If you cancel policy within 5 years from inception, the amount will grow at interest rate of 3.5% compounded annually. After five years, if you cancel the policy, there will be no cancellation charges and amount will be paid immediately.

Sahara Life Amar Jeevan Review

Plan Name: AmarJeevan

Insurer: Sahara Life Insurance

Category: Traditional Plan

Objective: Provides regular income post retirement

Major USP of Sahara Life Amar Jeevan

• Bonus
• Riders available
• Rebates

Eligibility of Sahara Life Amar Jeevan

Minimum Entry Age: 25 Years

Maximum Entry Age:  55 Years

Maximum Age at Maturity: 65 Years

Policy Term: 10 Years to 40 Years

Premium Paying Term: Same as Policy Term

Minimum Age for start of Pension: 50 Years

Premium Payment Frequency: Yearly, Half-Yearly, Quarterly, Monthly

What benefits does Sahara Life Amar Jeevan offer?

Death benefit:

If the life insured passes away, the Sum Assured along with vested bonuses will be paid to the nominees. Also if the policy has been in force for 15 years or more, terminal bonus if any will also be payable.

Maturity Benefit:

The Sum Assured along with vested bonuses will be payable at the end of policy term. Also if the policy has been in force for 15 years or more, terminal bonus if any will also be payable. The policyholder has option to take one third of the maturity amount in lump sum while the rest of the amount must be used to purchase annuity.

Discount:

For Sum Assured equal and above Rs 200,000, rebate on premium will be given.

Riders:

By paying additional nominal premium, you can add Accidental benefit & accidental total & permanent disability and critical illness benefit rider.

What will be my returns from Sahara Life Amar Jeevan?

Illustration:

Mr. Singla aged 35 invests Rs 12,077 annually for policy term of 25 years.

Death Benefit: If Mr. Singla passes away after 13 years, his wife will get the Sum Assured along with vested bonuses. In this case, his wife will get Rs 300,000 as death benefit apart from bonuses.

Maturity Benefit:

At maturity, the guaranteed returns are Rs 806,250 assuming bonus of 10%.

Are there any tax benefits?

Under Section 80C you can avail tax benefit, yearly premium (not more than 1lac) will be deducted from taxable income.

What else should I know about?

Paid-up Value: After three policy years if you are unable to continue policy, you can convert to paid up. The policy will not participate in future performance. On maturity or death, reduced Sum Assured vested bonuses will be paid.

Grace period: Amar Jeevan can be renewed within 30 days from due date for yearly, half yearly and quarterly. Grace period of 15 days is for monthly mode.

Free Look Period: Amar Jeevan plan can be cancelled within 15 days of receiving the policy

contract. A written application can be submitted to any branch for the same. The premium will be paid back minus some charges like stamp duty, medical reports.

How can I buy Sahara Life Amar Jeevan?

Policybazaar representatives will assist you in buying AmarJeevan.

What’s Policybazaar opinion on Sahara Life Amar Jeevan?

Sahara life primary is a traditional pension plan which provides Sum Assured and bonuses. The plan has very essential rider which you can add. Also you get discount on premium for large Sum Assured.

Insurer: HDFC Life Insurance

Category: Return of Premium Term Life Insurance Plan

Objective: Financial Protection of Family

HDFC Premium Guarantee is a return of premium term life insurance plan which provides financial security to your family in case you are not there to look out for them. You get good cover at low cost. If something unfortunate happens to you, Sum Assured is paid to the nominee. If you survive throughout the term, the base premium will be returned at the end of policy term.

How Much Cover?

The cover in HDFC Premium Return term insurance plan will depend on age of life insured and policy term opted. The issuance of cover is subject to underwriting.

What cover should you get?

Rule of Thumb: The typical cover should be ten times your annual income.

Summarized Table:

What do I get?

Death Benefit: In the event of life insured’s unfortunate demise (during policy term), the sum assured is paid to the nominee (parents, wife or children) if the insurance policy is in force.

Tax Benefits- The premium paid is eligible for tax benefits under Section 80C, 10 (10D) of the Income Tax Act, 1961.

Illustration: Sunil aged 30, to secure his family buys return of premium term insurance plan- HDFC Premium Guarantee with policy term of 25 years.

He pays premium of Rs 7,890 (exclusive of tax and cess) and gets Sum Assured of Rs 1,000,000.

Consider these Scenarios

Scenario1: Sunil dies in the 2^nd policy year; Sunil’s wife will get Sum Assured. This is true for the complete policy term.

Scenario 2: Policy is in grace period and Sunil dies, Sum Assured minus renewal premium will be paid.

Scenario 3: Policy lapses in the 10^th year, Sunil dies, nothing will be paid.

Scenario 4: If Sunil survives the policy term, premiums paid will be returned.

Free Look Period: HDFC Premium Guarantee can be cancelled within 15 days of receiving the policy contract. The policy document can be returned to the nearby branch along with letter of cancellation.

Grace period:  HDFC Premium Guarantee premium can be paid within 15 days from the date of renewal. After the grace period, if the renewal premium is not paid the policy will cease to exist or become paid up.

Maturity: Premium Guarantee is a return of premium term insurance plan and has survival benefits.

Surrender: Premium Guarantee term insurance plan can be surrendered and a guaranteed surrender amount is payable after 3 years of premium have been paid.

Payment Method: HDFC Life payment method is cash, cheque, credit card/debit card.

Exclusion: In term life insurance, death caused by suicide in the first year or within first year of revival, no Sum Assured will be paid.

Death Claim: The nominee can apply for the death claim (Sum Assured) after filling claim forms along with submitting list of documents which will prove authenticity of the claim.