Invest. Earn. Repeat

One cannot grow money if there is no investment. So, the foremost thing is to have a sustainable source of income and then save the amount, to invest it later on in some appropriate policies that will help you in doubling your sum, after years. This is the normal process through which maximum of us do our financial planning. But what if you come across policy, where both insurance and investments are integrated together?

What To Look for?

Yes, such policies exist and are termed as Unit Linked Insurance Plan. So, this is basically a life insurance policy where the risk is covered for the policyholder, and even you have an investment option at the same time that will give you the chance to invest in bonds, stocks or mutual funds. But such investments do have market risk and is with the policyholders.

Meeting the Goals!

The policies can be used for many purposes- retirement, health, child’s education, marriage and even for investment purposes. So this plan very well acts as a savings vehicle while at the same time is loaded with benefits of the insurance contract. So when one buys units in ULIP, the individual purchases units with a large group of investors, just like doing it in mutual funds. Different types of ULIP offer different types of qualified investments. So, it is a must to read the scheme prospectus carefully before investing.

Who Should Do ULIP?

1. Individuals Who Want To Closely Track Their Investments: ULIP helps investors to closely monitor their respective portfolios and even you are given the flexibility to switch funds to varying risk-return profiles.
2. Having Medium To Long Term Investment Horizon: This is ideal for those individuals who want to invest for a longer duration of time.
3. Individuals With Varying Risk Profiles: A choice of fund is available for all investors- from risk averse to those investors having strong risk zone.
4. Investors For All Life Stages: The plan can be selected based on your current status of age, your financial needs and different liabilities at different point of life.

Advantages

There are many advantages which you can avail time to time. Look at the points below for understanding it in a better way.

1. Market Linked returns
2. Life protection, savings, and investments
3. Flexibility
4. Single premium

Charges

There are different charges deducted by different insurance companies at the end. Some of the basic charges are

1. Administration charge
2. Fund management charge
3. Surrender charge
4. Switch charge
5. Premium allocation charge
6. Mortality charge
7. Partial withdrawal charge

Switching Between Funds

The insurance companies allow you to switch between funds after deduction of an amount. However, this helps in switching between debt and equity funds when the market is volatile or even when there is a fluctuation of the interest rates. This is one of the pros of ULIP, where your investments still tend to remain safe and secured. Even in the case of liabilities, financial standing, and risk profile, the investments can be changed accordingly.

Later, not sooner, to buy your dream home

Waiting for the festive period, when investor sentiment is high, is a wise move when looking for a home loan product. 

Every person wishes to buy a house for themselves and their loved ones. However, expensive real estate in India makes this dream an impossibility for most people. But those who properly plan the purchase account for the right timing.

The ‘right timing’ denotes a confluence of one’s personal finances, reduced interest rates and the best property that is available for purchase at that point of time. However, while one may or may not have adequate money at their disposal, or even find their dream house at the time, getting the right home loan is a matter of research. Most buyers wait patiently for the festive season to come around, when they believe that it is auspicious to buy a house – and when home loan rates are lower. 

Why wait for the festive period?

The festive period (generally spanning Ganesh Chaturthi, Navratri, Diwali, and later Christmas and the New Year) comprises of many days and dates that Indians consider auspicious for new beginnings. Thus, weddings, christenings, house and car purchases etc. are all timed to coincide with these dates.

Housing finance companies and banks are well aware of the positive sentiment towards big ticket purchases during this time. Thus, they maximise this sentiment by offering limited period home loan offers. Chief among these are lower interest rates (applicable for the tenure of the loan) and zero processing fees. 

Other home loan offers include discounts on online application of home loans, or transfer of existing home loan to another lender at a reduced rate, etc. 

Reduced interest rates are the biggest magnet during the home purchase process: a lower interest rate translates into a lower EMI, and hence, lesser repayment to the lending institution. A good offer also includes no processing or legal evaluation fees when granting the loan – this is a significant saving for the buyer. 

Not just banks and lending institutions, but real estate developers may also have offers to attract buyers. However, these are not always timed to coincide with the festive period, and may include such incentives as paying only 5% of the project cost to book the house, and paying the balance 95% on flat possession. Or they may include many free amenities or discounts for booking within a limited period of time. Many have pre-approved home loans on the project, so this also saves a lot of time for the buyer. 

However, do resist the temptation to buy a property only because there is a home loan offer being pitched at the moment. Do take some time to find the right home, and book it so that the developer or home owner does not sell it to someone else. You can then apply for the home loan at a suitable time, when a good offer comes along.

5 Reasons to Invest in Mutual Funds

While considering investment in the mutual funds or equities, one usually hesitates to invest due to the lack of information thereby assuming it to be too complex. However, what you need to know is that when you invest in MFs, your money, along with that of other investors, is put into various investment vehicles, such as money market instruments, stocks, bonds and securities. A fund manager is responsible for looking after these investments, in order to ensure that investors get the best possible returns.

Types of MFs:

There are basically four types of MFs that you can choose from:

1.      Equity – which invests only in stocks

2.      Debt – which invests in fixed income securities

3.      Money Market – which invests in short term instruments, such as government securities

4.      Balanced – which invests in equity and debt, to bring you the best of both worlds, meaning a balance between risk and reward.

Investing in MFs can be very beneficial. Here are five reasons why.

1.     Professional Management and Guidance

A qualified portfolio manager is in charge of each mutual fund. S/he is backed by a qualified research team so that investors can gain from the experience and expertise of knowledgeable fund managers. The manager is responsible for deciding where the money should be invested such that the best returns can be targeted, while keeping risks as low as possible.

2.     Provides a Shield in Times of Inflation

The fund managers assess various options to ensure that your money is invested in a way that you receive inflation-adjusted returns. This is one thing that the money in your savings account or even in fixed deposits might not be able to give you.

3.     Liquidity

Compared to a fixed deposit, these funds are very liquid. Unlike FDs, MFs have no penalty on withdrawing the capital early. However, some MFs have an exit load, meaning that you can withdraw after a specific period of time. This is actually done to help you remain invested for a good enough period to gain returns.

4.     Convenient

Since we live in a tech savvy world, where the internet has taken over, online services have also enhanced mutual fund investments. Investors not have the choice of making transactions online, which makes choosing, investing and tracking and even withdrawing your investments very convenient. Further, introduction of features like Systematic Investment Plan calculator or the Goal calculator, etc., allow you to understand your requirements for investment better.

5.     Higher Return

Based on the term of investment, MFs can generate higher returns, as compared to many other investment options. This is because your money is invested across a range of diverse sectors and instruments.

Another key advantage is that you can easily transfer money from one fund to another. As your investment grows and your risk appetite increases, you can look for schemes that offer higher rewards, although they might entail higher risks.

Term plans: Understanding the essentials

We list the 5 salient points that you need to know about term insurance.

Buying a term plan has become par for the course for those who are sensitive to the current and future needs of their loved ones. Though all the relevant information is freely available, buying a term plan online can become a tricky business if you are not aware of some important facts.

If you are about to buy a term plan, you must be aware of 5 important features of the same:

1. Buying term insurance is very simple. Earlier generations of Indians were used to buying insurance from the insurance provider branch offices, or through brokers. But buying term plans is extremely simple today. You can buy a term plan online in minutes, after entering details in the application form provided on the insurance provider’s website. After selecting the right plan and filling all the details, you can proceed to pay for the policy using Net banking or NEFT. Most insurance companies also do not insist on medical tests to complete the purchase.
2. The tenure is a limited one. Most term policies are structured such that once the tenure is up, the plan is terminated at that point – there cannot be a renewal of the policy or an extension of the tenure at that point. A new policy must be purchased at this point. The premiums paid are not returned to the policy holder, nor is there a plan maturity benefit. It is important to know these features before you buy the term plan.
3. It provides ample coverage. The term insurance plan is extremely useful for the families of those who take these policies. This is because the term plan has a very high sum assured amount. Currently, term insurance has some of the highest sum assured amounts across the insurance spectrum. Thus, the policy corpus allows the family members to enjoy a comfortable life even in the policy holder’s absence.
4. Anyone can buy it. Another important benefit of buying a term plan is that the premium payments are extremely affordable. This makes it an attractive option for those who have recently started working, or those who face many demands on their monthly income. Even as one pays a low premium amount, one can get a high coverage. Meanwhile, one can buy a more expensive plan at a later date.
5. You can decide the mode of pay-out. Not all term plan providers pay a lump sum amount on plan termination. You can decide the mode and frequency of pay-out at the time of buying the term plan. You can opt for a lump sum payment, or you can choose a periodic payment term so that your family members receive regular income.

Riders you need to check while going for a term plan

So, you are planning to buy a term plan. But have you thought about adding a term rider to your plan? Certainly, buying a term insurance plan is a good decision as it protects your near-dear ones in case of an unwanted event. However, there are various untoward events which may result in financial loss. So, term riders give protection in such situations. In this way, cost effective riders let you make the most of your insurance protection plan.

What is a Rider?

Depending on his/her specific needs, one can customize term insurance plans with add-on/attachment called ‘rider’ to increase the benefits of the policy. One has to purchase this additional feature along with the basic policy. Term insurance is an insurance product that offers death benefit to the family of insured in case of sudden death of an insured person. When it comes to buying a term plan with extra benefits, people think it as it would be pricey. However, it is essential to understand term riders and complete information about it. Surely one will understand the importance of extra benefits that can strengthen an insurance plan just by paying few bucks more.

Let us have a look at a few of common riders that supplement the coverage in the policy.

• Critical Illness - Some diseases/health issues can make a person out of action temporarily or permanently. Due to such health complications, it becomes impossible for the affected person to continue work. The person also loses his earnings because these illnesses require higher medical expenses. Term riders prove to be beneficial here. By adding critical illness term rider, you can have protection from loss of earnings and financial burden of treatment. Stroke, Coronary artery bypass surgery, heart attack, paralysis, cancer, kidney failure, major organ transplant like pancreas, lung, heart or liver, etc. are some of the most common critical illnesses.
• Accidental Death Benefit Rider - This type of term rider offers additional sum assured to the nominee if the death of an insured person faces due to an accident. Remember, even if you don’t purchase this rider, you will get the basic sum assured. This term rider is only for the additional sum assured if the policyholder dies due to an accident.
• Premium Waiver Rider - as the name suggests the rider waives premium in case of disability. A person has to stop work after a disability. Thus, there are no earnings, and still one has to pay the insurance premium. However, by availing waiver of premium insurance term rider, the insured person does not need to pay insurance premiums further.

Different insurance companies offer various types of riders. One should look for a reliable and reputed insurance provider to avail the maximum benefits. Remember, although the term riders are beneficial and provide additional cover to your term insurance plan, it is essential to understand the concept and go through the policy brochure carefully. Invest a little time in finding more details about different riders and selecting appropriate riders that will prove beneficial for you and let you maximize your term insurance policy benefits.