ULIPs are smart investments for the future

One of the best investment options currently is the ULIP. We examine how it works and what makes it such a great choice.

An investor looks to create wealth by making investments. However, the chosen investment instrument must be the right one: there are several types of investments to choose from, but which of them is the best investment option in India?

While every investment instrument has its merits and demerits, there are some that provide high returns at low to moderate risk to the investor. Many investors are averse to playing very high stakes on the stock market to get gains. In this context, it is pertinent to note a very good investment known as the Unit Linked Insurance Plan (ULIP), one of the best investment plans offering a mix of insurance as well as income for the future.

What is a ULIP?

As mentioned earlier, a ULIP offers the dual benefit of insurance for you and your loved ones with investment and returns thrown in. It is essentially an insurance policy that the holder pays premiums for. However, unlike other insurance policies, the premiums in a ULIP are divested in two parts.

One part goes towards paying the premium for the insurance, while the other is invested in good quality, high performing equity shares. Normally, a fund manager handles this particular aspect of investment by keeping close tabs on market trends. The fund manager manages the entire equity portfolio while taking a yearly fee for doing so, apart from a commission from income. No investments are made without informing the investor and taking approval.

Once the investment is made, the insurance company allots specific ‘units’ of shares to the policy holder. This allotment is subject to how much money is invested in the equity shares. The fund manager examines the unit value closely. The unit value changes as per changes in market trends, and the potential for income stems from these changes. An experienced fund manager will keep tabs on earnings basis the market values per business day.

There is a lock-in period of three years for the ULIP. However, the investor has the freedom to assess the shares invested in and also choose to change the chosen securities in favour of better ones. This is important, because the investor has full control over how much he can earn from the securities in his portfolio. Besides, the ULIP investment is a long term one, thus giving investors the chance to study the folio performance and make corrections when needed.

The maturity of the ULIP provides a large corpus of money that can be used for a variety of personal or professional needs. Some investors choose to re-invest a portion of the money earned in other investment options in India.

Additionally, the sum assured under ULIPs is tax deductible under Sec 80C of the Income Tax Act, 1961.

4 Reasons You Can’t Ignore Buying a Term Plan Online

Lack of awareness on the part of the customer and the agent’s motive to maximise his commission are two of the reasons that led to rampant misselling of insurance products, says an article published in MoneyControl in January 2014. Online policies have completely changed the way we buy insurance. Premiums are calculated within 2 to 3 minutes and if it is suitable, you can pay and buy a term plan online within minutes.

Why Buy Term Insurance Online

Online policies are self-serviced policies. Being self-serviced in nature, it becomes all the more necessary to go through every minute detail before giving it your final go. You certainly do not want your family to face claims rejection only because you did not provide proper information or missed out a document. It is essential to read the policy documents carefully to know more about the benefits and term and conditions. This will help you make the right decision. Here are few reasons why you should buy a term plan online:

1. Lower Premiums – Online term policies tend to be 50 to 60 percent cheaper than their offline counterparts, mainly due to the absence of an agent involvement. While buying a policy, you deal directly with the insurance company. This would also mean that you can buy higher cover for the same premium amount as an offline policy or even pay lower premium for the same cover amount.
2. Calculate Premium – One of the greatest advantages of buying a policy online is that you can calculate the premium yourself with the help of a premium calculator. You may have to fill your gender, DOB, cover amount, policy tenure, along with some personal details. You may also be asked whether you are a smoker or not. Even if you are an occasional smoker, you must click the smoker option. Hiding such information can become a cause of claim rejection at a later point. Premiums are lower for non-smokers and women. You can change the cover amount so as to calculate the most affordable premium amount.
3. Hassle Free Procedure – Once you have finalised your premium amount, all you have to do is upload your KYC documents online, pay through net banking or a credit/debit card and you are done. You can practically buy a policy sitting on your couch in the middle of the night, if you wish to. You can even pay your premiums online. Although a medical check-up is not necessary in case of online policies, you might want to take one. Insurance companies reward individuals who maintain a healthy lifestyle.
4. Customer Reviews – You can also go through customer reviews and ratings. This will help you know more about the company’s services and the product you are about to buy.

Make sure to fill in accurate and complete information while you buy a term plan online. You must also check the claim settlement ratio of a company before taking the final call.

Are You Looking To Begin Your Own Start-up?

Prime Minister Narendra Modi launched the much awaited Start-Up India initiative in January 2016. As part of this initiative, start-ups would not have to undergo any inspection for the first three years of operation. There would also be no tax on the profits earned in the first three years, says an article published in NDTV in January 2016. PM Modi has also urged banks to help start-ups with finance. This initiative is expected to give the much required boost to the start-up ecosystem in India.

Various Types of Credit Facilities Available to Business Firms

Finance is a big hurdle when it comes to setting up your business. Limitation in funds can force entrepreneurs to alter their plans. If you are planning to set up your own business, you must be aware of the various types of financing that you can apply for at various junctures of your entrepreneurial journey. Business loans are both unsecured and secured. They may range from SME loans to project finance.

1. Term Loans – You can take term loans to fund your start-up as well as for future financial needs. You might be able to raise a significant amount against collateral. This type of credit facility offers flexibility of repayment tenure, making it less burdensome for enterprises. This type of credit can also be used to buy new equipment to enhance production.
2. Working Capital Loan – This is taken to meet day-to-day expenses. Working capital refers to the difference between current assets and current liabilities. When the working capital ratio of an enterprise is less than one, there is a high chance of falling into a debt trap and eventually slipping into bankruptcy. A working capital loan in such a situation helps you pay your suppliers on time, pay employee salaries and pay off other short term debts.
3. PProject Finance – This type of credit facility is specifically meant to finance a specific project. You may present an estimate to the bank, along with the project details. Banks may also check the credentials of the individuals heading the project. This type of loan is offered across a wide spectrum of sectors, including infrastructure, manufacturing, hospitality, education and more.
4. Commercial Real Estate – This type of funding is given in order to acquire commercial properties, be it office space, warehouses or factories. The property to be acquired might act as collateral as well.
5. Invoice Discounting – Invoice discounting refers to a service offered by banks and NBFCs, through which you can cash-in future invoice receivables. The bank offers you the money that you are expected to receive against your sales invoices. It charges a fee for the same. Later, the bank collects the sum on the pre-decided due date directly from the buyer.

Project finance, term loans and other types of credit facilities can help finance day to day functioning as well as expansion and growth. You can consult your financial advisor to know more.