Avoid these insurance related mistakes

We list four common insurance-related mistakes that one may make, resulting in the purchase of an unsuitable policy.

That one must buy insurance in today’s uncertain times is a given. However, the potential to make several mistakes while buying life insurance is immense. The reasons are varied – from lack of information to deliberate concealment of facts – and they can all result in you buying the wrong insurance policies.

Broadly, the following are four common mistakes most buyers make when taking insurance:

1. Equating insurance with investment. Most people (mistakenly) equate inssurance products with investment products. At the outset, let us establish that insurance cannot be viewed as an investment – it is expected to primarily provide protection, not function as an investment option. If you want high returns, pick such investment options as ELSS, mutual funds, etc.
2. Looking only at getting the premiums back. The reason many people sign up for expensive or unsuitable insurance products is that they wish to have a maturity bonus, at which point they can get all their paid premiums back. While this may work towards fulfilling some financial goals, it may result in you buying a plan that you don’t need or which is too expensive. It also leaves you vulnerable to future financial uncertainties, because you may pick a policy whose sum assured is not commensurate with the family’s needs. Instead, it is better to buy a term plan online – you pay lower premiums and get a high sum assured, which can take care of your family in the future.
3. Taking inadequate coverage. Depending only on office-provided insurance is a big mistake. The insurance plan given by the place of work is often insufficient to meet your family’s future needs. Or you might be tempted to pick a low premium plan – with a low sum assured – simply because it is more affordable. Hence, it is a wiser move to buy a term plan – it provides a large amount of money as sum assured, which can safeguard your loved ones.
4. Falsifying information. Insurance companies take down information about the potential customers as regards their health profile, age and other data. Some customers are tempted to provide incorrect information to get lower premiums and higher coverage. For example, a smoker might attest to be a non-smoker so as to get a lower premium. Or a 35-year-old might try to pass off as 25-year-old to get more coverage. However, falsifying information never works – insurers conduct rigorous checks and incorrect data is flagged down at once. It might also result in the termination of the policy.

Reasons why one must opt for a term plan

A robust financial planning has become an integral part of our lives with such an unpredictable life. Things might go topsy-turvy at any moment for anyone of us, and our loved ones might need to bear the hardship. Term plans are just the smart solution to cover the death risks while making things easier for your near-dear ones. 

Term plans have become popular over the years as they offer a few additional benefits that you cannot get with the traditional life insurance policies. Here are some of the reasons why one must buy it:

•        Easy to understand:

This simple type of life insurance is easiest to understand and have a straightforward structure. It is the oldest and the least expensive plan that covers the risk of death. Like your vehicle insurance or medi-claim, it is a no return scheme. In simple words, the nominee will get the full sum assured if the claim comes within the insured period, or otherwise, there is no cash value or maturity value of the plan. 

It offers coverage for a definite term or period like 10, 20 or 30 years. 

•        Cost-effective 

The premium for term insurance is very low as compared to that for cash value policies. Term policies are becoming a commodity at a fast pace in today’s competitive market as they can be easily compared with each other on the basis of price. Buyers have fewer information queries for term insurance, and this makes the term market modest as compared to cash value policies. 

Furthermore, they offer tax benefit. Even though the premium paid for the term insurance is small, it is eligible for tax benefit. 

•        Perfect plan for all

Ideally, a term plan is suited for persons who are the sole breadwinner of the family with high financial liabilities. In general, good insurable health, high financial obligations, moderate income and dependent spouse and children are a few factors triggering the choice of term insurance plan. Term insurance is also a better option to save costs for individuals on the threshold of new business venture or careers. 

You can buy a term policy online quickly. Online plans are gaining immense popularity, because of ease of access and it eliminates the need for any mediation of an agent with the insurance company.

In short, a wisely chosen term plan is a must have in your financial portfolio. It lets you reap the benefits of comprehensive protection with tax benefits at economical premiums

Remember, never think a term insurance plan premiums as an expense; rather you are eventually planning a feasible way to protect your near dear ones and that too at a small investment. Like all other insurance products, it is always advised to start planning at a young age to get the maximum benefits. It lets you avail the longer term coverage benefits like for 30 years at low premiums. So, what are you waiting for? Start planning now!

Nikki Lauda: The Dark Side of the Sporting World

During the third test match between Australia and Pakistan that was played in the first week of January 2017 at Sydney Cricket Ground, Australia's opening batsman, Matt Renshaw, had to leave the field as he was diagnosed with a concussion after being hit on the helmet multiple times. These blows on the 20-year-old youngster from Queensland has once again brought into the spotlight the risk of injuries in the sporting world and the question is, should players opt for a term insurance policy before taking on a career in sports?

Renshaw's injury might not be severe but what the world witnessed in 1976, certainly was. On August 1, 1976, Niki Lauda, the Austrian Formula 1 racer, met with probably the worst on-field incident in the history of sports and scripted an inspirational comeback that is still used as the best example to explain the importance of term insurance in sporting careers.

The Nightmare of Nurburgring

Niki Lauda was the biggest name in the driving circuit during the mid-1970s. He shared an intense rivalry with fellow driver James Hunt. After winning the first six races and drawing the next two of the 1976 season, Lauda looked set to win his second consecutive title. By the time the German Grand Prix was to be held in Nurburgring, he had almost double the points that Hunt had.

However, things went ugly during the second lap of the Nurburgring race. Niki Lauda's Ferrari met with a horrific accident in the second lap. He lost control of the car, crashed into the wall and burst into flames. The car drifted into the middle of the track, where another car smashed into it. During the accident, Lauda’s helmet came off.

He was trapped inside the vehicle, where temperatures rose to 800^oF, for nearly one minute before other drivers dragged him out. Despite almost losing his right ear, hair on the right side of the head, eyebrows and eyelids, he made a return to the truck within 6 weeks.

Lesson to be Learned

In the final race of the season, Lauda retired after just two laps, as Hunt won the title by one point. The reason he gave was that he was worried about his family. That's the other side of a glorious career no one tells you about.

On November 27, 2014, Australian opening batsman Phillip Hughes lost his life on the field after being hit by a bouncer, while 19 players and staff members of the Brazilian football team Chapecoense were killed in a plane crash on November 30, 2016. This is why, in the modern day, it is important to have an online term insurance plan before taking to the field, given how uncertain life is and how much an accident can cost you and your family.

People Living in Tier 2 Cities in India Should Consider Term Insurance

According to a recent study, Ahmedabad, Bhubaneshwar, Chandigarh, Coimbatore, Jaipur, Kochi, Indore, Nagpur, Vadodara and Visakhapatnam were identified as the top 10 emerging cities of India. While Coimbatore has over 25,000 small and medium enterprises, Visakhapatnam was found suitable for industries such as mining, heavy manufacturing, etc.

Jaipur was counted as a significant service sector investment, while Ahmedabad was hailed as an attractive investment for the manufacturing sector. Another study by Cushman and Wakefield revealed that the growth in tier II cities is being aided by increasing disposable income of people, which has created immense opportunities for the companies looking to grow.

This is positive news for the insurance market as well, which is still trying to break into the tier II cities. If you are planning the financial future of your family, products like term insurance might be the right option to begin with.

Benefits of Term Insurance

• Low Premium: One of the reasons why rural insurance or tier II insurance is low in India is that people believe they are unable to afford it. However, the advantage with term insurance is that it is the least expensive form of insurance and provides coverage for the lowest premium. The cost does increase during renewal but it is still an affordable option. Since most term policies are structurally similar, they can be easily compared to choose the best possible option.
• Best Alternate Available: It is the best alternative for temporary life insurance needs. If you want protection for a fixed term of 10 to 15 years, then it is your best investment option. The policy holder gets similar benefits to that of a traditional policy.
• Flexibility: It is much easier to opt out of a term plan than a traditional policy. If you stop paying the premium, the policy is terminated automatically and the cover ceases. This is particularly beneficial in the context of rural insurance, where people may not have a fixed income.
• Tax Benefits: Although the premium paid is lower, it is still eligible for tax benefits under Section 80C of the Income Tax Act, just like endowment policies. The savings you get in the premium can also be invested in other tax efficient schemes.

A term policy can also be purchased to meet a specific financial obligation, like the repayment of a loan. Also, if your financial goals change, it can be converted into a traditional policy. It is undoubtedly the cheapest way to protect your family and requires minimum effort and money on your part.

The Impact of Demonetization on Property Deals May Lead to Cheaper Loans

The Indian real estate segment, hit hard by the demonetization move, is hoping to revive its fortunes in the form of cheaper loans once the financial system becomes stable. The Reserve Bank of India is likely to ease its monetary policy to give the sector a boost, which in turn could result in reduced lending rates and easier housing loans in India.

Demonetization and the Secondary Property Market

The latest government action aimed at curbing illicit transactions has had a catastrophic impact on all property deals involving black money. Earlier, many developers and property owners used to insist on the use of hard cash for payment of a significant component of the price of any deal. This has stopped post demonetization, resulting in a sharp fall in real estate prices in certain areas.

While secondary market deals have been hit by demonetization, investment in new property has also been negatively impacted by the uncertainty in the minds of the people of India. More and more people are choosing to wait before using their funds to buy property. This, in turn, is resulting in the piling up of inventories with builders and property developers, and may be followed by a sharp cut in prices by real estate companies to keep their inventories in check. Thus, buyers can hope for a continued decline in property prices in the near future at least.

The real estate segment is currently in a pause mode and the trend is likely to continue for a couple of months till the situation becomes clearer. Transactions involving land, commercial property or secondary deals may not happen for some time, with everyone busy sorting their finances.

Potential for Easing of Interest Rates

Another impact of demonetization has been the sharp inflow of funds into the banking system, which is expected to put downward pressure on the interest rate structure of the banks. Reduced dependence of banks on higher cost borrowings is likely to cut the MCLR or the Marginal Cost of Funds based Lending rate, followed by a cut in home loan interest rates. An easing of the monetary policy is also likely to have a favorable impact on the home loan interest rate scenario.

An easing of home loan interest rates is expected to result in more and more investors opting for real estate purchases over investment in bonds and fixed deposits, thus giving a fillip to the real estate segment. The move will also help builders and developers to reduce their inventories.

The government is also likely to boost housing loans in India to achieve its goal of providing houses to all by 2020. It may launch special housing schemes for first time buyers at attractive rates. However, the actual and final impact of demonetization will be visible only after several months, when the transition to the new currency is complete, the cash crunch situation is resolved and some kind of stability is achieved.