Manorama Online | Muslim boy faces discrimination during initiation ceremony

Manorama Online | Muslim boy faces discrimination during initiation ceremony

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Buying Insurance from a Friend or relative.

Is your Friend or relative an Insurance Agent…..??? Have you ever forced by them to take an insurance policy…..??? Nowadays we can see that most of the youngsters are getting attracted towards this industry. Huge salary, commissions and incentives make them to choose this industry. But have you ever thought how companies are providing them this much…..??? or how these companies are paying huge commission to their employees……??? Everything is out of your Investment…..!!! ULIPs are new trend in the industry; nowadays 90% of the insurance agents are trying to sell ULIPs because in ULIPs charges are high compared to traditional plans and this will help them to get more commission. Generally there are two kinds of ULIPs such as Customer beneficial (with fewer charges) and Agent beneficial (with higher charges). Always prefer customer beneficial plans so that the burden of charges will be less on your investment. More the charges less the benefit you will get and vice versa. There are so many things you need to consider while choosing an insurance product. A little negligence will make you to lose your hard earned money. Below given are some of the major charges levied on ULIPs. Charges You Need to Consider As we have already discussed that most of the insurance products carry (ULIPs) a number of charges, out of this majority will be hidden charges. If you are well aware of the charges, you can have a look into different charges levied on the product before buying it so that you can escape from the fraudulent sales tactics of insurance agents. The charge structure varies from product to product. Some of the common fees and charges are given below- Premium Allocation Charges Administrative charges Fund Management Fees Mortality Charges Fund Switching Charges Surrender Charges Premium Allocation Charges The money appropriated from the premium paid by you toward charges before allocating the units under the policy is called Premium Allocation Charges. It normally includes initial, renewal expenses, and commission expenses. This cost worst effects your returns and in initial years you have to more Premium Allocation charges then later years. Administrative charges You have to pay some charges out of your premium toward payment to the sale people/insurance agents/banks from whom you bought policy. It also includes the fees for administration of your plan this fee can be fixed or variable. Fund Management Fees This is one the most important charge which you have to pay for ULIPs. It is deducted as a percentage from the fund value. The fees levies for management of fund(s) and it is deducted before arriving the Net Present Value of the fund. Mortality Charges This is the cost that you bear for your insurance cover. It would vary depending on policyholder's age, sum assured and policy term. For ULIPs which pay higher of sum assured or fund value on death, Mortality Charge falls with time while ULIP which pays both the sum assured and fund value, it remains constant. Fund Switching Charges ULIPs give you the option to switch your fund to different equity or debt options which are applicable in your policy. There is a limited number of fund switches are allowed without charge but if you exceed that limits then you will be levied a charge. Surrender Charges ULIPs provide you to encash your units before the maturity date. When you go for premature partial or full encashment of units you have to pay Surrender Charges. Things to be considered while buying a Policy Qualification of the Agent Agent’s Knowledge about the product Word of mouth Never go by what you see Past accolades Avoid Miss-selling Consider different policies Conditions apply Benefits of Life Insurance Financial Security Life Insurance provides financial security for a human. When the breadwinner of a family dies the life insurance policy comes into picture to help the family. It helps the dependence of the insured person to meet their Individual and family’s needs. Therefore they will naturally be forced to give sufficient funds for this purpose. This practice encourages thrift and also helps people to plan for some productive schemes. Helps to Avail Tax Exemptions Insurance policy holders are allowed to claim income tax exemptions for the payment of premiums. The amount and the level to which they are allowed depends on different factors like the persons income, investment, etc. This provision is the most tempting point which makes people to invest in insurance and attain a mutual benefit of tax exemption. Since universal life insurance is a long term investment it is not advised to borrow money either by loans or through surrender values as they reduce your policy amount. To Save/Invest This is the third important reason to buy insurance. Generally savings is the amount remaining with a person after he/she meets all their basic expenses and other cash needs. If one has to build wealth, savings need to be channelized into an investment with precise time horizon and goal. But purchasing an insurance policy is neither savings nor investment; it is simply an effort going waste. Life insurance is the only investment option that offers specific products tailor-made for different life stages. It thus ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage, and hence guarantees that the financial goals of that life stage are met.

MONEY

If you have a ten-rupee note in your pocket, you have thousands of things in your pocket. You can have anything with those ten rupees. You can materialize a man who will massage your body the whole night! Or you can materialize food or you can materialize ANYTHING! That ten-rupee note carries many possibilities. You cannot carry all those possibilities with you if there is no note; then your life will be very limited. You can have a man who can massage your body, but then that is the only possibility you have with you. If you suddenly feel hungry or thirsty, then that man cannot do anything else. But a ten-rupee note can do many things, millions of things; it has infinite possibilities. It is one of the greatest inventions of man; there is no need to be against it. I am not against it.

Use it. Don't cling to it. Clinging is bad. The more you cling to money, the poorer the world becomes because of your clinging, because money is multiplied if it is always moving from one hand to another hand. In English we have another name for money which is more significant -- it is "currency." That simply indicates that money should always remain moving like a current. It should always be on the move from one hand to another hand. The more it moves the better. For example, if I have a ten-rupee note and I keep it to myself, then there is only one ten-rupee note in the world. If I give it to you and you give it to somebody else and each person goes on giving, if it goes through ten hands then we have a hundred rupees, we have used a hundred rupees' worth of utilities; the ten rupees is multiplied by ten. And Jews know how to use money; nothing is wrong in it. Yes, greed is bad. Greed means you become obsessed with money; you don't use it as a means, it becomes the end. That is bad, and it is bad whether you are a Jew or a Jaina, Hindu or Mohammedan; it doesn't matter.

ULIP Excuses, and Why They Are Wrong

The so-called turf-war on ULIPs that SEBI and IRDA have been fighting has now taken on a life of its own. In reality, just about the least important thing is who regulates ULIPs, while the most important thing-or rather, the only important thing-is that investors understand what they are getting into and make the choices that are best for them. I find that there's a great deal of misinformation floating around about ULIPs and why exactly are so many investment advisors so critical of them. ULIP proponents generally give a set of reasons which in their opinion invalidate criticism of ULIPs.

In this article, I'd like to briefly describe why I think these arguments are not valid.

Argument: ULIP expenses have been lowered by IRDA. ULIP expenses are now down to just 3 per cent for ULIPs of up to 10 years and 2.25 per cent for longer ones. Mutual funds, by comparison, have a higher fund management charges.
Reality: The way IRDA has framed the rules, 2.25 or 3 per cent is effectively the average over the entire lifetime of a ULIP. However, these charges are heavily front-loaded, something that allows insurance companies to circumvent them easily. During the first year, these charges are as high as 40 to 70 per cent. If the customer cannot continue with a policy for any reason, then his real expenses are far higher. And as it happens, a huge proportion of policies lapse during the earlier years. The front-loading has no logic, except to enrich insurers and agents. And fund management charges being lower than mutual funds is a not a full comparison. In mutual funds, total expenses are capped at 2.25 per cent for equity funds and less for other funds. These are not comparable to the fund management charges of ULIPs because ULIP customers also pay premium allocation charges, policy administration charges, mortality charges, and for guaranteed ULIPs, guarantee charge s. Comparing fund management charges alone is a joke.

Argument: ULIPs have led to a massive rise in insurance penetration in India.
Reality: Insurance means insurance, in the sense when the insured person dies, his family gets money to pay for food, rent and education. In a country with as little social security as ours, the growth of insurance has to mean the growth in the reach and quantum of risk cover for lives. To call ULIPs, a market risk-bearing product (with a tiny dose of insurance) by the name of insurance and then present it as evidence of the growth of insurance is simply dishonest, and to find a regulator appointed by the Government of India participating in this subterfuge is shameful.

Argument: The insurance industry provides a huge amount of employment. 30 lakh people have found work through insurance.
Reality: If ULIPs were a sound financial product than this would be wonderful news. Since they are not (see above reasons), this issue is a complete red herring. It is not the responsibility of ULIP customers to provide agents employment by giving away vast proportion of their premiums as commission. If crores of people's money has to be mis-invested to provide employment for lakhs of people, then it's better for those lakhs to find some other, more productive employment.

Argument: ULIP fund flows are important for the stock market and for infrastructure development.
Reality: The same as the employment argument. It is not the responsibility of ULIP customers to buy expensive and non-transparent investment products so that the stock markets can be boosted. Wouldn't it be possible to create infrastructure if ULIPs could be made more investor friendly.

I find the last two points to be particularly dishonest. They somehow imply that if ULIPs were made more investor-friendly, then lakhs of people would immediately become unemployed and money would stop flowing into development. However, ULIP critics like me have nothing against the concept of ULIPs. If ULIP cost is brought down and made non-front-loaded; and if transparency is enhanced to the level of other asset classes, then they would be a very good product. The fact that the ULIP's enforce gradual SIP-style investments could actually make them a superior product.

ULIPs should be converted into a product that has an investment component that has similar rules and regulations to mutual funds, in combination with an life-cover component that has the same pricing as term insurance. If this happens, then I'm sure that every opponent of ULIPs, including Value Research, will start recommending them above mutual funds.