LIC’s newly launched Online Term Plan

The largest life insurance market shareholder launched an online term plan last week. Although LIC has delayed to launch it as almost all private insurance players like Aviva, Ageon religare, HDFC, ICICI etc already launched it before many year. It is very popular product among young earning generation. The first online term plan were launched in 2009. It took 5 year to LIC come up with such type of plan.

The premium of LIC’s online term plan is costlier than its peer players. The brand value of LIC is much matter for people than premium. The PSU status of LIC do more score in policy holder’s mind and in our country people rely on LIC very much.

The premium of online term plan is very low due to there is no agent between insurer and insured. Therefore, agent’s commission directly passed to the insured and it is very cost effective for insurance companies also. However, premium calculator available on every insurer’s website but the premium is only indicative. You will know actual paying premium after submitting your information to the insurance company.

Every insurance company has risk assess department. It assess your profile based on information like your medical history, family health information, your habits like consuming tobacco, smoking and any adventure hobbies etc. I personally recommend all of you to provide true and accurate information to insurer to avoid claim rejection in future. At the time of claim if insurer find that you have hide any information with the insurer then your claim may be rejected.

There is misconception that private insurance company will not honour the claim but it is not true. All insurance companies do business under IRDA ambit. The claim settlement ratio of five private insurance companies HDFC Life, Kotak Life, ICICI Prudential life, SBI life and Max life are more than 90% according to IRDA annual report of 2012-13. Now the LIC has joined the race of selling online term plan. We can expect better service and rate to the insured by private companies and LIC.

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

National Pension Scheme

National Pension Scheme

In earlier days, only government employees were eligible for life time pension after retirement. After demise of employee, the pension continues to his/her spouse and dependent children. With the passing of time, due to the increasing no. of retired Govt. employee the liability of the government has increased tremendously. It has felt across the world. Increase in life expectancy age and better medical facility the expected increased liability, defined pension proved like a ticking time bomb for Indian government. 

The defined benefit pension means guaranteed pension or the pre decided pension benefits or fix benefits. After the report of three different studies, the defined contribution pension system has been replaced. On the basis of these studies, the NPS (New Pension Schemes) was made mandatory for central govt employees except the Armed forces with effect from 1st January, 2004. 

In our country, only 12% the working population covered under pension schemes. To cover the large no. of population for pension benefit, NPS has opened for all Indian citizen between age of 18 and 60 with effect from 1st May 2009. The name has been changed from New Pension Scheme to National Pension Scheme.

The main features and architecture of NPS:

• PFRDA (Pension Fund Regulatory and Development Authority) issues the investment guidelines for investment and manage the fund. It is regulatory authority for NPS.

• NPS has a two tier structure. Tier-1 account does not allow premature withdrawal and it is mandatory for all Govt. employees joining after 1st Jan, 2004. Tier-2 account is withdrawable account. Individual can make withdrawal prior retirement without telling any reason. To open Tier-2 account, Tier-1 account is mandatory. The monthly contribution would be 10% of the salary and DA to be paid by the employee.

• The minimum amount per contribution Rs 500 per month and one should invest at least once in a year. The minimum annual contribution is Rs 6000 in each subscriber account.

• If unable to deposit minimum annual contribution, a penalty of Rs 100 would be levied and account would be dormant. A dormant account would be closed when the account value falls. For re-active the account, subscriber have to pay minimum annual contribution amount and penalty.

• The normal exit option is available at or after the age of 60. At the time of exit, the individual would be required at least 40% corpus to purchase annuity. If any individual decide to exit prior age 60, then 80% corpus mandatory to purchase annuity. In case of subscriber’s death, the whole 100% available amount will be given to nominee.

• NPS scheme has lowest cast model in the world. The fund management charge is 0.0009% of the total AUM managed. The fund managed by 8 different fund houses with the help of professional fund managers. LIC , SBI and UTI manage the government employees and other subscriber’s  funds. HDFC, ICICI, Kotak Mahindra, Reliance and DSP BlackRock fund houses manage only non-govt subscriber’s funds. NPS allows to subscribers to switch from one fund house to another fund house.

• NPS offers two broad approach to invest. First is Active choice and the other is Auto choice. In Active choice, the subscriber will decide the asset classes for investment. In Auto choice, the funds will be invested according to life cycles of subscriber. Asset allocation would be change based on age of subscriber automatically in this option.

These are the main features which we have discussed. The article has been a bit lengthy. For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in