Insurance is not good product for investment

“Insurance is not good option for investment”

The headline of this article is very clear and I have mentioned it many times in my past blogs. Now you will question that why I am writing this simple line so many times that insurance is not good option for investment. In spite of writing many times on this subject, I still get the call from investors and friends and they all ask the same question which insurance policy is good for investment.

Increasing competition within insurance companies leads the high advertising and marketing budget. The no. of people is increasing to invest in insurance product inspired by glitzy aid and marketing. The people have been bombarded by the tricky insurance and return pitches at a rate that is much higher than earlier time. Internet, social networking sites are the main weapon to attract the young generation to invest in insurance. The whole focus of most insurance advertisement is on return not on the risk cover.

In today’s uncertain world, to insure yourself is most important thing and it should be done on priority basis. First, find out the right amount of insurance which will fulfill the need of your family in case anything wrong happen with you and go for any term insurance cover. A 35 year old person can get Rs 25 lakh insurance cover by paying only mere approx. Rs 4500 per year.

Actually, there is something deeply wrong in marketing and advised by insurance agent. The agent never suggest about the term insurance to the client as they get less commission on it as premium amount is less in case of client go with term insurance. In fact, term insurance is the best option for risk cover for client. The problem become more deep in that case when you ask about term insurance and they respond that you will get nothing back in term insurance and it has no benefit. After listening this statement from the agent that the term insurance has no benefit, you ask for other product with benefit and from here the miss-selling start.

The agent suggest you product which has more benefit for agent and insurance companies and poor people get trapped in the sweet talk of agent. The reasons why I am saying that insurance product is not good for investment purpose are it is illiquid investment. It means that whenever you need money you should get your money in your hand bit in this case insurance come with 10-20 years plan and your money get stuck for so long times.

Insurance products have lack of transparency in investment compare with mutual fund products. It has also more cost and agent commission when you compare it with mutual fund agents. In general, the agent get commission 15% of the annual premium in the first year and after that the commission get  reduce from 7.5% to 5% per year of the annual premium. Anyone can understand easily, in any investment product if an agent gets such huge commissions so how can such product will deliver the good return for investors. In fact, in 10-20 years poor investor get return on investment below than the bank fix deposit return in majority cases from invest in insurance product. I will again say please do not mix your investment with insurance products.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Insurance Planning: Part 3

Insurance Planning: Part 3

In last two parts of insurance planning we have discussed about life insurance. Today we will discuss about non life insurance. In our country, health insurance falls in non life insurance category.

Medical treatment is getting very costlier in these days. Hospitalization of any family member make a big hole in your pocket and your financial balance become in bad shape. None knows when it comes. It may be happen anytime without informing you and you will never know it prior. Health insurance is very critical and essential part of any individuals. No one should ignore it. In our country it is getting popular and demands are growing from last couple of year.

These policies not only cover hospitalization but also the expenses incurred before the admitting in hospital. There are many private companies like Max Bupa, Apolo Munich, ICICI Lombard, Religare Healthcare provide excellent coverage and services. Some of these companies provide free health check up if you do not get admitted in hospital during the policy cover period.

In tax saving point of view, one can claim deduction under section 80D for paying premium up to Rs 15,000 for self, spouse and dependent children. For senior citizens the claim deduction limit available up to Rs 20,000.

In addition to above mentioned limit, one can claim additional claim tax deduction of Rs 20,000 if one pay premium for parents if parents are senior citizen and if not senior citizen then additional limit is up to Rs 15,000. Therefore, one can claim maximum tax deduction up to RS 40,000 under section 80D.

It is very vast subject so please check all inclusion and exclusion of deceases and check the hospital list under TPA.

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

Insurance Sector Update - November 2013

Insurance Update – November, 2013

I am starting for now onward to simple update on insurance industry time to time. Insurance is very vital and critical part of any financial plan. It is our duty as an advisor and planner to inform our readers to update about this industry. A lot of regulatory activity is going on and companies come with new customized product. Every investor must know about this. Some recent update as given below:

• According to FICCI report, General insurance industry may touch gross written premium (GWP) 3 lakh crore by 2025 with a conservative growth rate of 13% CAGR. According to report that increased health insurance awareness would increase the opportunities in this sector.

• National Disaster Management Authority suggested that insurance should be mandatory for residential properties, malls, theaters, hospitals and hotels. It also be recommended that it should be applies on all urban property tax payers.

• Insurance regulator IRDA has increased investment limit in various category. Now general insurance companies are allowed to invest upto 1.50% or Rs, 3,500 crore in liquid mutual fund. It is for temporary time and can be reversed at a later stage.

• Life insurance companies now can invest upto 5% in FD schemes of promoter group bank. Earlier the limit was 3%. IRDA has also increased  invest limit to invest in information technology and industrial sector from existing 15% to 20%.
• Reliance life insurance has launched policy revival drive. In this campaign lapse policyholder can revive their lapse insurance policy without any penalty and medical tests subject to conditions. This offer will available till 30^th November, 2013 for all reliance insurance products.

• IRDA wants insures to stop giving high incentives to auto dealers. For pushing motor insurance policies sales, insurers offering high incentives to auto dealers and due to this policy holder are paying unreasonable premium.

• IRDS has also proposed to set up insurance clearing house. For smooth functioning of reinsurance and coinsurance business IRDA want to establish “Insurance Clearing House”. It would be promoted by Indian insurers, reinsurers and the authority.

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

Health Insurance Policies

Have you read your health insurance policy carefully..?

As we already know that the health insurance policy is very essential thing for anyone regardless any income group or age group. It is mandatory part of any comprehensive financial planning. Many private and public sector companies provide these types of policies with many attractive benefit and limitation.

Many companies come with these types of policies with restriction like hospital daily room rent and many exclusions like pre existing decease. Now, it has become more important that we should read all the term and conditioned very carefully. At present, there is no free look in facility but IRDA has indicated that they can implement this norm on health insurance policies. As per current scenario, it is only implemented on life insurance policies only.

Please make sure whether lifetime renewability is available or not with the policy. Many medi-claim policy provider often refuse renew the policy after certain age. You can select a plan that offers lifelong renewal because buying insurance at older age becomes a difficult task in case any ailment. There are many decent policies available with lifelong renewal. Few of them as given below:

• Apollo Munich Easy Health Plan
• Apollo Munich Optima Senior
• Star Citizen Red Corpet
• ICICI LombardComplete Health Insurance – iHealth Plan
• Max Bupa Health Assurance
• Religare Mediclaim

You should check premium and benefit and select the plan according to your need.

For more detail about any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com