Sunday, June 21, 2009

How To Claim For Your Policy.

Review your policy or employee booklet carefully to make sure the plan covers the service in question. If you have any reason to think a health care service may not be covered, or that your company disagrees with your understanding of the policy, talk it over first with your provider and with the insurance company. Resolving questions first can prevent problems later.

You should never assume your plan will cover a treatment or service. Follow your plan’s rules, including pre-certification requirements and use of network providers. Your provider may require you to make a copayment or pay your coinsurance at the time of visit.

Fill out any claim forms the provider or insurance company gives you. Be sure to include your policy number and other identifying information.

How to submit a claim yourself:
  • Find out if your provider submits the claim for you or if you need to do it.
  • If you need to do it, review the claim information to make sure it is complete and correct.
  • File the claim as soon as you get the bill from the provider.
  • Send it to the correct address.
  • Keep a copy for your reference.
  • Wait for your company’s statement before you pay your provider directly.
  • Allow reasonable time for the company to process your claim. The company must inform you if it needs any additional information to complete the claim. Sometimes, it will request additional information directly from the providers; in other cases, it will return the claim form to you to get more information.
If the insurance company denies your claim:
  • They should state the reason on your explanation of benefits.
  • If you disagree with the reason for denial, check your policy or employee booklet for the company’s appeal procedures.
  • The company should answer procedural questions about appeals over the phone. Call the company’s assistance line (the phone number should be listed on your statement).
  • Submit your appeal in writing. The company may require information from your doctor.

Things To Be consider While Buying Insurance On Internet.

You can also buy insurance on internet. The accessibility and ease of the Internet has revolutionized the shopping world. Everything from pet food to furniture is available 24 hours a day, seven days a week, from the comfort of your home. This includes insurance. Here are some tips to help you protect yourself when buying insurance on the Internet.

Research, research, research
Research is by far your best protection. Fortunately, the Internet is also a great research agent. Determine which insurance coverage best fits your needs, then shop around for companies, agents, cost and coverage.

Double-check the company and agent
In order to sell insurance in our state, the company and the agent must be licensed. To confirm the credibility of a company or agent, check with our agency for the following facts:
  • Is the company licensed in Washington?
  • Is the company licensed to sell the line of insurance you are interested in purchasing?
  • Is the agent licensed in Washington and a legitimate representative of the company?
  • Does the company have a good record of handling policy complaints?
Purchasing on the internet
Once you’ve checked your facts and found the company, agent and policy that suit your needs, you’re ready to purchase. At this point, security is the name the game. Take some extra precautions to protect your personal information:
  • Update your browser. The newer browsers are equipped with more current security measures. (One way to check if you are on a secure site is by checking the address. A secure site address may begin with https:// instead of the usual http://. Or, the site may have a small key or closed lock icon located somewhere in the bottom left or right corner of the screen. )
  • If you cannot confirm the security of the browser, contact the company or agent and submit your paperwork via fax or mail.
  • Take extra precautions when paying with a credit card. Some credit cards may be equipped with antitheft protections. Review your credit card agreement for antitheft provisions.
The proof is in the paperwork
As you complete your research and purchase, it’s important to keep detailed records. Get all rate quotes and key information in writing for your file. Also, once you decide to purchase online, keep a copy of all paperwork you complete and sign, as well as any correspondence, special offers and payment receipts.
You should receive a copy — not a photocopy — of your new policy within 30 to 60 days of purchase. If you do not receive a copy, contact the insurance company immediately.

Insurance "Red Flags"
Here are some quick "red flags" to warn you against possible insurance fraud:
  • Don’t submit to high-pressure tactics. If you are being overwhelmed with offers from a particular group or agent that make you uncomfortable, trust your instincts and steer clear.
  • Do your research. Scam artists may try to convince you to change coverage quickly without giving you the opportunity to do adequate research.
  • Seek advice. If a particular policy requires a large deposit in an account, ask a third party — such as a reputable local insurance agent, accountant or financial advisor — for advice.
  • If it seems too good to be true, it probably is!

Thursday, June 18, 2009

ULIPs vs Mutual Funds.

How ULIPS can make you RICH!

Despite the seemingly comparable structures there are various factors wherein the two differ.

In this article we evaluate the two avenues on certain common parameters and find out how they measure up.

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity.

This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter.

ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses

In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India.

For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. ULIP-related expenses have been dealt with in detail in the article "Understanding ULIP expenses".

3. Portfolio disclosure

Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our interactions with leading insurers we came across divergent views on this issue.

While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand.

Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions.

4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load.

On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches).

Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when the ULIP investor's equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan.

5. Tax benefits

ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds good, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain is taxed at the investor's marginal tax rate.

Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and make informed decisions.

What Is ULIP?

Unit linked policies are insurance investment plans that offer the policy holder to have insurance cover with reasonably good returns in a long term. ULIPS are recently introduced in insurance sector after considering the boom in the share market. These gave good returns upto 54% on the investment. The expected return in the normal market condition is around 26 to 45%. ULIPS are most sold life insurance products in the recent past due to their flexibility of operation and investment options and good returns from them.

Unlike traditional and conventional insurance products, there is less chance for lapse of policy even the premium is unpaid. The risk of investment in the ULIPS is hold by the policyholder. Most insurance companies offer you different investment options in equity, bonds and securities with different risk level. Taking Higher risk is always associated with expecting good returns. Investment in the bond fund is associated with study returns at 11% with less risk. The premium has to be paid for minimum 3 years. There is lock in period for 3 years during which policy holder is not allowed to either partially withdraw from the policy or fully withdraw the amount. Lock in period is preffered because in the early years there will be more allocation and policy administration charges. So the fund need atleast 3 years to give good returns. The amount is paid after considering the present NAV (Net Asset worth) of the plan. After 3 years lock in period ULIPS are same like your bank account, You can either partially withdraw money or terminate the policy without any extra charges involved.

Sunday, June 14, 2009

Insurance Sector In India.

Major players/ Companies in Indian insurance sector:
1. Public sector companies
2. Private sector companies

Public sector companies includes LIC OF INDIA which is dominant player in Indian insurance industry and holding upto 75% stake in the insurance premium collected and number of lives insured. The Life Insurance Corporation (LIC) of India founded in 1956 is the largest life insurance company in India owned solely by the Government of India. Headquartered in Mumbai, which is considered the financial capital of India, LIC presently has 7 Zonal Offices and 100 Divisional Offices situated all around the country. In addition to an even distribution of 2048 branches located in different towns and cities of India, LIC also has a network of around one million agents who solicit life insurance policies to the public.

Upon privatisation of insurance sector in india around 1999-2000 all segments of the financial sector had been opened to private players and it was only a matter of time before insurance followed. The bigger private players claim that opening up insurance will give policy holders better products and service; the opponents of privatization argue that in a poor country like India insurance needs to have social objectives and newcomers will not have that commitment. Many international players are eyeing the vast potential of the Indian market and are already making plans to come in.
Many International players have made partnership with the local companies and entered into the insurance sector and they are slowing occupying the major share of insurance sector which was earlier occupied by state hold LIC of India.

The major private players include:
LIFE INSURERS

Public Sector

Life Insurance Corporation of India www.licindia.com

Private Sector

Allianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in
Birla Sun-Life Insurance Company Limited www.birlasunlife.com
HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com
ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com
ING Vysya Life Insurance Company Limited www.ingvysayalife.com
Max New York Life Insurance Co. Limited www.maxnewyorklife.com
MetLife Insurance Company Limited www.metlife.com
Om Kotak Mahindra Life Insurance Co. Ltd. www.omkotakmahnidra.com
SBI Life Insurance Company Limited www.sbilife.co.in
TATA AIG Life Insurance Company Limited www.tata-aig.com
AMP Sanmar Assurance Company Limited www.ampsanmar.com
Dabur CGU Life Insurance Co. Pvt. Limited www.avivaindia.com

GENERAL INSURERS

Public Sector
National Insurance Company Limited www.nationalinsuranceindia.com
New India Assurance Company Limited www.niacl.com
Oriental Insurance Company Limited www.orientalinsurance.nic.in
United India Insurance Company Limited www.uiic.co.in

Private Sector
Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in
ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com
IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in
Reliance General Insurance Co. Limited www.ril.com
Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com
TATA AIG General Insurance Co. Limited www.tata-aig.com
Cholamandalam General Insurance Co. Ltd. www.cholainsurance.com
Export Credit Guarantee Corporation www.ecgcindia.com
HDFC Chubb General Insurance Co. Ltd.

REINSURER
General Insurance Corporation of India www.gicindia.com

Insurance Global Scenario.

The international insurance industry is one of the largest sectors of finance. It ranges from consumer to corporate and industrial insurance, and even reinsurance, or insurance of insurance.

The major insurance markets of the world are obviously the US, Europe, Japan, and South Korea. Emerging markets are found throughout Asia, specifically in India and China, and are also in Latin America.

With the internet and other forms of high-speed communication, companies and individuals are now able to purchase insurance and related financial products from almost anywhere in the world. Increasing affluence, especially in developing countries, and a rising understanding of the need to protect wealth and human capital has led to significant growth in the insurance industry.

Given the evolving and growing socio-economic conditions worldwide, insurance companies are increasingly reaching out across borders and are offering more competitive and customized products than ever before.
Global insurance platform has witnessed a phenomenal change over the past decade. The forces of globalization and liberalization have brought the insurance companies across the world closer to each other than ever before. The insurance landscape has changed significantly over the years due to many unforeseen incidents around the world like 9/11, SARS, derailment of corporate governance, natural disasters like Tsunami, Hurricane Katrina etc. Outsourcing is another major development in the insurance sector. Waning margins, massive claims disbursement and increasing competition in recent years, especially post 9/11, have compelled insurance companies to opt for outsourcing, to improve efficiency and channelize resources towards the core functions like product development and innovation.
Over the past ten years, global insurance premiums have risen by more than 50%, with annual growth rates ranging between 2 and 10%. In 2004, global insurance premiums amounted to $3.3 trillion. The global insurance market grew by 7.6% in 2007 to reach a value of $3,688.9 billion. In 2012, the global insurance market is forecast to have a value of $4,608.5 billion, an increase of 24.9% since 2007. Life insurance dominates the global insurance market, accounting for 59.7% of the market′s value. Europe accounts for 39.3% of the global insurance market′s value.
AXA generates 4.4% of the global insurance market’s value.
Top ten global insurance companies are american intl group(USA), AXA group (france), allianz worldwide(germany), Manulife financial (Japan),General group (italy), prudential financial (united states), met life (united states), Aviva(united kingdom) and Aegon(Netherland).
BOOMING INSURANCE INDUSTRY IN INDIA:
With a huge population base and large untapped market, insurance industry is a big opportunity area in India for national as well as foreign investors. India is the fifth largest life insurance market in the emerging insurance economies globally and is growing at 32-34% annually. This impressive growth in the market has been driven by liberalization, with new players significantly enhancing product awareness and promoting consumer education and information. The strong growth potential of the country has also made international players to look at the Indian insurance market. Moreover, saturation of insurance markets in many developed economies has made the Indian market more attractive for international insurance player.

Total life insurance premium in India is projected to grow Rs 1,230,000 Crore by 2010-11.
- Total non-life insurance premium is expected to increase at a CAGR of 25% for the period spanning from 2008-09 to 2010-11.
- With the entry of several low-cost airlines, along with fleet expansion by existing ones and increasing corporate aircraft ownership, the Indian aviation insurance market is all set to boom in a big way in coming years.
- Home insurance segment is set to achieve a 100% growth as financial institutions have made home insurance obligatory for housing loan approvals.
- Health insurance is poised to become the second largest business for non-life insurers after motor insurance in next three years.
- A booming life insurance market has propelled the Indian life insurance agents into the ‘top 10 country list’ in terms of membership to the Million Dollar Round Table (MDRT) — an exclusive club for the highest performing life insurance agents.

Friday, June 12, 2009

Things That Determine How Much Insurance You Need.

If you are an earning member of your family, and there are members of your family who are financially dependant on you, you need life insurance. But how much life insurance do you need?

There are many factors that are relevant in determining the amount of life cover you should buy:

Need for minimum protection

It is essential that a particular level of income should be maintained for the family even when its breadwinner is not around. Suppose a family's present needs are Rs 25,000 p.m. The extent of life insurance for its earning members should be such that interest income from the sum assured can meet the family's monthly expenses of Rs 25,000.

If one also wants to provide for the future fall in the purchasing power of rupee due to inflation, one must necessarily take policies for higher amounts. No widow, they say, has ever complained that her husband bought too much insurance.

Current income level

Payment of insurance premium results in an outflow of disposable income. You may, therefore, not like to buy too much insurance. One might have to limit the quantum of insurance keeping in mind the cash flow problems that will be created as a result of the obligation of regular payment of insurance premia.

Tax benefits

You should also take into account the tax benefit under Section 80C.

Accumulating for specific needs

If you expect to spend a particular sum of money for the education and / or wedding of your children, you may like to buy an insurance policy for a specific sum to meet such a lump sum commitment.

Present age

Your present age is a critical factor in deciding the quantum of insurance that you can afford. The rates of premium go up with the advancing age of the life assured. Hence, one can buy more insurance for the same premium at a younger age than at an older age.

The final decision rests upon a careful consideration and balance of all the above factors. The need for minimum protection may be quite high, but the current need for disposable income may not immediately permit buying adequate insurance.

You then have to make a compromise and buy extra insurance as and when you can afford it.

The 5 simple rules

In the event of any misfortune, well-planned life insurance can protect your loved ones from financial difficulties. However, in most cases, people find it difficult to estimate the correct value of insurance they need.

Partly this is because life insurance needs change through different stages of life. Young people with no dependants may not have much need for life insurance.

As one's family responsibility grows, life insurance needs too increase. Thus, a periodical review based on your family circumstances is required in order to ensure that the coverage is adequate.

There are several simple methods available to broadly estimate your life insurance needs. Five simple rules are:

1. Income rule

The most basic rule of thumb is provided by the income rule which holds that individual insurance cover should be at least around eight to ten times one's gross annual income. For example, a person earning a gross annual income of Rs 1 lakh should have about Rs 8 to10 lakh in life insurance cover.

2. Income plus expenses rule

This rule suggests that an individual needs insurance equal to five times your gross annual income, plus the total of basic expenses like housing or car loans, personal debt, child's education, etc.

3. Premiums as percentage of income

By this rule, payment of insurance premium depends on disposable income. In other words, one should decide the quantum of insurance after meeting the regular outgo from salary.

From the first two rules, you can make a broad estimate of the minimum insurance you should have. The premium as percentage of income rule can help you fine-tune your cash flow by committing an appropriate percentage of your income for paying life insurance premium.

4. Capital fund rule

This rule suggests that if you need Rs 1 lakh p.a. for your family needs, and assuming you do not have any other income-generating assets, you may like to create a capital fund of Rs 12.5 lakh (Rs 1.25 million) which can yield Rs 1 lakh (Rs 100,000) annual income @ 8% p.a. You may therefore buy a life insurance policy of Rs 12.5 lakh.

5. Family needs approach

This rule holds that you purchase enough life insurance to enable your family to meet various expenses in the event of key earning person's death. Under the family needs approach, one has to divide his family's needs into two main categories: immediate needs at death (cash needs), and ongoing needs (net income needs).


Caution: Insurance is not investment You should always remember that life insurance is a protection and not really an investment because financial returns are rather meagre. (This is equally true of the life insurance portion of even a ULIP scheme.)

If you take inflation into account, there could even be a negative rate of real return at the time of maturity of your insurance policies. So, while it's important to secure your family's well being through adequate insurance of the lives of the earning members, over-investing is a mistake.

NEED FOR INSURANCE.

Its a common question that why insurance is necessary , what are the benifits? The question contains the answer within itself. After all, life is filled with tensions and apprehensions regarding the future and what it holds for the individual. Despite all the planning and preparation one might make, no one can accurately guarantee or predict how or when death might result and the circumstances that might ensue in its aftermath.

I am not saying that life and existence are constantly fraught with danger and uncertainty. But then it is essential that you plan for the future. The chances for a fatality or an injury to occur to the average individual may not be particularly high but then no one can really afford to completely disregard his or her future and what it holds.

People generally regard insurance as a scheme when and where you have to lose a lot to gain a little. Nevertheless, insurance is still the most reliable tool an individual can use to plan for his future.

Thursday, June 11, 2009

MEANING AND TYPES OF INSURANCE.

According to Encarta Encyclopedia, insurance is a contractual arrangement that provides for compensation by an insurer to an insured part if a specify set of circumstances occurs. These circumstances could be accident, personal injury, death, loss or damage to property or any other number of instances that can compensated for financially.

How does the insurance company operate? The insurance company operates by collecting small contributions from many people who are exposed to risks. This money collected is used to settle those who fall victim of such risks. These contributions which the insurance company collects are called premium.

To some individuals, insurance is seen as an investment. But is insurance an investment? No I don’t think that insurance is an investment. Insurance is a way we share our risk with others. It is a way of getting protection to reduce damages associated with some mishaps. No matter how careful one may be, he/she must need one type of insurance or the other.

When you buy insurance, it means that you are sharing your risk with others. Simply, the insurance company is a risk management company that can help anyone to reduce risks associated in day to day activities. Man is vulnerable to dangers and by virtue of this need insurance to help him cope in an unfriendly world.

Another thing you have to know when buying insurance is “insurance policy”. The insurance policy is the rule or guideline of the insurance company. It is the insurance policy that will help you to choose a better option for your insurance needs.

Here are few major types of insurances:

  • Life insurance:Descendent's family receives financial benefits. Life insurances also offer paid proceeds to the beneficiary.
  • Automobile insurance:Usually automobile insurances cover damages and legal financial expenditures of the automobile driver.
  • Health insurance:Health insurance cover the expenditures associated to treatment and medical expenditures.
  • Credit insurance:Borrowers often fail to repay debts,loans and mortgages due to certain unavoidable circumstances,credit insurances can be of great help during such crisis.
  • Property insurance:Property protection insurance provide protection from risks associated to theft,fire,floods etc.
This type of insurance can be further classified into specialized forms as follows:
  • Fire Insurance
  • Earthquake Insurance
  • Flood Insurance
  • Home Insurance
  • Boiler Insurance