Prajna Capital

How to select the Best Term Insurance Plan for 2016
5 Best Credit Cards in India for 2016
SME and Bank Loan Ratings

How to select the Best Term Insurance Plan for 2016

Posted: 05 Feb 2016 04:10 AM PST

Life Insurance article in Advisorkhoj - How to select the best term life insurance plan for you

We have discussed a number of times on our blogs that term insurance is the best form of life insurance. It is a straightforward protection policy and the premium is much less than life insurance cum savings products. With a term life insurance plan you can get the optimal life cover and generate sufficient investible surplus to meet your long term financial goals. We have discussed why term plans are superior to traditional life insurance cum savings plans in our article, Taking term plan can be a smart Insurance choice. Once you have decided on buying a term life insurance, you should know that half the battle to provide financial security to your family in the event of an untimely death is won. In this blog we will discuss how to select the best term plan. You should go about the process of buying term insurance in a very methodical way and if you engage an experienced certified financial planner your job will be that much easier. There are 5 broad steps involved in buying the right term life insurance policy.

Determine the right amount of Sum Assured

You need to consider several factors in deciding how much life insurance cover is adequate for you. The insurance cover, also known as sum assured, should be adequate to cover the following:-

How much debt do you have: If you are the only earning member of your family, your dependents may not be able to meet the debt obligation in the event of an untimely death. Home loan, car loan, credit cards and personal loans must be paid off in full. For example, if the outstanding principal balance on your home loan is र 25 lacs and your car loan is र 5 lacs, you need a minimum insurance cover of र 30 lacs plus a little extra for accrued interest (not paid). If your spouse is also working, you should determine how much loan can he or she service, the balance must be paid off in full.

Income needs of your family: This is the biggest determinant of how much life cover you need. In the event of death, the income earned from the investment of the policy pay-out (also known as sum assured) should replace your current income. For example if your current monthly expense is र 50,000 and assuming you can get an annual pre-tax return of 7 - 8% on your investment, you will need an insurance cover of र 80 – 90 lacs. You should always add an additional amount, as a guard against inflation. As a thumb rule you may add your annual salary as the additional inflation guard to your sum assured. Your total sum assured, including inflation guard, in the example above should be र 90 lacs - 1 crore. So if you have loans of र 30 lacs and an expense of र 50,000/month, you total insurance cover or sum assured should be र 1.3 crores.

Future obligations: You also need to factor in your future obligations, like children's education, marriage etc. For example, if you need र 10 lacs for your child's higher education on an inflation adjusted, you should include that when you are calculating how much cover you require. If your child is 10 years old and if you can get about 12% returns from suitable child investment plans, you will need to make an investment of र 4 lacs. So, carrying on the above example, you should add र 4 lacs to your required sum assured.

You can see the above method of calculating insurance cover factors, in how much funds you will require immediately, how much funds you will require on an ongoing basis and how much will you require at a future point of time, in the event of an untimely death. Determining the right sum assured is a critical aspect of life insurance. Being under-insured is as worse or, at best, only marginally better than being uninsured.

Determine the term of your life insurance policy

The term of your life insurance policy is as important as the sum assured. For example, if you are 25 – 30 years old and have a 15 year term plan, you will be left without life insurance by the age of 40 – 45. At that age health risks are much higher, particularly with respect to coronary and cardio-vascular diseases, than when you are younger. Buying new life insurance when you are above 40 is much more expensive than when you are younger. For example, the premium of a 15 year term plan for a 45 year old is more than double of 35 year term plan for a 25 year old (based on LIC Amulya Jeevan premium rates). If you take a longer term plan when you are young, you may be paying slightly higher premiums in the initial policy years, but your overall savings in your life insurance premiums over your entire working career will be much higher. You should try to get the right life cover for the longest term possible. Of course, there is the question of affordability. While you should not compromise on the amount of life cover or sum assured to get a longer term plan, term plans are advantageous in the sense that you can get a longer life insurance term at a much lower cost, compared to other types of life insurance plans. 60 is normally considered to be the retirement age, but nowadays, more and more people are working even beyond the age of 60. It is always a good practice to assess your life insurance needs from time to time, and if you feel that you will be working beyond the age of 60, it will be prudent to buy term plan to cover you even beyond the age of 60.

Compare Plans before you buy

It is always advisable that insurance buyers compare different term plans before buying their life insurance policy, so that they can choose the right insurance policy for their needs. While cost is an important factor when buying an insurance policy, the claims settlement track record of the life insurance company is also an equally important factor. For example, while the premium of insurance plans of Life Insurance Corporation (LIC) is usually higher than other companies, the claim settlement ratio of LIC is also higher than other life insurance companies. There are a large number of term plans available in the market. You should note that, under the current insurance (IRDA) regulations an insurance agent are not allowed to sell products of multiple insurance companies. While the regulations may change in future, as of now, an insurance agent is not allowed to sell policies of more than one life insurance companies. Therefore, an insurance agent will obviously be biased towards the products of the company where he or she has the agency. A fee based independent financial planner or insurance advisor can help an insurance buyer buy the right policy. You can also buy term plans online after comparing different term plans, if you can devote the time and know what you need. We have compared premiums of some of the best term plans available in the market in our article The best term plans in 2016. The table shows the approximate term insurance premiums for a sum assured of ? 20 lacs and a policy term of 20 years. Please note that the premium rates are indicative only.

Choose a company with good claims settlement track record

A cheaper policy is no good, if the life insurance company for some reason or another cannot fulfil the claim of the insured in the event of an untimely death. It defeats the very purpose to buying life insurance. Even if the life insurer fulfils the claim, if it takes a very long time to fulfil the claim it is certainly not a desirable situation for family of the insured to be in. We have discussed the claim settlement statistics of some of the largest life insurers in the country in our article, Best Life Insurance Companies in Claim Settlement. The table below shows the number of the death claims received by these life insurers, number of death claims paid by the insurers, the number of the death claims repudiated (rejected) and the number of the death claims pending to be processed at the end of the year.

Monitor your life insurance needs on an ongoing basis

Some insurance buyers think that once they buy adequate cover in a good life insurance plan from a reputed company, they assume that their life insurance needs are taken care of forever. This is a mistake. Financial situations of insurance buyers change with time. Compare your current income with your income ten years back. Hasn't your income grown several times? Your lifestyle would also have improved significantly. If you bought a life insurance plan ten years ago based on your income back then, the sum assured will not be enough to meet your family's current lifestyle and needs, in the unfortunate event of your untimely death. Therefore you should buy an additional term plan to cover that risk. Life Insurance needs have to be re-evaluated at a regular frequency and any additional sum assured if required, should be bought.

Conclusion

In this blog we have discussed 5 broad steps involved in selecting the best term life insurance policy that is most suitable for your needs. Life insurance is one of the most critical aspects of our financial planning. It is as important as investment planning in ensuring the financial well being of our families. I have seen many investors devoting much more mind space to investments compared to life insurance, while at the same time, spending much more on life insurance than investments. If you follow the steps outlined in this blog and choose the right term plan for your life insurance, not only will you be able to provide adequate financial security to your family, you will also be able to free up substantial financial resources to invest towards your other long term financial goals.

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Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds
Top 10 Tax Saving Mutual Funds to invest in India for 2016
Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund
2. Axis Tax Saver Fund
3. Franklin India TaxShield
4. ICICI Prudential Long Term Equity Fund
5. IDFC Tax Advantage (ELSS) Fund
6. Birla Sun Life Tax Relief 96
7. DSP BlackRock Tax Saver Fund
8. Reliance Tax Saver (ELSS) Fund
9. Religare Tax Plan
10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online
Invest Online
Download Application Forms
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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5 Best Credit Cards in India for 2016

Posted: 05 Feb 2016 03:21 AM PST

Credit cards have been around for a while, but the dust around it never seems to settle. The facts that they're convenient to use and that you can pay for things even if you don't have cash right now are the biggest selling points of credit cards. But credit card companies go beyond these when trying to convince customers that theirs is the best credit card in India.

Credit card companies try everything when wooing customers. Some of the most common tactics used are these:

Points – A certain number earned every time you swipe
Zero percent interest – No interest on balances
Family spends – Vacations, schools, gifts
Smart advertising – Illusion of attainable luxury

While some of these benefits may be genuine, a good many of them are not of much use to most people. But even if you have the best credit card in India, you can't skimp on paying your dues on time. Even a small lapse on your side can send you spiralling down a deep hole of credit card debt.

That being said, it is worth your while to do some research to decide which credit card is best in India. Here are the top 5 we came across when determining which one is the best credit card in India 2015.

best credit card in india 01

ICICI Bank Coral Credit Card

This is a card which deserves the title of 'best credit card in India.' With special offers on joining and annual fees, this card offers many advantages for basics like grocery shopping with 4 payback points for every INR 100/- This is along with 2 free movie tickets every month at bookmyshow.com.

RBL Bank Platinum Maxima Credit Card

Another prime contender among the best credit cards in India, this card has no joining fees at all, although the renewal fee is a hefty INR 2000/- This card is quite open handed with points, at 5 points for every INR 100/- spent on essentials like fuel, utility, shopping, dining, travel, and entertainment.

ICICI Instant Platinum Credit Card

With no annual or joining fees, and approval even if you don't have any credit history to speak of, this is the ideal and safe option for a first timer. It offers a waiver of 2.5% fuel surcharge up to INR 4,000/- at HPCL pumps, and an INR 100/- discount on 2 movie tickets at bookmyshow every month. The only catch is that it requires that you have INR 20,000/- in a Fixed Deposit, locked away for at least 180 days.

Indian Oil Titanium Citibank Credit Card

As the name indicates, this is the ideal card for you if you rack up significant fuel bills every month. The card offers up to 4 points on every Indian Oil purchase of INR 150/- Besides these, you can also earn points on purchases from ecommerce sites like Amazon, Myntra, Jabong, etc., which you can redeem for free fuel.

HDFC Titanium Times Credit Card

If you and your family spend every weekend on movies, dining, and entertainment, this card is tailor-made for you. With only INR 500/- as joining and annual fees, this card offers a cool 25% discount on movies and a 15% discount on select restaurants. There are also gift vouchers for shopping, dining, and more.

Choosing the right credit card for you should depend upon your needs and your ability to pay the associated fees. Once you know exactly what you want, selecting the best credit card in India for your particular requirements should be a breeze, especially with us to help!

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saving Mutual Funds to invest in India for 2016 or Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

Leave a missed Call on 94 8300 8300

SME and Bank Loan Ratings

Posted: 05 Feb 2016 02:13 AM PST

SME and Bank Loan ratings

MSME Rating is a comprehensive and independent third-party evaluation of the MSME. It takes into account the financial position and several qualitative parameters of the MSME that have a bearing on the creditworthiness of the entity. Adequate credit flow to MSMEs helps in driving the overall growth of the economy. Rating company facilitates this by undertaking an independent, third-party and comprehensive assessment of the overall conditions of MSMEs. MSME ratings aid in enhancing the credibility of the MSME units, facilitate growth and also serve as a tool for self evaluation and improvement.

Bank Loan Ratings are assigned to various long and short term bank facilities such as: project loans, working capital demand loans, cash credit facilities, term loans, and corporate loans and, also, to non - fund based facilities such as: bank guarantee and letter of credit. A bank loan rating is a forward looking indicator of the extent of risk with regard to timely payment of interest and principal of the bank facility rated.

Benefits

Aids in enhancing the credibility of the MSME unit.
Helps open doors to the corporate sector, especially for MSMEs having a large vendor base.
Facilitates international trade and commerce by building confidence amongst potential trading partners.
Motivates MSMEs in adopting good governance practices for long term benefits.
Serve as a tool for self evaluation and improvement.

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds