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As we leave behind another memorable year and step ahead to welcome 2012, we look back at all the news and events that made headlines in the world of personal finance. Here is a snapshot of the 10 most important news items of 2011 that is sure to have an impact on most investors in some way or the other.

1. Deregulation of Savings Account

The interest rate on savings account, have always been regulated by the Reserve Bank of India (RBI). Banks seldom had much control, and the regulated interest rate always hovered around 3.5% to 4%. In a landmark move by the RBI, the interest rate on savings account has now been deregulated. This means that banks would now have a free hand in deciding the interest rates on savings account deposits and what they wish to pay to their customers.

Impact: Investors could now expect to earn much more from their liquid money parked in their savings accounts.   

2. Portability of Health Insurance
After a lot of delay, Insurance Regulatory Development Authority of India (IRDA) finally gave a go ahead to portability of health insurance. This facility lets health insurance policy holders to switch over from one health insurance provider to another under the same terms that exist under his current medical insurance policy. Though still in its nascent stage, portability would bring in a good amount of flexibility to policy holders.
Impact: Those unhappy with their insurance company and are seeking to switch over, no longer need to sacrifice their existing benefits or waiting period of Pre-Existing Diseases (PED).

3. No need to file returns for income less than Rs. 5 lakhs

Central Board of Direct Taxes (CBDT) passed a move to exempt all salaried individuals with an income of less than Rs. 5 lakhs from filing income tax returns. Applicable from assessment year 2011-2012 onwards, this exemption covers only income from salary and excludes income from other sources like house property, capital gains and gains from profession and business. If however a claim for tax refund exists for a salaried individual, he must file his returns.

Impact: The move comes as a great relief for a large number of tax payers.

4. IRDA Regulations on Distance Marketing

The year 2011 saw a number of regulations and guidelines set forth by IRDA to protect the interest of insurance investors. One such guideline is to regulate the distance marketing of insurance products. Marketing of insurance products through phone calls, SMS and emails, should be done by employees of insurance companies or their brokers or persons of a corporate agent only.  The person engaged in making sales, shall not promote a product but should assist the customer to choose a product that would suit him best. The guidelines also mandate brokers to provide a chart displaying the up-to-date price comparison of the available products under each category.

Impact: This directive makes it more reliable for customers to use alternative modes to buy insurance.

5. Stricter Know Your Customer (KYC) Guidelines

KYC or Know your Customer is the first step in customer identification that is employed by all financial institutions. KYC was earlier mandatory only if the investment was above Rs. 50,000. Under the new KYC guidelines, all retail investors must comply with KYC norms, irrespective of the amount invested. So whether it is a bank account, mutual fund scheme or a pension plan investors would now have to comply with the norms and furnish relevant documents for identity, address, and Permanent Account Number (PAN).

Impact:  KYC is a measure to prevent issues relating to identity theft, fraud and money laundering. 
 

6. More Time to Revive Discontinued ULIPs

Your discontinued ULIP could now be revived, if done so within two years from the date of its discontinuance, and before the expiry of its lock in period. The new norms set by IRDA allow insurers to review policies which would otherwise have been cancelled. The norms also make it mandatory for insurers to provide minimum returns for the discontinued period, equivalent to the savings deposit of State Bank of India at around 4%.

Impact: Now get more time to revive your policies and earn better returns for the discontinued period.

7. No Pre-payment penalties on your home loan

The National Housing Bank (NHB), the regulator of Home Finance companies, issued a directive to all Housing Finance Companies (HFC) to remove prepayment penalty on home loans. Though the move is currently applicable to HFC borrowers, the RBI too is in the process of making a directive to banks to remove this penalty. 

Impact: Relief to lakhs of home loan borrowers from.

8. Term Insurance Gets Cheaper

With the gaining popularity of the World Wide Web to purchase anything, insurance too is seldom left behind. Many insurance companies now provide an option to buy term plans through their websites. With the absence of any agents or pushy sales executives term plans are cheaper and are easier to buy too. Such online term plans are definitely here to stay and could be purchased from the comforts of your home or office.

Impact: A hassle free and cost effective way to take a life cover.

9. Widening of Tax Slabs

The Union budget of 2011 increased the basic tax exemption limit to Rs. 1, 80,000 from the Financial Year 2011 – 2012 (or Assessment Year 2012 – 2013). For senior citizens too, the exemption limit has been increased to Rs. 2, 50,000 along with reducing their qualifying age from 65 years to 60 years. A new tax slab has been introduced for senior citizens over 80 years in age-called as Super Seniors who will not be required to pay taxes for income up to Rs  5, 00,000

Impact: This widening has brought about great relief for the common man.

10. Fresh IPO Guidelines for the Insurance Sector

Insurance companies seeking to raise capital from an Initial Public Offering (IPO) now have to adhere to a fresh set of norms. As per the IRDA prescribed guidelines, an insurer before raising an IPO must have completed 10 years of operation in the sector. The company must obtain a go ahead from both the capital market regulator SEBI and from IRDA. Such approval from IRDA will be based on the insurer’s financial position, reputation, track record and the company’s post issue capital structure. IRDA holds the rights to decide on factors relating to the minimum lock in period, the maximum subscription of the IPO and even the extent of dilution of stake by promoters.

Impact: The guidelines prescribe certain disclosures that are mandatory for the insurance companies while raising capital through an IPO, thereby reducing problems related to mis-selling of a product.

Life insurance agents play a very important role in the insurance industry. In most cases, an agent is the first point of contact for a customer. An insurance agent helps the customer in choosing the right policy and guides the customer through the entire sales process.

Here is a look at the number of insurance agents of all the 23 private life insurance companies and Life Insurance Corporation of India (LIC of India) as on April 1, 2011 and June 30, 2011. The data also includes the addition and deletion of insurance agents.

LIC Insurance Agents= 13,06,185 (as on June 30, 2011)

All 23 Private Companies’ Insurance Agents = 11,73, 505 (as on June 30, 2011) 

Click to compare life insurance premiums and policies

‘Start date of Life Insurance Companies’ or ‘Registration date of Life Insurance Companies in India’

Life Insurance Companies in India include LIC which is fully owned by Government of India and 23 private life insurance companies. LIC was founded in the year 1956 with the merger of about 154 Indian insurance companies, 16 non-Indian companies and 75 provident societies.

Private life insurance companies entered the life insurance markets at a much later date after the government threw open its gates allowing them to operate in India.

Here’s a look at the start date or registration date of all life insurance companies in India: 

ICICI Prudential Life Insurance plans can be categorized into Protection Plans, Wealth Creation Plans and Education Insurance Plans. Various plans available in the life insurance segment include Term Plans, Endowment Plans, Whole Life Plans, Money Back Plans, Child Plans, Pension or Retirement Plans, Unit-linked Insurance Plans or Ulips etc.

The core benefit of life insurance plan is that it ensures that your family gets financial support, even in your absence. Life insurance plans also help you enhance your investment so that you can use it in the future to buy a new car, pay for your child’s education, marriage etc, or even to retire comfortably.  

Life insurance is an important investment and hence it is good to know how efficiently an insurance company deals with or resolves complaints. Below is the data of all insurance complaints of ICICI Prudential Life Insurance for the period April to September 2011. These complaints are categorized into sales, new business, policy servicing, claims and others. Total number of complaints received during the stated period is 14,790 plus 826 from the period before. At the end of this period the company resolved 15,526 complaints and 90 complaints remained unresolved or pending.

Life insurance in India gained momentum since the entry of private insurance companies. Currently there are 23 life insurance companies that are operational in the country which includes 22 private life insurance companies and LIC of India. Life insurance products that cater to different needs of a customer include plans like Term Insurance Plan, Endowment Plan, Money-back plan, Pension Plan, Unit-linked Insurance Plan (ULIP), Child Plan etc.

All the private and public insurance companies in India are governed by the Insurance Regulatory and Development Authority (IRDA). Each year, IRDA’s grievance cell receives thousands of complaints from customers. Here is a look at all life insurance complaints received during 2009-2010.

Total number of complaints received against life insurance companies was 2,449, out of which 606 complaints were directed against LIC of India and 1,843 against the private insurers.

The insurance authority directs such complaints to a special division of the insurance company for resolution. Respective insurance companies have to take necessary steps to resolve each and every complaint. Post resolution, there were 150 outstanding complaints against LIC and 245 complaints against private insurers (as of March 31, 2009).

You have gone through tons of advice and inputs on investments and now finally made up your mind to start investing. You’ve worked out the annual investment amount, the duration of savings and now the only question left is which financial product to avail? Should I invest in ULIPs, Mutual Funds/SIPs or both?

Everybody buys an insurance policy to ensure financial security and protection in times when it is most needed.

A term insurance plan is bought by a person to safeguard his or her family’s future financial needs in case of an untimely death. Similarly, a pension or retirement plan is bought with the idea to get regular income even after retiring.

Parents invest in child plans to ensure that their child’s education needs, marriage needs etc are met. Unit-linked plans gained popularity because people invested huge chunks of money in order to get good returns.

Different individuals have different insurance needs and life insurance policies are bought to fulfill these varied needs. So, in order to reap the benefits of a life insurance policy, it becomes extremely important to understand the claims process. 

How many types of insurance claims are there?

Maturity claim – There is a predefined period of insurance which is also known as the policy term or date of maturity. To ensure that you get the maturity amount on time, you must send the maturity claim to your life insurance company well in time before the last date.

Critical Illness Claims / Accidental Disability Claims / Waiver of premiums (Child ULIP) - In case you have an add-on cover like a critical illness rider or personal accident rider or a waiver of premiums on a child plan etc, the insurance company needs to be intimated incase of any unfortunate incident.

Death claim - In case of death of the policyholder, the beneficiary or the nominee would need to raise a death claim with the insurance company in order to get the monetary benefit.

Important points and documents required to make a claim:

♦ Send intimation in writing to the insurance company as soon as possible with complete policy details and a copy of the policy documents (if possible)

♦ Attach photocopies of documents such as a death certificate, doctor’s certificate and reports of illness or medical condition, police FIR etc

♦ Most important part is to educate the beneficiary or the nominee about the existence of the insurance cover along with the benefits. Keep them informed all the time and ensure that they know how to raise the claims when the need arises

Click on the respective insurance company name to visit their website and make a claim :

Aegon Religare life insurance

Aviva life insurance

Bajaj Allianz life insurance

Bharti AXA life insurance

Birla Sun life insurance

Canara HSBC Oriental Bank of Commerce life

DLF Pramerica life insurance

Future Generali India life insurance

HDFC life insurance

ICICI Prudential life insurance

IDBI Federal life insurance

IndiaFirst life insurance

ING Vysya life insurance

Kotak Mahindra Old Mutual life insurance

LIC (life insurance Corporation of India)

Max New York life insurance

Met life India insurance company

Reliance life insurance company

Sahara life insurance

SBI life insurance

Shriram life insurance

Star Union Daiichi life insurance

Tata AIG life insurance company

Life Insurance Claims are an integral part of any Life Insurance Policy

The basic idea of a Life insurance policy is to provide financial security and protection when most needed. There are different variants of life insurance such as term plans, endowment policy, whole life policy, money back plans, unit-linked insurance plans (ULIPs) etc.

Term insurance plan is bought to shield one’s family against any financial crunch in case of an untimely death. Similarly, a pension or retirement plan is bought with the idea to get regular income even after retiring.  

Parents invest in child plans to ensure that their child’s education needs, marriage needs etc are met. Unit-linked plans gained popularity because people invested huge chunk of money in order to get good returns.

Different individuals have different insurance needs and life insurance policies are bought to fulfill these varied needs. So, in order to reap the benefits of a life insurance policy, it becomes extremely important to understand the claims process. The first step is to know the type of insurance claim.

How many types of insurance claims are there?

Maturity Claim – There is a predefined period of insurance which is also known as the policy term or date of maturity. To ensure that you get the maturity amount on time, you must send the maturity claim to your life insurance company well in time before the last date.

Critical Illness Claims / Accidental Disability Claims / Waiver of premiums (Child ULIP) - In case you have an add-on cover like a critical illness rider or personal accident rider or a waiver of premiums on a child plan etc, the insurance company needs to be intimated incase of any unfortunate incident.

Death Claim - In case of death of the policyholder, the beneficiary or the nominee would need to raise a death claim with the insurance company in order to get the monetary benefit.

Important points and documents required to make a claim:

Send intimation in writing to the insurance company as soon as possible with complete policy details and a copy of the policy documents (if possible)

Attach photocopies of documents such as a death certificate, doctor’s certificate and reports of illness or medical condition, police FIR etc

Most important part is to educate the beneficiary or the nominee about the existence of the insurance cover along with the benefits. Keep them informed all the time and ensure that they know how to raise the claims when the need arises

Click on the respective insurance company name to visit their website and make a claim:

Aegon Religare Life Insurance

Aviva Life Insurance

Bajaj Allianz Life Insurance

Bharti AXA Life Insurance

Birla Sun Life Insurance

Canara HSBC Oriental Bank of Commerce Life

DLF Pramerica Life Insurance

Future Generali India Life Insurance

HDFC Life Insurance

ICICI Prudential Life Insurance

IDBI Federal Life Insurance

IndiaFirst Life Insurance

ING Vysya Life Insurance

Kotak Mahindra Old Mutual Life Insurance

LIC (Life Insurance Corporation of India)

Max New York Life Insurance

Met Life India Insurance Company

Reliance Life Insurance Company

Sahara Life Insurance

SBI Life Insurance

Shriram Life Insurance

Star Union Daiichi Life Insurance

Tata AIG Life Insurance Company

Should I have just one type of Life Insurance policy or is it advisable to have a diverse and mixed bag of insurance plans?

Often, people shy away from taking decisions with pertaining to insurance products thinking that it is too complicated for them. Few people dare to cut through the jargonised brochure language and manage to buy an insurance policy by themselves only to further meet yet another serious dilemma – whether to have a single type of insurance policy or maintain diversity in type of policies? Well, there isn’t a standard formula for this and the answer is very subjective. The insurance portfolio of an individual mainly depends on how one perceives his/her daily needs and matching the right type(s) of life insurance policy that meets his/her needs. But, more often than not, people are not fully aware of their financial needs and hence get further confused over the type of life insurance policy they should avail.

Insurance is a product which should be purchased only after self analysis of financial requirements. It is true that analysing one’s financial requirements is not a cake walk, but it is not an impossible deed. With a little thought and endurance, it can definitely be done.

Almost all insurance companies have a ‘Need Analysis’ calculator which they use during the first meeting with the customer. Without getting into the details of how to do a self analysis of financial requirements, I want to highlight the insurance products to be purchased once you have identified the need. This step is equally, if not more, critical and important in nature and equally challenging. It is important to understand how to choose your portfolio once the financial needs and requirements are identified.

Global statistics suggest that on an average, an earning individual buys 7 Life insurance policies in his entire lifetime. But there is no data which shows the types of life insurance policies an individual purchases in his lifetime. Ideally every individual should aim to have a combination of at least 2 to 3 insurance policies. In my opinion, any Portfolio should be a mix and match of various products, of different tenure and sum assured, depending upon the requirement of course. Moreover, as the saying goes, you should never put all your eggs in just one basket.

Few of the common types of life insurance policies which are must-haves are:

1.       Term Plan- This is the basic and pure form of insurance. Once the individual starts earning and contributing to the household, he/she should immediately avail a term insurance policy for the maximum policy tenure available. As time passes by and age + income increases, the individual should increase the term cover by buying more term plans. The premium for such a policy is the lowest when compared to other types of insurance policies and it is also cheap if taken at an early age. If you are earning member of your family, then a term policy guards the entire family from a possible financial loss in case of any unfortunate event. Since Term plan is the cheapest life cover solution, it is said that each and every earning member must have a Term Plan.

2.       Whole Life Plan- If you the sole earning member for your family then you should have a Whole Life plan to get a lifelong coverage. Since you are the ONLY earning member for your family, your family needs to have a protection and savings cover for the rest of their lives. To achieve this, you can take a Whole Life Plan which is basically an extended term plan with unlimited term such that your family would get money whenever you die.

3.       Decreasing Term Plan- has been recently very popular because increasing number of people are availing liabilities such as a Home loan. This is because, if you die before you repay your loan, then the burden of your loan would fall on your family and they would have to repay the same on your behalf. So often the bank or loan disbursing company will insist that you avail an insurance cover to take care of your loan. So, if you have a Decreasing Term Plan, such that the sum assured decreases each year along with the decreasing loan liability, then your family would be saved of this burden.

4.       Pension Plan – also referred to as an opposite of insurance comes extremely handy when the individual has passed his income earning age. To create income post retirement, pension insurance plan is the perfect solution. It helps the individual to remain independent and he/she does not have to stay at the mercy of other members for their expenses or requirements.

5.       Endowment Policies - For any asset building along with reasonable cover, this type of plan comes very handy. Even though an endowment plan provides low interest but they offer assured returns. It is basically a savings instrument with life cover attached to it. Risk-averse people can look it as an investment venue which offers guaranteed safety of capital.

6.       ULIP, or Unit Linked Insurance Policies - When investment becomes almost as important as protection and returns are measured as against market performance, then ULIPs are the best solutions. Unit-linked insurance policies provide market linked returns along with death benefit of the life insured.

As each of these insurance policies has a different purpose and benefit associated with it, the timing and the premium that goes into these policies should be taken with utmost care so that they do not disturb the monthly expenditures. Choosing an ideal mix of Insurance Policies should be done keeping in mind the responsibilities and lifestyle one has. Whether one is looking to protect his family from his untimely death or investing for his child’s future or his own retirement, the above insurance products will cater to all such needs. There is a huge tax benefit on premiums paid towards life insurance as well as the sum assured received on maturity of the policy. A life insurance policy is a safe and healthy savings option when compared to other financial products. The flowchart below will help one decide on the right policy to purchase based on his purpose.

Broadly one can classify his requirements into protecting his family when he dies or planning for his children’s careers or retirement. Whether it is protection or planning needs there are suitable insurance policies that suffice the need appropriately. For Planning needs Endowment, Pension or ULIP will be a good choice based on the risk one can afford to take. For protection needs the traditional Term or whole life policies are must.

Since you have such a vast variety of life insurance policies available in the market, you need to decide on your priorities and then choose from the wide variety and select the plan you would like to invest in. Always remember to avail 2 to 3 types of insurance policies, as mentioned earlier to maintain a diverse portfolio.