A Group Term Life Insurance is a term plan that offers life cover to a group of people.
The plan does not just cover employees and their families; employer-employee, banks, NGOs, financial institutions are also eligible for a group term life insurance.
As a result, many individuals find it feasible to opt for group term insurance as it is one of the best comprehensive term plans available.
In short, group term life insurance is an essential benefit provided by employers to the employees.
Group term life insurance policies are of different types. Some plans have the basic features of a term plan.
Employers may also choose a plan where the features differ depending upon the grades and position of the employees.
Some group term plans also cover an employee’s outstanding home loan, car loan.
The insured’s family can easily repay loans in the unfortunate event of the policyholder’s death or permanent disability.
Benefits of Group Insurance
1. Employees get default term cover
Employees can get this policy by simply being a part of the organization that offers group term insurance.
This reduces the need for unnecessary paperwork and formalities for individuals and the organization.
Many companies, themselves, pay premiums for group term policies offered to their employees.
2. The Benefits of a Cost-effective Plan
Group term life insurance plans are more economical than individual plans. For example, the minimum number of employees that can be a part of a group term life insurance plan is 50.
The administrative costs and paperwork of providing term insurance to the entire group are much less than an individual’s policy cost.
Insurance Plans come with tax benefits and, over a long period, help save money.
By providing employees with group term plans, employers, as well as employees can avail themselves of tax benefits.
3. Customization of plans
Individuals can customize their group term plan based on their specific needs for comprehensive coverage.
They can opt for additional riders that provide critical illnesses, accidental death, education allowance, loan repayments, etc.
These additions only multiply the benefits provided by group term plans.
4. Cover for High-risk Individuals:
In some cases, individuals who have a medical history of genetic illness or belong to a high-risk category can get a cover under this policy.
This is because a group term life insurance coverage does not depend on an individual’s health condition. All members of the group are insured under one single policy.
This comes as a relief for employees who find it difficult to buy term insurance. Employees don’t have to undergo a health-check up under this plan.
5. Ease of Premium Payment.
Organizations offering group term plans can choose the mode of premium payment. Companies can opt for monthly, quarterly, bi-annually, or yearly time points to pay premiums.
Group term life insurance provides many benefits to employees including comprehensive protection and savings.
For employers, issuing group term cover helps with employee retention by providing a cost-effective, employee-benefit plan.
This type of insurance policy is generally procured by companies or individuals who may be held liable, legally for injuries or other issues. This especially the case for hospitals, doctors, or even business owners.
An example would be, if a product manufacturer sells products that have been faulty or cause damage to other’s products, then he/she may be sued for the damages caused.
Procuring liability insurance will cover the manufacturer from ensuing legal costs.
Liability insurance is one part of the general insurance policy itself under the risk transference category.
In many countries, liability insurance is mandatory especially for drivers of public transport vehicles. The scope of this form of insurance in India has been defined by the Public Liability Insurance Act of 1991.
Liability Insurance Plans:
Public Liability Insurance
Product Liability
Employer Liability
Third-Party Liability
How is the Premium Amount Decided?
The premium that is to be paid by the insured will be worked out using the base rate based on the insurance company’s needs and assessments.
Another factor that is taken into consideration is the amount of risk that the company and its products come with. The higher the risk, the higher is the premium to be paid.
Claim history, size of the risk, and the company’s approach to the risk are additional factors.
While deciding the premium amount, insurance companies take into consideration the environment, the number of claims made previously, and their business record.
Several companies within India provide different forms of liability insurance covers. Some of these are –
HDFC Ergo Commercial General Liability – this insurance policy protects against claims of property damage or bodily injury for which the company is liable.
ICICI Lombard offers numerous liability insurance covers to suit business requirements.
Bharti AXA Commercial General Liability Policy offers cover for liabilities that are a result of business processes and operations.
Liability Insurance Claim Process:
The claims process varies from one company to the other. There is generally a form to be filled for the same post which all necessary documents will have to be provided.
However, when it comes to liabilities it is not as simple. There may be court cases or an out-of-court settlement.
The claims process will be different based on what the claim is being made for.
A Systematic Investment Plan (SIP), more popularly known as SIP, is a facility offered by mutual funds to the investors to invest in a disciplined manner.
SIP facility allows an investor to invest a fixed amount of money at pre-defined intervals in the selected mutual fund scheme.
The fixed amount of money can be as low as Rs. 500, while the pre-defined SIP intervals can be on a weekly/monthly/quarterly/semi-annually or annual basis.
By taking the SIP route to investments, the investor invests in a time-bound manner without worrying about the market dynamics and stands to benefit in the long-term due to average costing and power of compounding.
Top-Up SIP
Top-up SIP is a facility that lets you increase your SIP by a fixed amount or percentage (say 10%) every year or at pre-defined intervals in line with an increase in your income/savings.
This Top -Up in your SIP allows your investments to be in line with the increase in the cost of living or inflation and helps you plan for your financial goals right.
It can also help you reach your financial goals earlier or create a larger corpus for your goal.
Mr. A Normal SIP 5000 Investor A started investing 5,000/month using Normal SIP for 25 years with 12% Rate of Interest Total Investment: 15,00,000 95,00,000 Final Corpus after 25 Years
Mr. B SIP with 10% Top-Up 5000 Investor B started investing 5,000/month using Normal SIP for 25 years with 12% Rate of Interest Total Investment: 59,00,000 2.07 Crores Final Corpus after 25 Years
Power of Compounding
When you invest regularly through SIP and invest for the long term, the benefits are magnified by the compounding effect.
The compounding effect ensures that you earn returns not only on your principal amount (actual investment) but also on the gains on the principal amount i.e., your money grows over time as the money you invest earns returns.
Deposit (or FD) is a low-risk financial instrument that is offered by banks, post offices, or Non-Banking Financial Companies (NBFCS).
You can easily invest in a Fixed Deposit and grow your savings at a fixed rate of interest, which is higher than interest rates offered by savings accounts.
The convenience of investing along with the safety of your deposit can help you plan your short-term and long-term goals easily.
At Bajaj Finance Limited, you get attractive FD interest rates of up to 7.25%, so you can save for your goals easily.
Investing in a Bajaj Finance Fixed Deposit is easy, as you can invest from the comfort of your home through an end-to-end paperless online investment process.
In today’s times of increasing market volatilities, investing in a Bajaj Finance Fixed Deposit can help you get assured returns and steady growth of capital.
So you can build your savings with no effect of market fluctuations.
DID You Know? Bajaj Finance is now offering interest rates of up to 7.00% on fixed deposit and 0.25% more for senior citizens.
What’s more, online investors get 0.10% extra (not applicable for senior citizens) – Invest Online
SIP or Systematic Investment Plan is a plan through which a person can invest a small amount in a mutual fund at regular intervals (monthly/quarterly).
Hardly pinches your pocket
Most of us spend some money every day buying and eating a snack worth around Rs 15 or 20. Just saving that amount enables one to start investing in mutual funds through SIP.
That’s how small an amount is required to get started investing through SIP
While we all love and deserve to spend our hard-earned money, keeping a small amount aside each month can go a long way.
How often do we spend Rs 500 just over a whim? We may decide to order through one of the many food delivery applications or may meet up with a couple of friends at a coffee shop. Before we realize it, we end up spending around Rs 500.
Thanks to rising income and a higher standard of living, it doesn’t pinch as much as it used to.
After all, Rs 500 is what a couple of movie tickets or a couple of pizzas cost.
Most mutual funds allow investors to start investing with Rs 500 per month.
For an individual who has never invested earlier, starting with Rs 500 per month is also a promising beginning.
Therefore, this becomes a great way for new investors to begin as regularly investing Rs 500 per month over a longer period wouldn’t impact the investor’s wallet even if there is irregular income due to job loss or sabbaticals.
Magic of compounding
Investors would agree that Compound interest is one of the most powerful forces in the world! This is because of the impact it has on one’s investments. Investing over a longer period will create substantial wealth.
Investing just Rs 500 per month can result in the following scenarios
Over 10 years, a CAGR of 12% will offer Rs 1.2 lakhs
Over 10 years, a CAGR of 15% will offer Rs 1.4 lakhs
Over 10 years, a CAGR of 18% will offer Rs 1.7 lakhs
Over 20 years, a CAGR of 12% will offer Rs 5 lakhs
Over 20 years, a CAGR of 15% will offer Rs 7.6 lakhs
Over 20 years, a CAGR of 18% will offer Rs 11.7 lakhs
Over 30 years, a CAGR of 12% will offer Rs 17.6 lakhs
Over 30 years, a CAGR of 15% will offer Rs 35 lakhs
Over 30 years, a CAGR of 18% will offer Rs 71.6 lakhs
Let us look at the illustrations which offer a CAGR of 12% across 10, 20, and 30 years.
Over 10 years, the investment of Rs 500 per month turns out to be worth Rs 1.2 lakh.
Over 20 years, it balloons up to Rs 5 lakhs, and over 30 years it swells up to Rs 17.6 lakhs!
We don’t lose our sleep
Over a shorter period markets tend to be volatile. Even after investing consecutively for 36 months, one may see that one’s portfolio is in red. If the invested amount is small, then a new investor can deal with this situation and not feel stressed about it.
If a new investor starts a SIP with a larger amount in a small-cap fund during a choppy market, the variance in a portfolio can cause the investor to chicken out and withdraw his holdings much before the magic of rupee cost averaging plays out
As the performance of a mutual fund in which an investor has started a small SIP improves, she acquires confidence to invest higher amounts.
Suitable for risk-averse investors
Some individuals only prefer saving in fixed income or debt instruments. Due to certain reasons, such investors prefer the security of lower returns rather than the opportunity presented by equity funds to beat inflation.
If they haven’t tasted the growth that an equity-based instrument brings in, introducing them to the same through small SIPs is a great idea.
Some investors may not stay through the course even though the monthly invested amount is tiny. Whereas some may realize the benefits of investing in equity-based instruments as well and may seek to increase the SIP amount.
Continue to invest in case of unforeseen circumstances
As the size of an investor’s portfolio increases, her confidence in the wealth-creating ability of mutual funds increases.
After experiencing market volatility and continuing investments regularly, the investor begins to appreciate the process of creating wealth by investing through small SIP when the mutual fund portfolio starts growing.
This offers a huge boost of confidence to the investor which may result in the investor bumping up her SIPs.
Acquire confidence to invest more over some time as our portfolio grows
We live in an uncertain world. Incomes have improved but job security, especially in private firms, is a big question mark. There may also be health-related situations that may cause an individual to stop working for a while.
We are also living in a time when individuals wish to make the most out of their lives. This includes taking a sabbatical to travel or quitting a well-paying job to start up.
During such scenarios, one may not receive a regular flow of income. Or the size of income could reduce. Small SIPs can still be kept going as they may not cause a huge dent in an investor’s pocket during such uncertain times.
Easier to develop the habit of financial discipline
Financial discipline is rarely something we are born with. We have to work on it. Let us take the example of goal-based investing. A newbie investor may start a small SIP to invest a certain amount over 5 years to achieve a goal.
However, after 18 months, this individual may be tempted to buy a new laptop and would be falling short of some amount.
If this individual decides to redeem the corpus which has been created so far, he may not only lose the opportunity of creating more wealth but would also fall back on his efforts to achieve his goal.
Therefore it is critical to adhere to financial discipline when it comes to investing. Starting small makes it easier to get used to this. It is worth creating a habit of putting aside a small amount.
Over some time, this would make it easier to deal with following a discipline of investing larger amounts.
Claim tax benefits
Investors who are starting their journey in the world of investment can look at ELSS to not only help achieve financial goals but also save tax. ELSS stands for Equity Linked Savings Schemes.
ELSS is riskier than the fixed income alternatives available for tax-saving under section 80C but has the shortest lock-in period among all these options. It also offers the potential for growth via equity.
Conclusion
Rome wasn’t built in a day. And neither is a huge corpus that can offer financial freedom. One can begin investing modestly and then slowly keep increasing SIPs without being influenced by noise.
Once an investor signs up to ride several market cycles then there is no looking back.
This is because the investor begins to understand the importance of continuously investing during good times as well as bad. Small SIPs are bound to do wonders for our financial health.
The treatment costs of illnesses have been rising, therefore the need to have health insurance cannot be understated.
Having Health Insurance is not mandatory from the government of India but ignoring it could prove costly. Various medical policies offer different features and benefits.
Health insurance policies are of two types –
1. Individual Plan
2. Family Floater Plan
In an individual plan only, you are covered and the sum assured is available only on your hospitalization, whereas in the Family Floater plan other members of the family can be covered.
The cover is available on hospitalization of any of the members who are covered under the policy.
You take a health insurance plan with a clear intent to protect your capital from getting eroded.
Hospitalization expenses can cause a serious dent in your savings which could include the cost of medicines, doctors and nursing fees, and prescription costs. There are health insurance companies that offer daily hospitalization cash expenses.
Pre and Post Hospitalization Expenses
While all insurance companies cover hospitalization expenses, still it is suggested that you check if the policy you intend to buy covers pre and post-hospitalization expenses.
These costs could cost you a lot of money depending on the type of illness and treatment required.
List of diseases Covered
The policy that you have could have a feature or enhancement to the current benefits which could be a result of insurance companies subscribed plan, regulatory mandate, or it can also be because the insurance company has decided to extend these benefits as you have not claimed for a long time.
Few medical conditions which are covered can be extended, so one needs to be in communication with the health insurance company.
Top-Up
There are instances like getting a promotion or a salary hike, birth of a child where you might feel that the current health insurance coverage might not be sufficient and you need to enhance your cover. Getting a new health insurance plan can be a new process.
This is where the top-up option comes in handy. It allows getting an extra sum assured on top of the existing cover. Unlike a new plan, you don’t have to go for medical screenings for buying a top-up.
Income Tax Benefit
Payments made towards Health Insurance qualify for deduction under section 80 (D) of the Indian Income Tax Act.
If you buy health insurance for yourself or your family then you get a tax deduction of up to Rs 25, 000 and if also take a policy for your parents who are senior citizens then the tax benefits available increases up to Rs 50, 000.
Additional Benefits
You can also opt for additional benefits like the cover for ambulance charges, day-care procedures, health check-ups, and vaccination charges.
We are trying very hard to make savings which could come in handy as the economy of our nation India continues to steam ahead.
Effective financial planning is needed to consider your financial requirements and goals. People will always search for financial instruments which give them higher returns on investments.
Term Insurance Policies are a financial instrument that helps you to get the benefits of protection and tax benefit.
It helps the family to stay financially secured in case of the demise of the policyholder, therefore, buying a term insurance policy is an important instrument when one thinks about taking life insurance.
Online Purchase of term plans can be the first crucial step toward making a successful financial strategy. It offers you protection against the unknown and can be used as a supplement for retirement income.
Buy for the Right Reason
You need to analyze the need you want to take up term insurance. You need to remember that you are buying term insurance for a specific purpose that offers cover to your family in case of your demise.
Tax benefits can’t be the main reason for your decision to purchase Term Insurance. This policy funds your retirement and the education of your child. If you are buying this at a young age then it would cost you cheaper.
Deciding the Cover Amount
To arrive at the final sum of term insurance, customers need to estimate their annual income, salary, monthly expenses, current and future expenses like school fees, the mortgage to take care of the financial requirements of their family after their demise.
Tenure of Policy
The tenure of your life insurance policy needs to be Retirement Age minus the Current Age, if your current age is 35 years of age and you want to retire at the age of 60, policy tenure would be 25 years. Some plans offer high life insurance cover till the age of 75.
Additional Coverage & Benefits
Add-On is riders that you can take along with a base cover, some of them are critical illness rider, accidental death benefit rider, waiver of premium.
The benefits are available at a higher premium which is added to the base premium. We need to understand the importance and relevance of these riders so that a proper selection of the riders can be done.
Credentials of Life Insurance Company & Its Claim Expense
Before you finalize a life insurance policy, you would need to be completely assured of the credentials of your chosen life insurance company.
Factors which one should look at include Assets under Management and Solvency Ratio.
ULIP or Unit Linked Insurance Plan is a financial instrument that is a combination of insurance and investment. Under a ULIP, the premium paid is divided into two parts.
One part is to provide for your life insurance cover while the other part is put in investment products such as bonds, stocks, or mutual funds.
The life insurance cover depends on the sum insured, the higher the sum insured, the more the premium.
The investment fund comprises units in equities, debts, or hybrid funds. The value of such funds/assets depends on the prevailing market conditions.
The sum insured is usually the original sum insured or net asset value of all units (whichever is higher) or both.
An endowment plan is a traditional life insurance plan which guarantees a lump sum amount/payout post the survival period or on the death of the policyholder.
Apart from providing life cover, an endowment plan helps in creating savings over the investment tenure.
The savings amount is released on the maturity of the policy or to the mentioned beneficiary/nominee.
There are two types of endowment plans, one with profit and the other without profit.
Also, there are multiple variants of endowment plans which are a mixture of life cover, savings, retirement, pension, education, money-back, etc.
Which is Better? ULIP or Endowment Plan?
Criteria
ENDOWMENT PLAN
ULIPS
Type
Insurance cum savings
Insurance cum investment
Lock-in
Depends on the plan and premium payment term, usually 2-3 years
5 years
Investment Decision
Does not have investment decision power for policyholder
Comes with investment options which can be chosen by policyholder
Transparency
Lacks transparency as there is no investment portfolio
Can easily track your entire investment portfolio
Maturity
The policyholder will receive sum assured plus bonuses, if any
Redemption of units at the prevailing unit prices
Fund Switching
You cannot make any changes to the policy
You have the option to make fund switches to the entire investment policy
Withdrawal
There are restrictions and penalties upon withdrawal
You can withdraw from the policy post the mandatory 5 year lock-in period
Returns
Guaranteed fixed amount
Depends on market performance
Why Invest in an Endowment Policy?
Guaranteed Returns
Endowment policies offer guaranteed returns upon maturity/survival/death. The returns offered are independent of market performance and help you create savings.
Bonus
In a participating policy, the insurance company distributes a part of its profit in the form of bonuses to the policyholder. Simple Reversionary Bonus and Terminal Bonus are added to the policy over the investment tenure.
Long Term Financial Goals
An endowment plan offers high returns when invested for the long term. This will help you achieve your long-term goals effectively.
Why Invest in ULIP Plan?
Flexibility: Under a ULIP, you have the flexibility to:
Switch the investment funds
Make partial withdrawals
Make lump sum additions in the form of top-ups
High Returns: Since ULIPs offer different types of investment funds, some of these investment funds are equity-based which offer high returns over the investment period.
Rider Options: You can enhance your ULIP scheme with rider add-ons such as accidental death rider, term rider, and critical illness rider by paying an additional premium.
Transparency: ULIPs offer complete transparency. You can keep track of your investment portfolio. The policy provider keeps you informed of all the charges levied, the number of units issued, etc.
Financial Security: Over the entire investment tenure, ULIPs allow an investor to accumulate a huge corpus which can be utilized for retirement planning, child education, marriage, etc.
Funds Switching: You can easily switch between the investment funds and revise your entire investment portfolio if needed.
