Insurance agents have possibly existed since the shippers got together at Lloyds of London. But in recent times in India, insurance is being bought heavily. Many are seeking out cover for protection rather than for the traditional tax-saving or investment reasons. Naturally, then, selling is going beyond the traditional sellers, the agents.
Buying. You can do this without an agent, either offline or online. For instance, you can meet the direct sales team of an insurance company. Else, you can call toll-free numbers, or send a message from your phone directly to the company. This works well provided you are clear about what you want to buy and which insurer you want to deal with.
If you want to buy online, although this is not very popular yet, you can do so as well. You will have to fill out an application form after reading the brochure and illustration and pay the premium online. However, it has an offline component too: You have to submit the mandatory ‘know your customer’ (KYC) documents. Besides, few insurers will sell you a life policy with a high sum assured online as it needs to be cleared, depending on the medical records of the customer. Online buying is popular for non-life policies.
Post-purchase services. If you buy a regular premium policy, you can pay through ECS (electronic clearance scheme) or sign in on the company’s website and make payments using credit cards or Internet banking. For that, you need to register for an online account on the insurer’s website. You can also switch funds or redirect premiums after you have done so. The offline channels for subsequent premium payments include the company’s branch offices, designated banks or other partners.
Life policy claims. Policyholders should make sure policy and nominee details are filed properly and are easily accessible. In the event of death of the policyholder, the nominee needs to submit the original life insurance policy, the claim form, accompanied by a copy of the death certificate. The request can be made online or at the branch office. In case of accidental death, documents such as an FIR may be required.
This is one place where DIY can make a big difference.
Buying new. Fix your budget and, if you need a loan, how big an EMI (equated monthly instalment) you will be comfortable paying—and stick to these. New projects are typically sold through marketeers, but there’s no harm checking if the developer will sell directly at a lower price. Do some searching yourself. Check the credentials of the developer. Search Internet forums and talk to the lending institution that has approved the project. Even for approved projects, appoint a lawyer to ensure that the title is clear, that you can hold the developer to its delivery commitments, and you have mid-term exit clauses. Finally, check the progress of construction regularly and try to form a group of people who have a share in the same project. This will help you if the project gets stuck and you have to contact the developer.
Buying or selling old. Avoid brokers if possible. Sound out family and friends. They might know someone looking to buy or sell. Go on the property classifieds, online and in newspapers. Once you zero in on the property, proceed with the follow up just as you would with a new project.
Financing. Do not depend only on lenders that have approved a project for a home loan. They may not give you the best rate. Shop around and bargain hard. Definitely check with your regular banker. He is likely to give you a good deal. If you can access the cash, few developers can refuse to sell you a property.
Mutual fund brokers and distributers earn a commission from the amount you invest for helping you with advice and paperwork. Now, with capital market regulator Securities and Exchange Board of India (Sebi) abolishing entry loads, you and your broker must agree on a fee that you will pay him for his services. But you can avoid that if you do your investing yourself.
Application form and offer document. These are available as downloads at the websites of mutual fund houses. Make sure you read at least the scheme information document (SID)— commonly referred to as the offer document—before investing.
Application. If you decide to call your broker, you will be paying him only to deposit the application. That is like a courier service, which is a convenience hard to let go of, if it comes at the right price. But if you must, DIY again. Alternatively, you can transact online, where you will have to pay a nominal charge. Compare a few before you take your pick. For instance, www.icicidirect.com charges a flat fee of Rs100 a year on investments made up to Rs8 lakh. New online portals such as www.fundsindia.com offer schemes from 17 fund houses free of cost to investors. The portal hopes to scale up its client base and earn through trail commissions. It is planning to add another five-six mutual funds to its list soon.
Placing “buy” and “sell” orders with stockbrokers over the phone is almost out for the retail investor. An online trading account makes investing easier.
Primary market. Companies such as Geojit Paribas let clients apply for IPOs (initial public offerings) online. Simply go to the “Apply IPO” section, select the open issue you want to invest in and feed in the number of shares you wish to subscribe to. No messy paperwork and running around. The payment takes place electronically from your attached bank account. Check with your broker about this facility, as not all of them provide this option.
Secondary market. An online trading account allows you to buy or sell without depending on anyone to put the trade through for you. The transaction is almost paperless as even the cash exchange happens electronically.
Smart Health critical insurance policy
You can now get a critical illness cover along with a family floater health insurance plan. Bharti AXA General Insurance has launched a unique plan, Smart Health critical insurance policy—a family floater plan that also covers critical illnesses. The plan will offer a fixed sum for the entire family, including you, your spouse and two children up to the age of 23. The minimum joining age is three months and the maximum is 55. Once taken, the policy can be renewed till 65 years of age. The policy covers 20 critical illnesses. A feature unique to the plan is that the policyholder can either get a reimbursement for hospitalization expenses for treatment of a critical illness once it is diagnosed, or take lump sum compensation after the 30-day waiting period.
Insure your jewellery
If you have bought jewellery recently, you must take an all-risk policy specified under section 3 of a householder’s policy to insure it against unforeseen exigencies. Such a policy covers any loss or damage to ornaments and valuables by accident or misfortune when kept, worn or carried anywhere in India. Since the nature of cover is “all risk”, it also covers loss of jewellery from a locked car or even a bank locker. Jewellery insurance covers valuable items belonging to all members of the family provided they are permanent residents of the house. Before getting such a policy, you need to fill up a proposal form giving a detailed description and the weight of each piece of jewellery. You also need to submit a valuation certificate obtained from a valuer approved by the insurance company. The valuation certificate forms the basis for settling claims.
Invest in liquid mutual fund
A better alternative to a savings account in a bank is a liquid mutual fund. There’s minimal credit risk here on account of the low maturity period (maximum 91 days) of the underlying instruments in these funds. Compared with bank fixed deposits, which give higher returns than a savings bank account, in some cases, liquid funds may give better returns. Back-of-the-envelope calculations show that Rs10,000 invested in a liquid fund (with 6% returns a year) would yield Rs10,212.23 as against Rs10,179.66 invested in a 180-day fixed deposit. But expect moderate returns after recent restrictions on liquid funds’ average maturity by the Securities and Exchange Board of India (Sebi).
Ulips are expensive and risky
That unit-linked investment plans (Ulips) are popular investment vehicles is common knowledge, but that they are expensive options that may not suit everyone is not so well-known. Besides, there are risks involved. If you buy Ulips, you need to ensure that the cost remains low so that your money grows the way it needs to. All this becomes very important if Ulips form a large part of your investments. Costs in Ulips are usually deducted up front in the first five years of the policy. Hence, for short-term needs, Ulips are a costly option. It is always advisable to have a time frame of at least 10 years to invest in Ulips as you begin to earn serious money only after this period.
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Our previously scheduled story, Home truths, rupee wise, will now appear next Monday.