LIC online term plan is coming soon

Posted on September 20, 2011September 9, 2019 by Jagoinvestor

LIC online Term Plan is soon coming to markets ! . There is some good news for all those who would either like to take up a term plan or who are looking to upgrade (increase) their life insurance cover! It is recently disclosed by LIC that Term Plans will be sold online and offline and the premiums will be cheaper than the current rates offered.

LIC online term plan

I personally never thought that LIC would come up with online term plan because of its dependence on agents’ network for selling its products. But this is a good move from LIC as their share of term plan market is eaten away by private insurers from last few years. At the moment, a person has to pay a very high premium for term plan through LIC. For example, the premium for 25 lacs cover with LIC term plan at the moment is around 7,000 – 8,000, whereas it’s around 3,000-3,500 in companies like ICICI iProtect & Kotak e-preferred.

“We are in the process of designing a pure term product which would be sold through both online and through agents,” LIC’s ED- marketing S Roy Chowdhury. “The rates will be lower than what is charged at the moment,” he added.

LIC uses mortality table 1994-96 at the moment

Do you know why LIC premiums are higher? One of the reasons is that they follow old mortality tables which has older death experience ratio. A lot has changed in last 10-15 yrs and we have much better access to health care and lifestyle, which has changed the number of death. Most of the new companies in Life insurance use the latest mortality data but LIC is still using old data and that’s pushing their premiums. Now LIC is planning to revise the mortality rates based on the last 10-15 yrs of experience and hence the premiums would drop down from its current level.

Note that mortality experience are different for different age groups and classes, so it’s not necessary that mortality rates will go down it might happen that mortality rates for age group 25-35 goes up because of the bad lifestyle and new age ailments (stress, junk food, etc). So keep that point in mind. (9 most asked questions about Term Insurance)

How cheap will be LIC online term plan ?

LIC online term plan will be cheaper than the current term plan they offer but expect it to be 15%-25% lower than current premiums. Do not expect a very steep decrease like 50%-60%, because LIC is a very different ball game than other life insurance companies. LIC has accessed in each corner of India and the new online term plan they will launch will be targeted at a very big group and scattered across various cities. It will be offered online and also offline (through agents).

How will this impact Insurance Industry ?

With whatever little I know I can see that urban class will welcome this move with open heart and a lot of people who trusts LIC like anything and even a lot of people who are not big fan of LIC will wait and watch for this online term plan from LIC and would like to go for it only. This move will lead to more sales of LIC term plans in bigger cities and reduce the term plan selling of different other companies (to some extent).

What do you think about LIC online term plan . Are you going for it ? Are you waiting for it ?

How to redeem mutual funds units – Procedure and Forms to fill ?

Posted on September 15, 2011September 8, 2019 by Jagoinvestor

Most of the people investing in mutual funds through agent offline have this question – “How to redeem mutual funds ?”. mutual funds investors often do not know what the procedure to redeem these mutual funds. I redeemed some of my ELSS mutual funds (HDFC tax saver , Sundaram Taxsaver, HDFC long term advantage Fund and SBI magnum taxgain fund) which I had bought some years back from an agent, so I thought why not let everyone know what is the simple procedure for redeeming the mutual funds.

Mutual funds redemption Process

Process to redeem Mutual Funds

if you have bought the mutual funds from an agent or from the AMC directly, then you will have to fill up the mutual fund redemption form. This form is available from the mutual funds AMC office (you can get its office address from internet). You will have to go to their office in person. You can also go to the nearest CAMS office and fill up the mutual fund redemption form directly from there. It’s much convenient to visit CAMS office and directly redeem more than one mutual funds in one go (this is what I did in my case).

The redemption form is very easy to fill and all you need to put is your name, folio number (make sure you put correct folio number, else it will create issue later) and the number of units (exact number or ALL) you want to redeem. Just give this form to the CAMS processing assistant and they will put up your request.

Important Points

1. NAV Applicable: If you give your redemption request before 3:00 pm, the same day closing NAV will be applicable, else you will get next day NAV. So make sure you do the redemption well before 3:00 pm if you want same day NAV.

2. Bank accounts: Where will you get the money when you redeem the mutual funds? You will get the proceeds in your same account which is registered with your AMC (which you used to pay at the time of buying). If that account is not active, then there are few run around like you will have to attach the cancelled cheque of your new bank account or copy of pass-book etc and if you don’t have that, then a declaration from the bank and sign of some bank manager etc. So this can be a little frustrating if you are in urgent need of money. In my case my old account was active so it was pretty easy for me.

3. CAMS do not handle all the AMC’s redemption: CAMS do not handle each and every Mutual funds transaction. It can happen that you will have to go to the AMC office itself for redemption. Like in my case I had to go to Sundaram AMC office to redeem my Sundaram Tax Saver proceeds. So check with CAMS which all mutual funds they handle, you can shoot an email to your city CAMS (their emails and addresses are there on CAMS website

4. How much time it takes to get money? : It generally takes 3-4 working days to get the money credited in your account. But in my case I got it in next 2 days itself. So if you redeem the funds on Monday or Tuesday, you can safely assume that you will get the money by the weekend. But if you have weekend falling in between, then it can take some time.

Process of redemption if have bought Mutual funds online

If you bought your mutual funds from your demat account or some online brokers or if you activated your online account after buying from agent, then you can redeem your mutual funds online itself just by following the procedure mentioned by your online account. Most of the people who buy tax saving mutual funds (ELSS funds) online can also redeem tax saver mutual funds online only.

Did you activate your online account with the AMC ?

If not, I would suggest you to do it, so that you can take the redemption action as and when required. What was your redemption of mutual funds experience? What point’s people should keep in mind while redeeming? I hope you are now clear on how to redeem mutual funds ?

Why to increase sip amount in your Mutual funds

Posted on September 8, 2011September 8, 2019 by Jagoinvestor

Do you want to increase the SIP amount for your mutual funds ? Or you want to keep it constant always ? A lot of people start with a SIP amount at first and then look forward to increase SIP amount later. This is a very common of every investor and its “how to increase sip amount”

Increase SIP amount

When we say “SIP”, it generally means constant SIP, which does not increase every year. When we calculate SIP amount using any SIP Calculator – the SIP value is generally very high and does not look realistic and at times and such high investment can trigger affordability issue. However there is a clear solution for this, which is used by financial planners and that’s called “Increasing SIP”, where one starts the SIP with a lower amount and then gradually increases them year on year. This looks more realistic as one’s income also increase overtime and ability to invest increases. We see this situation a lot while working with our clients under financial coaching program.

Let me show you the example : Ajay wanted to accumulate 5,00,00,000 (5 crores) for his retirement which is 25 yrs away. When he calculates the SIP amount, it’s coming around Rs 31,000 (assuming 12% returns from equity). Now it’s not possible for Ajay to invest Rs 31,000 every month, as it’s a very high amount. Rather he is fine if he can start with a small amount today and then increase it every year as his income would also increase with time. This is called as Increasing SIP model. If Ajay is ready to increase his SIPs by 10% every year, then he has to start with just Rs. 13,500. This amount is much more convenient for Ajay to arrange, rather than Rs 31,000 per month.

Should you increase SIP amount or not ?

At the first look, a general conclusion which comes into mind is that Increasing SIP is better than Constant SIP because it is much convenient and looks logical that investment should rise as the income increases. But there are different angles through which both the options can be looked at. Let’s look at two important points one by one.

1. Investment required in case of Increasing and Constant SIP

One of the most important factor one can judge both the situation is the amount of investment needed. If we take the above example we just discussed, one would need to start SIP of 31,000 per month to accumulate 5,00,00,000 in 25 yrs assuming 12% return. Now this amount will be constant throughout the all 25 yrs. Where as one can choose to start his SIP with Rs 13,500 and then increase it by 8% per year, but in this increasing SIP model, his SIP amount would reach 50,000 in 18th year and 85,000 in 25th year, which might look very big in numbers, but years from now, it would be worth a small amount considering the purchasing power of money and the annual income one earns. So don’t get surprised by numbers.

One should opt for increasing SIP, when his situation really does not allow him to invest a big amount and he is very sure that he would be able to increase his investments in tune with his salary increase. Truly speaking I am in favour of Constant SIP if one’s situation permits because that way you are investing more in the start of your life and that would help you keep your SIP in check later on in life. Imagine after many years in life, you have to just invest the same amount where as your Income has risen 3X. Isn’t it a big relief and freedom to do whatever you want from your money at that time. Imagine your salary is Rs 50,000 per month and you do SIP of 10,000 and even after 10 yrs, when your salary has risen to say 1.5 lacs per month and you are still doing SIP of Rs 10,000 only. I would choose to pay a little more today and then get into that kind of situation.

Most of the people who are not able to go for constant SIP, because of high SIP amount is because they are very late in investments and now their goals are near and they have less time for compounding. These people have high expenses already in life. Had they started long back when they started earning they could be in a better situation now. Below is the table which shows the Increasing and Constant SIP amounts required for the example discussed above and shows you the ratio of increasing and constant sip. You can see how it started with 44%, but rose to 203% later after 25 yrs.

Conclusion

One should start his SIP’s early so that he can keep his SIP’s constant through-out the tenure. If you are late, then your SIP amount will be very high and will look unrealistic and then you will have to increase your Systematic Investment plan (SIP) amount in future if you want to reach the goals.

2. How the corpus will grow in case of Increasing and Constant SIP

The other major thing to look is how your over all corpus would grow in both the cases. Note that in constant SIP and increasing SIP, the final corpus is getting accumulated and they reach the same point at end, but in case of Constant SIP, the overall Corpus is always higher than the increasing SIP and it’s because you are investing higher amount in the start and that way the compounding factor is in your favour. See the chart below which shows, how the gap between the two narrows down at the end of the tenure and both the cases lead to same corpus.

If you look at the table below, you will see that the maximum difference between the two is 36,00,000 in 17-18th year and after that the difference starts coming down (not so clear in table , you need to calculate it) . As you are starting with lower amounts in increasing SIP, the overall corpus is obviously going to be less, but it’s very much above 50% all the time, so if you are saving for long-term, you should be interested in the final corpus.

Note that the example and charts above are assuming a 25 yr old tenure and equity returns of 12%. The numbers would change depending on tenure and the equity return, but the overall conclusions discussed above remains same. For a shorter tenure like 4-5 yrs, the constant SIP and increasing SIP won’t differ a lot; it would be a small number.

So the conclusion is that one should keep on increasing their mutual funds SIP amount as and when they can , preferably every year. So are you ready to increase sip amount ?