Category Archives: Blog

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Received Cash Gifts This Diwali

Have You Received Cash Gifts on Diwali?

During the Diwali celebrations, family, friends, and acquaintances exchange presents. In addition to chocolates, sweets, and trinkets, there is also an influx of cash – Diwali bonus and cash gifts!

After Diwali, when we exchanged notes, my nephew informed me that his parents had given him cash gifts. I informed him that his grandfather also handed me cash this time:)

His next inquiry was about what I intended to do with the financial gift. It sparked my interest as I intended to purchase HOKA Speedgoat 5. I have been on the lookout for trail running shoes and Hoka Speedgoat has been rated as one of the best trail running shoes for 2022.

The Personal Finance Expert in me kicked in: Rather than spending money on materialistic ambitions, I ought to consider investment options that will aid me in my retirement planning.

As a shoe enthusiast, it is easy and enticing for me to purchase another pair of shoes. If I want to maintain a healthy financial status, I must practice delayed gratification.

In addition, my nephew was observing me. To teach him the value of investing and delayed pleasure, I was required to take the initiative.

There are numerous intelligent uses for my financial gift:

  1. To invest in mutual funds, both with lump sums and SIPs.

Mutual funds can earn inflation-beating returns in the long term and are ideal for wealth creation. The selection of mutual funds will depend on suitability based on my risk profile, investment horizon, and objectives.

  1. Increase my health insurance coverage, which I’ve been contemplating for some time.

Covid has emphasized the need for affordable but adequate coverage. Medical inflation is double-digit, cost of hospitalization and procedures is exorbitant.

  1. Obtain home insurance, which has been a priority for me.

If you’re wondering why Home Insurance is a priority, it compensates you for your losses. This is especially vital in the event of damage caused by natural catastrophes such as earthquakes, storms, cyclones, floods, etc. These are unpredictable and unpredictable events.

  1. Contribute to my Emergency Fund

An emergency fund is the critical sum of money that you should set aside to deal with life’s unforeseen financial curve balls. It serves as a safety net, covering you in the event of an unexpected, unanticipated event.

You are probably curious as to what I and my nephew Yash did with our respective financial presents. Mutual funds were our chosen investment vehicle.

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Five mistakes to avoid to keep your Diwali budget in check

I have a confession to make before I continue with this blog post. I awoke this morning with an unsettling sense of foreboding. Credit Card bill looming large 🙁 It’s not because of overindulging in sweets during Diwali; rather, it’s because of going beyond with expenses during this year’s celebration.

Festivals are part of life in our country. There is a wide range of festivals celebrated in India, each honouring a different religion, event, or social norm. The lengthy and extensive shopping list that comes with festival preparations can easily throw off your regular monthly budget. We shouldn’t worry about the costs associated with celebrating, though, because those occasions are what bring vibrancy and excitement into our otherwise dull daily lives.

We don’t want to miss out on the joy and good fortune that festivals bring. In our zeal, we rush out and blow our entire monthly spending limit on unnecessary gifts, furniture, jewellery, and other items. We soon realise the strain the festival has placed on our finances. This year I have fallen in this category 🙁 I am now dreading seeing my credit card statement.

This will resonate with many. During the festival season, it’s all too common to spend more than one can afford. One day of splurging can come back to bother you when you find yourself very short on money.

What’s done can’t be undone. But what we can do is learn from our mistakes. Sharing my 5 mistakes that can help in checking the festival budget and ensure that we don’t overspend.

1. No Budgeting

During festival season, the word “budget” is usually the last thing any of us want to hear. However, a budget may prevent us from throwing away hard-earned cash.

With the attractive displays and offers, whenever you enter a store, it’s easy to get carried away with the spending. In order to keep your spending under control throughout the festivity, it is essential to create a budget in advance. Having a set spending plan in place will help you avoid unnecessary expenditures and save money.

2. No shopping list

All of our Diwali preparations start weeks in advance. As a result of our excitement, we often go shopping for days on end, spending all of our money on unnecessary stuff.

To shop without a list is to buy without considering whether you need the item. Festivals may get pricey if you buy a lot of food, drinks, and souvenirs. Furthermore, once you start spending your hard-earned money in this way on celebrations, you won’t be able to stop. Of course, we’ll go over budget if we go shopping before we’ve settled on exactly what we need.

If you want to limit your holiday spending, make a list of what you need before heading out to the store. To a certain extent, it can assist you in maintaining a reasonable budget for the holiday season.

3. Not Shopping Smartly

I made a big-ticket purchase just before the Diwali offers started and my credit card company came with attractive offers. This could have saved me some money and earned extra reward points and not to say a good deal from the company.

The ‘SALE’ season coincides with the Diwali festivities. During this period, nearly every business offers attractive discounts and bargains.

Have a look at these great offers and do some comparison shopping before you buy anything. Credit card purchases also qualify for cash-back incentives from many retailers. Using a credit card instead of cash can help you save money. It could aid you in keeping your holiday spending in check. Therefore, before commencing to make purchases during festive seasons, seek for additional deals and cashback offers.

4. Recycling and reusing

Diwali is about lights, colours, and diyas. Clay lamps, or mitti-ka-diyas, have one distinguishing feature: they can be reused. Many Diwali decorations can be recycled and reused with a little ingenuity and creativity. Diyas can be repainted and decorated again to be reused next year.

5. Home Decorations

Every time we have a holiday or a special event, we decorate our homes and buildings. To give our homes a new look, we buy new curtains, cushion covers, rugs, and a few other things. The cost of celebrations is often inflated by the need to buy new accoutrements for each event.

Use gorgeous old sarees to make your own drapes and recycle other materials around the house to make new cushion covers, curtains, and other decorative accoutrements instead of buying them every time a holiday rolls around. DIY projects extend beyond functional objects to the realm of the ornamental as well. Simply moving the furniture around may radically transform the aesthetic of your home.

Takeaway: During festival season, it’s all too common to spend more than one can afford. Having a budget in place will help you avoid unnecessary expenditures and save money. Sharing my 5 mistakes that if avoided can help us in checking the festival budget and ensure we don’t overspend.

Let us celebrate Diwali in a manner that we fondly remember, and not as the moment we maxed out our credit card buying useless/unavoidable things.

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Best Auto Insurance Plans and Policies to Meet Your Needs

Introduction

For FY19, the rate of uninsured automobiles on Indian roads remained at a high of 57%, with more than 60% of vehicles uninsured in 15 states.

While third-party insurance is mandatory for all vehicles on Indian roads, insurers focus on added services to differentiate themselves in an extremely competitive world.

Having one’s vehicle is exciting, but at the same time, one has to maintain the car/two-wheeler regularly and keep it insured. 

Auto insurance is one of the significant decisions to be made by a vehicle owner. Auto insurance is a kind of financial protection against the accidents caused due to owning a vehicle or any other unforeseen events. It provides monetary compensation for the injuries caused to the person and the vehicle.

Auto insurance policies are designed to protect a person, their vehicle, and any other parties involved in the accident. The best auto insurance plans and policies vary by lenders and coverage level. 

What are auto insurance plans?  

Auto insurance plans, sometimes known as motor insurance, cover any vehicle, including cars, motorcycles, and commercial vehicles. 

This insurance protects individuals from financial losses resulting from accidents or unforeseen events such as theft, collision, etc. 

The insured must pay a premium in exchange. The premium amount is determined by various criteria such as the insured’s stated value, age of the vehicle, kind of vehicle, fuel type, insured’s age, etc.

Automobile insurance safeguards the person against any legal liability for third-party unintentional damages, injuries, or death and personal automobile coverage.

Types of auto insurance policies 

There are two types of auto insurance policies:

  1. Comprehensive policy

A comprehensive policy is a combined policy that covers both third-party liability and vehicle damage. If the vehicle breaks and needs fixing, the coverage will pay for the costs. A comprehensive auto insurance policy includes the following items: 

  • If the automobile damages someone else’s property, there is a third-party liability.
  • Third-party liability arises if a person is killed or wounded as a result of the vehicle. 
  • Damages were sustained while transporting the vehicle from one location to another.
  • Injuries to the car are caused by natural or man-made natural disasters like floods, earthquakes, theft, fire, etc.

Comprehensive coverage plans also cover personal accidents. The insured would be compensated if they died or became disabled due to an accident.

As a result, a comprehensive automobile insurance policy covers damage to third parties and the price of fixing one’s losses.

  1. Third-party liability policy

Third party liability covers only damages to the third-party. Under third-party insurance, a person does not get compensation for the damages to their car.

Third-party auto insurance provides financial protection in the event of third-party property damage in an accident. In addition, it is a legal obligation.

A third-party liability policy is mandatory under the Act. The coverage covers the financial consequences of causing injury to another person. Some of the obligations that are covered include: 

  • Liability is incurred if a person is killed by a vehicle.
  • If the vehicle damages someone’s property, the driver is liable.
  • The driver is responsible if a person is physically damaged or injured by a car/two-wheeler/commercial vehicle. 

How do you pick the best auto insurance policy in India?

Insurance firms offer a wide variety of auto insurance policies to meet customers’ demands, but selecting the right policy can be difficult. 

Thus, individuals must study before selecting the right insurance policy for their needs.

  1. Identify needs

Individuals need to assess their demands and determine what type of policy they want before looking for the best auto insurance and the best insurance company. 

They need to decide whether they want comprehensive coverage, third-party liability coverage, or both.

  1. Compare auto insurance plans

Soon after the individuals have decided on the type of auto insurance coverage they require, they need to compare the policies offered by several insurance providers before making a purchase. 

They can compare the plans based on the amount covered, the types of add-ons available, the coverage and exclusions, the claim process, deductibles, etc.

  1. Examine financial standing

Examine the insurer’s financial position once the plans have been compared. To determine whether they are financially stable, look at their solvency ratio. All insurers are required to post their financial reports online so that one can verify their financial records on the company’s website.

  1. Ask about add-ons

Additional coverage options, known as add-ons or riders, can be purchased for a fee. People need to inquire about the available add-ons and select the one that best meets their requirements. 

However, only comprehensive insurance policyholders are eligible for add-ons. 

  1. Verify the claim process and claim ratio

Getting instant financial aid in the event of an accident is one of the main goals of buying auto insurance. Hence, choosing insurance with a simple and speedy claim process is critical. 

Before choosing an insurer, individuals need to evaluate the claim settlement ratio (CSR). Compared to the number of claim applications submitted in a year, the CSR shows how many claims the insurance company has successfully settled. It is preferable to buy insurance from a firm with a high CSR because the claim will be accepted more quickly.

  1. Read the terms and conditions of the policy 

Examine the terms and conditions thoroughly before signing the policy documents to ensure that they are favourable and match one’s needs. This is a necessary step to do before claiming to avoid any legal issues.

Conclusion

Thus, take into account these considerations, compare the available auto insurance policies from prominent insurance companies, and then get the right policy.

Individuals would not like to put themselves at a disadvantage if involved in an accident or unforeseen event, so getting the appropriate auto insurance policy is critical. 

It is also crucial to have the correct auto insurance, as this could be the difference between being insured and not. It is not as difficult as it may appear to purchase auto insurance. Following the above guidelines will greatly assist one in selecting the best plan.   

Still getting some questions in your head? Write to me contact@sbsfin.com.

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All About Critical Insurance Policy and Its Benefits

Introduction

These days, critical illnesses are more common. According to a study, these illnesses are now responsible for 60% of deaths in India.

Furthermore, the costs of treating these severe illnesses are rising rapidly, putting individuals and their families in financial trouble. In extreme situations, their savings can be wiped out completely, trapping them in debt or causing them to fall behind on their financial goals.

Given the high cost of critical illness treatments, obtaining a critical illness insurance plan would be an excellent approach to cover these costs without jeopardizing a family’s regular income.

Who should consider critical illness insurance, and what is it? 

A critical illness insurance policy is a type of health insurance policy that pays monetary compensation to the person diagnosed with one of the critical illnesses listed in the policy. 

Once the insured gets diagnosed with a critical illness and the waiting period has expired, the insurer will pay the insured a lump sum payout in exchange for premium payments. The payout might be used according to the insured’s needs. 

A critical illness insurance coverage may be purchased by the following people:

  • Individuals who have a family history of critical illness are more prone to develop it themselves. Thus, they can have it. 
  • The family’s breadwinner role and relevance are critical. This will badly impact the family’s financial future if something happens. Thus, getting critical illness insurance for them is essential.
  • According to research, people who work in high-stress environments are more likely to get serious illnesses. As a result, these individuals can think about purchasing critical illness insurance.
  • Critical illnesses are more likely to strike people beyond the age of 40. Thus, they can consider buying the policy.

What is the significance of having a critical illness plan?

Taking a critical illness insurance policy has many benefits:

  • When someone is diagnosed with a severe condition, medical treatment can be incredibly costly, becoming a significant financial strain. Medical bills and hospitalization are covered under critical illness insurance coverage.
  • In a critical illness, individuals and their entire families get financially impacted. Thus, the policy will provide monetary compensation that can be used to meet healthcare and household expenses.
  • The emphasis needs to be on medical treatment while coping with an illness. A critical illness policy eliminates the financial burden of treatment and lost workdays.
  • The critical illness insurance policy will pay out a lump sum if the person is diagnosed with one of the listed illnesses. They have complete discretion over how they want to spend the funds. 
  • The payout from critical illness insurance is tax-free u/s 80D of the Income Tax Act. 
  • Even if the insured’s treatment occurs in another nation, critical illness insurance may cover them.

How does a critical illness insurance plan work?

The critical illness insurance policy will pay out a lump sum if the person is diagnosed with one of the listed illnesses. They have complete discretion over how they want to spend the funds.

The premise for determining how much coverage one requires is to compute the monetary losses if one stops working due to illness. 

A critical illnesses policy covers heart attacks and strokes, cancer, Parkinson’s disease, meningitis, deafness, head damage, etc. Further, check the policy document to examine what all illnesses are covered.

Some of the most typical critical illness policy exclusions are listed below. However, read the policy paper carefully to learn about the specific exceptions.

  • During the survival stage, death occurs
  • Illnesses that develop while the waiting period (usually around 90 days).
  • Smoking, tobacco, drinking or drug usage causes sickness
  • Complications associated with pregnancy or childbirth
  • This policy does not cover HIV/AIDS
  • Injuries caused by participating in war or terrorism, etc.

What to look for before purchasing a critical illness cover?

Before obtaining a critical illness plan, take into account the following factors: 

  1. Financial position

Treatment for an acute illness can be expensive. Thus, it is essential to check one’s financial position to identify whether the treatment costs can be covered. A person can learn about the prices from a reputable medical expert or a knowledgeable individual. They can get some ideas by doing some internet research.   

  1. Diseases covered and exclusions 

As the sorts of diseases covered vary by firm, conducting a self-assessment to select a plan that meets one’s healthcare needs is recommended. 

A person needs to examine their medical history, health profile, and lifestyle to spot the diseases they could be susceptible to. 

Further, it is also crucial to keep track of what their critical illness insurance coverage does not cover. 

  1. Sum assured

The quantity of coverage a person requires is critical in determining which policy is best for them. Some illnesses have less expensive treatment options than others. 

Thus, if individuals know how much insurance they will require, it will help them choose the best plan for their needs.

  1. Rider or Standalone 

Critical insurance coverage can be added as a rider or add-on to an existing policy or purchased separately.

Since a standalone policy has a higher premium than a rider, it provides complete coverage. Although a rider may cover the same range of acute illnesses, the amount of coverage or the sum assured is decreased.

  1. Waiting period 

A critical illness plan will usually include a time limit after which it becomes effective, known as the waiting time. It begins when one acquires critical illness insurance and continues until the rewards are received. 

Generally, the waiting period is of 30-90 days. Thus, it is vital to choose a plan that kicks in as soon as possible. 

Conclusion

In India, the current pandemic has significantly raised insurance awareness. People have begun purchasing life, health and critical illness coverage.

A critical illness often cripples an individual’s financial stability and savings, and a critical insurance policy helps with the significant financial loss incurred. The critical disease usually leaves the victim struggling to pay their medical bills, living costs, and other expenses associated with their treatment. 

Critical illness policy helps fight the financial standing of a victim who has been diagnosed with a critical illness. Thus, a critical insurance policy will provide monetary compensation to individuals suffering from critical diseases.

When buying a critical insurance policy, it is essential to know how it can help a person in the long run. They must understand what they are getting into when they buy one of these policies. Thus, take a look at some of the benefits of this kind of insurance policy and why it is important to have one.

Still getting some questions in your head? Write to me at contact@sbsfin.com.

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What are Corporate Fixed Deposits? How are they different from Bank Fixed Deposits?

Introduction

Fixed deposits (FDs) are one of the most common ways by which people save money in India, especially for their children’s education or retirement.

On 10th February 2022, RBI did not change the repo rate and it remained at 4%. This news can be good for fixed deposit holders, as banks will likely stop lowering FD interest rates.

However, inflation has surged in the past few months, and many investors are seeing negative real returns. One option for FD investors is to invest in corporate FDs, which provide a higher interest rate.

Moreover, many retail investors are investing in these products right now because of geopolitical tensions and high volatility in both equity and debt markets.

What are corporate fixed deposits?

A corporate FD or a corporate fixed deposit is a type of deposit that is similar to that offered by banks. 

Companies and Non-Banking Financial Institutions (NBFCs) collect deposits from individuals for a fixed term with a fixed interest rate. This type of deposit is called a corporate fixed deposit (corporate FD). 

They assure guaranteed returns and flexibility in deciding the tenure, just like bank FDs. They act as a savings product for individuals. 

Further, issuers of corporate FDs are given credit ratings by agencies like CRISIL, CARE, ICRA, etc., which shows the riskiness of the deposit. 

Features of corporate fixed deposits

The features of corporate FDs are as follows:

  • NBFCs and some companies issue corporate FDs after they fulfill the RBI guidelines.
  • The corpus accumulated at the end of the tenure can be utilised for any purpose, such as higher education, vacation, marriage, house repair, etc. 
  • Corporate FDs provide a fixed interest rate to individuals, which means they are not exposed to market risks and are suitable for low-risk appetite investors. 
  • In many aspects, corporate FDs are similar to bank FDs, but they provide a higher interest rate than bank FDs.
  • Corporate FDs provide flexible terms for depositing money, thus ensuring that investors can choose to invest in the product depending on their plans, any goals they may have, etc. 

Further, some corporate FDs also offer premature withdrawal without restrictions.

  • They are rated by credit rating agencies, representing how credible and effective an investment instrument is. 

Corporate fixed deposits Vs Bank fixed deposits

There are many advantages of corporate fixed deposits compared to bank fixed deposits. However, corporate FDs also have some disadvantages. 

Let us examine the differences between the two of them.

  1. Interest Rate

One of the critical factors while deciding on any investment is the returns the investor will make. 

Corporate FDs usually have a higher interest rate than bank FDs, so individuals’ investments will grow faster if they choose to invest in a corporate FD. 

With an interest rate that remains fixed and locked throughout the entire duration of the chosen FD, unbeatable returns on corporate fixed deposits make it more attractive. 

As of 30th March 2022, the interest rate on bank FDs varies from 2.50% to 6.50%, and the corporate fixed deposits interest rates in India range from 5.45% to 8.09%. 

Thus, the first difference is that corporate FDs provide a higher interest rate than bank FDs. 

  1. Withdrawal

When people are in an emergency and need funds, they generally withdraw their amount from a fixed deposit. However, this could mean that banks and entities can charge a penalty to them.

Under RBI guidelines, there is a minimum penalty period of 3 months for all fixed deposits. Thus, if individuals withdraw money before that, they will be charged a penalty. 

Beyond that, banks and NBFCs have their policies about how long the penalty period will be. Usually, the penalty period for corporate FDs is shorter than for bank FDs.

  1. Risk 

Analysing the risks of investment is a wise move before a person invests. A fixed deposit is a safe investment, but it also has some risks. 

Corporate fixed deposits are unsecured, and there is a possibility that the company can collapse and that investors might not get the money back.

Conversely, RBI’s subsidiary Deposit Insurance and Credit Guarantee Corporation (DICGC) insures bank fixed deposits up to Rs. 5 lakhs. 

Thus, corporate fixed deposits carry a higher risk than bank fixed deposits.

  1. Credit Rating 

The last difference between bank FDs and corporate FDs is credit ratings. Corporate FDs are given credit ratings, whereas bank FDs are not given any credit ratings.

Credit rating agencies issue ratings that let investors know the financial health of an issuer. The higher the rating, the less likely the company is to default, which means more excellent protection for their investment.

Credit agencies assign these ratings by analyzing the issuer’s financial stability, including its background, repayment history, management quality, etc. 

How to invest in corporate fixed deposits? 

Individuals can invest in a corporate fixed deposit by visiting a nearby issuer’s branch or by logging on to their online account.

Who is allowed to collect corporate deposits?

When it comes to collecting deposits from the public, the Reserve Bank of India (RBI) is very vigilant.  

To be registered with RBI, the NBFC has to have a legitimate licence and has to manage at least Rs. 5,000 crores in financial assets. 

Further, it has to fulfill some other criteria as well, like:

  • The total deposit an NBFC can collect can vary depending on the company, but it is limited to a specific limit that varies across organisations.
  • All information about the deposit must be disclosed to the RBI.
  • NBFCs are not allowed to provide any extra benefits or gifts to the depositor.
  • To collect deposits from customers, NBFCs have to sustain a minimum credit rating.

It is essential to note that collecting deposits without a licence is a federal offence.

Conclusion

Bank FDs and corporate FDs both have their own set of benefits and downsides.

It is essential to weigh which option better suits one’s investment style, goals, and risk appetite when choosing an investment option. 

Corporate FDs are often a good fit for investors with a lower to medium risk tolerance, who are looking for higher returns than bank FDs. However, always remember that there is no DICGC insurance for corporate FDs. So make sure to research a company’s financial fundamentals and credit rating before opening a corporate FD. 

Evaluating multiple factors before investing in a bank/corporate FD is vital. Investors can examine factors like the interest rate offered, the issuer’s credit rating, repayment history, past performance, etc.

Examining all these factors will help investors make an informed decision and help safeguard their money.

 

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7 Major things to consider before buying a term insurance policy

Introduction

Buying a term insurance policy has become the need of the hour. 

In a world of uncertainty, many people seek security. Early planning for a financial future is the first step individuals can take to prepare for all the surprises life throws at them. And if there is one thing that is certain in today’s society, it is that health and well-being are more important than ever before.

Individuals have to live with the stress of growth, productivity, and job stability, and that stress is being taken out on their families. 

Therefore, investment plans must take our entire financial situation into account and develop strategies to optimise savings, considering all stages of life and all goals. 

Life insurance has always been essential in India, but after the Covid-19 virus swept through the country, it became even more so.

A recent study conducted by the Life Insurance Council found that three-fourths of respondents (out of 12000) ranked life insurance as one of the top three most essential holdings for an individual.

What is a term insurance policy?

Like any other insurance policy, term insurance is essential to one’s financial protection. 

Term life insurance is a pure life insurance policy that protects from the uncertainty of life and its risks and does not include any investment/savings component. 

If an insured person dies during the life insurance policy term, their beneficiary can receive a lump sum payment. Term life insurance is not very expensive compared to other life insurance plans.

Individuals can buy term life insurance policy online or offline. 

Seven significant things to examine before buying a term insurance policy

Purchasing a term insurance policy is vital for one’s financial protection.

However, before individuals buy term insurance in India, it is crucial to consider the following points. Below is a guide to buy term insurance. 

  1. Amount coverage

Before individuals purchase a term insurance plan, they are advised to consider the amount of coverage required. It is essential to evaluate what the family will need to live the same lifestyle and meet their future expenses if something should happen to the individual.

Thus, to decide the insurance coverage required, individuals need to consider their age, the number of dependents, lifestyle, present expenses, present debts and investments, future goals, rate of inflation, etc.

After evaluating these points, individuals can decide on the required insurance coverage. 

  1. Tenure of policy 

Once individuals have decided the amount of coverage they require, the next thing to consider is for how long they want the policy to last (i.e., policy’s tenure).

If individuals opt for a policy with short tenure, the policy might not last long enough or might lapse before their financial obligations are done. 

However, if the policy tenure is too long, the premium will be too high because of the higher period. 

Thus, individuals are advised to properly evaluate the tenure of their policy before buying a term insurance plan.

  1. Research the insurer

When individuals buy online term insurance plans, it is advisable to choose a lender that offers individuals the best term insurance plan.

Reviewing different plans is a prudent approach to take. It is also wise to compare the benefits the insurer offers. 

It is also necessary to look at the insurer’s reputation, claim settlement ratio, process, customer service, premium, and even the terms of each contract.

  1. Premium payout 

Paying for a term insurance policy is not a one time cost, but it is a long-term commitment that the insured must fulfill. Therefore, individuals are advised to have a plan that will work well for them. 

When they choose the sum assured and premium, they have to consider their future financial stability because the cost of insurance may not be affordable in the years to come. They must find the balance between how much insurance their family needs and what they can afford for premiums every year.

To avoid lapsing on premium payments, it is better to choose the online payment method for premium payments. Online payments are more secure, and they make sure that premiums are paid on time. 

Essentially, choosing this mode ensures that the customer will never lapse their policy and will not have to pay late fees.

  1. Add riders 

A term insurance policy offers a variety of riders that can be purchased at a reasonable cost, apart from the death benefits.

Some of the riders are critical illness riders, accidental death benefit riders, waiver of premium on disability riders, waiver of premium on critical illness riders, etc. 

Individuals need to research these additional benefits to find out if they meet the needs of their situation. These riders might differ for each insurance company, so it is crucial to read the fine print.

  1. Claim settlement process

The claim settlement process is another factor that needs to be considered before buying a term insurance plan. The death of the breadwinner in a family can cause a lot of stress, both emotionally and financially. 

Having a hassle-free claim process can ease some of the burdens by providing compensation to the survivors of the deceased.

In some cases, families have given up on their insurance claims because of the mess that can occur in the process. 

Without an easy claim settlement process, life insurance would not be worth it because it would not serve its original purpose.

  1. Tax benefits

Individuals are also recommended to consider the tax benefits of a term insurance policy. 

Individuals who buy a term insurance policy are eligible to use the amount paid in premiums as a deduction under Section 80C of the Income Tax Act up to Rs. 1.5 lakhs. 

Moreover, the sum assured received by the nominee on the death of the insured will not be taxed u/s 10 (10D), subject to some conditions. 

Finally, the premiums paid for a critical illness cover option can be availed as a deduction u/s 80D, subject to some limits. 

Conclusion

Term life insurance policy is one of the essential financial products that every individual needs to have. There are many benefits and advantages of term life insurance. 

Life insurance can essentially provide a safety net and take care of an individual’s financial responsibilities by paying off any debt they owe, paying their mortgage off, and providing a sizable sum to their spouse or children in the event of their death. 

A term policy is one of the most popular ways of buying insurance coverage in India because it provides good coverage at affordable rates.

In addition, always read and comprehend the various features, benefits, terms and conditions, inclusions, exemptions, etc., to avoid any disappointment in the future.

Choosing a good plan to ensure individuals are well-covered and that the insurance meets their requirements is crucial.

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7 Timeless Rules About Money

A medium of exchange in an economy, one of the essential functions of money is to serve as a store of value, that is, of maintaining a stable and reliable standard of living. 

Money is vital in an individual’s life, it also provides power to form an immediate bridge from your past to your future.

While it has multiple functions in any society, it is essential in financing a wide range of activities in personal and professional life.

Dedicate time to understand money and build a strategy for financial goals as early as possible. There are certain Dos and Don’t which serve a financial plan in the long run.

Timeless rules about Money 

  1. Save money

The first rule for money is to save it, or in other words, pay yourself first.

Shopping and discretionary expenses should be in a balance with your financial goals. Pay for yourself first i.e. save money for your needs and goals. If you save and invest you can accumulate wealth for your future.

Start saving early to allow more time for your money to have more opportunities to grow. This is known as compounding. 

For example, you invest Rs. 1000 in an asset, and it generates a 10% return for you in the 1st year. After 1st year your investment + return will be = 1000 + (1000*10%) = Rs. 1,100. In the second year, it also generates a 10% return. The investment value after 2 years will be 1,100+1,100*10% = Rs. 1,210.

It is also recommended that one should spend what is left after saving.

  1. Never rely on only one source of Income

“Never depend on a single income. Make investment to create a second source.” – Warren Buffett.

Portfolio planning involves diversifying capital into various assets. 

Similarly, it is advised that you should not rely on only one source of income. To create a contingency source of inflow, develop an income from various sources to help you build your wealth. Investing is considered to be one of the second sources.

  1. Avoid unnecessary expenses 

“Beware of little expenses; a small leak will sink a great ship.” — Benjamin Franklin.

Living within your means is a great virtue for financial growth.

It is common to increase spending with an increase in income to upgrade our lifestyle. However, a balance has to be created in using that money today and harvesting it for tomorrow.

It does not mean that you have to avoid necessary expenses but rationalise it. your expenses are lower than your income by a comfortable margin- say at least 30-40%. This will help you build wealth for yourself.

  1. Have an emergency fund

You can have an emergency at any point in your life, such as a medical emergency in your house, a sudden house/car repair, loss of job, etc. So, at that point, you should have enough money to meet your day-to-day expenses for upto six months to a year without splurging

If you have a working EMI or impending large outlays, ensure your emergency fund accounts for these as well.

  1. Invest your money 

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen.

Just saving is not going to make you rich, and finding investment instruments that beat inflation is essential. There are various instruments available in the market, such as equity, fixed income instruments, mutual funds, real estate, gold, etc., where you can invest. However, one should consider his goals, risk profile, age, income, etc., while creating a mix of assets. 

Suppose, if you are 60 years old and retired, then you might not consider investing your money into equities as they carry high risk and have the possibility of even going to zero. On the other hand, if you are 27 years old and single, earning sufficient money, and are saving for retirement, then equity will be a good option for you as you will give your money more time to grow. 

It is generally believed that allocation towards equity should be determined through this formula – 100 – age. So, if your age is 30, you can invest 70% in equity.

Based on risk, if you have a relatively high-risk tolerance and the time, then equity could be a better option for you. However, if you have a low-risk tolerance but want higher returns, then a bond might be more appropriate, where your capital will be protected. 

One of the essential rules of investing money is to be patient.

The market will someday go up or down, but you have to stay invested.

For any investment to grow, it is important to stay invested for a long time.

  1. Take calculated risks

Different assets provide different returns. The returns you generate will depend upon the risk you have taken. Expecting fixed deposits to give a higher average return than stocks, is impossible. This is because you are comparatively taking less risk in FDs than stocks.

To earn high returns and generate wealth, you need to invest in risky assets. But before investing, you should consider factors even time of exit and tax factors and then invest.

  1. Diversify your investments

Diversification is an investing strategy used to manage risk. It says that rather than investing money in a single company, industry, sector, or asset class, investors should diversify their investments across a range of different companies, industries, and asset classes. This is because the risk will be spread out across different assets. If one asset class does not perform well, the other might and vice versa, which means the overall risk can be reduced.

Conclusion

In India, as of August 2021, there are 1.2 crores active investors against a country of 138 crore people. We have a long way to go. 

To generate wealth, investing is very important. Investing will fulfill your financial goals and provide financial security and freedom after your retirement.  

However, one should consider the risks involved in investing, consider the right investment vehicle, stay invested for longer and start investing as early as possible.

As said by Benjamin Graham, “Successful investing is about managing risk, and not avoiding it.” 

To understand more about allocation of your money to meet financial goals, reach out to us at:contact@sbsfin.com