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Avoid These Six Common Life Insurance Mistakes
By [https://EzineArticles.com/expert/Dwaipayan_Bose/1976106]Dwaipayan Bose
Life insurance is one of the most important components of any individual's financial plan. However there is lot of misunderstanding about life insurance, mainly due to the way life insurance products have been sold over the years in India. We have discussed some common mistakes insurance buyers should avoid when buying insurance policies.
1. Underestimating insurance requirement: Many life insurance buyers choose their insurance covers or sum assured, based on the plans their agents want to sell and how much premium they can afford. This a wrong approach. Your insurance requirement is a function of your financial situation, and has nothing do with what products are available. Many insurance buyers use thumb rules like 10 times annual income for cover. Some financial advisers say that a cover of 10 times your annual income is adequate because it gives your family 10 years worth of income, when you are gone. But this is not always correct. Suppose, you have 20 year mortgage or home loan. How will your family pay the EMIs after 10 years, when most of the loan is still outstanding? Suppose you have very young children. Your family will run out of income, when your children need it the most, e.g. for their higher education. Insurance buyers need to consider several factors in deciding how much insurance cover is adequate for them.
� Repayment of the entire outstanding debt (e.g. home loan, car loan etc.) of the policy holder
� After debt repayment, the cover or sum assured should have surplus funds to generate enough monthly income to cover all the living expenses of the dependents of the policy holder, factoring in inflation
� After debt repayment and generating monthly income, the sum assured should also be adequate to meet future obligations of the policy holder, like children's education, marriage etc.
2. Choosing the cheapest policy: Many insurance buyers like to buy policies that are cheaper. This is another serious mistake. A cheap policy is no good, if the insurance company for some reason or another cannot fulfil the claim in the event of an untimely death. Even if the insurer fulfils the claim, if it takes a very long time to fulfil the claim it is certainly not a desirable situation for family of the insured to be in. You should look at metrics like Claims Settlement Ratio and Duration wise settlement of death claims of different life insurance companies, to select an insurer, that will honour its obligation in fulfilling your claim in a timely manner, should such an unfortunate situation arise. Data on these metrics for all the insurance companies in India is available in the IRDA annual report (on the IRDA website). You should also check claim settlement reviews online and only then choose a company that has a good track record of settling claims.
3. Treating life insurance as an investment and buying the wrong plan: The common misconception about life insurance is that, it is also as a good investment or retirement planning solution. This misconception is largely due to some insurance agents who like to sell expensive policies to earn high commissions. If you compare returns from life insurance to other investment options, it simply does not make sense as an investment. If you are a young investor with a long time horizon, equity is the best wealth creation instrument. Over a 20 year time horizon, investment in equity funds through SIP will result in a corpus that is at least three or four times the maturity amount of life insurance plan with a 20 year term, with the same investment. Life insurance should always been seen as protection for your family, in the event of an untimely death. Investment should be a completely separate consideration. Even though insurance companies sell Unit Linked Insurance Plans (ULIPs) as attractive investment products, for your own evaluation you should separate the insurance component and investment component and pay careful attention to what portion of your premium actually gets allocated to investments. In the early years of a ULIP policy, only a small amount goes to buying units.
A good financial planner will always advise you to buy term insurance plan. A term plan is the purest form of insurance and is a straightforward protection policy. The premium of term insurance plans is much less than other types of insurance plans, and it leaves the policy holders with a much larger investible surplus that they can invest in investment products like mutual funds that give much higher returns in the long term, compared to endowment or money back plans. If you are a term insurance policy holder, under some specific situations, you may opt for other types of insurance (e.g. ULIP, endowment or money back plans), in addition to your term policy, for your specific financial needs.
4. Buying insurance for the purpose of tax planning: For many years agents have inveigled their clients into buying insurance plans to save tax under Section 80C of the Income Tax Act. Investors should realize that insurance is probably the worst tax saving investment. Return from insurance plans is in the range of 5 - 6%, whereas Public Provident Fund, another 80C investment, gives close to 9% risk free and tax free returns. Equity Linked Saving Schemes, another 80C investment, gives much higher tax free returns over the long term. Further, returns from insurance plans may not be entirely tax free. If the premiums exceed 20% of sum assured, then to that extent the maturity proceeds are taxable. As discussed earlier, the most important thing to note about life insurance is that objective is to provide life cover, not to generate the best investment return.
5. Surrendering life insurance policy or withdrawing from it before maturity: This is a serious mistake and compromises the financial security of your family in the event of an unfortunate incident. Life Insurance should not be touched until the unfortunate death of the insured occurs. Some policy holders surrender their policy to meet an urgent financial need, with the hope of buying a new policy when their financial situation improves. Such policy holders need to remember two things. First, mortality is not in anyone's control. That is why we buy life insurance in the first place. Second, life insurance gets very expensive as the insurance buyer gets older. Your financial plan should provide for contingency funds to meet any unexpected urgent expense or provide liquidity for a period of time in the event of a financial distress.
6. Insurance is a one-time exercise: I am reminded of an old motorcycle advertisement on television, which had the punch line, "Fill it, shut it, forget it". Some insurance buyers have the same philosophy towards life insurance. Once they buy adequate cover in a good life insurance plan from a reputed company, they assume that their life insurance needs are taken care of forever. This is a mistake. Financial situation of insurance buyers change with time. Compare your current income with your income ten years back. Hasn't your income grown several times? Your lifestyle would also have improved significantly. If you bought a life insurance plan ten years ago based on your income back then, the sum assured will not be enough to meet your family's current lifestyle and needs, in the unfortunate event of your untimely death. Therefore you should buy an additional term plan to cover that risk. Life Insurance needs have to be re-evaluated at a regular frequency and any additional sum assured if required, should be bought.
Conclusion
Investors should avoid these common mistakes when buying insurance policies. Life insurance is one of the most important components of any individual's financial plan. Therefore, thoughtful consideration must be devoted to life insurance. Insurance buyers should exercise prudence against questionable selling practised in the life insurance industry. It is always beneficial to engage a financial planner who looks at your entire portfolio of investments and insurance on a holistic basis, so that you can take the best decision with regards to both life insurance and investments.
Article Source: [http://EzineArticles.com/?Avoid-These-Six-Common-Life-Insurance-Mistakes&id=8691522] Avoid These Six Common Life Insurance Mistakes
Gas Home Buyers Report
By [https://EzineArticles.com/expert/Steve_Duval/2304033]Steve Duval
When buying a new home you want to be sure you don't have any unexpected expensive bills to repair or replace the gas boiler and any other appliance.
A gas home buyers report would find any problems that may be waiting for the new owners.
When you buy a new home you engage a surveyor to carry out a survey of the property to ensure everything is as is should be, any problems found are then listed in the survey report.
Once you receive the report you can then discuss whether to carry on with the purchase or negotiate with the seller re any faults that may have been found.
Most surveyors when compiling your report may state that the heating is working but untested.
This normally means they have turned the heating on and everything starts to heat up.
That's fine, but there could be a hidden problem that could costs you a lot of your hard earned cash to put right.
Most surveyors are not gas safe registered and by law cannot give you a full report on the state of the heating and any gas appliances within the property.
They can only test them by switching the appliances on to see if they work, but that's it.
By having a gas home buyers report carried out this will reveal any hidden problems that may be waiting for the new owners.
The most important part of a gas home buyers report is Safety, you want to be sure that once you have moved into your new property you are safe.
So what is involved in a gas home buyers report?
First, a gas tightness test is carried out at the gas meter, this will reveal if any form of a gas leak is present. Once the test is complete a print out of the results printed off.
Now we start with the appliances
Lets first take a look at the boiler visually, does it comply with gas and building regulations.
Does the flue have any signs of corrosion, internally and externally?
Is the boiler in good working order and safe to use.
The gas rate of the boiler is checked to ensure the boiler is getting enough gas to burn correctly.
Undersized gas pipes are quite common on combination boilers.
A full flue flow test is carried out with a flue gas analyzer and the results printed off. This test will reveal if there are any combustion problems present.
Check to ensure that the correct ventilation is present and not obstructed.
Any faults found are recorded on a gas safe certificate and forwarded on with the gas home buyers report.
The type of boiler is it a high efficiency condensing boiler or an old style gas guzzler as well as the age of the boiler.
Check to ensure that the correct controls are fitted to control the boiler.
If there are any gas fires within the property these are checked over, again to ensure they are safe to use.
Gas fires seem to get overlooked and are never serviced, because of this the fire flues tend to get partly blocked overtime with objects falling down the flue.
A full flue test is carried out to ensure the flue is working and adequate for the gas fire.
if ventilation is required for the gas fire, check that it is of the correct size and not blocked off.
All other gas appliances are checked over to ensure they are working as they should and they have been fitted correctly to gas and building regulations.
At the end of the gas home buyers report another gas tightness test is carried out and the results printed off.
A full written report is then put together for the client detailing any problems found as well as the costs to put any problems right.
The report is then forwarded on to the client as well as the gas certificate and print offs.
This gas home buyers report applies to both LPG and naturals gas properties.
When buying your dream property you want everything to be right when you move in, that's why you engage a surveyor to carry out a property report.
Do the right thing and have a gas home buyers report carried out.
Gas can be very dangerous if installed incorrectly, be safe with your new home move and have a Gas home buyers report carried out.
When it comes to gas, you need to use a gas safe registered person or company, don't be fooled into thinking Joe Bloggs can do your work. It could cost lives. We are gas safe friendly and can issue a certificate once all works is complete. http://www.duvalheating.co.uk/gas-safe/
Article Source: [http://EzineArticles.com/?Gas-Home-Buyers-Report&id=9940702] Gas Home Buyers Report