Wednesday, 25 September 2013

IRDA Life Insurance Regulations 2013-Do you know these changes?

Recently IRDA revamped so many changes when it comes to Life Insurance. All these changes will be effective from 1st October 2013. It is very important for all Life Insurance buyers to understand these changes well before going ahead for any buying.

Non Linked Regulations-

1.       Non Linked products like traditional life insurance policies will be classified as “PARTICIPATING PRODUCTS OR “PAR PRODUCTS” and NON-PARTICIPATING PRODUCTS OR “NON-PAR PRODUCTS” .

2.       PAR PRODUCTS will be eligible for Bonus on annual basis + Interim Bonus + Final Additional Bonus.

3.       Minimum Death Benefit will be   A) For Single Premium it is 125% for age up to 45 years, 110% for others.  B) For Non Single Premium it is minimum 10 times of the annualized premium (for age up to 45 years), for the rest       it is 7 times of annualized premium.

4.       For Non Single Premium it is minimum 10 times of the annualized premium (for age up to 45 years), for the rest       it is 7 times of annualized premium.

5.       The minimum policy term will be 5 years and minimum premium paying term for non single premium policies will be more than 5 years.

6.       Guaranteed Surrender Value (for regular premium policies) will be as below.  A) 30% of premium paid less any survival benefit already paid, if surrendered within 2nd Or 3rd Year. B) 50% of premium paid less any survival benefit already paid, if surrendered within 4th To 7th Year. C) 90% of premium paid less any survival benefit already paid, if surrendered in the last 2 years of policy , if term of the policy is less than 7 years.

7.       Premiums will be equal throughout the period of the policy.

8.       One can pay their premium only 30 days before the date of premium due. This move has both negative and positive effects. Negative effects are like if your employer ask you submit investment proof before 31st January of FY and your Life Insurance premium is due by 1st March then you are unable to produce it buy paying advance. So you need to ask for the TDS done from your employer afterward. Earlier to this, there was a provision to pay the advance premium and avail discount on this. Agents used to woo policy holders to pay advance payment and have a discount on this. Reason is, they will get a handsome commission immediately.

9.       For monthly premium payment mode only during the start of policy insurance company may accept 3 months advance payment.

10.     Service tax will be collected over and above the contractual premium. Now there will be a clear idea about how much you are paying as tax and how much will go towards premium. So this move will actually bring transparency.

11.    Selling of same plan and same tenure by splitting plans will not be allowed henceforth. It means from now onward your agent will not be able to sell the one product with same tenure by splitting Sum Assured (which increases his number of policy count but cumbersome for policy holders to maintain the data.) Like Jeevan Anand with tenure of 20 years can not be split like 5 policies of  each SA Rs.5,00,000. Instead you have to buy only one Jeevan Anand for tenure of 20 years and SA Rs.25,00,000. But your agent can sell with different terms.

12.    Existing plans of insurance companies will be revamped to suit the new regulations. Hence plans of LIC’s Jeevan Anand or Jeevan Tarang may come out with new features.

13.    Policies sold during the transition period (from 20th Feb 2013 to 1st Oct 2013) will have the option either to have continued their policies with existing features or move to new features.

14.    Your premiums will come down drastically as from now onward new mortality table will be referred to fix insurance premium.  Especially LIC which is using the 1994-96 Ultimate Mortality Rates will move to IRDA’s Indian Assured Lives Mortality (2006-08).

15.    The agents commission structure was revamped.

16.    The product literature must indicate whether the policy is protection oriented or saving orientd.

17.    Benefit illustration like guaranteed and non guaranteed at gross investment returns of 4% and 8% respectively signed by both prospective policyholder and agent. It must form the part of the policy document.
Linked Regulations-

1.       Death Benefit will be either of below. A)  The Sum Assured as agreed in the policy plus the balance unit of fund. B)  Higher of Sum Assured or balance unit of a fund.

2.       But the minimum maturity value should be equal to the value of units available on maturity date.

3.       Minimum Death Benefit will be as below. A) For single premium 125% of premium paid (if age at entry is under 45 years) or 110% of premium paid (if age at  entry is above 45 years). B) For regular premiums 10 times of annualized premiums or 0.5 * Term of the Policy * annual premium whichever is higher (if age at entry is under 45 years). Else 7 times of annualized premiums or 0.5 * Term of the policy * annual premium whichever is higher (if age at entry is above 45 years). 

4.       Single premium health insurance products will not be available from now onward.

5.       In case of death within 12 months of the start of the policy or from the date of revival of the policy then nominee will be entitled for fund value available on the date of death.

6.       For policies issued for minors the date of commencement of policy and risk commencement will be same.

7.       At any point of time death benefit will not be less than 105% of total premiums paid including top up but excluding service tax.

8.       Minimum policy term will be 5 years and premium payment will be 5 years.

9.       Grace period will be 15 days  monthly premium paying and 30 days for in all other cases.

10.    Lock in period will be 5 years.

11.    If policies discontinued within 5 years then they can revive the policies within two years or complete withdrawal without any risk.

12.    Partial withdrawal will be available after 5 years only. But for child policies one can not withdraw until minor insured attained the age of 18 years.

13.    Benefit illustration like guaranteed and non guaranteed at gross investment returns of 4% and 8% respectively signed by both prospective policyholder and agent. It must form the part of the policy document.

14.    Loan will not be available under linked products.

15.    Heighest NAV Guaranteed Plans are not allowed to operate.

16.    Closed ended funds are not allowed to operate.

17.    One can pay their premium only 30 days before the date of premium due and 3 months for monthly premium payment schedule.

18.    Splitting of policies will not be allowed in the case of linked policies.

19.    Same day NAV will be applicable if the premium received or redemption request received within 3 P.M. Else next day NAV will be applicable.

20.    Yearly statement will be sent showing the charges and the current fund values.

These are the major points which one must know. The list is big to go by, but I mentioned the major changes one most know.Cancel reply

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Wednesday, 15 May 2013

RBI to issue inflation -indexed bonds from 4 june 13, for more info pls call 09810232830

Dear All,

An article in Business Today states that RBI is to issue Inflation Indexed Bonds from 4th June 2013. Before going through the details, let us define what are Inflation Indexed Bonds - Inflation-indexed bonds (also known as inflation-linked bonds or colloquially as linkers) are bonds where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment. Now see below the news as appeared in Business Today:

RBI to issue inflation-indexed bonds from June 4
PTI New Delhi Last Updated: May 15, 2013 | 16:45 IST
The Reserve Bank on Wednesday announced it will launch inflation-linked bonds every month, starting June 4, to attract household savings of up to Rs 15,000 crore this fiscal so as to discourage investments in gold.

"RBI, in consultation with Government of India, has decided to launch Inflation Indexed Bonds (IIBs)," the central bank said in statement.

The first tranche of the IIBs 2013-14 for Rs 1,000-2,000 crore will be issued on June 4, it said, adding that the maturity period of these bonds will be 10 years. The total issue size will be Rs 12,000-15,000 crore in 2013-14.

After the first tranche, bonds will be issued on last Tuesday of every month.

While the first series of the bonds will be open for all class of investors, the second series issue - beginning October - will be reserved exclusively for retail investors.

RBI said the bonds are pursuant to the Budget proposal to "introduce instruments that will protect savings of poor and middle classes from inflation and incentives household sector to save in financial instruments rather than buy gold ".

Both the government as well as the RBI are concerned over the rising gold imports as its putting pressure on Current Account Deficit (CAD), which widened to historic high of 6.7 per cent in third quarter of 2012-13.

Gold and silver imports last month shot up 138 per cent, year-on-year, to $7.5 billion.

Announcement of the bonds to discourage investments in gold is the second major move by RBI in the last three days.

On Monday, it had placed restrictions on banks to import gold.

Giving details of the for first series of IIBs, RBI said while the coupon rate (interest rate) will remain fixed, the principal amount invested in the bonds will be linked to inflation based on Wholesale Price Index (WPI).

"Thus these bonds provide inflation protection to both principal and coupon payment. At maturity, the adjusted principal or the face value, whichever is higher, will be paid," RBI said.

Wednesday, 27 February 2013


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Thursday, 14 February 2013

Rajiv Gandhi Equity Saving Scheme 80CCG

Rajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets.". It was approved by The Union Finance Minister, Shri. P. Chidambaram on September 21, 2012. It is exclusively for the first time retail investors in securities market. This Scheme would give tax benefits to new investors who invest up to Rs. 50,000 and whose annual income is below Rs. 10 lakh.

The Scheme not only encourages the flow of savings and improves the depth of domestic capital markets, but also aims to promote an 'equity culture' in India. This is also expected to widen the retail investor base in the Indian securities markets.

The maximum Investment permissible under the Scheme is Rs. 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year.


·         It provides additional tax benefits over and above the present tax savings schemes under the Income Tax Act.


·         Gains, arising of investments in RGESS, can be realized after a year. This is in contrast to all other tax saving instruments.


·         Investments are allowed to be made in installments in the year in which the tax claims are filed.


·         Dividend payments are tax free.


·         This scheme has a long run benefit of educating the retail investment segment and thereby moving towards financial inclusivity in the country.


·         Success of this scheme can lead to transfer of assets from traditional savings instruments such as bank deposits and FDs to the capital markets, leading to diversification in retail investor portfolio and also leading to more productive "capital formation" assets.


A new retail investor can make investments under the Scheme in the following manner:

1.       Open a demat account


2.       An investor can invest in eligible securities in one or more transactions during the year in which the deduction has to be claimed.


3.       An investor can make any amount of investment in the demat account but the amount eligible for deduction, under the Scheme will not exceed fifty thousand rupees.


4.       The eligible securities brought into the demat account, as declared or designated by the new retail investor, will automatically be subject to lock-in during its first year, unless the new retail investor specifies otherwise and for such specification, the new retail investor will submit a declaration in Form B indicating that such securities are not to be included within the above limit of investment.


5.       An investor will be eligible for a deduction under subsection (1) of section 80CCG of the Act in respect of the actual amount invested in eligible securities , in the first financial year in respect of which a declaration in has not been made, subject to the maximum investment limit of fifty thousand rupees.


6.       An investor who has claimed a deduction under sub- section (1) of section 80CCG of the Act, in any assessment year, will not be allowed any deduction under the Scheme for any subsequent assessment year;


7.       An investor will be permitted a grace period of three trading days from the end of the financial year so that the eligible securities purchased on the last trading day of the financial year also get credited in the demat account and such securities will be deemed to have been purchased in the financial year itself.


8.       An investor may also keep securities other than the eligible securities in the demat account through which benefits under the Scheme are availed.


9.       An investor can make investments in securities other than the eligible securities covered under the Scheme and such investments will not be subject to the conditions of the Scheme nor will they be counted for availing the benefit under the Scheme.


10.    The investment under the Scheme will consist of an investment in any of the eligible securities covered under the Scheme.


11.    Deductions claimed will be withdrawn if the lock-in period requirements of the investment are not complied with or any other condition of the Scheme is violated.