Capital Management & Associates

Thursday, December 30, 2010

Sunday, March 22, 2009

Tata AIG Life InvestAssure Apex

Tata AIG Life is proud to present Tata AIG Life InvestAssure Apex a unique unit-linked life insurance plan that provides a platform ensuring the upside potential of the equity markets while safeguarding the investors interest by offering a Guaranteed Maturity Unit Price.

This product is open for sale for a limited period only.

IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER.

Key Advantages:

A novel investment fund Apex Return Lock-in Fund which on the policy maturity guarantees the highest noted unit price on the defined set of 100 reset dates during your policy term
You can access your investment through partial withdrawal to meet your liquidity needs
In this unit linked plan you have the convenience of limited premium payment

Key Features and Benefits:

The annualized policy premium, net of applicable charge (including service tax), is allocated to the Apex Investment Fund.
On the immediate reset date, the amount in Apex Investment Fund will be switched to Apex Return Lock-in Fund using the unit price determined as of 3.00 p.m. on that day.
Apex Return Lock-in fund is a unique close ended fund which on the policy maturity guarantees the highest noted unit price (NAV) on the defined set of 100 reset dates during your policy term.
Reset dates are the 10th Day of every calendar month applicable only for Apex Return Lock-in Fund on which the unit price of the fund is noted for the purpose of calculation of Guaranteed Maturity Unit Price. The Unit Price is Rs 10 on the first Reset Date.
Death Benefit: In case of unfortunate demise of the policyholder the beneficiary will receive Higher of Sum Assured or Fund Value at the applicable Unit Price.
Maturity Benefit: On survival till the end of the policy term the policyholder will receive higher of Fund Value at the applicable Unit Price or Guaranteed Maturity Unit Price multiplied by the number of Units of the Apex Lock-in Fund.

Riders:

Option to attach any of the 3 following riders at a nominal extra cost - Tata AIG Life Accidental Death Benefit (ADB) Rider (UIN 110C003V01), Tata AIG Life Accidental Death and Dismemberment (ADDL) (Long Scale) Rider (UIN 110C004V01) or; Tata AIG Life Critical Illness (Lump Sum) Rider (UIN 110C012V01).

Eligibility:

Minimum issue age of 18 years, maximum issue age of 70 years with maximum age at maturity of 80 years.
Minimum Premium: Rs.90,000 p.a.

Tax Benefits

Premiums paid under this plan are eligible for tax benefits under section 80C of the Income Tax Act, 1961. Premium paid towards Tata AIG Life Critical Illness Lump Sum Benefit Rider is eligible for tax benefit U/s 80D of the same act. Moreover, life insurance proceeds enjoy tax benefits as per section 10(10D) of the said Act.

Want to know more?

Monday, February 16, 2009

Make The Right Choice

Monday February 16, 03:10 AM

Source: Indian Express Finance

Make the right choice

By Suneeti Ahuja

Rising medical costs and lack of a good public healthcare system can put you in a spot in case of a medical emergency. Taking a health insurance policy can save you from heavy expenditure in such times. Here's a brief of the types of plans available in the market today.

Basic plan

As the name suggests, this is a basic health insurance plan that covers expenses incurred during hospitalisation. Besides regular hospitalisation, such policies also cover pre- and post-hopsitalisation expenses, typically up to a month. You can invoke this plan in case of accidents or on contraction of an ailment. However, keep in mind that this plan will not honour claims in case of any pre-existing disease. Pre-existing diseases are usually covered after four years.

No matter how fit we might think we are, it is always advisable to take a cover at an early age. Doing so has multiple benefits like low premium, and 5 per cent bonus on the sum insured up to a maximum of 50 per cent. That means ten claim-free years can bump up your insurance by 50 per cent. Also, it gets harder to get a mediclaim policy as you grow older as rejections tend to be high.

Floater plan

This is the second-most popular variant of medical insurance. It covers the entire family - usually the policy holder, spouse and two kids - as one unit. Consider a family of four aged 33, 30, 8 and 5. For a floater policy of Rs 3 lakh, the family would have to pay Rs 7,398 per annum. However, if the family buys individual covers, then it would end up paying Rs 12,180.

However, there is a flip side to the floater policy. In case one of the members of the family gets hospitalised, and uses, say, Rs 75,000, then the cover is reduced for the other members.

Critical illness plan

This plan is offered both as a standalone product and as a rider. Critical illness typically offers you lump sum reimbursement upon diagnosis of typically six critical illnesses: heart attack, major organ transplant, cancer, end stage renal failure, coronary artery bypass graft surgery and stroke. On detection of the disease, the insured gets the benefit amount and the policy ceases to exist immediately.

While this plan is cheaper than a basic mediclaim plan, the sum insured could be as high as Rs 10 lakh. For instance, for a sum insured of Rs 3 lakh a 30-year-old would have to shell out Rs 3,100 in case of mediclaim policy; for a critical illness plan the cost would be only Rs 1,000.

Therefore, it is advisable to buy a separate mediclaim policy and a critical illness policy.

Satyam effect: Maytas Infra facing tough time in Orissa

Monday February 16, 01:41 AM

Source: Indian Express Finance

Satyam effect: Maytas Infra facing tough time in Orissa

By Dilip Bisoi

Maytas Infra, the infrastructure company run by Satyam's disgraced founder B Ramalinga Raju's son Teja Raju, is facing serious problems in Orissa with its business collapsing there.

Maytas Infra widened its business interest in the state by bagging a number of power and irrigation projects. However, after the Satyam scam, Maytas is finding it really difficult to keep itself afloat.

The company first lost its job in Anil Agarwala-owned Vedanta Aluminium Ltd, which is putting up an aluminium complex and power plants in Jharsuguda. Maytas, which was involved in construction of the power plant, however, has challenged the breach of contract by project promoters. Central-sector utility Power Grid Corporation of India Ltd (PGCIL) had awarded rural electrification works to Maytas under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) in Orissa's Jajpur district. The contract has been cancelled after the Satyam scam unfolded.

Maytas is not on the good book of the state government either. It forced promoters of KVK Nilachal Power Company to remove Maytas from the project. Buckling under pressure, KVK Energy of Hyderabad, the main promoter of the project, has acquired the 25% stakes of Maytas in the company. KVK Nilachal is setting up a 1000 mw thermal project in Cuttack district. Maytas also lost the EPC contract for the project.

"We have asked the promoters of the Nilachal Power to take a fresh look at the share holding patterns following the Satyam scam", said state energy minister SN Patro. Maytas recently received another serious blow when Orissa Power Transmission Corporation Ltd (OPTCL), a state-owned company, cancelled all the contracts with it.

Maytas Infra was one of the bidders for several infrastructure projects including the 220/33 KV grid sub-station at Karadagadai in Khorda district. Even though the technical and financial bids for the project were opened, the OPTCL board decided to reject the ones of Maytas. According to OPTCL chairman and managing director CJ Vendugopal, the board on February 9 rejected all the bids of Maytas as the firm was facing liquidity crunch. He said OPTCL had the right to reject any contracts with any firm on the financial ground.

Thursday, February 12, 2009

Triple Trouble

Thursday February 12, 02:25 AM

Source: Indian Express Finance

Triple Trouble

Just as straight-A students have been drawn to exotic areas of finance over recent decades, so have several firms with AAA credit ratings. General Electric (GE) relentlessly expanded its finance arm which handles everything from credit cards to property. American International Group (AIG) diversified from plain insurance into credit derivatives. And even Warren Buffett's Berkshire Hathaway was tempted to write a book of equity-derivative contracts that has recently created a big mark-to-market liability in its accounts.

Just as plenty of AAA banks have been taken to the cleaners, so these non-bank firms have suffered too. AIG is now state-controlled, after huge derivative losses. Standard and Poor's (SandP) says GE now faces a one-in-three chance of losing its rating, which it has held since 1956, largely due to problems at its financial arm. Berkshire Hathaway's credit-default swap spreads are far above those of AAA non-bank firms, such as Exxon Mobil (see chart). Rock-bottom borrowing costs undoubtedly created moral hazard at banks. Might AAA ratings have also tempted non-banks to take foolish risks? Not in general. The number of industrial firms with SandP's highest credit score has dropped from over 60 in the 1980s to six today, but this reflects shareholder pressure on firms to gear-up core businesses, or a dimming of their industry's prospects.

A few firms do seem to have sought exposure to finance precisely because they wanted to exploit their high ratings. "My gut told me that...this business seemed an easy way to make money," wrote Jack Welch, GE's former boss. It was about "finding smart and creative people and then using GE's strong balance-sheet." When AIG set up its credit-derivatives arm in the 1980s it hired specialists from the junk-bond shop Drexel Burnham Lambert, who were attracted partly by the potential to piggyback off AIG's excellent rating. Such instincts are not always wrong. Risky activities can create losses, but that is acceptable if the profits compensate.

Ajit Jain, an executive at Berkshire Hathaway, has said that with its AAA rating the firm has toyed with entering the bond-insurance market for the past 20 years. Only recently, after the collapse of the industry, have prices risen to a level that Berkshire finds attractive.

Even if the prices are right, depending on being AAA-rated for survival is a treacherous strategy. This has little to do with the small rise in borrowing costs a lower rating might prompt; the real danger is from the collateral calls that counterparties can demand. Like some banks, AIG found that downgrades fed a fatal liquidity crisis. Reassuringly, Berkshire Hathaway says most of its equity derivatives do not require collateral postings. GE, meanwhile, insists that a downgrade would have no "major" impact.

Although an AAA rating is nice and exploiting it can make sense, nobody should become its slave.

The Economist Newspaper Limited 2009

Wednesday, February 11, 2009

No PAN for savings a/c, insurance premium below a lakh

Tuesday February 10, 11:24 AM

Source: Financial Express

No PAN for savings a/c, insurance premium below a lakh

A year after declaring that PAN (permanent account number) would be made mandatory for all financial transactions, former Finance Minister P Chidambaram has decided to make it must for just insurance products that have an investment element of more than Rs 1 lakh per annum.

At the same time, he has decided that PAN be mandatory for opening a current account and not a savings account. "PAN can be mandated for opening current accounts. However, for savings account, requirement of PAN should not be insisted upon as it would adversely impact financial inclusion initiatives," says a follow-up decision on Chidambaram's 2008-09 Budget proposals.

In his Budget speech, Chidambaram had proposed "to extend the requirement of PAN to all transactions in the financial market subject to suitable threshold exemption limits".

However, the action taken report to be laid in Parliament on February 16 says: "It is proposed to mandate PAN for such insurance products that have an investment element in them, with exemption granted in cases where the contracted premium payable on such insurance policy does not exceed Rs 1 lakh."

Sources in the Ministry's Department of Financial Services said that they had written to Insurance Regulatory and Development Authority, Life Insurance Corp and General Insurers' (Public) Sector Association to ensure compliance of the above norms on PAN for insurance products.

Initially, there was talk of PAN becoming compulsory for insurance policies, post office savings account or its savings certificates which did not require quoting of the 10-digit alphanumeric taxpayer identification number.

Besides an individual, banks, credit card companies etc are required to quote PAN of their clients in select financial transactions so that the data could be matched with the tax returns of the individual to see if he or she is evading taxes.

Every person has to quote his PAN or General Index Register Number in documents pertaining to the following transactions:

Sale/purchase of any immovable property valued at Rs 5 lakh or more.
Sale/purchase of motor vehicle which requires registration.
A time deposit exceeding Rs 50,000 with a banking company.
A deposit exceeding Rs 50,000 in any account with Post Office Saving Bank.
A contract of a value exceeding Rs 10 lakh for sale or purchase of securities.
Opening an account with a banking company to which the Banking Regulation Act, 1949 applies.
Applying for installation of a telephone, including cellular telephone.
Payment to hotels and restaurants against bills for an amount exceeding Rs 25,000 at any one time.

Tuesday, February 10, 2009

Buying Life Insurance: What Kind and How Much?

Finding the middle ground between being "insurance poor" and unprotected requires assessing real needs and choosing products that are affordable. This article introduces different types of insurance products and the role that they can play in a personal financial plan.

Before You Start

Think about which members of your household should be covered by life insurance. (It's typically a good idea to insure anyone who earns income.)
Find out whether you're eligible for group life insurance coverage at work. If you already have it, review the policy to understand exactly what benefits it provides.
Keep in mind that you may not need life insurance if you have no dependents and nobody else relies on you for financial support.

How-To Guides

Calculators

Topics

Buying Life Insurance

Conventional wisdom says that life insurance is sold, not purchased. In other words, some people are reluctant to discuss the importance of owning life insurance, and others are simply unaware of the need to have life insurance. Although many large companies provide life insurance as part of their benefits package, this coverage may be insufficient.

Who needs life insurance? If there are individuals who depend on you for financial support, or if you work at home providing your family with such services as child care, cooking, and cleaning, you need life insurance. Older couples also may need life insurance to protect a surviving spouse against the possibility of the couple's retirement savings being depleted by unexpected medical expenses. And individuals with substantial assets may need life insurance to help reduce the effects of estate taxes or to transfer wealth to future generations.

Types of Insurance

Term insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically 1 to 10 years, and may be renewable at the end of each term. Also, the premiums increase at the end of each term and can become prohibitively expensive for older individuals. A level term policy locks in the annual premium for periods of up to 30 years.

Declining Balance Term insurance, a variation on this theme, is often used as mortgage insurance since it can be written to match the amortization of your mortgage principal. While the premium stays constant over the term, the face value steadily declines. Once the mortgage is paid off, the insurance is no longer needed and the policy expires. Unlike many other policies, term insurance has no cash value. In this sense, it is "pure" insurance without any investment options. Benefits are paid only if you die during the policy's term. After the term ends, your coverage expires unless you choose to renew the policy. When buying term insurance, you might look for a policy that is renewable up to age 70 and convertible to permanent insurance without a medical exam.

Whole Life combines permanent protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow up to 90% of your policy's cash value tax-free.

Universal Life is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also highly flexible in regard to premiums and face value. Premiums can be increased, decreased or deferred, and cash values can be withdrawn. You may also have the option to change face values. Universal life policies typically offer a guaranteed return on cash value, usually at least 4%. You'll receive an annual statement that details cash value, total protection, earnings, and fees.

Drawbacks to this type of insurance include higher fees and interest rate sensitivity. Universal policies include up-front fees as well as ongoing administrative fees totaling as high as 5% to 7% of your premiums. You may also find your premiums increasing when interest rates decline.

Variable Life generally offers fixed premiums and control over your policy's cash value. Your cash value is invested in your choice of stock, bond, or money market funding options. Cash values and death benefits can rise and fall based on the performance of your investment choices. Although death benefits usually have a floor, there is no guarantee on cash values. Fees for these policies may be higher than for universal life, and investment options can be volatile. On the plus side, capital gains and other investment earnings accrue tax deferred as long as the funds remain invested in the insurance contract.

Universal Variable Life insurance is the most aggressive type of policy. Like variable life, you control your investment in mutual funds. However, there are no guarantees on universal variable policies beyond the original face value death benefit. These policies are probably best suited to affluent buyers who can afford the risks involved.

Key Terms and Definitions

Face Value -- The original death benefit amount.
Convertibility -- Option to convert from one type of policy (term) to another (whole life), usually without a physical examination.
Cash Value -- The savings portion of a policy that can be borrowed against or cashed in.
Premiums -- Monthly, quarterly, or yearly payments required to maintain coverage.
Beneficiary -- The individual(s) or entity (e.g., trust) that is designated as benefit recipient.
Paid Up -- A policy requiring no further premium payments due to prepayment or earnings.

How Much Insurance Do I Need?

A popular approach to buying insurance is based on income replacement. In this approach, a formula of between five and ten times your annual salary is often used to calculate how much coverage you need. Another approach is to purchase insurance based on your individual needs and preferences. The first step is to determine your unique income replacement needs.

Currently, a large portion of your income goes to taxes (insurance benefits are generally income tax free) and to support your own lifestyle. Start off by determining your net earnings after taxes. Then add up all your personal expenses such as food, clothing, magazine subscriptions, club memberships, transportation expenses, etc. The remainder represents annual income that your insurance will need to replace. You'll want a death benefit amount which, when invested, will provide income annually to cover this amount. Then, you should add to that the amounts needed to fund one-time expenses such as college tuition for your children or paying down mortgage or debt.

Income replacement for nonworking spouses is an important and often overlooked insurance need. Coverage should provide for your costs for day care, housekeeping, or nursing care. Add to this any net earnings from part-time employment.

Finally, estimate your own "final expenses" such as estate taxes, uninsured medical costs, and funeral costs.

Other Types of Life Insurance

Survivorship life insurance (also referred to as last-to-die or second-to-die) is a unique type of contract that insures the lives of two people. It pays a death benefit upon the death of the second insured. Therefore, it is typically less expensive than two individual policies. Survivorship life is often used for estate planning, where it may be possible to potentially leverage today's dollars -- via insurance premiums -- into a potentially significant death benefit that can be used to fund estate taxes, create wealth for future generations, or benefit a charity. These policies may be available if one insured is medically "uninsurable."

First-to-die life insurance insures the life of at least two people and pays a benefit upon the death of the first insured. This policy is useful for covering a mortgage or other large debt obligation where there is more than one debtor. In addition, it can be an ideal tool for funding a buy-sell agreement within a closely held business.

Conclusion

Life insurance is an important component of a sound financial plan. Buying insurance involves asking a variety of personal lifestyle and financial questions. If you are not already working with an insurance professional, you may want to consider the advice of a fee-for-service financial planner who can offer you an objective review of your insurance options. When you decide on what you want, there are many solid insurance companies to choose from. Consult your library or an independent insurance professional for companies with the highest ratings from the four ratings agencies: AM Best, Duff Phelps, Standard & Poor's, and Moody's.

Summary

Term insurance is basic, inexpensive coverage with premiums that increase over time and have no cash value.
Consider a term policy that is renewable and convertible to whole life should your needs change.
Whole life provides level coverage with level premiums. A portion of those premiums goes into tax-deferred savings.
Check rates on whole life policies and compare them to other investment opportunities.
Variable life offers control over your investments.
Premiums on variable policies are fixed, but face value and the value of your investments can fluctuate.
Universal life offers more investment options, but is highly sensitive to interest rate changes. Universal variable life is highly flexible, but offers no guarantees beyond the original face value.
Insurance needs are based on income replacement and personal preferences.

Checklist

Determine exactly how much money your survivors would need from life insurance in order to maintain long-term financial security.
Decide whether you prefer term life insurance or a policy that also includes a savings feature.
Shop around for the best deal, and read the policy before making a purchase. Don't assume you'll be getting benefits that aren't clearly spelled out.

Trim -- Don't Lapse -- Life Insurance

Bankrate.com
Trim -- don't lapse -- life insurance
Monday February 9, 6:00 am ET
Michael Giusti

As the nation enters the second year of recession, families are taking a close look at their budgets to find expenses to cut. And while life insurance may seem like an easy place to save a few bucks, letting a policy lapse may be trading long-term security for short-term savings.

Trimming life insurance costs

1. Shop around
2. Get the right size
3. Find the right coverage
4. Verify the company is sound
5. Get some professional help
6. Ask for a payment plan

"The dangerous thing about tough times is that things that don't seem critical get pushed aside," says Byron Udell, founder and CEO of AccuQuote, an online insurance broker and comparison service based in Wheeling, Ill.

Udell says trimming expenses like dinner out is one thing. "But with life insurance, you are taking a big risk by letting a policy lapse," he says.

So rather than cutting your coverage, consider these cost-saving moves instead:

1. Shop around

People are living longer now than they ever have, and insurance companies have taken notice. Since the mid-1990s, insurance companies across the nation have begun using new actuarial charts that reflect those longer life spans, which translates to lower life insurance rates.

That means that if you bought a policy in the years before the change, your rate is probably much higher than it needs to be.

"Most people who have term life policies are overpaying," Udell says. "Rates have come down dramatically in the last 15 years."

He says that in the mid '90s, a man in his 40s would pay $995 a year for a $500,000, 20-year policy. "And that was a terrific rate," Udell says.

Today, that same policy would likely cost just $350 a year -- less than half the cost.

"Now, you have to keep in mind, that same customer isn't 40 anymore, and so his rates would be higher, but the point is that rates have come down dramatically," he says.

Steven Weisbart, vice president and chief economist for the New York-based Insurance Information Institute, says the best answer for most people is to shop around. And because you don't have to cancel your existing policy to do that, comparing rates is risk-free, he says.

"Shopping costs you nothing but energy and time," Weisbart says.

Comparing rates especially makes sense if you didn't get one of the top rankings with your original policy, he says. That's because along with the longer life spans, many insurance companies also are taking into account developments in medicine over the last few decades when they price a policy.

"People who died of a condition years ago now live with it for years," he says.

So if a company wouldn't even consider you for coverage years ago, you may qualify today.

On the other hand, if your health has slipped significantly or if you have put on more than a little weight or have taken up smoking since you first bought your policy, you might do best by sticking with the old insurance, Udell says. That's because even with the lower rates, you may not qualify for the best coverage anymore.

2. Get the right size

If you are desperate to squeeze down your insurance costs, one option may be to reduce the amount of coverage you have.

"It's not the best solution, but it's better than dropping it altogether," Udell says.

Going with a smaller policy will reduce your premium, but the danger is twofold. First, if you were to die, your family may not have enough to replace your income. And second, once your finances improve, your health may not be as good, and that would mean you may have trouble getting that coverage back without having to pay an arm and a leg.

On the other hand, many older policies may suffer from the opposite problem.

While a $100,000 insurance policy seemed like a fortune in 1990, it may not be nearly enough to cover today's expenses, Weisbart says.

If that is the case, it may make sense to either buy a second policy to make up the difference or even cancel the old policy and replace it with a larger one at today's rates.

For help in determining how much life insurance coverage you need, consult Bankrate's life insurance calculator.

3. Find the right kind of coverage

Life insurance comes in two basic "flavors" -- term and cash value.

The different types of policies make sense for different financial situations. With life insurance, one size certainly doesn't fit all, and with a tight budget, you may just find that your policy doesn't fit you anymore.

As a rule of thumb, term insurance is much, much less expensive than the cash value variety. And while cash-value insurance can come in handy for special circumstances, such as if you have a special-needs child, or to offer some financial stability in rough financial times, term insurance tends to rule with budget-conscious buyers.

4. Verify the company is sound

With financial misdealings and banking scandals making headlines seemingly every week, one good practice when shopping around for life insurance options is to make sure you only buy from a sound company.

One way to do that is to rely on the ratings of companies like A.M. Best, Standard & Poor's, Weiss Research, Duff & Phelps or Moody's Investors Service.

These companies check the financial books of the different insurance carriers and make sure the companies will be around if you ever have to cash in that policy.

"These things are tough to judge on your own," Weisbart says. "But you can get some help."

Weisbart suggests you check the ratings of your company against at least two of these services to make sure the first one you picked wasn't skewed in some way.

5. Get some professional help

If shopping for an insurance policy still seems daunting, you aren't alone -- at least you don't have to be. That's because in every state, regulators set life insurance rates. That means whether you buy your insurance with the help of a broker, or if you go it alone, the price is the same.

"Since it doesn't cost extra, why not get help from an expert?" Udell says.

But Weisbart says you don't have to start the process in an agent's office.

"It is not a bad idea to go on the Internet and get quotes from sites like AccuQuote and Insure.com before talking to a professional," he says. Another good site to get information and quotes is InsureMe.com, a Bankrate company.

With a rate in hand, you can be more confident that the broker is being forthright with you.

Where the agent really excels, Udell says, is by steering you toward a policy that fits your specific needs.

"People are bad about knowing what rate class they will qualify for," he says. "If you have risky hobbies or ailments, knowing which company won't charge more for that can end up saving you a lot of money. Brokers know which companies offer what and which companies are your best fits."

6. Ask for a payment plan

Assuming you already have the lowest rate available, there is still one more step you can take to ease the burden of your life insurance bill -- ask for a payment plan.

Nearly every insurance company will let you split your premium into monthly installments, and many won't even charge more as long as you agree to have the premium automatically deducted from your account.

The bottom line is that you want to make sure you have enough coverage to pay your expenses if you die, without paying more than you need to.