Home Insurance A Must Have? Home Is The Shelter From Storms

         One Lives in a World Of Tragedy. One clearly remembers the flood that took place in Uttarakhand. The loss of life and property was immense. Earthquakes across the World and in India remind one of how fickle life on this planet can be. Tsunami’s and the terrible damage followed in their aftermath are still fresh in one’s mind. One still remembers clearly the tsunami that struck the Chennai coast and the Island nation of Sri Lanka almost a decade ago. In this year due to the excess monsoons flooding took place in a  great measure across our nation. The terrible loss of life and limb due to natural calamities cannot be prevented as they are ”Acts Of God”. However the massive damage and destruction caused by these natural calamities can be mitigated to some extent by the taking of insurance. Taken in this context Home Insurance plays a very important role in preserving our peace of mind and provides one with a sense of security in these terrible times. Think One Doesn’t Need Home Insurance? Think Again.

So What Is Home Insurance?

 Home insurance is basically a protection cover taken on one’s home. This helps to protect ones home against damage caused due to fire, riots, lightning, flood, burglary, earthquake, tsunami, terrorism and storms. One can take the building insurance policy where compensation is provided for the damage to the property and its reconstruction due to riots, natural calamities like flood and cyclone, landslide, damage due to aircraft, fires and lightning and exploding of domestic cylinders. One can also opt for a basic fire protection policy or a house holder’s package policy. A basic fire policy might cover one for loss caused due to riots, lightning, storms and flooding. On payment of an additional premium, cover is provided from earthquake, landslide and in some cases terrorism. In a householders package policy protection is provided to the basic structure against damage from fire, domestic cylinder explosions and so on. Another comprehensive cover provided by the householder’s package policy is the insurance of the contents of the house. The contents of the house can be insured against theft of valuables such as jewelry, electronic items, costly crockery, electrical appliances, paintings and damage to windows and doors. For those who live in rented houses only the contents of the house can be insured.                                                                                                                                                                               

What Is The Ideal Coverage To Be Taken To Insure One’s Home?

 So how does one decide the amount of coverage one needs to take in order to insure one’s home?A house basically consists of land on which the house is built on, the actual structure of the house and the locality in which the house is built in. If the market value of the house is INR 70 Lakhs the building cost might be only INR 25 Lakhs. The rest of the cost is due to the locality and the market value of the land. The home insurance covers only the cost of the structure and is concerned mainly with the cost of rebuilding the structure. This cost mainly depends on the city in which one resides in. If one is staying in a Metro the costs of construction are relatively higher. The locality might not have too much of a role to play as far as cost of construction is concerned. A house valued at INR 60 Lakhs might have a premium of around INR 1800-2000 for a home insurance policy taken to protect the basic structure and an additional amount of around INR 500 for the protection of the contents of the house up to an amount of INR 10 Lakhs. A premium of INR 1000-1500 is paid as additional coverage for the protection against burglary and damage to doors and windows up to an amount of INR 10 Lakhs. On a payment of additional premium of around INR 5000-6000 per annum one can obtain protection against damage due to terrorism up to an amount of INR 50 Lakhs and the insurance of the contents of the house up to 10 Lakhs, death of a domestic worker due to an accident, Loss of rent due to damage of the house for a period of around 6 months, and the damage caused to the house given for rent for a period of 6 months .                                                                                                                             

So How Does The Insurer Assess The Value Of Ones House ?

 One has to consider the market value of the house when one takes that home insurance policy. Market value is often mistaken as resale value where the land as well as the construction and the locality are factored in. In the case of a home insurance policy one has the market value minus the depreciation at the rate of 2% per annum. After a period of 50 years the market value minus the depreciation will be zero. Hence houses over 50 Years of age are not insured. Under a reinstatement policy the cost of rebuilding the house structure is considered. No depreciation is deducted in this case. Let us consider ones house is destroyed due to a flood. The land remains in ones name and the new structure can be built at the same location as home protection cover is a basic structure replacement cover. The reconstruction costs are reimbursed after the house has been reconstructed and in some cases the money is reimbursed in installments. One of the most important factors to be noted is one does not need to consider the value of the property but only the cost of reconstruction or structural protection. If a 1000 Square Foot apartment in Bangalore costs INR 80 Lakhs one has to bear only the reconstruction costs of the structure and the land price is not factored in .One can purchase home insurance protection against structural damage for as low as INR 50 per Lakh and for a sum of INR 2000 premium paid per annum protection of about INR 40 Lakhs on the structure can be obtained .Do You Think This Is An Amount Too High To Bear For The Protection Of Your Home And Its Belongings?

What Happens If Your Home Is Underinsured?

 Mr Ravi had purchased a house of INR 50 Lakhs. He took a basic home insurance cover against structural damage for an amount of INR 10 Lakhs. Mr Ravi’s house was badly damaged in a fire and rebuilding was necessary. As five years had past Mr Ravi discovered to his dismay that the reconstruction costs would now cost around INR 18 Lakhs. The severe shortage of sand had led to a massive price hike in the reconstruction costs. What advice would one give Mr Ravi?                                                                                                                                                 After assessing the damage the Insurance Company stated that Mr Ravi would be compensated only an amount of up to INR 10 Lakh. Insurance Companies give a leeway of up to 10-15% owing to the change in prices of the construction. If one is underinsured it means that he has to bear the expenses up to the cost underinsured from one’s own pocket. Mr Ravi had to bear a cost of INR 8 Lakhs from his own pocket. Surely a lesson for one to learn from this example .It is also important to note that if one stays in an apartment and if a flood were to destroy it then one cannot reinstate the apartment by oneself. Hence the whole society needs to get the apartment insured. Surely A Stitch In Time Saves Nine.

What You Should Note While Making That Claim:

 When home insurance cover is taken the insurer does not survey the contents of the house or assess the structure. The deal is made in good faith .However were to fall a if the structure through damage assessment is done .It is up to the individual to make the right declaration and have proof to back it. The insurer can refuse the damage claims on the grounds that the building was poorly maintained or an unauthorized construction was done .It is in one’s own interests to see that the claim is done in a hassle free manner. One has to show and maintain bills to prove that one owns the goods that one is claiming damages for .Always maintain an inventory of the goods and contents of one’s house in an orderly manner with necessary billing and proof of purchase which will help one make a hassle free claim .Always take the help of a local real estate agent or a builder to estimate the cost of rebuilding the structure. Once one knows the cost of rebuilding the structure one can estimate the coverage required. If the coverage is not sufficient then hike the coverage. Take note of the additional features that one’s house might incorporate such as marble tiles, ceramics, and costly woodwork. Another common practice followed is having the insurer estimate the costs of rebuilding and mark the contents of the house before a tragedy occurs. This is a Prevention Is Better Than Cure Approach”.                                             

The Role Of The Indian Government In Home Insurance:

 The Indian Government plays on important role in the promotion of home insurance. The Government is planning to make it mandatory for all developers to ensure that buildings are structurally sound to withstand fire and earthquakes. A spate of tragedies such as the fire accidents in garment factories in neighboring Bangladesh, collapse of buildings in Mumbai and Bangalore due to faulty construction has led the Government to put its foot down and make home insurance mandatory for developers. This will soon be passed in the Real estate Bill. The home insurance premiums will be lower if the building adheres to the necessary norms, Is earthquake resistant, Is of a good design and makes use of good technology. The onus is on the developer and builder to follow the seismic code and use earthquake proof technology, better design in projects, and follow the best practices in urban development and planning. Since the developer has to compulsorily take home insurance he is forced to adhere to the set norms and bears liability for the structure he will follow good construction principles leading to the growth of quality constructions and save the hassle for the customer to go for individual home insurance.                                                                                               

Either You Run The Day Or The Day Runs You:

  If one were asked the question “Which Is Ones Most Prized Possession What Would The Answer Be?”. Ones Home And Its Contents Would Be The Obvious Answer”.IndianMoney.com strongly believes that each and every homeowner of this Nation should take a home insurance policy to protect ones house against structural damage as well as insure the contents of ones house. A house is a Once In a lifetime asset for most of the citizens of our country. Gross neglect is noticed  in the rural areas as well as highly literate urban areas while taking that home insurance policy which is often ignored .If one were to observe the statistics of the insurance Companies mainly the home insurance policies one would notice about 35-40 Lakh policies sold combined. Considering the basic structure protection costs about INR 50 per Lakh insured per annum this is a must have policy in ones portfolio. Always take a reinstatement policy rather than a market value policy which subtracts the depreciation. A reinstatement policy would compensate you the actual rebuilding cost of your home. No depreciation is deducted. If one leaves in a rented apartment one cannot insure the basic structure and a house content insurance policy is a must have. Imagine returning from a vacation and finding ones house completely robbed and lakhs of Rupees worth of goods stolen? A miniscule amount of INR 500-1000 per annum can provide a coverage of INR 10 Lakhs.IndianMoney.com firmly advocates the coverage of ones jewelry, furniture or electronic items which can be a severe loss to replace. Never be “Penny Wise Pound Foolish”. A simple household content insurance policy can go a long way in preventing severe heartburn in the future..I would like to remind you that the team of Financial Planners at IndianMoney.com are always there for you to plan your insurance needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 02261816111.

            I would like to end this article with the famous phrase” Happiness Is Not Something Readymade. It Comes From Ones Actions”. One should always plan for the best but prepare for the worst. A small deed done at the right time can go a long way in ensuring success in the long run.

               

Tags: Either You Run The Day Or The Day Runs You: The Role Of The Indian Government In Home Insurance: What You Should Note While Making That Claim: What Happens If Your Home Is Underinsured? So How Does The Insurer Assess The Value Of Ones House? What Is The Ideal Coverage To Be Taken To Insure One’s Home? So What Is Home Insurance? What are Acts Of God?The team of financial planners at IndianMoney.com are ready to help you with your insurance needs,Follow a prevention is better than cure approach, Never be pennywise pound foolish.                                                        

Why Buy That Online Term Insurance Plan-The Internet Has Become The Town Square For The Global Village Of  Tomorrow 

          Where does one look for a solution to a problem these days. Chances are “The Internet”. Internet has become a source of knowledge like a well whose water never dries up. Ever wondered what are the practical applications of the internet to the financial services industry. A decade ago when one went to the bank one had to stand in a queue for simple branch banking operations. Today the use of National Electronic Fund Transfer and Real Time Gross Settlement enables fund transfers in seconds. Mobile banking using smart phones and the use of near field communications has revolutionized the banking industry. It is a small matter that the insurance sector too has benefited heavily from the internet and insurance policies especially term insurance policies can easily be purchased online. The payment of the premiums can also be done online. Internet has surely changed the world of banking and insurance for the better. Remember “The Best Way To Predict The Future Is To Invent It”.     

What Is The Cost Of That Online Term Policy?                                                                                                                                    

          Online term insurance policies are cheaper than their offline counterparts by a percentage which may be as high as 50%.Wondering Why This Is So? The online term insurance policy doesn't have an intermediatory or an agent who tries to push this product in exchange for a commission. As one deals directly with the Company the costs for the Company are lesser. This serves as an incentive for the Company to give its customers what is known as a “Good Deal” One can purchase a term insurance policy of a Crore for as less an INR 30 per day. Death doesn't make any distinctions and knocks on the doors of both the rich and the poor. If one is a HNI and in good physical health he should pick up an online term policy of a Crore paying a ridiculously small amount of INR 30 a day. The online policy has a through medical checkup. The lesser premiums   and the easy method of purchase has made these policies a hit among the youth of our nation who are internet savvy. A number of websites are available today with a wide variety of online term insurance plans and choosing the best plan is up to the individual. The coverage of the online term plan is also higher than the offline term plan as it is perceived that those who purchase online term polices are rich. One of the main grouses widely heard is that I purchased an online term insurance policy a couple of years ago and now similar policies are available for a lesser amount. So What Should I Do? Many a time individuals discontinue such policies and take up newer policies. However one needs to make a note of all the factors involved before discontinuing the current policy.                                                                                                                  

What Is The Cost Of That Online Term Policy?

                                                                    

          The process of taking up an online term insurance policy is a recent trend. Insurance Companies tend to thoroughly investigate claims made within a couple of years of taking up an insurance policy .Insurers have to settle these claims within a period of six months. In the case of claims made after a period of three years from taking these policies the claim settlement period is three months. Even though it is too early to predict how claim settlement will pan out there is no reason to believe that it will not be a success. People tend to be more open online and since no agent or third party is involved important details are rarely hidden. The agents might fill the forms themselves and certain important information might be misrepresented. This might lead to that claim being rejected. In the online policy since one fills the form himself, submits the relevant documents and goes through a detailed medical checkup the chances of claims being rejected are slim. The online term insurance policies tend to have a higher coverage amount while compared to an offline policy. This calls for a through medical checkup as insurance firms are not in the business of charity. This means that online insurance companies do pay up their claims but one needs to study the claim repudiation ratio. This is basically the percentage of claims rejected by the insurance agencies and is a better ratio to measure the claim settlement of the insurance company. This is because of wrong or incorrect information filled up in the term policy, hiding and failure to disclose certain relevant facts as well as mis selling of these policies by insurance agents who just fill up anything in order that one takes up the insurance policy. This results in a higher claim repudiation ratio in an offline policy than in an online policy. This means that genuine claims are very rarely rejected in an online policy.

Will That Online Policy Pay Up My Claim?                                                                                                                              

          One must always keep a note of the riders available in that online term insurance policy. An accidental rider benefit can be of immense use in that online term insurance policy. If the cover is INR 25 Lakhs and one takes an additional cover of INR 15 Lakhs through an accidental rider by paying a slightly higher premium and one were to die in an accident then the mortality cover is INR 40 Lakhs. Certainly  Food For Thought. A critical Illness rider is another addition one can think of which provides payments as soon as a critical illness is detected. It is very necessary that the online term insurance policy provides a cover across your working life. If one  takes an online term insurance policy at the age of 30 years it should last him till the age of 60 Years if one plans to retire at the age of 60.The coverage amount should be at least 10 times ones annual income.                                                                                                                                                                                   

I Want To Die Rich:

          One has surely heard the phrase “Early Bird Gets The Best Worm” .If one has to die rich then one needs to pick that online term plan early. If one picks up a term plan at the age of 25 Years for a tenure that covers his working life mainly 35 Years assuming he works till 60 Years the premium would be INR 6000-9000 per annum for a Crore. The premium subsequently goes up as a person reaches the age of 30.The premiums are in a range of INR 9000-13000 per annum for a Crore and the tenure would be of 30 Years. Similarly if a person picks up a term plan at the age of 40 Years the tenure is 20 Years and the premiums are in the range of INR 15000-22000 per annum for a Crore. What Do You Learn From This? Buck Up. Take That Online Term Policy Now.

Factors One Should Take Note Of When Purchasing That Online Term Insurance Policy:                          

      

Old Is Gold:                                                                                                                                                                                                     

          Many a time one purchases an online term insurance policy owing to low premium costs. Do these premiums remain constant? No There Is A Race To The Bottom. This results in a reduction in the value of premiums with time. After a couple of years one finds the premiums are even lower than what they were when one had purchased that online term policy .So What Should One Do ? Should One Surrender This Policy And Pick Up A New Policy? One needs to remember that any claim that is made within a period of 2 Years from purchasing an online term insurance policy is considered as an “Early Claim”. An early claim is naturally thoroughly investigated and the claim settlement can be a time consuming process. If one were to swap ones online term policy just by looking at the price factor then one would certainly be making a mistake. If one made a claim after swapping the older policy for a newer policy and had a claim a year later this would come under the “Early Claim” category. One has to note that in the race to procure the lowest premiums insurance Companies have certain costs such as administration costs and so on which are fixed. This means that at a certain point of time premiums are forced to rise again. Clearly there is a threshold point in the race to the bottom. 

                                                                                                                                                                                           

The Good The Bad And The Ugly:                                                                                                                                                                       

  

          One knows that any product has its pros and its cons. The same applies to an online term insurance policy. Most of the insurance products are simple vanilla products or what are known as the basic models in the case of term insurance. It is not easy to customize  these products or their premiums to suit all our needs .One of the most important factors needed to be taken into consideration is the rider benefits Riders are not as easily available in an online policy as when compared to an offline policy and rider benefits have to be purchased paying an additional premium. Even though the basic online term policy may be stated to have a low premium the addition of riders to compensate these plans may push up their costs when compared to their offline variants where riders are readily available. Another important point to be noted is the premium of an online policy might increase by as high as 25% after medical tests are taken. Currently a number of online term insurance policies have done away with the practice of raising the premiums after conducting medicals. A person taking up these policies needs to be financially aware or has to have knowledge of insurance when purchasing such policies .If one is not well versed with insurance products taking the help of an insurance agent is advised. Of course the claim filing process involves directly meeting up face to face with ones insurer and the online process cannot be followed .One has to study the insurance products as well as verify the authenticity of the website as well as the product being displayed on the website. One has to check the features of the products as well as their compatibility to ones needs and see if all the features displayed are actually available. Always maintain a copy of the e-transactions pertaining to payments as proof that the premiums have been payed. This helps to solve a lot of heartburn at a later stage.                                         

          I would like to end this article with a famous saying” Success Is The Sum  Of Small Efforts Repeated Day In And Day Out”. Remember that “Time And Tide Waits For No Man”. So do not unnecessarily postpone the purchase of that term insurance policy. Procrastination has never helped anyone. If one has to purchase a term insurance plan it is best purchased today. I would like to remind you that the team of Financial Planners at IndianMoney.com are always there for you to plan your insurance needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 02261816111.

Tags: Time And Tide Waits For No Man, Success Is The Sum Of Small Efforts Repeated Day In And Day Out. The team of financial planners at IndianMoney.com are ready to help you with your insurance needs, The Good The Bad And The Ugly , Remember old is gold, Should One Surrender This Policy And Pick Up A New Policy? Factors One Should Take Note Of When Purchasing That Online Term Insurance Policy: I Want To Die Rich: Study Those Additional Benefits Obtained In A Term Insurance Policy: Buck Up. Take That Online Term Policy Now. Will That Online Policy Pay Up My Claim? What Is The Cost Of That Online Term Policy? What Is The Cost Of That Online Term Policy? Early Bird Gets The Best Worm

Please Click on the Link........http://www.indianmoney.com

What Is Islamic Banking? Eat And Drink But Waste Not By Extravagance

                                 Today’s world abounds in banking and financial scandals. The banks of today have redefined the art of money laundering. Some of the biggest banks in the United Kingdom were charged billions of dollars in fines by the US authorities for indulging in money laundering practices which could put US citizens at a risk of terrorism. One has surely heard of the LIBOR rate rigging scandal and the record trading losses suffered by investment banks in the US and other parts of the world. A major ethical issue was the huge salaries drawn by the top management of the Too Big To Fail banks in the Western world inspite of the US Government bailing out these banks using tax savers funds. One has surely heard of the US Subprime Mortgage Crisis which shook the entire western and world banking system and necessitated the bailout of top banking and insurance institutions which were regarded as Too Big To Fail. Who can forget the recent Cyprus Financial Crisis? Closer home the bad loans in our public and private sector banks have reached great heights. Some of the reputed industries in the gold and diamond business, infrastructure, airlines and other industries have defaulted on their loan repayments and raised the non performing assets of Indian banks to very high levels. Problems Galore? Is there a viable solution to all these problems that plague the banking and financial sector. Is There Something One Can Learn From Islamic Banking To Solve The Problems That Plague The Western Financial And Banking Institutions? I would like to remind you that the team of Financial Planners at IndianMoney.com are always there for you to plan your financial needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 02261816111.                                    

So What Is Islamic Banking All About?  

                                           Let us first understand that the Shariah law is a moral code and a religious law of Islam. The Shariah law is against the concept of both charging and receiving interest which is strictly forbidden. This is known as Riba or Usury. The Shariah law strictly forbids investing in companies that provide goods and services contrary to the basic tenets of Islam. These include alcohol (Haram), tobacco, arms, pork, cigarettes and gambling (Maysir). When one compares modern banking systems one notes the collection of Usury or Interest. So Why Do Banks Charge Interest? Interest is basically paid by the borrower to the lender as the lender would lose the use of the capital lent or the liquidity that cash provides for a certain period or a measure of time. The borrower compensates this loss to the lender by paying interest. Another reason for collecting interest is the change in the value of money due to inflation or the change in the purchasing power of money. Inflation needs to be factored in and the lender needs to be compensated for this loss.                                                                                                                         

How Does Islamic Banking Work?

                           Let us consider a bank lends capital for a businessman to start a business. The businessman then invests these amounts in his business and works to get a profit. The bank loses liquidity for a fixed period of time and the borrower has to compensate for this by paying the bank an interest compenent as well as return the capital within a certain time frame. This has to be done irrespective of whether the business is running at a profit or a loss. If the businessman suffers a loss he has to pay back the amount from his own resources. This might even lead to a seizure of assets in extreme cases. The bank or the lender suffers no loss in this entire transaction. According to Islam this is an injustice to the borrower and Riba is strictly forbidden.                                                                                                                                                        Let us consider the owner of a large amount of capital does not know what to do with these funds as he does not possess any managerial skills or the necessary business skills needed to run a business. At the other extreme is a person who has managerial and business skills but no capital to start and run the business .Let us call him a manager. Both the party’s co-operate with each other and run the business. The capital owner provides the capital but is not involved in the day to day operation of the business and is free to stipulate certain terms and conditions to ensure the best use of his funds. At the end of the agreed period the capital owner gets back his principle along with a share of the profits as per a mutually agreed ratio at the start of the contract. The manager who runs the business gets a share in the profits and this serves as an incentive for him to run the business. In case of a loss in the business the capital owner bears the brunt of the loss. As the capital owner bears a loss in case the business fails this serves as a justifiable cause for him to provide capital to run the business. The manager bears no financial loss except the loss of his time and his work and effort. If the manager does not run the business in a professional manner and the business suffers heavy losses due to negligence of the manager he has to return the full capital back to the capital owner. In case the capital owner withdraws monetary support then he has to reward and compensate the manager for his time and efforts in a suitable manner as per compensation he would have earned elsewhere. This is surely a win-win situation for both. This is the principle of Mudarabah.                                                         

What Is Mudarabah?   

                                                 Under the principles of Islamic banking the clients or customers who deposit money in the bank are the owners of the capital. The bank functions as the manager of the funds. This is a Tier-1 system. Under the Tier-2 system one has an entrepreneur who functions as the manager of the business and the Islamic bank is the capital owner. Under Islam the capital owner and the manager or the labour are viewed on an equal pedestal. The capital owner bears a risk mainly a loss if the business fails. This entitles the capital owner to a stake in the profits of the business. In the Western system of banking the interest component involves a risk free element which is viewed as unjust according to Islam. The entrepreneur through his labour and effort is also entitled to a share in the profits. The capital owner is whole heartedly immersed in the business and as a stakeholder is interested in the growth and development of the business unlike a bank which cares a damn about the business but only in the interest and the return of the capital. One needs to remember that you can transfer funds from a Shariah complaint bank account to a conventional account but if you want to transfer funds from a conventional bank account to an Islamic bank account  you can transfer only the principle amounts and not the interest component. This profit sharing model followed in Islamic banking has proved to be highly successful and the assets under management under the Islamic banking model are expected to touch a Trillion US dollars by the end of the Year 2013.      

Types Of Services Provided In Islamic Banking:  

                                                    One must be knowing about the Current account deposits which are same in the case of Islamic banking as in conventional banking. One has the deposit amounts guaranteed. Savings bank accounts have less stringent norms and conditions and are lenient with respect to maintenance of minimum balance as well as huge amount of funds are set aside for withdrawals. The funds are invested in short term risk free projects with an emphasis to meet the withdrawal demands. The full amount is returned with no promise of profit sharing. Investment banking under the Islamic banking lays emphasis on the profit sharing model and the depositors share the profits with the bank.

How Do These Islamic Banks Raise Deposits From The Public And What Is Their Source Of Funding?

                                                  One must have heard of Musharaka where the Islamic bank joins up with a business organisation in order to run a project on a profit sharing model. This is basically a joint venture. The bank gradually withdraws from the project after the passing of a certain time period. Profits. are shared according to a pre defined ratio but losses are strictly based on the capital contribution. Another common method of financing followed is the bank estimates the rate of return it should earn from a project. The bank then enters into an agreement with the business institution to procure the estimated rate of return the bank believes the project would yield. If the project profits to an extent greater than estimated by the bank it takes only the agreed rate of return. In case of a loss in the project the bank shares the burden of the loss .If the profit is less than the banks estimated amount the bank accepts a lower amount. The Islamic banking also runs a profitable Trade Financing venture. The bank purchases say a car in the name of the client and the client agrees to repay the bank the paid amounts as well as a measure of profits at a later period of time. The Islamic banking model follows a system of leasing where the bank would buy a car used by the client as a cab leased to the client for an agreed price and time period. At the end of the time frame the lessee becomes the owner of the car after paying a balance amount as agreed as per the agreement. Under a Hire-Purchase agreement the bank buys an item say a car and hires it to a client for an agreed rent and time period. At the end of the time period the client automatically becomes the owner of the item or the car. Under a buy-back system the client sells a property or an item to the bank with an agreement to purchase it back at a later time at a fixed or an agreed price. Under the Letter Of Credit the bank imports an item say a costly car or a hi-fi electronic gadget and shares in the profit of the sale of that item.  

                                                  

Use Of Exotic Investment Such As Derivatives In Islamic Banking:                                                                                                                      

                                                 One must have heard of a forward contract which is a non standardised contract between two parties to buy or sell an underlying asset at a time specified in the future but the price is agreed today.This is an Obligatory contract. Let us consider the Kharif season in India where cotton is grown which is a commercial crop. A cotton farmer can enter into an agreement with a cotton merchant before the Kharif season begins in September where both parties hit upon an agreed price for the bales of cotton at a future date say the end of the Kharif season in March of the following year. This removes speculation (Qimar) from the deal as both parties are familiar with the future price of the product which is cotton in this case. The cotton farmer knows what price he will get for the cotton in the following year and he can set aside funds for certain other important priorities. The merchant also has an idea of the future price of the product which is cotton in this case and can hit upon a proper selling price. This is known as hedging with a forward contract. Under a spot transaction both money and commodities are exchanged simultaneously at the same time (t). Under a deferred system the commodity is delivered immediately (t) but the amounts are paid later (t+1). Under the Salam system money is paid immediately (t) but the commodity is delivered at a later date (t+1). All these transactions namely Spot, Deferred, and Salam are valid as per Shariah scholars. A speculator thrives on volatility which is mainly profiting from the sudden upward and downward movements in the prices of a commodity at a future dare. This Qimar is forbidden according to Islamic traditions. However since hedging takes an offsetting position from the investors current position this protects the investor from uncertainity and volatility and hedging with a forward contract is permissible according to Shariah law.                                                                I would like to end this article on an important note stating that Islamic banking also concentrates on moral values and social norms. It has an obligation to deal with the poor and the destitute .It focuses on development projects and charitable causes. It has Quard Al Hasan where if an individual needs hospitalisation or a good university education amounts are lent for a short duration of a year and there are no charges for these amounts.”Follow Up A Bad Deed With A Good Deed To Cancel It Out”.

Term Life VS Whole Life Insurance-The Eternal Debate

               

                            Here in insurance we have a number of different kinds of life policies. The choices we have are vast which results in confusion while choosing which kind of policy one wants. Here when one is faced with a greater number of  choices  greater is the chance he will make the wrong one. So how are you going to make the right decision. Will you be just another face in the crowd…If not read about Insurance Planning at   IndianMoney.com.

                      So what is term life policy. This is mainly a life insurance policy which provides coverage at a fixed rate of payments called the premium for a fixed duration or a time limit. Here term life insurance is a pure insurance policy where 100% of the cost of premiums is applied for the cost of insurance. If you find this information   useful you can explore our unique Free Advisory Service just by giving a missed call on  02261816111 for your Insurance and Financial Planning needs.

                Then what is Whole Life Insurance. Here the insured can opt for the single premium or regular premiums which have to be paid lifelong. This policy is valid for the whole life of the user. This is as long as the policyholder is alive. Here the sum of money is accumulated and the bonus is paid to the beneficiary on the death of the policy holder. The policyholder is not entitled to any money during his own lifetime. Here whole life policy combines a term policy with an investment component. The policy builds cash value which one can borrow against.  However here one must remember that whole life policies are expensive as the premiums charged also include the investment component , which has to be paid out on the death of the policy holder. Generally the premium for whole life insurance remains constant during the entire term of the policy and the policy holder gets life cover throughout. The premium terms differ, ranging from single premium plan   payments for a whole life policy and there are   riders  such as accident benefits available on whole life insurance We know that human tendency is to admire complexity but reward simplicity .We aim to simplify your needs by asking you to look up the website IndianMoney.com for your Insurance Planning needs.

Single Premium Whole Life Policy:

Ø  Here premium is paid  in a lump sum.

Ø  This policy enables the life assured to pay the premium during the most productive years of his life relieving the person of making payments in the later stages of his life when they might become a burden.

Ø  The profit sharing option is available where the policy holder shares in the periodical bonus distribution until the death of the life assured. The without profit option is also available.

Benefits:

Ø  Survival benefits include the sum assured and any accrued bonuses payable on attaining 80 years of age or on the expiry of term of 40 years from the date of commencement of the policy whichever is later.

Ø  Sum assured and any accrued bonuses paid on the death of the policyholder.

Ø  The policy may be surrendered after it has been in force for 3 years or more. The Guaranteed surrender value is around 30% of basic premium paid excluding the first years premium. In case of single premium the guaranteed surrender value is 90% of the single premium paid excluding any extra premium charged.

Ø  Premium paid under this policy are tax exempt under section 80C and maturity proceeds are tax exempt under section 10 (10D)

Term Insurance Beats Whole Life Insurance Hands Down:

    Here life insurance is very essential to protect ones dependents. If a person dies prematurely then his homemaker wife might not have the necessary funds to purchase the groceries. Here all financial advisors advice you to go for term insurance. But why do they do this….Is there any logic in this…On a Lighter Note I Want To Show You The Way Out..Which Way Did You Come In…

Ø  Term insurance is simple and cheap. It is basic insurance with a pure protection policy. The premiums for a Whole Life Policy are around 4-5 times higher than the comparable term policy for the same death benefits.

Ø  Whole life policies have a history of being pushed through by insurance agents because of higher commissions. Here some families end up paying for the wrong benefits. A family’s main concern should be the maturity amounts payable on the death of the primary breadwinner. Any cash benefits and investment benefits are secondary.

Ø  Here since premiums for term plans are cheap the difference is easily available for investments which would give higher returns than say a Whole Life Policy which combines protection with a cash value.

  We all know that it is hard to read the label when one is inside the bottle. Insurance agents put us in situations similar to like being in the bottle. It is up to us not to fall prey to such misleading and   mis-selling practices. Here in order not to fall for such tactics it is necessary to brush up on Financial Planning and Insurance Planning .Please lookup the website IndianMoney.com for such Planning needs. On a lighter vein..The Winner Of A Rat Race Is Still A Rat…The Insurance agent Always wins…

Whole Life Insurance Fights Back:

Ø  Here let us consider a case where a person wants to leave a huge legacy for a disabled child. He would take up a Universal policy where on his death , the disabled child (beneficiary) gets the sum assured as well as the accrued bonus.

Ø  Here let us consider a case where one of the parents has a genetic disorder which has a high chance of being passed on to their children. Here if the person takes up a term policy and does not die for a certain number of terms he would land up paying a higher premium as the term comes up for renewable. On death the amount obtained would be very less compared to a cash value plan such as a Whole Life Policy where he gets death benefits and an accrued bonus.

Ø  Wealthy people can use whole life in their estate planning by setting up an insurance trust that will pay their estate taxes from the proceeds of the policy.

   Here one can continue the debate endlessly as to which policy is better for a policy holder without arriving at any rock hard conclusion. Each insurance policy has its own benefits and one should pick up such a policy based on ones needs .Here needs of individuals turn out to be different based on different  circumstances. Hence one would be wise to choose a policy after through online  research , based on ones needs and gain Financial Knowledge in the vast field of insurance. I would like to end this article by stating that although our time is finite the demands made on us in our finite lifetime are infinite.Here is something for you to ponder..In Winter Why Do We Try To Keep The House As Warm As It Was In Summer…While In Summer We Complained About The Heat.

Wealth Tax-Wealth Doesn’t Mean Great Possessions But Fewer Wants

         

              We have all heard the saying “Desire Is A Well That Never Dries Up”. Wealth is a relative term. It can never be measured. It is never enough .Don’t we all feel that how much ever we have we are not satisfied? Where is that security and feeling of heavenly bliss that money alone can buy? India is a nation which strives to produce millionaires. More the merrier is our motto. Ours is a nation which aspires to be one of the Dollar Billionaires’. We have about 50 people in our country with a Net worth of about 4500 crores. We have about 2 Lakh Dollar Millionaires in our country. Crème De La Crème….  Remember A Golden Key Can Open Any Door….   

           The rich are taxed the world over. Remember the Cyprus case in which the rich were taxed, mainly a tax imposed on their bank deposits in order to fund the nation’s bailout package. Can our nation be far behind? Aren’t our neo rich unhappy with the 10% surcharge imposed on their earnings?  I would like to remind all of you that the team of Financial   Planners at IndianMoney.com  are always there for you to plan your Taxation needs in a most efficient manner. You can explore this unique Free Advisory Service just by giving a missed call at 02261816111. 

     So What Is Wealth Tax….Here we have wealth taxation in India known as the wealth tax act 1957.It is a direct annual tax levied on the ownership of certain assets by individuals and HUF even though these assets may not generate any income. Pensioners, The retired, senior citizens no one has been spared by this tax. This tax needs to be filed by July 31^st of the assessment year. Remember always pay your wealth tax on time as the late payment of wealth tax attracts a penalty of 1% of interest per month for each month of delay. Do not even try to evade your wealth tax as a heavy penalty of five times the tax amount due may be imposed.

  

  So How Much Is the Wealth Tax Charged …This is basically an amount of 1% on net wealth above and over 30 Lakhs. Let us consider the net wealth to be 75 Lakhs. Then we have the difference of 75 Lakhs over and above 30 Lakhs. This translates to be 45 Lakhs charged at 1 % .An amount of INR 45000 is charged as wealth tax.

  On What Is The Wealth Tax Charged….

·         Commercial Buildings and nearby land.

·         Jewelry, Bullion, Articles made totally or partly of Gold, Platinum, Silver or an alloy of these metals.

·         Residential Buildings and nearby land

·         Yachts, Aircraft and Boats.

·         Guest Houses and the nearby land.

·         Urban land located within a local authorities jurisdiction and has at least 10000 people as per the last census conducted   before the valuation date. An area within 8 Kms of a local authority like the Central Government. 

·         A farm house located within 25 Kms of the local limits of a cantonment board or a municipality.

·         Cash in hand in excess of INR 50000.

·         Precious metals including those in the form of utensils and furniture.

According to the Wealth Tax Act 1957 the following are regarded as deemed assets and wealth tax is charged:

·         Assets transferred between Spouses

·         Assets owned by minors, unless specially-abled child owns any asset it will not be grouped with the parent’s net income.

·         Assets provided to son’s wife or to another person or group of individuals for the benefit of son’s wife.

·         Assets that have been transferred to an individual or a group of people. This transfer must benefit the providers or their spouses in either the short or the long term.

On What Is Wealth Tax Exempt?

·         A residential property that has been allocated to a full time employee by either  the Company, Director, or an Officer with a gross yearly salary lesser than 5 Lakh Rupees.

·         A commercial or a residential real estate property that is part of stock –in – process.

·         Commercial or real estate property used for official or business purposes.

·         A Commercial Complex or an Establishment.

·         A residential property that has been put on hire for a minimum of 300 days in the immediate earlier year.

·         A land where construction is illegal.

·         A land where the building has been set up with approval from proper authorities.

·         An unused land owned for industrial purposes. This land should remain unused for 2 years after acquisition.

·         The land that has been owned by an assessee for 5 years as stock-in-trade.

·         Religious or charitable property owned by a trust or a legal entity.

·         Jewelry owned by erstwhile rulers

·         Residential Property owned by former rulers.

Advantages Of Imposing Of Wealth Tax On The Rich: 

·         April Showers Bring Out May Flowers: Revenues for healthcare, defence and education must come from somewhere. Ours is a nation with ballooning costs in healthcare and medical treatment. With a rising population, food security for the needy and an excellent public distribution system is necessary. Building of Infrastructure and Bridges is necessary for the growth of the nation.

·         Big Fish Eat Little Fish: The rich already have enough wealth and taxing them should be no problem.

·         Everybody Wants To Go To Heaven But Nobody Wants To Die:  The rich may not approve of this but the nation’s ballooning current account deficit and fiscal deficit has to be controlled

.

·         Fair Exchange Is No Robbery: The taxes collected from the rich are redistributed among the poor.

Disadvantages Of Imposing Wealth Tax On The Rich: 

·         Tax increases have a negative effect on the economy as they lead to spending cuts which slows growth.

·         Inflation may rise and high wealth tax on the rich might indirectly affect the middle class.

·         Taxing of the rich transfers money from the private sector to the public sector where it might not be efficiently spent or may land in the hands of greedy politicians for their campaigns.

·         Here we have seen how many rich individuals in USA and France have left their nation and reside in other countries. Rich HNI Indians would do the same and this might affect the progress of the nation. 

  Here I would like to end this article by giving my readers a thought provoking message. We know that wealth alone is not enough to satisfy our needs and there is something extra which we must all do in order to provide that inner gratification .Here we look at Corporate Social Responsibility and Philanthropy. Here we need to look no further than Mr Azim Premji who donated a 12 % stake in his company Wipro valued at $ 2.2 Billion towards education focused Azim Premji Foundation. Mrs Nita Ambani wife of Mr Mukesh Ambani owner of the Petrochemical giant Reliance Industries runs a nonprofit organization for the education and healthcare of the poor and under privileged in India. She is also a part of Reliance and UNAIDS Partnership which is aimed towards halting and reversing the spread of the HIV Epidemic in India. Here we know that Imitation Is The Sincerest Form Of Flattery and if we can, we must imitate these great individuals. We can read up IndianMoney.com for our Taxation needs.