Did you know | Types of term insurance plans

There are various types of term insurance covers that you should understand so that you can choose according to your needs

A term insurance policy, that only charges you for the cost of insurance, is what you should buy if you need a cover to protect your family. However, there are various types of term insurance covers that you should understand so that you can choose according to your needs.

Pure term plan

The simplest and cheapest of all, this one pays a fixed sum assured on the death of the policyholder. However, if the policyholder survives the term, he gets back nothing. The premium on term plans depends on three factors: age, term of the policy and the sum assured you choose. Even as term plans are the cheapest insurance product you get a further discount by buying them online.

Return of premium plan

Not everybody likes the thought of paying for years and not getting anything back at the end. Return of premium plans are meant for such people. These are slightly more expensive policies since they promise a return of premium. The policyholder gets the return of premium at the end of the term, but if he dies mid way, the nominee gets the sum assured.

Decreasing plan

A popular with mortgage products, the sum assured in this plan decreases every year, as does your outstanding loan amount. The premiums on these plans are lower than that of a level term plan since every year the sum assured decreases. Banks may bundle the single premium version of this policy and pay the premium on your behalf. The amount of premium gets added to your total debt liability, which you pay through an increased EMI. While it may seem easier to pay a single premium and get that added to your debt, a more cost effective technique is to pay regular premiums and that too on your own.

Increasing plan

This is the opposite of a decreasing plan. Here the amount of cover increases by about 5% every year until your sum assured increase by 50% or doubles up in value. The premiums are on the higher side as the insurer puts more money at risk every year. Unless you are sure that your assets won’t suffice for your family, avoid this one.

Convertible plan

This combines the benefits of a term plan with a savings plan. Here, initially you buy a term plan, which you can convert into an investment-cum-insurance plan later. So, you cover your insurance needs during, say, your initial years of work and if you think you have saved enough over the years, you switch to a different plan where a part of your money is invested. However, your premium may change at the time of conversion.

What motivates your employees? Is pay the sole motivating factor or do non-cash incentives drive engagement?

The debate on whether money motivates employees more than other factors has been prevalent in organisations for quite a long time. Should incentives or rewards be financial or non-financial? Both options make an action seem more purposeful, but how one chooses the incentive option that is ideal for the organisation, is crucial.

Sridhar Ganesan, managing consultant – Mumbai operations and rewards practice leader, Hay Group, expresses that there is no ‘this or that’, when you plan for an overall rewards value proposition for the employees; it has to be holistic, which means both have to be aligned in a balanced manner.

“The reward strategy has a more powerful effect on employee engagement if it doesn’t just concentrate on cash incentives, but instead creates an overall employee value proposition incorporating intangible rewards such as quality of work, non-financial recognition and work climate,” he says.

According to Ashish Kumar Srivastava, director – HR, Canara HSBC Oriental Bank of Commerce Life Insurance Company, “As an organisation, the challenge is to determine whether financial rewards or non-financial ones have a greater impact on the motivation of various employee segments. A ‘one size fits all’ approach does not work. For example, a young sales employee working in a target-driven environment is more likely to be motivated by tangible monetary incentives, whereas for a mid-level manager, access to a valued leadership development training programme may hold greater relevance.”

Financial rewards is an extrinsic motivating factor, and non-financial incentives represent the intrinsic one, points out Rajita Singh, head HR, Broadridge Financial Solutions India Pvt Ltd.

“But it’s interesting to note that eventually, we employ less intrinsically motivated actions. As children, spontaneous learning and curiosity are vital for our cognitive development . As we get older, rules and regulations mean that most of what we do is extrinsically motivated to some extent. And now in the conceptual age that we live in, we seem to be going back to the route we must, which is – small things matter,” she avers.

Understanding employee perceptions of the reward package on offer can greatly enhance an organisation’s ability to deliver a return on its investment. Ganesan explains, “At the CXO level, our research points to a growing focus on performance, thus leading to a more pronounced variable pay component in overall compensation – pegged to be at around 15 to 30 per cent of the fixed CTC.

Reliance Life targets small cities to hire salary-based agents

New Delhi: Leading private sector insurer Reliance Life Insurance will target small cities and rural areas to hire over 5,000 advisers on fixed-salary basis by the end of this fiscal.

“We are aiming to hire over 5,000 insurance agentsfrom small towns and rural areas and give them jobs as their career option with a sense of security. The recruitment drive is targeted at Tier II and III cities,” Reliance Life Insurance President and Executive Director Malay Ghosh told PTI.

“We believe that the fixed salary-cum-variable income will be a game-changer in the domestic insurance sector,” he added.

In India, insurance agents work on commission basis and have uncertain income level. Hence, the industry is facing a very high attrition rate.

The Anil Ambani-led Reliance group company has identified some potential non-metro cities, small towns and rural areas across the country to hire sales agents on its pay-roll.

The company is betting on the fixed salary-based agents in order to check increasing attrition and provide committed customer service.

In the beginning, Reliance Life Insurance will be recruiting these career agents across 200 out of over 1,200 branches across India.

“We have already hired over 500 career agents and deputed them in about 100 branches across the country. Now, our aim is to hire around another 5,000 career agents by March 2013,” Ghosh added.

The company is hiring 5,500 insurance advisors this fiscal under a new distribution channel, Career Agent, with a view to providing young people with career paths where successful agent could become supervisors in three years.

“The objective is to give a fixed stipend to insurance agents in the first six months during their training tenure and help them pass the licensing examination. This will help them take their jobs with greater commitment,” Ghosh said.

When asked, whether this new distribution format will hit the exiting advisor workforce working on commission basis, Ghosh pointed out that the two distribution channels are positioned differently in terms of composition and execution. “Rather both will complement each other and improve customer service.”

With the passage of time, Reliance Life Insurance plans to take the salary-based advisor system to the next level with bigger numbers and proliferation.

Five ways to get the most out of your workday

Managing your workday well is a challenge for many with an overdose of information in your day to day life. It gets more difficult to finish numerous tasks within the time period without missing on deadlines when you have only 8-10 hours a day.

Follow discipline

Plan your day ahead. Make a list of to-do things for the coming week. Make a log of events to attend or participate a day ahead. “You will know how much work you will have in hand to manage the next day and prepare accordingly,” says Adecco India managing director Sudhakar Balakrishnan.

Prioritise tasks

Prioritise your work. “Categorise into three segments – what needs to be addressed immediately, what has a mid-term deadline and what can be taken up later. You can then proceed to take up things and finish your work on time,” says Manjunath S R, senior director, HR, Netapp.

Revisit timeline

Stick to your timeline. And to do that be sure you don’t keep unrealistic deadlines. Being realistic with your targets will not only help you finish your work on time but will ultimately add to your productivity as you will have time even to do things which can’t be accommodated in a chaotic work schedule.

“Revisit your pending works to figure out how much you have already completed and what’s left to be done. This will help you keep track of how much time you have for different tasks at hand,” says Mr Balakrishnan.

Organise emails

Emails can be classified into three different types: simple mails that ask for an appointment or your presence for certain events or meeting – respond to them immediately after checking your calendar; informative emails – read them and label them accordingly; and complex mails that seek detailed information, suggestion and ideas – mark them as important and keep a reminder.

You would need to gather info, ideas or figure out certain things before you can respond. Rest are all promotions and you must delete them immediately. “Sorting emails is the most essential part of managing them. If you can do that, you will not have email headache,” explains Manjunath.

Prepare for meetings

Be it a concall or one-on-one interactions, prepare for everything. List down the points you need to raise, doubts to be cleared and answers to be sought for projects/ tasks that are in progress. You will not only have a fruitful meeting but will also ensure that crucial time is not lost.

‘Tax Paid by Employer on Behalf of Staff is Exempt from Taxation’

Tax paid by an employer on behalf of employees is a non-monetary remuneration and therefore exempt from tax, according to an Uttarakhand High Court order.
The income-tax department had held that employees are obliged to pay tax on the tax paid by their employers on their behalf. The high court delivered this verdict on July 30 on an appeal filed by the Director, International Taxation, New Delhi against Triton Holding, R&B Falcon, Sedco Forex International Drilling, Transocean Offshore International Ventures and Transocean Discoverer and Others, BG International.
The court pointed out that Section 17 (2) of the Income-tax Act, among other things, exempts “any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee”. The tax paid by the employer on behalf of the employee is among the pre-requisites mentioned under this section such as rent-free accommodation, amenities granted free of cost, sum payable by the employer to Provident Fund, etc, the high court pointed out. On many occasions, employers agree to pay income tax on behalf of the employees. The issue before the court was whether the tax paid by the employer on behalf of employees would be exempt from taxation as such payments are non-monetary benefits to the employees as classified under section 10 (10CC) of the Income-tax Act. The High Court explained that Section 10 (10CC) of the Income-tax Act stipulates that such payment shall be excluded from the income of the employees computed for the purpose of taxation. The High Court also pointed out that payment of tax by the employer to the Income-tax department on account of their employees is non-monetary payment to employees and can be classified as remuneration mentioned under clause (2) of section 17 of the Income-tax Act.

FM Nod For 49% FDI in Insurance, Pension

Even if approved by cabinet, the bill is unlikely to make it to Parliament in the Monsoon session

DEEPSHIKHA SIKARWAR NEW DELHI
Finance minister P Chidambaram has cleared a proposal to raise foreign direct investment limit in insurance and pension sectors to 49%, making it clear that he intends to push sentiment changing reforms even though politically things look difficult for the United Progressive Alliance government.
The finance ministry will move a detailed proposal for the consideration of the cabinet.
“The bills (pension and insurance) have been cleared and are ready to go to the cabinet,” a finance ministry official said.
The union cabinet had deferred a decision on these bills when Pranab Mukherjee was the finance minister because of opposition from allies such as Trinamool Congress even though the FDI limit was only 26%.
Chidambaram will need all his persuasion skills to get all allies on board, though it is not yet clear when the cabinet will take up the proposal. Even if approved, the two bills are unlikely to make it to Parliament in the Monsoon session that concludes on August 27.
Stung by criticism over lack of policy decisions, the UPA government is eyeing several measures to lift investment sentiment, and boost growth that slipped to a nine year low of 6.5% in 2012-12 and is in the danger of going down further.
The government had introduced the Insurance Laws (amendment) bill, 2008 in Parliament December 2008 to update the sector law and increase the foreign participation in the sector.
FDI limit in the pension sector will be linked to cap in insurance sector that the government proposes to raise to 49% from present 26%. Raising limit in the sector will help insurance companies to step up investment. The Pension Fund Regulatory and Development Authority Bill, 2011 seeks to give statutory backing to the pensions regulator that was set up through an executive order in 2003.
Senior BJP leader and former finance minister Yashwant Sinha headed standing committee on finance has in its recommendation on the bill not favoured an increase in FDI limit. In fact, it had recommended that the bill expressly cap FDI in the sector at 26%, implying that the legislation will not have an easy passage in Parliament.

How to ensure health insurance plans for extended family

Many individuals are preparing for a life without a comprehensive health insurance cover for their family as insurance companies are busy imposing caps, sub-limits, co-payment clause, among other things, on corporate group health insurance schemes to cut the mounting losses on these plans.
Needless to say, it puts some members of the family, especially elderly parents, at grave risk. They can salvage the situation in two ways.

First, by going for an individual health insurance cover for every member of the family. If money is an issue, they have another option of getting a family floater plan that will cover the entire family.

However, most family floaters restrict the coverage to two adults and two children, which means the elderly parents are likely to be left out again.

Grim scenario, right? Not necessarily. You now have a third option of buying a health insurance plan that will cover not only your parents, but also in-laws, siblings and even cousins.

“During customer research, we found out that customers are more concerned about the health of their family members than their own. Also, the joint family system is still quite prevalent in India,” says Neeraj Basur, CFO of Max Bupa.

“Our research showed that there was a significant lack of coverage for dependant parents and in-laws, given that group covers rarely insure dependants. We saw this as an opportunity to provide individual covers that could be gifted to an extended family,” adds Harshal Shah, director, marketing, Aegon Religare Life.

No wonder, the recently-launched online defined benefit health plan from Aegon Religare Life has brought parents, in-laws and siblings under the coverage ambit.

Similarly, Oriental General Insurance’s family floater allows the holder to include either parents or parents-in-law in the plan. Max Bupa has been promoting its product with cover for multiple relations as its USP. Oriental General Insurance’s family floater allows the holder to include either parents or parents-in-law in the plan.

Max Bupa has been promoting its product with cover for multiple relations as its USP. “These covers look to tap the Indian joint family system where the decision-making is centralised with the head of the family taking a call on behalf of all family members,” says Mahavir Chopra, head, e-business with insurance portal medimanage.com.

“Newer entrants and standalone health insurers have to bank on innovation to differentiate themselves from the existing general insurers. Such policies serve as a means of achieving this objective,” adds Juzer Jawadwala, executive director, Nandi Insurance Broking.

Then, there are companies that have introduced family floaters to address the issue of inadequate sum insured under a single policy.

How do they work?

While the one of chief aims is to get around the challenge of sum insured getting exhausted in a year – particularly, if senior citizens or those with adverse health history are covered under the plan – there are variations in the solutions offered.