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FAQ
What is a Mutual Fund?

Ans.A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc.

Where to look for if you want to begin saving in mutual funds

Ans.Mutual funds are much like any other product, in that there are manufacturers who provide the product and there are dealers who sell them.
Large banks to organized brokerage houses to Individual Financial agents get empanelled with Mutual Funds to provide advise and assistance to customers who want to buy units. Mutual funds units can now also be bought over the Internet.

What is Net Asset Value (NAV) of a scheme?

Ans.Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.

What is a Load or no-load Fund?

Ans.A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads.

A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

What is a sales or repurchase/redemption price?

Ans.The price or NAV a unit holder is charged while investing in an open-ended scheme is called sales price. It may include sales load, if applicable.

Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unit holders. It may include exit load, if applicable.

What is an assured return scheme?

Ans.Assured return schemes are those schemes that assure a specific return to the unitholders irrespective of performance of the scheme.
A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the offer document.

Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for a certain period. Some schemes assure returns one year at a time and they review and change it at the beginning of the next year.

Can a mutual fund change the asset allocation while deploying funds of investors?

Ans. Considering the market trends, any prudent fund managers can change the asset allocation i.e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unit holders and giving them option to exit the scheme at prevailing NAV without any load.

What should an investor look into an offer document?

Ans.An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsor's track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.

As a unitholder, how much time will it take to receive dividends/repurchase proceeds?

Ans.A mutual fund is required to dispatch to the unit holders the dividend warrants within 30 days of the declaration of the dividend and the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase request made by the unit holder.

In case of failures to dispatch the redemption/repurchase proceeds within the stipulated time period, Asset Management Company is liable to pay interest as specified by SEBI from time to time (15% at present).

How to know the performance of a mutual fund scheme?

Ans.The performance of a scheme is reflected in its net asset value (NAV) which is disclosed on daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs of mutual funds are required to be published in newspapers. The NAVs are also available on the web sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) http://www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place. The mutual funds are also required to publish their performance in the form of half-yearly results which also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and since inception of schemes. Investors can also look into other details like percentage of expenses of total assets as these have an affect on the yield and other useful information in the same half-yearly format. The mutual funds are also required to send annual report or abridged annual report to the unit holders at the end of the year. Various studies on mutual fund schemes including yields of different schemes are being published by the financial newspapers on a weekly basis. Apart from these, many research agencies also publish research reports on performance of mutual funds including the ranking of various schemes in terms of their performance. Investors should study these reports and keep themselves informed about the performance of various schemes of different mutual funds. Investors can compare the performance of their schemes with those of other mutual funds under the same category. They can also compare the performance of equity oriented schemes with the benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc. On the basis of performance of the mutual funds, the investors should decide when to enter or exit from a mutual fund scheme.

How to choose a scheme for investment from a number of schemes available?

Ans. The investors must read the offer document of the mutual fund scheme very carefully. They may also look into the past track record of performance of the scheme or other schemes of the same mutual fund. They may also compare the performance with other schemes having similar investment objectives. Though past performance of a scheme is not an indicator of its future performance and good performance in the past may or may not be sustained in the future, this is one of the important factors for making investment decision. In case of debt oriented schemes, apart from looking into past returns, the investors should also see the quality of debt instruments which is reflected in their rating. A scheme with lower rate of return but having investments in better rated instruments may be safer. Similarly, in equities schemes also, investors may look for quality of portfolio. They may also seek advice of experts.

When will the investor get certificate or statement of account after investing in a mutual fund?

Ans. Mutual funds are required to dispatch certificates or statements of accounts within six weeks from the date of closure of the initial subscription of the scheme. In case of close-ended schemes, the investors would get either a demat account statement or unit certificates as these are traded in the stock exchanges. In case of open-ended schemes, a statement of account is issued by the mutual fund within 30 days from the date of closure of initial public offer of the scheme. The procedure of repurchase is mentioned in the offer document.

Can a mutual fund change the nature of the scheme from the one specified in the offer document?

Ans.Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme e.g.structure, investment pattern, etc. can be carried out unless a written communication is sent to each unit holder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unit holders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close-ended to open-ended scheme and in case of change in sponsor.

How to know where the mutual fund scheme has invested money mobilised from the investors?

Ans.The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly basis which are published in the newspapers. Some mutual funds send the portfolios to their unit holders.

The scheme portfolio shows investment made in each security i.e. equity, debentures, money market instruments, government securities, etc. and their quantity, market value and % to NAV. These portfolio statements also required to disclose illiquid securities in the portfolio, investment made in rated and unrated debt securities, non-performing assets (NPAs), etc.

Some of the mutual funds send newsletters to the unit holders on quarterly basis which also contain portfolios of the schemes.

Is there any difference between investing in a mutual fund and in an initial public offering (IPO) of a company?

Ans.Yes, there is a difference. IPOs of companies may open at lower or higher price than the issue price depending on market sentiment and perception of investors. However, in the case of mutual funds, the par value of the units may not rise or fall immediately after allotment. A mutual fund scheme takes some time to make investment in securities. NAV of the scheme depends on the value of securities in which the funds have been deployed.

Where can an investor look out for information on mutual funds?

Ans.Almost all the mutual funds have their own web sites. Investors can also access the NAVs, half-yearly results and portfolios of all mutual funds at the web site of Association of mutual funds in India (AMFI) www.amfiindia.com AMFI has also published useful literature for the investors.

Investors can log on to the web site of SEBI www.sebi.gov.in and go to "Mutual Funds" section for information on SEBI regulations and guidelines, data on mutual funds, draft offer documents filed by mutual funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI available on the web site, a lot of information on mutual funds is given.

There are a number of other web sites which give a lot of information of various schemes of mutual funds including yields over a period of time. Many newspapers also publish useful information on mutual funds on daily and weekly basis. Investors may approach their agents and distributors to guide them in this regard.

If mutual fund scheme is wound up, what happens to money invested?

Ans.In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after adjustment of expenses. Unit holders are entitled to receive a report on winding up from the mutual funds which gives all necessary details.

If schemes in the same category of different mutual funds are available, should one choose a scheme with lower NAV?

Ans.Some of the investors have the tendency to prefer a scheme that is available at lower NAV compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is issuing units at Rs. 10 whereas the existing schemes in the same category are available at much higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. On the other hand, investors should choose a scheme based on its merit considering performance track record of the mutual fund, service standards, professional management, etc. This is explained in an example given below.

Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of scheme B to Rs. 99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes.

On the other hand, it is likely that the better managed scheme with higher NAV may give higher returns compared to a scheme which is available at lower NAV but is not managed efficiently. Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as much as inefficiently managed scheme with lower NAV. Therefore, the investor should give more weight age to the professional management of a scheme instead of lower NAV of any scheme. He may get much higher number of units at lower NAV, but the scheme may not give higher returns if it is not managed efficiently.

If schemes in the same category of different mutual funds are available, should one choose a scheme with lower NAV?

Ans.Some of the investors have the tendency to prefer a scheme that is available at lower NAV compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is issuing units at Rs. 10 whereas the existing schemes in the same category are available at much higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. On the other hand, investors should choose a scheme based on its merit considering performance track record of the mutual fund, service standards, professional management, etc. This is explained in an example given below.

Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of scheme B to Rs. 99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes.

On the other hand, it is likely that the better managed scheme with higher NAV may give higher returns compared to a scheme which is available at lower NAV but is not managed efficiently. Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as much as inefficiently managed scheme with lower NAV. Therefore, the investor should give more weight age to the professional management of a scheme instead of lower NAV of any scheme. He may get much higher number of units at lower NAV, but the scheme may not give higher returns if it is not managed efficiently.

How is a mutual fund set up?

How is a mutual fund set up?
Ans.A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund.
SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).

What is the history of Mutual Funds in India and role of SEBI in mutual funds industry?

Ans.Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are - to protect the interest of investors in securities and to promote the development of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors.

All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a mutual fund (as on January 15, 2002).

Can non-resident Indians (NRIs) invest in mutual funds?

Ans.Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes.

How long will it take for transfer of units after purchase from stock markets in case of close-ended schemes?

Ans.According to SEBI Regulations, transfer of units is required to be done within thirty days from the date of lodgement of certificates with the mutual fund.

How can the investors redress their complaints?

Ans.Investors would find the name of contact person in the offer document of the mutual fund scheme whom they may approach in case of any query, complaints or grievances. Trustees of a mutual fund monitor the activities of the mutual fund. The names of the directors of asset management company and trustees are also given in the offer documents. Investors should approach the concerned Mutual Fund / Investor Service Centre of the Mutual Fund with their complaints,

If the complaints remain unresolved, the investors may approach SEBI for facilitating redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned mutual fund and follows up with it regularly. Investors may send their complaints to:


Securities and Exchange Board of India
Plot No.C4-A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051
Tel : +91-22-26449000 / 40459000
Fax : +91-22-26449019-22 / 40459019-22
E-mail : sebi@sebi.gov.in

Interactive Voice Response System (IVRS):
Tel : +91-22-26449950 / 40459950

Toll Free Investor Helpline: 1800 22 7575

What is Insurance ?

Ans.Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Ideally, insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a reasonable fee.

How can I track my returns if I decide to invest in a Unit Linked product?

Ans.A unit-linked insurance policy provides you greater transparency than the traditional life insurance policy. In a traditional policy you are not aware of how your money is invested, where it is invested, what is the value of your investment, etc. In a Unit Linked policy the underlying investments made by the policyholder are clearly identifiable and determine its cash values (Net Asset Value). Most of the organizations publish their NAV listings on a regular basis in the mainline publications, which will help you check the performance of your fund. Companies also mail quarterly newsletters to their customers that provide them a detailed analysis of the Fund performance.

Is my money safe with an insurance company?

Ans.Most of the foreign partners in the Indian market are well-established global insurance players with a proven track record in the business. Some of them have been in the business for almost three hundred years. This amply demonstrates their credibility and stability in the business. All insurance companies in India are regulated by the IRDA which has laid down a very clear criteria defining the manner in which insurance companies can invest your funds. In fact every insurance company needs to have a minimum paid up capital of Rs 100 crore, which acts as a safety net. Further the insurance companies are also required to maintain their solvency margins depending on their volume of business. The minimum solvency margin required to be maintained by any insurer is Rs 50 crores.

Can I change my beneficiary on my policy?

Ans.This is a simple procedure. Beneficiary changes are usually in writing, on a form that your insurer will provide. However if you have designated an irrevocable beneficiary, you are not allowed changes without prior consent of the current beneficiary.

What kind of returns should one expect from a life insurance product?

Ans.Today life insurance policies are comparable to other savings instruments available in the market. Moreover, they also provide you risk cover for that unforeseen event. A big advantage of insurance products over certain other savings instruments is that there is a tax rebate on premiums paid for certain income groups upto a prescribed amount and the policy proceeds are tax free, thus providing a high net yield.

What is the role of Actuaries in Insurance companies?

Ans.Actuaries are involved in all areas of financial management of insurance companies. These include: designing of products, pricing of products,& nbsp;setting policy terms and conditions, valuation of policyholder liabilities, experience investigations with regard to mortality, sickness, expenses, lapses, surrenders etc. They also have to ensure solvency of the company at all times.

What happens if I fail to make the required premium payments on time?

Ans.This entirely depends on the policy terms and conditions. In most cases, if you miss a premium payment, you have a 30 or 31-day grace period during which you can pay the premium with no interest charged. However if you are unable to pay, you can declare the policy paid-up for that year, provided that at least two year’s premium has been paid. The company with your authorization will then withdraw the charges from your permanent policy's cash value to keep that policy in force. In some flexible-premium policies, premiums may be reduced or skipped as long as sufficient cash values remain in the policy. However, this will result in lower cash values and a shortened coverage period.

How Can Businesses use Life Insurance?

Ans.Life Insurance policies are often used to protect the future of businesses as well as families. For instance, a life insurance policy can be structured to fund a Buy-Sell Agreement, which would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. In short, the owners get the business, the family gets the money. To protect the business in case of the death of a key employee, Key Man Insurance policy, payable to the company, provides the owners with the financial flexibility needed either to hire a replacement or work out an alternative arrangement.

Can I take legal action against an insurance company if it takes more than six months to clear my claims?

Ans. In case of any claim dispute the case can be represented to the insurance Ombudsman. The Ombudsman has judicial powers and can be challenged only in the High Court. The IRDA (Insurance Regulatory and Development Authority) clearly articulates that a claim will have to be paid within 30 days from the date of receipt. In case the claim warrants an investigation then the insurance company has to complete the investigation not later than 6 months from the time of lodging the claim. Moreover, in case a claim is ready for payment but the payment cannot be made due to any reasons then such an amount will earn interest at the rate applicable to a savings bank account.

How to make a claim in case of a Life Insurance Policy?

Ans.On the death of the life insured, the claimant needs to give the following documents to the insurance company:
-A death certificate of the deceased
-The details of the life insurance policy, as it will be required to be mentioned in the claim
-The claim form from the insurance agent or the insurance company's office.
-Discharge Form should be returned duly signed by the policyholder over a Re. 1/- revenue stamp and duly witnessed
-The Policy Document in original
-Age Proof of the life insured

In case of Maturity / Survival Benefits Claims the policyholder needs to give the following documents.
-Discharge Voucher duly executed by the Life Assured / Assignee / Trustee & Original Policy documents
-Age proof in case the policy did not have the age admitted.

What is a level premium policy?

Ans.During the term of a life policy, cost of life cover increases with age as mortality risk increases as we get older. Therefore, if you had a series of policies that lasted for one year, at each anniversary the premium would increase. However, for ease of administration and simplicity, this increasing stream of life cover cost is converted into an equivalent amount payable each year throughout the life of a policy, which remains constant (level) during the term of the policy. This amount is called level premium. Effectively it means you pay a bit more in the early years in return for paying a bit less in the later years. The alternative to this approach is the variable premium approach, which has become quite popular in many markets, wherein the premium amount varies with the age of the policyholder. A person would pay less in the early years of his life and more in the later years as the mortality risk increases with age.

Do all life insurance policies require a medical test?

Ans.Life insurance companies underwrite risk on the basis of the health status of the person. The amount of evidence of health required by the insurer depends upon the amount of risk involved i.e. the sum insured under the contract. In the case of a low sum insured of the life to be insured or younger age, the company might ask only for the statement of health in the form of a health questionnaire from the customer and not a medical examination. In other cases a full medical examination may be required.

How much do I insure myself for?

Ans.One of the simplest rules is to assume that insurance is a replacement for your lost earning capacity. Calculate your total income for the years that you expect to work.

Assuming that the prevailing interest rate is 8%, you need to insure your life for at least 12 times your current annual income. Assuming that a family needs Rs.100 annually for household expenditure and the rate of interest would be at 8%, then the breadwinner needs to have a life insurance policy of approximately Rs.1200. If the insurance amount were to be put in the bank by the family, the family would get a comfortable Rs.96 p.a., which would at least let the family maintain the current life style.

However to calculate your insurance need more precisely, use the following steps:

Calculate Monthly Livable Income required (Post tax). This is the monthly amount that the survivors of the policyholder will need in the event of his death. This is taken at 70% of the current total family expenses. Denote this as "M".
Calculate Monthly Income required (Pre tax) as M/ (100-t)%. Denote this as "M1". Here t = Tax rate.
Calculate Annual Income (A) = M1*12.
Assume Estimated-earning rate on capital as 8%. Denote this as "r".
Calculate Capital livable income required (C ) as A/ r%.
Subtract Existing Insurance Cover amount (if any) from "C".
The final amount you arrive at is the amount for which you should buy insurance.

Why do you need life insurance?

Ans.If you have dependents and financial responsibilities towards them, then you certainly need insurance.

Having a family means dependents, which, in turn means financial commitments. Financial commitments come in the form of loans, children's education, medical expenses etc.

Imagine what would happen if you were to lose your life suddenly or become disabled and cannot earn. . Being insured in a situation like this is a necessity.

When you insure your life, in effect what you are doing is insuring your earning capacity. This guarantees that your dependents will be able to continue living without financial hardships even in case of your demise.

Most insurance plans available today come with a savings element built into it. These policies help you plan not only for protection against death but also for a financially independent future, which would enable you to have a comfortable retirement.

What is the importance of Life Insurance?

Ans.Life Insurance is important as -

i) It allows systematic long term savings which are low in nature but grow compoundingly.
ii) Can be used for transferring wealth though estate planning.
iii) To give adequate cover to key executives of the business, for its continuity.
iv) Short term death benefit.
v) To substitute loss of income source in case of death.
vi) Help supplement retirement income in case there is no other retirement coverage.

What is an Endowment Policy?

Ans.An Endowment Policy is a combination of savings along with risk cover. These policies are specifically designed to accumulate wealth and at the same time cover your life. In simple words, these polices are issued for specific time periods during which you pay a regular premium. If you die during the tenure of the policy, your beneficiaries will receive the sum assured along with the accumulated bonus additions and if you outlive the policy tenure you will receive the sum assured along with accumulated bonus additions (if any).

What is Money Back Policy ?

Ans.This is an anticipated endowment policy with an additional feature of receiving a benefit at regular intervals during the tenure of the policy. The risk cover continues for the entire sum assured inspire of the installments already paid. If you outlive the policy, the balance sum assured along with accumulated bonus is paid back to you.

What are riders?

Ans.Riders are additional benefits that can be attached onto your basic life insurance policy. These riders give you the benefit of increasing your risk cover in case of certain events happening. For instance if you have taken an Accident Death Benefit rider and you die due to an accident then your beneficiaries can get upto a maximum of twice the basic sum assured.

Similarly there are different riders addressing different contingencies like Critical Illness, Permanent Disability Benefit, etc. There are riders available that waive your future premiums in case of death or disability of the proposer.

These riders come at a nominal cost. and can be availed of depending on the policy taken. These can only be taken at the beginning of the policy term.

What will I receive on maturity of my policy?

Ans.On maturity, you will receive the sum assured or the Accumulation Account whichever is higher. Lets understand how does this work.

# Every year you will pay premium on your policy.
# This premium will get credited to an Accumulation Account.
# The amount required towards your life cover expenses and any other expense would be deducted from this Account.
# The balance will be invested in sound financial securities (as per IRDA regulations) on your behalf.
# The bonuses declared each year by the company would be added to the Accumulation Account.
# Thus, every year the value in your Accumulation Account will get compounded.
# At the end of the policy tenure, you would receive the amount in the Accumulation Account or the sum assured, whichever is higher.

 
 
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