People around us are always complaining about everything getting so expensive, increasing prices of fuel, gold, food and so on. Of course the tech products such as Flat-screen Television, Smart Phones, Laptops and Tablets did get cheaper as compared to the prices they commanded initially. And thankfully, we did witness a few products in the financial domain which became cheaper too.
Term Insurance Plans
The staple life insurance product – term plan witnessed a revolutionary change when companies decided to sell this on the internet. Couple of life insurance companies in the private sector experimented selling their term plan through their own website and it became a runaway success. Online term plans with their amazingly low pricing have become a hot topic of discussion in homes, offices, coffee shops, etc. Life insurance, which has a legacy of being referred to as a push-product suddenly became a pull-product in the avatar of online term plans. A term cover of Rs.50 lacs for a healthy male aged 30 years which used to cost upwards of Rs.15,000 p.a. is now available for below Rs.5,000 p.a. Life insurers distributing online term plans are of the opinion that the saving made by eliminating the cost of physical (offline) distribution is huge and it can easily be passed on to the customer (policyholder) by way of low premiums.
In 2010, the Insurance Regulatory and Development Authority (IRDA) directed the life insurance companies to offer unit-linked insurance plans (Ulips) at a much lower cost to buyers. As per the new ULIP rule, insurers are allowed to levy up to 4% on annual premium as policy charges for the first five years, and thereafter charges will be reduced during the tenure of the policy. For plans of 15 years and above, the charges will be restricted at 2.25% of the yearly premium. IRDA also increased the insurance cover on ULIPS to 10 times of the first-year premium compared to five times earlier and also increased the lock-in period for all Ulips from three years to five years now.
In 2009, the entry load charged on mutual funds was removed by Securities and Exchange Board of India (SEBI) where the investors directly invested in mutual funds without going through an agent or a distributor. An entry load was basically charged up front to meet expenses on distributor commission. An entry load of 2.25% was charged on the investment made by an individual in mutual funds and the balance went into stock purchase.
So, instead of worrying about the rising cost of products and services, we should spare some time in knowing about good financial products that have become cheaper and more customer-friendly. There is a Swedish proverb, “Those who wish to sing, always find a song.” Similarly one can also say, “Those who wish to save will always find a way.”