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Avoid These Six Common Life Insurance Mistakes

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Life insurance is one of the most important components of any individual’s financial plan. However there is lot of misunderstanding about life insurance, mainly due to the way life insurance products have been sold over the years in India. We have discussed some common mistakes insurance buyers should avoid when buying insurance policies.

1. Underestimating insurance requirement: Many life insurance buyers choose their insurance covers or sum assured, based on the plans their agents want to sell and how much premium they can afford. This a wrong approach. Your insurance requirement is a function of your financial situation, and has nothing do with what products are available. Many insurance buyers use thumb rules like 10 times annual income for cover. Some financial advisers say that a cover of 10 times your annual income is adequate because it gives your family 10 years worth of income, when you are gone. But this is not always correct. Suppose, you have 20 year mortgage or home loan. How will your family pay the EMIs after 10 years, when most of the loan is still outstanding? Suppose you have very young children. Your family will run out of income, when your children need it the most, e.g. for their higher education. Insurance buyers need to consider several factors in deciding how much insurance cover is adequate for them.

· Repayment of the entire outstanding debt (e.g. home loan, car loan etc.) of the policy holder

· After debt repayment, the cover or sum assured should have surplus funds to generate enough monthly income to cover all the living expenses of the dependents of the policy holder, factoring in inflation

· After debt repayment and generating monthly income, the sum assured should also be adequate to meet future obligations of the policy holder, like children’s education, marriage etc.

2. Choosing the cheapest policy: Many insurance buyers like to buy policies that are cheaper. This is another serious mistake. A cheap policy is no good, if the insurance company for some reason or another cannot fulfil the claim in the event of an untimely death. Even if the insurer fulfils the claim, if it takes a very long time to fulfil the claim it is certainly not a desirable situation for family of the insured to be in. You should look at metrics like Claims Settlement Ratio and Duration wise settlement of death claims of different life insurance companies, to select an insurer, that will honour its obligation in fulfilling your claim in a timely manner, should such an unfortunate situation arise. Data on these metrics for all the insurance companies in India is available in the IRDA annual report (on the IRDA website). You should also check claim settlement reviews online and only then choose a company that has a good track record of settling claims.

3. Treating life insurance as an investment and buying the wrong plan: The common misconception about life insurance is that, it is also as a good investment or retirement planning solution. This misconception is largely due to some insurance agents who like to sell expensive policies to earn high commissions. If you compare returns from life insurance to other investment options, it simply does not make sense as an investment. If you are a young investor with a long time horizon, equity is the best wealth creation instrument. Over a 20 year time horizon, investment in equity funds through SIP will result in a corpus that is at least three or four times the maturity amount of life insurance plan with a 20 year term, with the same investment. Life insurance should always been seen as protection for your family, in the event of an untimely death. Investment should be a completely separate consideration. Even though insurance companies sell Unit Linked Insurance Plans (ULIPs) as attractive investment products, for your own evaluation you should separate the insurance component and investment component and pay careful attention to what portion of your premium actually gets allocated to investments. In the early years of a ULIP policy, only a small amount goes to buying units.

A good financial planner will always advise you to buy term insurance plan. A term plan is the purest form of insurance and is a straightforward protection policy. The premium of term insurance plans is much less than other types of insurance plans, and it leaves the policy holders with a much larger investible surplus that they can invest in investment products like mutual funds that give much higher returns in the long term, compared to endowment or money back plans. If you are a term insurance policy holder, under some specific situations, you may opt for other types of insurance (e.g. ULIP, endowment or money back plans), in addition to your term policy, for your specific financial needs.

4. Buying insurance for the purpose of tax planning: For many years agents have inveigled their clients into buying insurance plans to save tax under Section 80C of the Income Tax Act. Investors should realize that insurance is probably the worst tax saving investment. Return from insurance plans is in the range of 5 – 6%, whereas Public Provident Fund, another 80C investment, gives close to 9% risk free and tax free returns. Equity Linked Saving Schemes, another 80C investment, gives much higher tax free returns over the long term. Further, returns from insurance plans may not be entirely tax free. If the premiums exceed 20% of sum assured, then to that extent the maturity proceeds are taxable. As discussed earlier, the most important thing to note about life insurance is that objective is to provide life cover, not to generate the best investment return.

5. Surrendering life insurance policy or withdrawing from it before maturity: This is a serious mistake and compromises the financial security of your family in the event of an unfortunate incident. Life Insurance should not be touched until the unfortunate death of the insured occurs. Some policy holders surrender their policy to meet an urgent financial need, with the hope of buying a new policy when their financial situation improves. Such policy holders need to remember two things. First, mortality is not in anyone’s control. That is why we buy life insurance in the first place. Second, life insurance gets very expensive as the insurance buyer gets older. Your financial plan should provide for contingency funds to meet any unexpected urgent expense or provide liquidity for a period of time in the event of a financial distress.

6. Insurance is a one-time exercise: I am reminded of an old motorcycle advertisement on television, which had the punch line, “Fill it, shut it, forget it”. Some insurance buyers have the same philosophy towards life insurance. Once they buy adequate cover in a good life insurance plan from a reputed company, they assume that their life insurance needs are taken care of forever. This is a mistake. Financial situation of insurance buyers change with time. Compare your current income with your income ten years back. Hasn’t your income grown several times? Your lifestyle would also have improved significantly. If you bought a life insurance plan ten years ago based on your income back then, the sum assured will not be enough to meet your family’s current lifestyle and needs, in the unfortunate event of your untimely death. Therefore you should buy an additional term plan to cover that risk. Life Insurance needs have to be re-evaluated at a regular frequency and any additional sum assured if required, should be bought.

Conclusion

Investors should avoid these common mistakes when buying insurance policies. Life insurance is one of the most important components of any individual’s financial plan. Therefore, thoughtful consideration must be devoted to life insurance. Insurance buyers should exercise prudence against questionable selling practised in the life insurance industry. It is always beneficial to engage a financial planner who looks at your entire portfolio of investments and insurance on a holistic basis, so that you can take the best decision with regards to both life insurance and investments.

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Source by Dwaipayan Bose

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Where to Find Those Efficient and Hardworking Affiliates?

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Everyone wants a hardworking affiliate, employee, associate, partner, or even spouse, and why not? It’s the next best thing to doing the work yourself. However with the massive outbreak of work and income opportunities available online, how can you beat everyone else and find that one (or more) ideal person who will make your online business explode with success? Here are some of the most ingenious and uncommon ways to snag the idea affiliates for your affiliate program

Direct Sales Agents

Direct sales people are really one of the most enterprising, hard-working individuals in business. They mostly work on commissions or rebates and are willing to literally go door-to-door offering their products to anyone and everyone they bump into. Imagine how much easier their job would be if they could be an affiliate and simply work via the Internet and a mobile device or desktop.

Also, most direct sales people tend to carry more than one brand in their product arsenal so signing up as an affiliate would be almost the same type of work but using a different approach.

Colleges and Universities

Many college kids would be interested in a part-time income opportunity if it would mean funds to help pay for their education, loan, or partying. All you have to do is make sure to offer them products they can endorse as a student.

Freelancers

Did you know that the U.S. Census Bureau’s latest annual report show that 75% of U.S. businesses used freelancers in 2011? Freelancers earned a whopping US$990 billion in 2011 which is a 4.1% increase from the previous year. The only industries where the number of freelancers decreased were in insurance, finance, and construction. Most probably your affiliate program isn’t a part of these 3 industries.

Furthermore, online business and finance experts are predicting the growth to increase incrementally every year even with an economy that is improving. People just want income security and more control over their earnings. With the spate of lay-offs, it’s understandable why many would prefer to work as an affiliate than as an employee.

Scout For Them At Affiliate Conventions

There are annual affiliate conventions held in different cities around the country. You should try to catch one when it is held somewhere near your location. The average turn-out for these types of conventions has increased regularly over the years. Last year, many of them were sold out weeks before the event.

Advertise!

The US Census Bureau has said that as of 2012, 15% of Americans are poor, 43% of young adults depend on their parents to some extent for money. Even more surprising is that the median income of young adults in 1982 was $31,583 and last year it was $30,604 for the same age group! Income is dropping and people are looking for ways to earn additional income outside of their 9 to 5 jobs. That’s where you can come in playing the hero and helping others realize their dream income.

Finally, go online and talk about your product. Make the affiliate marketers come to you and have the luxury of picking the best candidates. You will need some help in marketing your affiliate program so target a marketer who’s experienced in affiliate program and SEO.

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Source by Lina Stakauskaite

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Recession Is Here… Six Costly Mistakes Home Sellers Make During Recessions And How To Avoid Them

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The U.S. is officially in a recession. What is a recession? A recession is a business cycle contraction or general economic decline due to significant drop in spending and other commercial activities. Most pundits and politicians will blame Covid-19 crisis for the recession, but even pre-Covid-19 the proverbial writing was on the wall.

The U.S. had over 120 months of economic growth, which was the longest expansion in the modern history. Other indicators, such as negative yield spread on treasuries (long term bonds having lower interest rates than short term T-notes), were pointing to an imminent change of the economic cycle and an impending recession. The only real question was: when and how bad?

Then Covid-19 came… If the cycle was going to change anyway, Covid-19 acted as a huge and unexpected accelerant to make the recession much more immediate and severe.

Inevitably during recessions all classes of real estate, including residential homes and condominiums, will be negatively impacted as lower consumer spending and higher unemployment rates affect real estate prices and marketing times.

Here are the six costly mistakes home and other real property sellers make during recessions and how to avoid them:

Mistake #1: This will pass and real estate market will be hot again soon

First thing to remember is that real estate cycles are much longer than general economic cycles. Even if the general economy recovers, which eventually it always does, a typical real estate cycle takes as long as 10 to 15 years. The cycle has four key stages: Top, Decline, Bottom and Rise.

Let us consider the last real estate cycle, which lasted approximately 14 years:

  • 2006 – Prices hit the Top
  • 2006 to 2012 – Prices Decline
  • 2012 – Prices hit the Bottom (Trough)
  • 2012 to 2019 – Prices Rise*
  • 2020 – Prices hit the Top
  • 2020 to? – Prices Decline

*NOTE: In 2016 the national residential real estate price index reached its pre-recession 2006 peak levels. It took 10 years for the real estate market to recover.

The way to avoid this mistake is to recognize that real estate cycles take years to run and plan accordingly. Additionally, nobody knows for sure when the prices will hit the top or bottom until after the fact.

Mistake #2: Low interest rates will make the economy and real estate market rebound

Between 2006 and 2011 the interest rates (Fed Funds) were continuously cut by the Federal Reserve Board and went from low 5% to almost 0%. However, that did not stop the real estate recession and depreciation of property values.

Undoubtedly, low interest rates made the economic decline and real estate recession less severe and saved some properties from foreclosures, but it still took six painful years for the real estate market to hit the bottom and then four more years for the prices to go back to their pre-recession levels.

Some markets had never fully recovered. For example, residential home prices in some parts of California, Arizona and Nevada are still below their 2006 highs.

To avoid this mistake, one needs to realize that although low interest rates help stimulate the economy and the real estate market, they do not cure them.

Mistake #3: I don’t need to sell now, so I don’t care

If you do not need to sell until the cycle plays out, which typically is over ten years, then you will not be as affected, especially if you have a strong equity position, limited mortgage debt, and solid liquid assets.

However, it is good to keep in mind that “life happens” and either professional or personal circumstances can change and we may need to sell property before the downturn runs its course.

Furthermore, if a property has a mortgages and its value declines to the point being “upside down,” meaning the mortgage loan balance exceeds the value of the property, then the options of selling, refinancing or even obtaining an equity line of credit, will be significantly limited.

This does not mean that everybody should be rushing into selling their real estate if there is no need to do so, just keep in mind that circumstances may and often do change and property options will be affected, so plan in advance. As one wise proverb says: “Dig your well before your thirst.”

Mistake #4: I’m selling, but I won’t sell below my “bottom line” price

This is a common and potentially very costly mistake. Generally speaking, every seller wants to sell for the highest price and every buyer wants to pay the lowest price. That’s nothing new. When selling real estate, most sellers want to achieve a certain price point and/or have a “bottom line.”

However, it is important to understand that the market does not care what the Seller, or his/her Agent, think the property value should be at. The market value is a price a willing and able buyer will pay, when a property is offered on an open market for a reasonable amount of time.

Overpricing property based on Seller’s subjective value or what is sometimes called an “aspirational price,” especially in a declining market, is a sure first step to losing money. When a property lingers on the market for an extended period of time, carrying costs will continue to accumulate and property value will depreciate in line with the market conditions.

Additionally, properties with prolonged marketing times tend to get “stale” and attract fewer buyers. The solution is to honestly assess your selling objectives, including the desired time-frame, evaluate your property’s attributes and physical condition, analyze comparable sales and market conditions, and then decide on market-based pricing and marketing strategies.

Mistake #5: I will list my property for sale only with Agent who promises the highest price

Real estate is a competitive business and real estate agents compete to list properties for sale which generate their sales commission incomes. It is not unusual that Seller will interview several agents before signing an exclusive listing agreement and go with the agent who agrees to list the property at the highest price, often regardless if such price is market-based.

Similarly to Mistake #4, this mistake can be very damaging to Sellers, as overpriced properties stay on the market for extended periods of time costing Sellers carrying expenses such as mortgage payments, property taxes, insurance, utilities and maintenance.

Furthermore, there is the “opportunity cost” since the equity is “frozen,” and it cannot be deployed elsewhere till the property is sold. However, the most expensive cost is the loss of property value while the real estate market deteriorates.

During the last recession, we have seen multiple cases where overpriced properties stayed on the market for years and ended up selling for 25% to 40% below their initial fair market values.

The solution is to make sure that your pricing strategy is based on the market, not empty promises or wishful thinking.

Mistake #6: I will list my property only with Agent who charges the lowest commission

Real estate commission rates are negotiable and not set by law. A commission usually represents the highest transactional expense in selling real properties and is typically split between Brokers and Agents who work on the transaction

Some real estate agents offer discounted commissions, in order to induce Sellers to list their properties with them. But does paying a discounted commission ensure savings for the Seller? Not necessarily.

For example, if the final sales price is 5% to 10% below property’s highest market value, which is not that unusual, due to inadequate marketing, bad pricing strategy, and/or poor negotiation skills, it will easily wipe out any commission savings and actually cost the Seller tens of thousands of dollars in lost revenues.

The solution is to engage an agent who is a “Trusted Advisor,” not just a “Salesperson.” A Trusted Advisor will take his/her time and effort to do the following: 1) Perform Needs Analysis: listen and understand your property needs and concerns; 2) Prepare Property Analysis: thoroughly evaluate your property and market conditions; 3) Execute Sales and Marketing Plan: prepare and implement custom sales and marketing plan for your property; and 4) Obtain Optimal Results: be your trusted advocate throughout the process and achieve the best possible outcome.

Finding such a real estate professional may not be always easy, but it certainly is worth the effort and will pay off at the end.

In conclusion, this article has outlined six costly mistakes real estate Sellers make during recessions and how to avoid them. The first mistake is not understanding that real estate cycles are long and take years. The second mistake is a misconception that low interest rates alone will create a recovery. Another mistake is not realizing that circumstances may change and not planning in advance. Mistakes number four, five and six pertain to understanding the market value, proper pricing and selecting the right real estate professional.

By understanding and avoiding these mistakes, real estate Sellers have significantly better chances of minimizing the negative impact of a recession while selling their properties.

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Source by Robert W. Dudek

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Useful Tips To Build The Best Gaming Computer

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Every gamer will want their computer to be the best gaming computer among their peers. Sometimes, with a little knowledge and tips and tricks, it is possible to build the best gaming computer and show it off to your peers. This article will show you how:

1) You can’t get the best gaming computer from computer retailers

If you want to get the best gaming computer, you have to build your own. Different gamers have different requirement for their gaming machine. Unless you are willing to pay a high price, you will not be able to buy a commercial computer that fulfills all your gaming needs. The only option you have is to build your own gaming computer.

2) You don’t have to be rich to build the best gaming computer

It is not necessary to burn a hole in your pocket to build the best gaming computer. With some due diligence, do some market research and compare prices around the marketplace. Merchant such as TigerDirect and NewEgg give regular discount to their products and you could save a lot of money if you catch them during their promotional period.

3) Most expensive parts do not have to be the best part

Sometime, the latest model or the most expensive model does not have to be the best part for your computer. It requires various components to work together to form the best computer system. When choosing a computer part, what matters is how well it can integrate with the rest of the components. Compatibility is more important than individual performance. What use is there if you spend lot of money on the latest quad-core processor and find that your motherboard doesn’t support it?

4) You don’t need to change the whole PC to own the best gaming computer

It is a misconception that you have to change the whole gaming machine to build the best gaming computer. If you already have a good barebone system, what you need to do is to upgrade the necessary parts and your gaming computer can roar back to life instantly.

5) Brand is important

Unless you want to see your computer system malfunction every few days, it is important that you purchase the parts from branded manufacturers with strict quality control. Motherboard brand such as Gigabyte, ABIT, ASUS are some quality brands that you can consider

If you follow diligently to the tips stated above. You will be on your way to build the best gaming computer. While price can be an issue, it is better not to scrimp on important computer parts such as motherboard, CPU, RAM and graphics card as it will cost you more to upgrade in the future.

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Source by Damien Oh

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