Buying insurance policy and mutual funds online
A decade ago, booking train tickets during vacations could have easily topped the list of most tedious yet necessary tasks, thanks to the never-ending queues at the booking counters. Though the queues have got even longer rather than disappear, the advent of the internet technologies has made the task much easier.
With the internet, mundane and time-consuming tasks such as booking tickets have become merely a matter of a few clicks on the keyboard of your computer. With the introduction of online services in the mutual fund (MF) and insurance industry, investors can purchase MFs and policies through online.
Most asset management companies and insurance providers have launched online services and due to its ease of use, cost efficiency and convenience, this new mode of investments is expected to gain popularity. Here is the first cut on what and how of the cyber-way of investing.
Invest in mutual funds online
In the physical world, imagine the time it requires to apply for a new mutual fund (MF) policy. You first wait for a person to collect your form; then write a cheque and then give a copy of your KYC/PAN card. The process is daunting even for the MF company since it demands more time and higher costs to develop a distribution channel.
The cost factor seems more critical given the fall in MF commissions. Through the online mode, you can transact from any corner of the world using the internet banking facility.
Stock exchanges using the demat route: You can buy and sell MFs online the same way as you trade in shares, either on the National Stock Exchange ( NSE) or on the Bombay Stock Exchange (BSE), provided your broker is offering these services.
You can also avail for a consolidated statement for both your stocks and MF holdings. You first need to register with your existing stockbroker by filling a mandatory 2-page form. Once this is done, you can buy and sell units through your stock broker the same way as you buy and sell shares with units being credited into your demat account.
Independent websites offering online MF services
In addition, NSDL has now enabled holding of MFs units in dematerialised form for demat account holders. You can use your existing demat accounts for converting your existing MFs units in dematerialised form. For this, approach your depository participant (DP).
If you want to redeem your MF units, you can do it in two ways. One, you can place an order through the stock exchange route. You can submit the delivery instruction slip to the DP to transfer the MF units the same way as for stocks. You can also redeem it through your DP.
However, dealing with the stock exchange has its flaws. First, you cannot opt for systematic investment plans. Second, you need to have a demat account, which entails paying an annual fee to the depository participant. Buy online: There are independent websites, which offer online MF services. All you have to do is open an account with these websites. Once your account is open, you can transact in MFs with ease. In case you want to skip an SIP payment in a particular month due to some emergency, you can do so at the click of a key. The advantage over the stock exchange route is that you do not have to open and maintain a demat account here.
Buying insurance online
Insurance firms are also entering the online space. Aegon Religare Life Insurance has a online term insurance plan, iTerm. ICICI Pru Life Insurance has recently launched a similar plan – iProtect. It offers accidental death benefit rider along with term plan as optional.
In the unit-linked category, Bajaj Allianz offers an online Ulip -iGain II, which has been running in the market for over a year-and-a-half now. Online plans are 40-55% cheaper than the usual plans.
Modus Operandi: First decide on the category of insurance product. You have an option of iProtect and iTerm for term insurance and iGain II for Ulip. The procedure is different for term plan and Ulip.For term plan, you need to first generate a premium quote by mentioning the death cover required, age and term of the policy.
Income and medical state also need to be revealed for generating the premium. This medical status helps the company in underwriting process. The medical questionnaire will include question relating to individual habits like smoking, health history and family health history.
15-day free look period available for online customers
Once you are through, make a premium payment by either a credit card or by using net banking solution offered by your banker. Once the payment is made, your policy becomes active. The policy kit along with the policy document is delivered at your doorstep.
To buy Ulips online, first enter the premium you are willing to pay along with the death cover to generate the benefit illustrator. It shows the way your investments would grow throughout the policy tenure. Once you fill the online proposal form along with medical details, you can make the payment. In the case of Ulips, Know Your Customer form is mandatory.
You need to hand it over to a company representative later. For online Ulips, all the benefits such as top-up and partial withdrawal are akin to that of a regular Ulip. There is a 15-day freelook period, which is available in both term and Ulip. This allows you to cancel the policy.
Upon such cancellation, you will be paid back the premiums less the cost of stamp duty, medical reports and proportionate premium for the period for which the risk was covered.The online world has indeed made investments less cumbersome and more cost effective.
Source: Economic Times
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