Buying life insurance: savings, protection or investment
For years on end, Indians relied on life insurance as a major savings vehicle. But today, it is ranked very low on their list of saving schemes, if it makes the list at all.
Noted economist Robert P. Murphy explains in his blog, “After several years of study, I have come to believe that the old-timers were on to something: Life insurance is an excellent savings vehicle. Not only does it allow you to conservatively store your wealth in a relatively safe place, but you can instantly access it through policy loans from the insurance company.”
The difference between term and whole life insurance can tell the difference between treating it as protection for family or as an investment vehicle. A term policy offers only life coverage, and on the death of the insured party, pays the face amount to a beneficiary. Term policies — available for periods of one to 30 years — offer the biggest returns, with the maximum death benefits. “Insurance products should be bought for protection, everything else is incidental,” says Somer Massey, CEO, Kotak Mahindra Financial Services Limited, Dubai. “By and large, people in the UAE are under-insured, and with variants such as critical illness covers, dual-benefit policies and other riders, it does make sense to increase one’s protection investment.”
Meanwhile, whole life insurance combines a term policy with an investment component that includes stocks, bonds or money market instruments. “By its very nature, a whole life insurance plan causes a build-up of cash value for future needs,” points out Sandi Saksena, Sales Manager, Nexus Insurance Brokers. “When you purchase whole life insurance, you overpay in the early years so that you can maintain a reasonably low level premium in later years. You can borrow on your cash build-up, return your policy and collect the cash build-up, or simply stop paying for the insurance and use the cash build-up to convert the policy to a reduced paid-up coverage.”
Financing Indian property: home loan in india or the UAE
While Indian banks have attractive home loan schemes for Non-Resident Indians (NRIs), several UAE institutions are also staking their claim, with personal loans specifically designed to address NRIs who wish to buy property in India.
Home loans in India can be availed of by NRIs with almost as much convenience as any Indian citizen, but there are small differences in terms of period, documents and payments. Indian banks with international branches are another option for securing loans. State Bank of India is attracting NRIs by making it convenient to apply for a home loan at any of its foreign offices, including Dubai. ‘Apply for an SBI NRI home loan without even coming to India,’ declares its campaign.
Meanwhile, HDFC, also with a branch in Dubai, has the widest range of home loans for NRIs, including those for improvement, extensions and for plots of land. “My recommendation would always be to take a home loan from India even though the rate may be higher, because the bank will conduct its own due diligence on the property and its title, thereby providing additional comfort to the buyer,” says Massey.
In the UAE, ADCB Personal Banking makes it very simple
for NRIs to finance a home in India, with steps as simple as calling a toll-free number, sending an SMS, or filling an online form. Citibank Home Loans are available to NRIs based in Dubai, Abu Dhabi and Sharjah for purchasing ready-to-occupy homes, or homes under construction by an approved developer.
Casey Bond, managing editor of a network of over 600 banking websites, Gobankingrates.com, says a personal loan may be ideal to finance a smaller property. “Homeowners in small towns or depressed local economies, don’t need to borrow hundreds of thousands of dollars to buy property. Rather than obtaining a mortgage loan, you can finance your home purchase using a personal loan,” she writes on her website.
Investing in gold: physical or ETFs
Investing in gold is now deemed almost necessary to protect and even increase personal wealth, but should it be bought directly in physical form, or indirectly through derivative proxies such as exchange-traded funds (ETFs)? >
When it is to be sold, traded or passed on, the weight of gold will be the same as at purchase. The best buy is the 24 karat, 99.99 purity UAE Gold Bullion Coin — available in four denominations at reputed jewellers across the UAE. Designed by Dubai Multi Commodities Centre, the coins carry the Argor-Heraeus’ stamp of quality and authenticity, and are accredited by the Dubai Good Delivery standard, an international benchmark since 2005.
Gold ETFs are a convenient way to trade on gold prices, can form part of a larger account, and can be bought and sold as quickly as stocks. The downside is that the shares cannot be hedged against the volatility of paper stocks, can be vulnerable to excessive leveraging, and are a gradually depleting asset as fractions of gold holdings are regularly sold to offset management and other fees.
Jakob Beck Thomsen, CEO, Saxo Bank Dubai, presents both sides of buying: “ETFs are designed to track the price of physical gold and offers an excellent low cost way of access to the market with little or no tracking error — apart from fees being charged by the issuer. Against this, a physical gold buyer has to consider the safe custody fees that local banks will charge, which may exceed the fees for trading the ETF.
Most ETFs track gold, but do not consist of actual ownership, as most providers do not offer the ability to exchange the share for physical gold. So whereas physical gold only carries market risk related to price movements, an ETF investor will also be exposed to the company risk of the issuer.
