Dear Friends,
PANCH-TATTVA PHILOSOPHY
You may be wondering as to how I have called my insurance philosophy as Panch Tattva Insurance. The insurance is a very vast field and the complications have arisen due to the differently named products by different companies. Further, these products are sold to less/no knowledgeable by the less/no knowledgeable in the most cases. The career in insurance was not a likeable one until the time you had the single player, which also worked under pressure to only look for the safety of the capital of the insurance policy holder, and had no desire or the need to show exemplary savings growth. They even did a very wrong thing i.e. reward the policyholders in an skewed manner. Some had to be satisfied with lesser share in the fund growth pie and some had larger share than it should have been rightly given. The gullible public had no choice; it did not know exactly what was happening to really be able to raise a finger.
Now I take the opportunity of explaining what the vedic Panch Tattvas namely Prithvi, Jal, Agni, Vayu and Akash mean and where they fit in to the philosophy of insurance that I have given you.
PRITHVI-TATTVA: The Gross Basis to Life
The Prithvi Tattva is the grossest of all, it denotes the physical building blocks that can be seen, felt etc.In our scheme of things the property owner ship is the first thing for it can not be stolen, it can not be destroyed, it yields returns as rent and may be used in other requirements etc., it grows in value but has the disadvantage of hassles in managing it and of illiquidity and there are costs involved in exchanges. Therefore, you have to invest in it but only to the extent of 25% of your saved capital for having the feeling of stability and as hedge against inflation. I may further tell you that a house in the hometown may not be considered as having the asset acquired out of the savings for security. It is properties apart from the family house in the hometown that I am discussing about.You may buy property only in middle years when enough capital has been saved for the purpose,till then this notional 25% of the yearly saving will form part of Unit Linked Endowment Plan and would be topped up with extra money if available for creating a money pool for buying property and growth(Under Vayu Tattva catagory this has been suggested in follwing paragraphs).
THE JAL-TATTVA :The Sustainer of Life
After this comes the 'Jal Tattva'. The water is needed every day and all through ones life. When the sources on the surface are no more there, we dig well to have water. Similarly, the Unit Linked Pension Plans are necessary to be taken early in one's life and regularly an amount affordable i.e. roughly 25% of your current savings should go in to balanced fund under this plan. This represents such part of income which sinks in to form a reservoir like rainwater seeping in below the earth's surface forms an under ground water reservoir out of which we take out water when the surface water is not sufficient. This pool, created over the years, comes in handy at the start of no income period due to retirement or due to loss of income earning capacity. Since the money is kept in balanced fund and not tinkered with, it keeps growing very steadily without worry or anxiety(it has been obseved that at times the interest bearing instruments give better returns and at other times the equity investemnt gives better return,since this is for long term both give balanced returns without making you sorry for deciding this way or that). The insurance companies manage the funds under pension plans in more conservative ways hence one may be rest assured about the out come.
THE AGNI-TATTVA: The Enhancer of Life
Third comes the 'Agni Tattva'. The fire is considered the basic need of the civilised world. It has to be handled with care. It rewards by adding value to otherwise non-usable stuffs. We should have 25 % of our savings in Gold and Silver, which are very good carriers of purchase power and easy encashability in case of need. These metals also beat the inflation surely. As the fire cannot be left without keeping an eye, these metals also we have to be kept an eye on and handled with care.This is such an asset which can be stolen or misplaced(in todays times it can be kept in bank lockers for safety).You have to buy it from the most reliable source as mixing of cheaper metals is done very commonly.You may even convert it in to gold ornaments and silver utensils for use otherwise than for security.With this your feelings would remain elated and you would not feel under thumb of some body in case of emergent needs to be fulfilled.This is also good for meeting partly the marriage related expenses as some gold or silver is necessarily bought on such occasions.
THE VAYU-TATTVA: The Provider of Riches
Now comes the case of 'Vayu Tattva'.This is a still more subtle element. We cannot see the currents of winds changing course but the winds are the most responsible factor for weather changes. Similarly, the stock market trends have to be carefully understood and at times, you should have investment in shares and at other times not in shares. This reshuffling is a difficult task and involves costs of brokerage, depository charges, and govts' taxes like STT, LTCG TAX, STCG TAX etc. but the Unit Linked Endowment Plan has the features where these taxes and brokerage and other charges are avoided. Since for faster growth, money has to be kept invested in shares also, we may do so by keeping 25% of our investible savings in to the growth fund under a Unit Linked Endowment Plan. This gives you the tax saving advantage under section 80 C and gives you protection under life risk cover in proportion to your chosen premium level. You are further able to have health related cover in this plan. These plans also have the liquidity after a period of three years. Because of the facility of topping up, you can manage your extra savings on this platform and withdraw money for any big-ticket purchase or for expenses for marriage in family or for any other big need. Switching without charges for 24 times in a year is special feature in HDFC SLIC's plans. Besides HDFC SLIC's fund managers have beaten the index by a margin of about 10% p.a. over last three years. With power of compounding, the money here grows so much faster that can only be understood by the real life examples; if you have the time, your consultant has the inclination to demonstrate it to you.You gain complete control in case of this plan after the third year and the policy continues even if you decide to go on a premium holiday due to tightness of funds in hand due to change in circumstances.You are allowed to resume paying premium later on.Is it not a wonderful thing?
THE AKASH-TATTVA: The Most Subtle Element of Life
In Indian mythology the five basic elements are considered necessary for the life to be sustained, it is the combination of these five elements in balance that the life has its course without problems. You have seen here that the economic life also has to have the balance in order to keep the physical existence fully enjoyable. Worry is the worst of the afflictions of mind. We must try and keep our worries at bay. We also know that death is a reality and a certain one but at the same time when it will occur is the most uncertain phenomenon. In addition, we know that families find stability as long as the income is regular and supposing the income earner for the family meets an end to life suddenly, the miserable times for the family ensue. Last of the 'Panch Tattvas' i.e. Akash-Tattva' is subtlest of all. It is said we keep marching towards death continuously and the footfalls of approaching misfortune can not be seen and they don't make noise either and this can be likened to 'Akash Tattva' which also is neither seen nor does it make noise. It is a householder's mundane duty to have ample provision for the family in case of his sudden demise. This need, however, in today's times can easily be taken care of. Therefore, the first advice for the person just starting the working life and the family life is to have life risk cover under a term plan, which comes at quite nominal premiums in younger years. It should be with the double benefit in case of accident. Businesspersons know that the creditors flock at the doors of the person who has just passed away and the debtors are not seen anywhere near. Therefore, the funds involved in business are not recoverable by the family members and hence the risk cover should be bought with this in mind.
TIMES HAVE CHANGED SUDDENLY BUT YOU DO NOT HAVE THE FACILITY/TIME TO LOCATE THE RIGHT PERSON FOR THE RIGHT ADVICE IN RESPECT OF YOUR INSURANCE NEEDS. YOU SHOULD WAIT UNTIL YOU COME ACROSS A PERSON WHO UNDERSTANDS THE NUANCES OF INSURANCE AND FINANCIAL CROSS CURRENTS AND NOT SETTLE FOR ANY LESSER PERSON AS ADVISOR.
NAME OF THE INSURANCE PLAN DOES NOT CONYEY MUCH
As you may be aware now that just the name of plan does not convey much. I have simplified the matter by telling you that the Unit Linked plans are the most transparent and the money growth opportunities are immense here(you may refer to earlier posting titled 'you are in your middle years and are afraid of old age'). I have further analysed as to how much should be kept where with the long-term view without having to suffer unduly on account of sudden changes in the environment. By the principles expounded there, you may yourself take care and stay afloat. In case you have an advisor still more experienced, you will be enabled to take extra advantages by scientific switching between the funds.
The broader framework has been explained. An expert will make it still more suitable after the facts about the income are given and if he knows expenses and structure of family along with personal leanings. Please talk to him with an open mind and know him as your friend and if required make him your confidant..
I may have missed out some point, please do not hesitate to bring it to my knowledge to enable me to explain.
Hari Om
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