10 PRODUCT NOTE

Task 5: A public opinion poll is no substitute for thought

Submitted By – Rajat Mishra

Mentor – RK Hegde

APRIL 17, 2021

HEDGE EQUITIES
Mysuru
 Product Note

1. Direct Equity
 What - Direct equity essentially means that you invest directly in the stock market.
To do this, you will typically need to open a demat and a trading account and invest in
the markets through a stockbroker. Once that is done, you can buy shares of
companies directly from the stock market. In other words, you can purchase the
shares of the companies that are listed on stock exchanges like the NSE and the BSE.

 Who - Since the direct equity option requires that you make the investment decisions
yourself, it is a better choice for seasoned investors who have a good idea about how
the market functions. Timing the market and taking buy, sell and hold decisions need
to be done frequently. It is also important to keep yourself updated about the various
developments nationally and internationally. So, investing in direct equity is a good
choice if you can handle these requirements.

 Where - A investor can invest in the shares of several companies that are available on
numerous stock markets around the world via Direct Equity Investment. This asset
class may be invested in using recommendations from a variety of outlets or by doing
one's own analysis.

 When - When you invest directly in equities, it becomes challenging to ignore daily
market fluctuations. As a result, you might react to market movements and make
investment decisions that are influenced by sentiment rather than rational thoughts.
Your decision to invest in equity funds must be in sync with your risk profile,
investment horizon, and objectives. Generally, if you have a long-term goal (say, five
years or more), then it is better to invest in equity funds. It will also give the fund
much needed time to combat market fluctuations.

 Why - Choosing direct equity for your investment portfolio gives you many
advantages, as an investor.
a. You have complete control over your investments.
b. You can liquidate your investments at any time during a trading session.
c. Individual stock selection is possible since you can buy or sell a single stock.
d. You can carry out speculative trades.

 How - For buying and selling of shares one need a demat account and online trading
account. Through online trading account one can trade shares online. But just having
online trading account in not sufficient. To trade shares profitably an investor should
do slightly more than buying and selling.
 Let’s see what required to be done to invest profitably in shares:
a. Invest for long term
b. Diversify your investments
c. One shall not hold more than fifteen to twenty different shares in one’s
portfolio. Include other asset class like debt, real estate, gold etc in portfolio.
This will make the portfolio very well diversified.
d. Invest intelligently– One need not be a genius to be a successful investor.
e. Disciplined investing is all that is requiried. Analyze company’s balance
sheets profit and loss accounts and its cash flow statement.
f. If a share is not performing in tune with the markets performance, do not
hesitate to sell it.
g. Resist the temptation to buy more only because you want to average your
cost–After you have done all these steps in detail you can start investing.

2. Mutual Funds
 What - A mutual fund is a type of financial vehicle made up of a pool of money
collected from many investors to invest in securities like stocks, bonds, money market
instruments, and other assets. Mutual funds are operated by professional money
managers, who allocate the fund's assets and attempt to produce capital gains or
income for the fund's investors. A mutual fund's portfolio is structured and maintained
to match the investment objectives stated in its prospectus.

 Who - You can easily invest in mutual funds if you are a student above 18 years of
age. You may invest in direct plans of mutual funds through the AMC. You can also
invest in regular plans of mutual funds through a broker. However, you must
complete your KYC by submitting a self-attested identity and address proof and
passport size photographs at the branch of the mutual fund house.

 Where - You may invest in the direct plan of mutual funds directly through the AMC
both offline and online. You may also invest in mutual funds through a mutual fund
distributor.

 When - There is no minimum age to invest in mutual fund. But to invest on your

own, you need to be 18 years. If you are below 18 years, minor investments are
identified by the date of birth of the investor, and so, while making an investment, you
have to provide the child's date of birth and age.

 Why – Following are the reasons to invest in Mutual Fund:

a. Convenience -Investing in Mutual Funds is a paperless and straightforward

process. Investors can monitor the market and make investments as per their
requirements.
 b. Low initial investment - You can have a diversified mutual fund portfolio by
investing as low as Rs 500 a month.

c. Tax-saving - Section 80C provides tax deductions on specific financial

instruments, and mutual fund is one of them.

d. Professional fund management - In mutual funds, your money is managed by a

professional fund manager who is backed by a team of researchers.

 How - You can invest in mutual funds directly with the asset management company
(AMC) through the direct plan. You must complete your KYC at a KRA (KYC
Registration Agency) online by filling the KYC registration form and uploading the
self-attested identity proof such as PAN Card and address proof such as
Passport/Driving License/Voter ID and also a passport size photograph. You will also
have to complete the IPV (In-Person Verification). You may also invest directly with
the mutual fund house through the direct plan. You just have to visit the website of
the fund house and fill up your relevant details such as name, email id, mobile
number, and bank details.

3. Liquid funds
 What - Liquid funds are debt funds that invest in fixed-income securities such as
certificates of deposit, treasury bills, commercial papers, and other debt securities that
mature within 91 days. Liquid funds do not come with a lock-in period. The
redemption requests of liquid funds are processed within 24 hours on business days.
Liquid funds are considered to least risky among all classes of debt funds as they
mostly invest in high-quality fixed-income securities that mature soon.

 Who - The returns offered by liquid funds are much higher than that of a regular
savings bank account. Therefore, if you have any surplus funds, then you may
consider parking them in liquid funds and earn better returns. As the fund mostly
invests in high-quality securities, the risk-averse investors may also consider investing
in liquid funds.
 Where - even the liquid funds are not entirely risk-free. If there is any change in the
credit ratings of the underlying securities, then it may lead to a change in the NAV of
the fund. Therefore, even liquid funds are not entirely risk-free. Here are some
important aspects that you must consider before investing in liquid funds:
a. Returns
b. Fund Size
c. Expense Ratio
d. Portfolio Diversification
  When - Financial experts recommend liquid funds to investors who want to park their
idle cash for a short term and earn decent returns from the same. Since liquid funds
offer better returns than savings accounts, it is better to put the idle cash in the former.
The accumulated corpus can be used to fulfil short term financial goals in the next 4-5
months. One can also use Systematic Transfer Plan (STPs) to use the accrued capital
in a liquid fund for SIP instalment in an equity fund. This strategy generates higher
returns and helps in mitigating market volatility, over a long term.

 Why - The following are the most significant advantages of investing in income
funds:

a. Low cost - The liquid funds are not actively managed like most other debt
funds. Therefore, the expense ratio of liquid funds is on the lower side,
resulting in higher take-home returns.

b. Low risk - As mentioned earlier, the risk possessed by liquid funds is on the
lower side as the underlying securities mature within 91 days. This mitigates
the risk of volatility.

c. Flexibility - Liquid funds, as the name suggests, are open-ended mutual funds.
Therefore, you can redeem your units at any time.

d. Faster processing - The redemption requests are generally processed within a

working day. Some liquid funds facilitate instant redemption.

 How - Investing in liquid funds is made paperless and hassle-free at ClearTax. Using
the following steps, you can start your investment journey: Step 1: Sign in at
cleartax.in. Step 2: Enter your details, such as the amount and period of investment.
Step 3: Complete your e-KYC; it takes no more than than 5 minutes. Step 4: Invest in
the most suitable fund from amongst our hand-picked mutual funds.

4. Gold ETF
 What - A Gold ETF is an exchange-traded fund (ETF) that aims to track the domestic
physical gold price. They are passive investment instruments that are based on gold
prices and invest in gold bullion.

 Who - Gold ETFs are ideal for investors who wish to invest in gold but do not want
to invest in physical gold due to the storage hassles / doubt about purity of gold and
are also looking to get tax benefits. There is no premium or making charge, so
investors stand to save money if their investment is substantial. What is more, one can
purchase as low as one unit (which is 1 gram).
  Where - Gold ETFs are listed and traded on the National Stock Exchange of India
(NSE) and Bombay Stock Exchange Ltd. (BSE) like a stock of any company. Gold
ETFs trade on the cash segment of BSE & NSE, like any other company stock, and
can be bought and sold continuously at market prices. Gold ETFs can be bought on
BSE/NSE through the broker using a demat account and trading account. A brokerage
fee and minor fund management charges are applicable when buying or selling gold
ETFs.

 When - These exchange-traded funds are considered to be among the best defensive
investments available. Many investors use it to insure their portfolios against
economic volatility and, in serious situations, currency depreciation, because it is
known to have the same class characteristics as shares. As global currencies, such as
the pound, drops in value, the price of gold will increase significantly.

 Why – Following are the reasons to buy Gold ETF:

a. Purity of the gold is guaranteed and each unit is backed by physical gold of
high purity.
b. Transparent and real time gold prices.
c. Listed and traded on stock exchange.
d. A tax efficient way to hold gold as the income earned from them is treated as
long term capital gain.
e. No wealth tax, no security transaction tax, no VAT and no sales tax.
f. No fear of theft - Safe and secure as units held in Demat. One also saves on
safe deposit locker charges.
g. ETFs are accepted as collateral for loans.
h. No entry and exit load.

 How - Gold ETFs can be sold at the stock exchange through the broker using a demat
account and trading account. Since one is investing in an ETF that is backed by
physical gold, ETFs are best used as a tool to benefit from the price of gold rather
than to get access to physical gold. So, when one liquidates Gold ETF Units, one is
paid as per domestic market price of the gold. AMCs also permit redemption of Gold
ETF Units in the form of physical gold in ‘Creation Unit’ size, if one holds equivalent
of 1kg of gold in ETFs, or in multiples thereof.

5. Non-Convertible Debentures
 What - Non-convertible debentures fall under the debt category. They cannot be
converted into equity or stocks. NCDs have a fixed maturity date and the interest can
be paid along with the principal amount either monthly, quarterly, or annually
depending on the fixed tenure specified. They benefit investors with their supreme
returns, liquidity, low risk and tax benefits when compared to that of convertible
debentures.
  Who - Nonconvertible debentures are issued for a specific period of time. Even
though there is a secondary market for these instruments, people should consider
investing small amounts or funds which they will not require until maturity.
Investments in non-convertible debentures might be a risky venture. So, they should
diversify their portfolio and invest in various sectors of the economy to reduce the
risk.

 Where - Easily Tradable NCD investment are listed on the open stock markets and
exchanges. Direct Bank Credit Interest on NCD investment is paid by a direct bank
credit. Digitalised Issuance and Trading of NCD investment is in the demat form
only. Lower Risk Only companies with a good credit rating can issue secured NCDs.

 When - NCDs are vulnerable to risks related to handling business and funding.
Hence, the credit rating can take a hit if the turnover is negatively impacted. The
company will have to borrow additional funds from banks or NBFCs to
counterbalance the impact. Hence, it is advised to keep a few things in mind before
opting for a company or NCD. Choose a company with an AA rating or above. Credit
rating calculates the firm’s potential to raise cash from its internal and external
operations and its sustainability. This is the best parameter that can reveal the
financial position of the company. Some background check on the asset quality of the
company can go a long way for NCD investors. Do not invest if the company
allocates more than 50% of its total assets towards unsecured loans.

 Why - NCDs have a fixed maturity date and the interest can be paid along with the
principal amount either monthly, quarterly, or annually depending on the fixed tenure
specified. They benefit investors with their supreme returns, liquidity, low risk and
tax benefits when compared to that of convertible debentures.

 How - NCDs are initially issued by the company in the exchange and later traded in
the secondary market. So, you can either choose to subscribe when a company
announces NCD or buy later in the secondary market when it is trading. Listed
companies issue NCDs in BSE and NSE, where these instruments are also publicly
traded.

6. Public Provident Fund

 What - Public provident fund is a popular investment scheme among investors
courtesy its multiple investor-friendly features and associated benefits. It is a long-
term investment scheme popular among individuals who want to earn high but are
also looking for stable returns. Safety of the principal amount is the prime target of
individuals opening a PPF account.
 Who - A Public provident fund scheme is ideal for individuals with a low-risk
appetite. Since this plan is mandated by the government, it is backed up with
guaranteed returns to protect the financial needs of the masses in India. Indian citizens
residing in the country are eligible to open a PPF account in his/her name. Minors are
also allowed to have a Public provident fund account in their name, provided it is
operated by their parent.

Non-residential Indians are not permitted to open a new PPF account. However, any
existing account in their name remains active till the completion of tenure. These
accounts cannot be extended for 5 years – a benefit available to Indian residents.

 Where - You can open a PPF account online at the nationalized public sector banks in
India, at the post offices, and at other financial centres like the private banks. You will
have to submit the relevant and desired documents, the initial amount, and will also
have to fill and submit the relevant form, for the purpose.

 When - PPF or Public Provident Fund is a very good product for the long-term fixed
income part of your portfolio. You should open a PPF account and invest regularly.
At the time of maturity, opt for an extension. Each extension is for five years, which
means that if you extend it twice it will finally mature after 25 years.

 Why - A Public provident fund scheme is ideal for individuals with a low risk
appetite. Since this plan is mandated by the government, it is backed up with
guaranteed returns to protect the financial needs of the masses in India. Further,
invested funds in the PPF account are not market-linked either. Investors can also
undertake the public provident fund regime to diversify their financial and investment
portfolio. At times of downswing of the business cycle, PPF accounts can provide
stable returns on investment annually.

 How - Both offline and online procedures are available for an individual provided
he/she meets requisite parameters mentioned in the eligibility criteria. Activating PPF
online can be done by visiting the portal of a chosen bank or post office. The
following documents have to be produced at the time of activation of a public
provident fund account –
a. KYC documents verifying the identity of an individual, such as Aadhaar,
Voter ID, Driver’s License, etc.
b. PAN card.
c. Residential address proof.
d. Form for nominee declaration.
e. Passport-sized photograph.
7. National Pension Scheme
 What - This is an initiative undertaken by the Government of India, the National
Pension System seeks to provide retirement benefits to all citizens of India, even from
the unorganized sectors. NPS is largely focused on one's retirement. While up to 60%
of the maturity corpus can be withdrawn as a lump sum on maturity, the balance is
compulsorily annuitized, i.e., balance is used to fund the annuity (pension) after
retirement. This annuity is fully taxable in the year of receipt as income from other
sources.

 Who - Contributions made by individual subscribers to the National Pensions Scheme

under the system accumulate until retirement and corpus growth continues via
market-linked returns. Subscribers also have an option to exit this plan before
retirement or opt for superannuation. However, this scheme ensures that a part of
savings is utilised to provide a subscriber with retirement benefits.

 Where - It is administered and regulated by the Pension Fund Regulatory and

Development Authority (PFRDA). You should open an NPS account with entities
known as Point of Presence (POP). Most banks, both private and public sector, are
enrolled as POPs. Several financial institutions also act as POPs. The authorized
branches of a POP, called point of presence service providers (POP-SPs), act as the
collection points. NPS offers two types of accounts to its subscribers:

a. Tier I: The primary account, which is a pension account which has restrictions
on withdrawals and utilization of accumulated corpus. All the tax breaks that
NPS offers are applicable only to Tier I account.

b. Tier II: In order to introduce some liquidity to the scheme, the PFRDA allows
for a Tier II account where subscribers with pre-existing Tier I accounts can
deposit and withdrawn monies as and when they want. NPS Tier II is an
investment account, similar to a mutual fund in characteristics, but offers no
Exit load, no commissions, good returns. The Tier 2 NPS account offers tax
benefits to government employees under certain conditions.

 When – The subscriber to the NPS can opt either of the above-mentioned investment
options, thus there is flexibility of choice. It is available as a default option for
subscribers as per the system. Fund investments under this option are managed
automatically by an appointed fund manager as per an investor’s age profile

 Why – Following are the reasons to for NPS:

 a. Portability – NPS does not have any Geographical restrictions. An account
opened in any state of India can be accessed from all over the country. NPS
corporate account is transferable between employers.
b. Flexible – NPS gives the subscriber the flexibility to choose the Fund
Manager, Investment Option, Annuity Service Provider, etc. This gives you
the control over your investments.
c. Economical – NPS is currently one of the cheapest investment products
available.
d. Voluntary – NPS is voluntary product for citizens of India. Only for central
and state Government employees, NPS is compulsorily under the fixed
contribution scheme.

 How - An NPS Account can either be opened online or offline. To open the NPS
account online, visit the PFRDA Website and follow these steps:
a. Click on the ‘Registration’ and select ‘register with Aadhaar’ Option.
b. Enter the Aadhaar Number and click on “Generate OTP” option.
c. The OTP will be sent to your registered mobile number.
d. Enter the OTP along with your personal details, nomination details, and bank
details.
e. Once the application is successfully submitted, your Permanent Retirement
Allotment Number (PRAN) will be allotted.
f. Your photograph will be the same as in the ‘Photograph and Signature’ tab.
g. Click on the ‘e-signature’ option. Once again an OTP will be generated and
sent to your mobile number.
h. Enter the OTP to verify your signature and make payment.

To open an NPS Account Offline, one can visit the nearest Point of Presence (POPs)
registered under PFRDA to get the registration form. POPs are certain banks and
financial institutions appointed by PFRDA to provide services to customers under the
NPS scheme.

Subscription to NPS Scheme, changing fund manager, and all related services under
NPS are provided at these POPs. For subscribing to NPS Scheme, you need to fill out
basic details in the application form and provide necessary Know Your Customer
(KYC) documents including Aadhar Card, PAN Card, address proof etc.

8. Portfolio Management Services

 What - Portfolio Management Services (PMS), service offered by the Portfolio
Manager, is an investment portfolio in stocks, fixed income, debt, cash, structured
products, and other individual securities, managed by a professional money manager
that can potentially be tailored to meet specific investment objectives. When you
invest in PMS, you own individual securities unlike a mutual fund investor, who owns
 units of the fund. You have the freedom and flexibility to tailor your portfolio to
address personal preferences and financial goals. Although portfolio managers may
oversee hundreds of portfolios, your account may be unique.
 Who - The Investment solutions provided by PMS cater to a niche segment of clients.
The clients can be Individuals or Institutions entities with high net worth.

The offerings are usually ideal for investors: who are looking to invest in asset classes
like equity, fixed income, structured products etc, who desire personalised investment
solutions, who desire long-term wealth creation, who appreciate a high level of
service.

 Where - In a broader sense, portfolio management can be classified under 3 major

types:

a. Discretionary - Under these services, the choice as well as the timings of the
investment decisions rest solely with the Portfolio Manager.

b. Non-Discretionary - Under these services, the portfolio manager only suggests

the investment ideas. The choice as well as the timings of the investment
decisions rest solely with the Investor. However, the execution of trade is done
by the portfolio manager.

c. Advisory - Under these services, the portfolio manager only suggests the
investment ideas. The choice as well as the execution of the investment
decisions rest solely with the Investor. Note: In India majority of Portfolio
Managers offer Discretionary Services.

 When – Choosing the right PMS provider is essential to maintaining long-term

portfolio discipline and in meeting an individual's financial goals. It should be a
logical decision based on an array of information relating to the risk-adjusted
performance of the portfolio manager, quality and experience of the portfolio
manager, fee structure and transparency in reporting and communication.

Risk-adjusted return - While choosing a PMS provider, it is important to start with by

evaluating the portfolio manager's past performance relative to a benchmark.

Quality of portfolio manager - Given the fiduciary nature of the relationship, an ideal
portfolio manager would be someone with whom one can maintain a collaborative
relationship.

Fee structure - Understand the type of fee structure which would be best suited to you
as an investor and would justify the quality of services provided by the PMS team.
 Transparency - The investment philosophy and decision-making process should be
clearly outlined in the agreement.

 Why - Availing portfolio management services is the optimal way by which investors
investment decisions which are designed to meet their wealth creation goals with the
help of expert advice and assistance. Other advantages are as follows:

a. Access to innovative and sophisticated strategies which can provide the client
with an opportunity to choose from an array of investment opportunities.
b. Higher degree of customisation usually takes into consideration individual
investment needs and goals, with the investment philosophy to help clearly
reflect the risk profile of the investor.
c. Ability to take focused positions in both stocks and sectors has the added
advantage of being beneficial once the true potential of the idea is realised
over a period of time.
d. Transparency and a higher level of information: Most PMS providers are
technologically savvy and provide the client with real-time ccess to portfolio
positions and value. PMS managers are directly accountable to the client, who
can seek clarifications at will.

 How – There are normally two ways to invest in portfolio management services given
below:

a. An investor can invest in PMS through cheque. Once the cheque is handed to
the fund manager or investment manager and the cash value is received
through the cheque then he starts the process of investment on his/her behalf.

b. The investment in PMS can also be done by directly transferring current

shares held by the investor to the PMS account. The amount of transferred
portfolio needs to be above the minimum investment criteria. Normally, the
customer must have a minimum amount of Rs. 25 lakhs in order to invest in
PMS.

Apart from this, the investor will require to sign some documents including- Power of
Attorney agreement, PMS agreement with the service provider, the fresh format of the
demat account opening and some other documents like identity proof, age proof, PAN
card are necessary.

9. Senior Citizens Saving Scheme-

 What - The Senior Citizens Savings Scheme (SCSS) is a government-backed savings
program for Indian citizens above the age of 60. The deposit matures after five years
from the date of account opening, although it can be renewed for another three years.
The SCSS interest rate has been set at 7.4 percent for the months of April to June
2020. This is the highest interest rate offered by any of India's small savings schemes.
SCSS is accessible at public and private banks, as well as India Post Offices. Since
the SCSS is a government-backed investment tool, the terms and conditions apply
regardless of which bank or post office you invest in.

 Who – The scheme is available to any resident individual aged 60 years and above.
Also, individuals who have attained 55 years but are less than sixty years old are also
eligible to apply for the senior citizens savings scheme provided they have retired
under applicable superannuation or VRS rules.

 Where - You can open a Senior Citizens Savings Scheme account at all India Post
Offices. The interest earned from SCSS account is automatically credited to the
investor’s linked savings account at the same post office. The wide reach of India Post
ensures that the option of SCSS account is available to Indians across the country-
even those located in the most remote parts.

 When - SCSS suits senior citizens looking for a high fixed rate of return and a regular
income on a quarterly basis. Currently, (April to June 2021) the interest rate on SCSS
is 7.4 per cent per annum, payable quarterly. Considering the pandemic situation
 And looking into the current return rates of FDs and all, SCSS is one of the most
suitable scheme for Senior Citizens.

 Why - Investing in SCSS is a good opportunity for senior citizens above 60 years to
make money. This is an effective and long-term saving option which offers security
and added features that are usually associated with any government-sponsored savings
or investment scheme. These schemes are available through certified banks and post
offices across India.

 Safe and Reliable - This is an Indian government-sponsored investment

scheme and hence is considered to be one the safest and most reliable
investment options.
 Simple and easy process - The process to open an SCSS account is simple and
can be opened at any authorized bank or any post office in India. It is also
transferable across India.
 Good returns - At 7.4% p.a. the return rate is very good as compared to a
savings or FD account.
 Nomination - Nomination facility is available at the time of opening an SCSS
account by means of applying as part of Form C. This submission is also
accompanied by the passbook to the Branch.
  Tax benefits - Tax deduction of up to Rs.1.5 lakh can be claimed under
Section 80C of the Indian Tax Act, 1961.
 Flexible - The tenure of this investment scheme is flexible with an average
tenure of 5 years which can be extended up to 3 additional years.
 How- Currently, a SCSS account cannot be opened via the online route, thus after
downloading the SCSS application form, you have to print, fill it out and submit the
completed SCSS Application form (at the post office/bank) along with applicable
supporting documents.  The SCSS application form requires you to provide some key
information at the time of opening a Senior Citizen’s Savings Scheme account such
as:

 Applicant name and PAN

 Name of the primary applicant’s father/mother/husband/wife
 In the case of joint SCSS account with spouse, you have to mention the name, age,
and address of your spouse.
 Cheque/demand draft amount and number (if applicable)
 Nominee name, age, and address (If you wish to have more than one nominee,
mention detail of individual share of each nominee)

10. Insurance
 What - Insurance is a contract, represented by a policy, in which an individual or
entity receives financial protection or reimbursement against losses from an insurance
company. The company pools clients' risks to make payments more affordable for the
insured. Insurance policies are used to hedge against the risk of financial losses, both
big and small, that may result from damage to the insured or her property, or from
liability for damage or injury caused to a third party.

 Who – Insurance benefits individuals, organizations and society in more ways than
the average person realizes. Some of the benefits of insurance are obvious while
others are not.
a. Insurance is the payment of losses. An insurance policy is a contract used to
indemnify individuals and organizations for covered losses.
b. Insurance provides payment for covered losses when they occur. Therefore,
the uncertainty of paying for losses out-of-pocket is reduced significantly.
c. Insurance is complying with legal requirements. Insurance meets statutory
and contractual requirements as well as provides evidence of financial
resources.
d. Insurance policies provide incentives to implement a loss control program
because of policy requirements and premium savings incentives.
e. Insurance makes it unnecessary to set aside a large amount of money to pay
for the financial consequences of the risk exposures that can be insured.
 f. Insurance facilitates loans to individuals and organizations by guaranteeing
that the lender will be paid if the collateral for the loan is destroyed or
damaged by an insured event. This reduces the lender's uncertainty of default
by the party borrowing funds.
g. Insurance companies collect premiums up front, invest those premiums in a
variety of investment vehicles, and pay claims if they occur.
h. Insurance helps reduce the burden of uncompensated accident victims and the
uncertainty of society.

 Where - Be it life insurance, health insurance or general insurance, you can buy an
insurance policy offline as well as online. Just like there are insurance agents who will
help you buy a policy, there are websites as well that you can buy a policy from.
Ensure that you have done your research before choosing and investing in an
insurance policy. Insurance is categorized based on risk, type, and hazards. These are
few of the Insurances where we can invest:

 Life insurance - As the name suggests, life insurance is insurance on your life.
You buy life insurance to make sure your dependents are financially secured
in the event of your untimely demise.
 Health insurance - Health insurance is bought to cover medical costs for
expensive treatments. Different types of health insurance policies cover an
array of diseases and ailments.
 Car insurance - This insurance protects you against any untoward incident like
accidents.
 Education Insurance - The child education insurance is akin to a life insurance
policy which has been specially designed as a saving tool.
 Home insurance - Home insurance can help with covering loss or damage
caused to your home due to accidents like fire and other natural calamities or
perils.

 When - When it comes to buying life insurance, your age and health are two of the
most important factors an insurer will consider when determining eligibility and
pricing. As you can imagine, the younger and healthier you are, the more affordable a
policy will be. Typically, you get the best rates in your 20s or 30s. That is because an
insurer is taking on less risk when insuring a young person in good health.

That said, affordable and high-quality coverage is available across a variety of age
ranges. But when you need life insurance coverage, such as when you have children
or other financial dependents, it is important not to put off buying a policy to help
ensure it remains affordable.
 Why - Buying insurance is important as it ensures that you are financially secure to
face any type of problem in life, and this is why insurance is a very important part of
financial planning. A general insurance company offers insurance policies to secure
health, travel, motor vehicle, and home. The convenient part of it is that you can
purchase all these insurance policies online nowadays.

 How – Following are the measures to apply for insurance:

 You can buy your insurance policy through an individual agent, a corporate
agent, or a broker.
 You can also buy your policy directly from the insurance company and some
of them can be bought on the internet. An agent or a corporate agent or a
broker may also sell insurance through using tele-marketers.
 Whatever channel you choose to buy insurance through, please ensure that you
are dealing with an authorised channel and ask questions, get information, and
clear your doubts.
 An agent or broker must hold an IRDAI licence.