Bonus can be defined as a financial compensation given to an individual on top of the regular payment the individual expects. Any senior or an entry-level employee can be eligible for a bonus. A company can use a bonus to show gratitude or reward achievements. A bonus can be monetary and non-monetary. Companies these days offer bonuses in various forms such as referral bonus and retention bonus, among others, to their employees.
Earned income is an income term under IRS, which reflects the various type of income such as salaries, bonuses, wages, etc., obtained by an individual by participating in a business or trade. It could also be regarded as an overall pay secured by an individual by indulging in any business or trade activity with another party.
A year-end bonus also known as Christmas bonus is a bonus for the employee at the end of the year and are generally made up of lump-sum payments used to reward the employee for their dedication and hard work. For some year-end bonuses, the amount of the reward can vary depending on the completion of certain milestones.
What is life insurance? Life insurance is a financial protection plan to safeguard a family's financial future when the policyholder is no longer in a situation to support. During the unfortunate event, the nominee mentioned in the policy by the policyholder receives the economic benefit. It acts as a defence in protecting the family and loved ones. The insurance policy also helps in managing finance in case The policyholder becomes disabled or gets seriously ill Of accidental deaths During accidental deaths, the dependents have to continue taking care of the liabilities such as rent, loan, fees for education. Amount from the insurance policy helps the beneficiaries with maintaining the lifestyle ahead. In today's fast-moving life, life is uncertain, and ill-fated circumstances take a toll on both physical and financial health of the family. Life insurance, in a way, provides financial peace of mind to the family. Life insurance gives assurance that after the incapability of the policyholder to provide financial support, the family members continue with the similar lifestyle without feeling the burden. These policies usually provide lump sum money to the beneficiary. It allows the nominee to continue with their financial goals and acts as a valued asset. Check the podcast on: Rising Health Claims. Are Insurance Firms Prepared? How does life insurance work? Image: Kalkine In order to benefit the most from life insurance, experts advise availing the policy at the earliest stage of life. It is a contract where the policyholder pays a premium to the insurance company either as a lump sum or on a regular/monthly basis. In the case of a circumstance such as the death of the policyholder within the term period, the insurance company pays to the family or the nominee of the policy the amount in the contract, i.e. life insurance policy. Life insurance policy is given to the person earning a stable income through his skill or talent. If a person earning income through other mediums such as property rent or interest from fixed deposits, then the person will not be eligible to avail the policy. Before giving the term policy, the insurance company does the complete health and medical check-up of the person. Many companies do not provide insurance if the person has existing severe health problems and diseases such as Cancer, but few have started covering critical illness in their package. Life insurance policies typically provide higher income coverage compared to the income of the policyholder, and the range reduces as the age increases. Hence the insurance agents suggest taking the plan as early as possible. Policyholders can choose the policy and its terms based on the need and the goal. Many companies provide various types of life insurance. Good Read: Mental Health Claims Likely to Go Up; Are Insurance Firms Ready? Image: Kalkine What are the benefits of life insurance? Life insurance offers various advantages apart from the financial ones. Protection: investing in the life term policies can provide a secure future to the family. In case of an unfortunate event, the beneficiaries would receive a sum assured plus any bonuses from the insurance company. Life insurance not just helps the young kids who are dependent upon the policyholder, but it could also be used to assist the retired parents who may not have any source of income anymore. The beneficiaries can use the funds the way they wish. As per the government of Australia, more than 70 per cent life insurance is purchased through Super funds. Super funds include much more than life insurance benefits to the policyholder such as Disability (total or permanent disability) and income protection. The policy then helps cover any current or future expenses of the person. Tax Benefits: In many countries, life insurance provides tax benefits to policyholders. Especially for the salaried individual, it is the best way to reduce liability. The premiums paid towards term policies are tax-exempt. Though in Australia, the premiums are only tax-deductible if they are connected to earning an assessable income. Rehabilitation and living costs: This policy pays a lump sum amount to the policyholder to help with rehabilitation and living costs. Total and permanent disability (TPD) insurance provides various benefits if the person becomes seriously ill and disabled and is unlikely to work again. Trauma coverage: Trauma insurance covers the person when diagnosed with a critical illness. A lump sum amount is given to the policyholder after getting diagnosed with a severe medical condition. Income replacement: Income protection insurance is also called salary continuance cover. The policyholder enjoys a regular income for a specific period if they are unable to work due to temporary disability or illness. Income protection insurance policy often uses a benefit amount which is the amount it pays per month. The amount can be set automatically, or the person can choose on its own. Did You Read: Getting Quarantined: Insurance and Bank Dividends Under New Restrictions by APRA How to decide on the life cover? The person who wishes to avail the life cover needs to consider the financial needs of the family in future as every household as a different requirement. It also depends on circumstances like which stage of life are you in; type of insurance under consideration; financial obligations for a family and so on. The government in Australia suggests everyone check if they have existing life insurance through super. Super funds provide life insurance as default service with premium cheaper than buying it directly as they buy insurance policies in bulk. In case an uptick is required in your insurance cover, it’s easily done through Super funds, only answers to a few medical questions and a medical checkup is needed. Individuals can also avail life insurances from insurance brokers, financial advisors or directly from the insurance company. Apart from the single insurance, life cover can be clubbed with its own or other insurance such as trauma, TPD and income protection insurance. But if the insurance is clubbed then at the time of claiming a certain amount, the cover from others may reduce. Also Read: Lens on three ASX-listed insurance companies: QBE, IAG and SUN How to pay life insurance premiums? Premiums are usually recalculated during policy renewal. It increases each year as there is a higher chance of claiming the insurance policy as the age increases. Conclusion There are various companies offering Life insurance. The one buying should do its research such and decide on the right product from the right company. Research may include a few of the points mentioned below and invest wisely What all is covered in the policy What all information you will need to give to an insurer Details about the premium amount, method of payment Waiting period before a claim can be made Process to claim
Share Capital is the amount raised by a company through the issue of common/preferred shares. It remains with the company till it is liquidated. The company’s shareholders own the share capital. Since shareholders are also the company's owners, share capital is the company's owned capital. Source: © Djbobus | Megapixl.com Why do companies issue shares? Primarily, a company issues shares to raise capital. Typically, a large privately held firm would issue stock on a stock exchange for public trading. A business would allow the general public to purchase its shares to gain fractional ownership. Shareholders are also eligible to collect dividends based on their holdings. What are the features of Share Capital? Availability: A Company can easily raise share capital to fund its expansion plans or other business development activities. Owned Capital: Share Capital is the company's own money, unlike debt. As highlighted above, it is owned by a company’s owners and is thus the company’s owned capital. Permanent Capital: Raising money via share issue brings the company its permanent capital. It can use the funds during the business’s lifetime without worrying about repayment of the owner’s funds. Also, there is no agreement as such to refund the money of shareholders. Shareholders will receive their capital after the company is liquidated and all obligations are met. If a shareholder wishes to recoup his investment, he can sell his stock to others, provided he is allowed to do so under the Companies Act. It would be a permanent investment for the investors who wish to stay invested throughout the company’s lifetime. No Compulsory Dividend: Another benefit of redeeming stocks is that there is no fixed fee, and the corporation is not obligated to pay dividends. Shareholders have no right to intervene if the management uses its profits for reinvestment. No Security: The issuing company does not have to mortgage any of its properties to obtain share capital. Participation: Share capital gives the shareholders the right to be a part of the company’s management through their normal rights as shareholders. Residual Claims to Income and Property: Once a debtor’s claims are addressed, the shareholders’ claim to income are met. Similarly, creditors have the first claim to the company's assets if it is liquidated. The shareholders would get the remaining amount. What are the types of Share Capital? To generate share capital, a Company has various types of equity shares to consider. The different types of share capital are highlighted below: Issued Share Capital: Issued share capital refers to the shares that a company sells to its investors. For instance, if a company issues 800 shares at $100 each, the issued capital will be $80,000. Unissued capital: It refers to the portion of the approved capital that is not distributed to the general public. Authorized capital: It refers to the biggest amount a company can raise by issuing shares to the general public. The approved capital of a corporation is the amount of money with which it is registered. Subscribed Capital: It's the portion of the issued capital that the general public buys. For example, if a company issues 800 shares at $100 each and the general public buys 700 shares out of the total, the subscribed capital would be $70,000. Copyright © 2021 Kalkine Media Pty Ltd. Unsubscribed capital: It's the portion of the issued capital that the general public does not subscribe. Thus, if a company issues 800 shares at $100 each and 600 shares are bought by the general public, the remaining 200 shares form a part of the unsubscribed capital, worth $20,000. Called up capital: It is the portion of the subscribed money that a company uses. For instance, if a company's shareholders pay $50 per share for 100 shares, they have to pay a total of $5,000. Uncalled Capital: This is the portion of a firm’s subscribed capital that has not been called up yet. It could be called upon if the organization needs funds. Reserve Capital: Reserve capital is the component of the uncalled capital set aside to be called up only if a company's winding up or liquidating. It is not possible to name it during the life of the company. It can only be used under exceptional circumstances, such as the company's liquidation. Reserve capital intends to protect the interests of creditors when the company is wound up. Sweat equity shares: Companies give shares to their staff or directors as a token of gratitude for a job well done. Sweat equity shares are the term for these types of shares. Bonus Shares: Investors earn these securities in the form of a dividend. What are the associated risks? Equity shares have their fair share of drawbacks, which tend to amplify associated risks with equity share capital. Here are the key risks linked with share capital: No Buyers A business can sell its equity shares to the general public for purchase. These days, investors have a greater understanding of how the investment market works and which practices will benefit them. They gather detailed data and evaluate an investment opportunity to determine its prospects before deciding to invest. Investors would not be able to invest in a company's shares if they do not meet their criteria or standards. The firm would not be able to raise equity share capital if there are no investors in the stock market. Insufficient Capital Raise As there are many options for investors to pick from in the stock exchange, there are chances of raising capital, which is insufficient for the intended purpose. Liabilities Companies that sell several shares at a low-face value risk attracting a higher number of investors than expected. Getting a broad shareholder base is only helpful if the number of shareholders is held within a manageable range. When the amount becomes unmanageable, it increases the company's liability burden by requiring them to pay a larger portion of their profits as a dividend than they had expected.