We love Diwali—with its wonderful feeling of a fresh new start. And, it came just in the nick of time. A lot of people always want to know the best investments they can make? This Diwali, we want to share one of the greatest investment tip with you. If there is one single investment with the potentially highest payout, we would argue that it is maintaining a healthy body. All too often in the pursuit of financial health, we forget that we also need to invest in caring for our physical health.
We don’t stop playing because we grow old; we grow old because we stop playing.”
Everybody is running around the best 4 star, 5 star rated mutual funds, stock or the cheapest term plan or any killer tip which will make them wealthy. However we often forget more important things in our life like Education , good values and great health which is more critical part of our life , Health is our True wealth and today we want to share an e-book which will help you understand how you can make your life more simpler and healthy using some basic suggestions made in the book.
If you want to invest this Diwali, the best thing I would recommend is to invest some hours of your time to read this valuable ebbok (atleast go through the content page and you will love it) , and your will reap the benefit all your life.
Thanking you all to be part of this awesome community 🙂 . Happy Diwali to you all
Are you confused about many things when it comes to Health Insurance in India ? Are you afraid of rules and regulation in Mediclaim policies ? Don’t you have a clear idea about how will you deal with various things in Health Insurance and delaying your decision of taking a Health Policy ?
Today we will look at most frequently asked questions in Health Insurance try to answer those questions.
1. Can a person get claim from his own company and spouse company if they are covered under both companies ?
Yes, if both husband and wife are covered from their employer, they can claim from insurance provided to them by both the companies.
For e.g. if husband is covered for 1 lac under group insurance policy from his company (and her spouse is also covered under her husband company policy), and the same situation exists vice versa, both of them are then, actually covered for 2 lacs each; 1 lac from their company and 1 lac from their spouse’s company.
Now if something happens and husband gets hospitalized and expenses are 1.8 lacs, then husband can make a claim of 1 lacs from any one of the company and remaining 80k from other company. If you have cashless facility then you just show both health cards. If you don’t, you can get reimbursed by insurance company.
One important point worth noting is that during reimbursement, one should apply for the reimbursement first to his parent company and then to the one of his spouse. See some hidden health insurance policies
2. Do we have to notify the company about any illness or habit developed in between?
No, we are not required to notify the company regarding any complication or health issue. If the policyholder is hospitalized, the company will automatically come to know of it. Otherwise, no need to inform the company about any such policy.
If you notify the company, your premium for year after notification will increase, if it is under their list of illness to be checked. If you don’t notify the company and when you go for a claim, they will come to know that it was developed earlier and the claim will be settled accordingly and from next year onwards they might put loading on it (All these reasons vary from company to company).
So whether you tell them or not, it’s the same thing. They have doctors panels with whom they check your details before giving you the claim.
3. Does Health Insurance cover everything from accident, surgery, normal hospitalization ?
Yes, Health Insurance covers you for everything, provided you were hospitalized, be it for any reason; due to accident, illness, or disease. If someone met with an accident and he is hospitalized, then his mediclaim policy will pay for his bills, no exceptions.
Watch this video to know what are the things to look for while choosing a health insurance plan:
4. What are the advantages of sticking to one Health Insurance company for a long time ?
The plus point of sticking with one company is that if someone is suffering from any pre-existing disease at the time of commencement of policy, those complications will be covered after 4 years. Until portability is introduced in India, this is the single biggest advantage to stick with one company for long.
Another advantage is that when you have a continued policy from any insurance company, after few years you get bonus or discount in premium.
For example: Suppose you have a policy of 3 lacs and you are with the same insurer for past 4 years you can get a bonus of 50% i.e. you pay premium for 3 lac only but you get coverage of 4.5 lacs. Similarly some companies don’t offer bonus but they offer discount in premium i.e. for coverage amount of 3 lacs you pay lesser premium than actual amount.
So if you don’t have any serious problems with the insurance company then it is better to stick to one company.
5. Can NRI’s take health insurance? Can they travel to India for treatment and claim? What about emergency situations ?
Yes NRI’s can take Health insurance in India. They can definitely travel to India for treatment and can claim it. however they will have to show their residence proof, ITR and a few other documents. If they don’t have those documents, then they are not eligible to get insured in India.
The cost of treatment in India is different and cheaper than countries like USA, UK and other European countries. The premium amount computed depends on Indian conditions and parameters. So if a NRI has health insurance form Indian company, that person would be paying premium as per India actuaries and obviously cost of treatment in his residing country would be higher than India.
For example:
If a person get dengue and he is very critical and requires urgent hospitalization, the cost of treatment in India would come up to 1-2 lacs (and this is on higher side.) The same treatment would cost around 10-15 thousand dollars in US so this burns a hole in insurance companies’ pocket.
6. How to claim successfully in case of emergency and planned hospitalization?
The most basic fundamental for a smooth claim process is keeping all your documents up to date. If you have a past history of illness, make sure that you submit those documents too, because the TPA department will come to know whether it’s a pre-existing disease or not.
While submitting your documents make sure that all the documents are proper and there is no missing document pertaining to your illness. This will just give a chance to TPAs to make excuses and you will have to run for your money.
It’s worth noting that in case of planned hospitalization, if you inform your mediclaim company in advance and take prior authorization, everything will be settled by the mediclaim company or TPA, without the policyholder been required to submit any document.
7. Is it better to take accidental policy separately or mix it with term insurance as a rider?
If your accidental policy is a rider with some Term insurance (9 most asked questions about Term Insurance) then you must take care that it covers everything what accidental policy should cover. Generally when a policy is offered as a rider it does not cover each and every aspect.
For example: An accidental policy offers insurance against partial disablement, loss of limbs, hands and many other parts. But in a rider, many insurance company offers insurance against permanent disablement only and not for partial disablement and loss of body parts.
Also note that, because accidental rider is much less if taken with Term Plan as compared to the personal accidental policy taken stand alone. Under term plan, accidental death benefit could be taken for as little as Rs.1000 for a cover of upto 15 lakhs where as in a stand alone policy the same amount will be available for a premium of around Rs.2000. So it depends.
8. What are the top most things one should check in the policy documents ?
The first thing one should have a look at, is to check what the exclusions in the policy are. This is because, we get information on what is covered but no insurance company will give information on what is not covered and this creates a problem at the time of claims. So to avoid any surprises, one should have a thorough look at exclusions as well.
For example: A new circular was passed by many insurance companies few months ago in which they provided only Rs.20-24 thousand (different companies had different rates) compensation for cataract operation. Earlier there was no limit on it.
So sometimes in list of coverage for health insurance we just read the tabular format given by companies but don’t go inside to see the details and this can land us in soup sometimes. Many insurance companies now provide Maternity benefits but they limit it to coverage of only Rs.20-30 thousand, we just see that maternity benefits are given but sometimes fail to notice how much coverage is given.
9. If there are no loading charges, can premium still change on renewal?
This is a very big question with very easy answer..If you check the premium structure of any of the mediclaim company, either there premium is increasing every year or they have premium slab for different age groups; something like for age 30-35 premium is 4200 and from age 36-40 its 6700.
So under this second policy, when the policy holder moves from age 35 to 36, his premium suddenly jumps by Rs.2500 and this is not loading.
So yes, premium can/will increase irrespective of loading after certain age.
10. Is it a good idea to split health insurance into 2 policies? Tips?
No logic for doing this except personal preference. If you are taking another mediclaim policy just to increase your cover, why not get your cover amount enhanced in the existing policy/company.
Get another mediclaim policy only if certain other company is offering feature/features which your existing policy does not and you have surplus funds at your end to afford 2 separate mediclaim policies at a time. No other reason to, otherwise.
11 . During the course of my treatment, can I change the hospitals?
Yes it is possible to shift to another hospital for reasons of requirement, of better medical procedure. However, this will be evaluated by the TPA on the merits of the case and as per policy terms and conditions. Note that it would be prudent if you check the network hospital list and go to the best hospital in the beginning itself rather than changing midway.
12. What are the situations under which one may be denied cashless hospitalization?
If there is any doubt in the coverage of treatment of present ailment under the Policy if the information sent to TPA is insufficient to confirm coverage
When the ailment/condition is not being covered under the policy.
If the request for pre-authorization is not received by TPA in time. In such a situation, the Insured can take the treatment, pay for the treatment to the hospital and after discharge, send the claim to TPA for processing.
In case the hospital in not on the panel of the company or the disease/illness is pre-existing and not covered for 4 years.
13. Whom can I approach in case of a conflict with insurance company with regards to my claims?
The Grievance Redressal Cell of the Insurance Regulatory and Development Authority (IRDA) looks into complaints from policyholders. Complaints against Life and Non-life insurers are handled separately. This Cell plays a facilitative role by taking up complaints with the respective insurers.
Policyholders who have complaints against insurers are required to first approach the Grievance/ Customer Complaints Cell of the concerned insurer. If they do not receive a response from insurer(s) within a reasonable period of time or are dissatisfied with the response of the company, they may approach the Grievance Cell of the IRDA.
Private Insurers:
Shri K.Srinivas, Asst. Director,
Insurance Regulatory and Development Authority
Consumer Affairs Department
United India Tower, 9th floor, 3-5-817/818,
Basheerbagh, Hyderabad – 500 029.
E-mail ids: [email protected]
Public Sector Insurers:
Mr.R.Srinivasan, Officer on Special Duty
Insurance Regulatory and Development Authority
Consumer Affairs Department
United India Tower, 9th floor, 3-5-817/818,
Basheerbagh, Hyderabad – 500 029.
E-mail ids: [email protected] . As claims/policy contracts in dispute require adjudication and the IRDA does not carry out any adjudication, insured’s are advised to approach the available quasi-judicial or judicial channels, i.e., the Insurance Ombudsmen, Consumer for or the Civil courts for such complaints.
The list of Insurance Ombudsmen along with their contact details are available on this website under the heading ‘Ombudsmen
Here is the link
If you have a good broker from whom you have purchased the policy, then they will help you in coordinating with health insurance companies.
14. What is the difference between Critical illness insurance and normal health insurance ?
In a critical illness policy you are covered for certain mentioned critical illnesses only. Some of coverage’s are Kidney disease, brain tumor, and major organ transplant and many more depending on the companies.
If you have normal health insurance you will definitely get covered for critical illness but in critical illness you won’t get coverage for normal disease like malaria, typhoid.
For example: If your age is 25 and you buy normal health insurance from any XYZ company and let say its premium is Rs.3000 for cover of 3 lacs but if you buy critical illness policy for 3 lacs the premium would be less because considering your age the changes of you getting a critical illness is lesser than any normal disease.
Similarly for old age person the premium for critical illness insurance will be more than normal health insurance because chances of getting that critical disease are more at older age. One other option would be to avail critical illness rider in term plan itself.
15. What is the benefit of critical illness policy?
So as you grow older it is advisable to have another critical illness policy along with normal health insurance. So those at old age when undergo major operation or transplant, this critical illness policy can be used and for minor disease normal health insurance is used.
Image source: Slideshare.net
The reason for this is e.g. if you have normal health insurance of 5 lacs and you undergo tumor surgery with other complications and the expenses are around 4 lacs and after sometime you get hospitalized because of ill-health then you have nothing left in your health insurance.
16. What is Domiciliary Hospitalization?
Domiciliary Hospitalization means medical treatment for a period exceeding three days for such illness/disease/injury which in the normal course would require care and treatment at a Hospital/Nursing Home but actually taken whilst confined at home in India under any of the following circumstances, namely:
i) The condition of the patient is such that he/she cannot be removed to the Hospital/Nursing Home or
ii) The patient cannot be removed to Hospital/Nursing Home for lack of accommodation therein
For smooth claim process, just take care that all your documents are in place and to be on a safer side have a report from your family doctor, stating that this person cannot move to nursing home/hospital due to such and such reasons.
It just provides the proof and makes the process simpler. Note that every company does not offer this facility, you should check your policy document.
17. Some important exclusion under health insurance policy.
1 Pre-existing diseases i.e. Any condition, ailment or injury or related condition(s) for which insured person had signs or symptoms and/or was diagnosed and/or received medical advice/treatment within 48 months prior to his/her health policy with the company.
Pre-existing diseases will be covered after a maximum of four years since the inception of the policy
2. Any disease contracted during the first 30 days of inception of policy except in case of injury arising out of accident
3. Certain diseases such as cataract, piles, hernia, and sinusitis etc. are excluded for specified periods if contracted or manifested during the currency of the policy.
4. Injury or Diseases directly or indirectly attributable to War, Invasion, Act of Foreign Enemy, War like operations.
5. Cosmetic, aesthetic treatment unless arising out of accident.
6. Cost of spectacles, contact lenses and hearing aids
7. Dental treatment or surgery of any kind unless requiring hospitalization
8. Charges incurred at Hospital or Nursing Home primarily for diagnostic, x-ray or laboratory examinations, without any treatment.
9. Naturopathy or other forms of local medication
10. Pregnancy & childbirth related diseases
11. Intentional self-injury / injury under influence of alcohol, drugs
12. Diseases such as HIV or AIDS
13. Expenses on vitamins and tonics unless forming part of treatment for disease or injury as certified by the attending physician.
14. Convalescence, general debility, run-down condition or test cure, congenital external diseases or defects or anomalies, sterility, venereal disease.
Do you have all your mutual funds investments in different companies and are looking for aggregating them at a common place? If so, there’s some good news for you. Now you can convert all your existing Mutual funds into demat form, which means that you can now have it electronically stored in your demat account, just like shares! Note, that once your mutual funds are in demat form, you can sell them either through stock broker platform (your demat account) or through the normal way of selling it through your Depository participant (like you do, right now.)
Advantages of converting your Mutual funds into demat form ?
1. Centralization : Once you convert mutual funds in demat form, you will then get just a single statement for your holdings. Right now, if you have investments in say 10 AMC’s, you must be getting statements from all those AMC’s. How to choose a good mutual fund
2. Monitoring : Once you have all your mutual funds at one place, you will be able to monitor them better, & you can see the performance at one go. Compare that to when they were at different places; we tend to be lazy to look at all of them and just keep ignoring them.
3. Fast transactions : : If you have all the mutual funds in demat form, you will be able to sell those mutual funds in stock markets whenever you need money. Mutual funds are now, tradable in stock markets, so you can buy and sell them in stock exchange in real-time. If you don’t have them in demat form, selling them would not be as convenient.
Steps to convert your Mutual funds into demat form
a) Obtain and sign DRF : The first step, is to ask your demat provider (like ICICIDirect, Sharekhan, Reliance Money) for a ‘Dematerialization Request Form’ (DRF) for conversion of mutual funds units held in physical form into demat form. Obtain it, duly fill it and sign it. You should be able to find the DRF form at your demat provider website. [DDET Click here to see a Sample DRF form][/DDET]
b) Sign all the statement of Accounts from your Mutual Funds : You will have to collect the statements from all the AMC’s which have the mutual funds names which you want to convert, once you have them, you have to sign it. You will get all these statements in your email box most probably. This step is important to make sure you have documentary proof that you own those mutual funds and have their names, so if you have investments in 5 different AMCs, you should collect all 5 statements.
c) Submit and Acknowledgement: Submit the duly filled and signed DRF along with and Account Statement issued by the Mutual Fund House to the Depository Participant. Acknowledgement will be given by the Depository Participant for the document acceptance, subject to verification.[DDET Click Here to see all Important points before submitting a Dematerialization Request]
1. The investor should check with their Depository participants (DPs) for the dematerialization Request Form to convert mutual funds units held in physical form into demat form.
2. The details in the DRF, i.e. Name(s), holding pattern and signature should match with the details as appearing in the account statement.
3. The form is duly filled and signed by all unit holders as per the holding nature and is complete in all aspects.
4. All the schemes as available in a folio are mentioned in the DRF and the unit balances as specified are matching with the closing balances available in the folio. No partial units or selected schemes available in the folio will be accepted for conversion.
5. Units requested for dematerialization should be should be free from credit hold, lien or any other hold. In case any units are under hold for want of credit status, conversion will be processed only after clearance of such hold.
6. Dematerialization request should not be submitted if the units are lien or locked for any Income Tax or other legal purpose.
7. Rejection letter will be sent by the Depository Participants if the documents are not in order, units are under lock, or rejected by the Registrar during the conversion process providing reason thereof.
8. Investors can check with their Depository Participant on the status of the request if no intimation has been received within twenty-one days.
9. No separate confirmation letter will be sent by the Registrar for successful transfer of physical units in demat form.
10. Post dematerialization of units the investors can only transact through the stock exchange platform. They will have to approach their broker for purchase / redemption of units.
11. Physical requests received by the Registrar of DSP BlackRock Mutual Fund for purchase/redemption of units will be rejected.
d) Processing : The Depository Participant will process the application for conversion of physical units into electronic form. For this, the DP would sent the request form and Statement of Account to the Asset Management Company (AMC) / Registrar and Transfer Agent (RTA).
e) Confirmation : The AMC / RTA will after due verification, confirm the conversion request sent by your DP and credit the mutual fund units in your demat account.
Selling Mutual funds in Demat form
Note that converting the mutual funds will require you to have a demat account first, so incase you don’t have a demat account , you will not be able to convert them , because unless you have a demat account, how can it be stored . Now once you have converted the mutual funds in demat form , you can sell them through your demat account in stock market , which would attract brokerage as per defined by your Depository participant, however you can also sell your mutual funds through the normal old way where you put a request for sell through a Redemption Form .
Conclusion
This is one of those simple and small steps, towards simplifying your financial life. Once you do this, it can motivate you to take further steps in automating many things which will improve your financial life. Dematerialization of mutual funds will make sure your documentation will improve . Let me know if you plan to do this on comments section .. also lets discuss if anything is not covered in article . Has anyone done this already ?
Last month we launched Questions Forum, which is a place where you can ask your personal finance doubts . There were some prizes which I am going to announce today . JagoInvestor Forum is a place where anyone can ask a personal finance question and get its answer within 24 hours from experts present there .
So if you have any doubts on your Insurance policy , Banking, Mutual-funds, stock market , tax related or any kind of money related query , feel free to ask it . JagoInvestor Forum has got great response in this last 1 month with more than 250 people asking 300 questions and with 1200 answers overall .
First Prize : The winner is Mr. Gopal Krishan Doda. He has been a great help in providing good answers and has answered more than 150 times. He wins a free one year subscription toMProfita desktop portfolio management software worth Rs. 1488.
Second Prize : The second Prize goes to Mr Naveen Arichwal for asking maximum questions. He wins the book on retirement Planning named “Retire Rich Invest” or any other book of choice .
Bonus Prizes : Jagadees and Rakesh (rakeshnwo ) , they also win the book “Retire Rich Invest” , or another book of their choice . They have also contributed well in answering the questions of others . Good job .
Free-Stuff to all Members of the Forum
As promised I also sent some free stuff to all the registered members of the forum. Here is the list of things I sent to them.
HouseHold Budget Spreadsheet to maintain your holdhold budget and see basic analysis
A research report on a Mid-cap Stock (Not made by me)
Do you want these free stuff ? I am planning to mail this to all the members who are subscribed to this blog in coming week , so if you are not yet registered on the blog you can register by putting your name and email on the subscription form on the right side sidebar or Click Here to directly go to the Subscribe Form
Note : Make sure you click on the subscription Link you get in your email after you fill in the information , Its required step to get subscribed
Win Prizes every month
You can now win every month! , You you heard it right . There will be total of 2 prizes every month from now onwards. Just ask a question on the forum for any personal finance related doubts and the question which gets the maximum number of comments will win the first prize. So make sure you ask an interesting questions which is of everybody’s interst and make the question very clear. Apart from this first prize , there will be a second prize for a member who will give the maximum number of good answers and helped other to solve their queries . I will choose the winner based on every month data . So every-month you can win prizes by asking your questions . Let me know how do you like this concept.
First Prize : The person who asks a question and gets the maximum number of comments wins a free one year subscription to MProfit– a desktop portfolio management software worth Rs. 1488.
Second Prize : The second prize would be the person who gives the maximum good answers and helps others in clearing their doubts . He wins a personalised Tshirt or a book of his choice worth Rs 500 .
I would like to hear back the feedback of readers on the forum , Is it useful ? What changes are required to make it a better community ?
Winners Please contact me for claiming the Prize 🙂
Have you already bought Life Insurance ? Though you might have done the sin of being underinsured, I would say its fine, because today we are going to look at detailed steps of buying Life Insurance and we will also learn a lot of things.
Almost everyone has his own set of doubts regarding Life Insurance contracts, but in this article we will not just look at detailed procedure of buying Life Insurance, but also see why most of the people have the doubts which they have. This is probably going to be the last article on Life Insurance you would need.
So here we go. Today for the savvy life insurance buyer, it is possible to buy the policy on the web – it saves money for sure.
Choose company that suits you
The first step in buying Term insurance is to shortlist the company from where you wish to buy the product. There are many companies in India selling life insurance and almost all of them have a Term cover available. Let us call them companies A to M.
Now let us say you like to deal only with A, D, F, G and H. Visit these companies’ websites and find out how much a term insurance for you costs. If you are 35 – look for a policy that will protect YOUR INCOME till the age of say 55 years (choosing age 65 will increase the premium) if your retirement age is 55.
However, if you think you will be earning till the age of 65 years, choose a 30-year plan.
Formalities to fulfill
If you are savvy and patient enough, you could fill up the form online – and a person will get in touch for the formalities. Or you could call up and ask for an agent. On an average the agent will not be very well qualified – but most of them will try to dissuade you from buying a term insurance.
Just say, ‘give me a term insurance form’. There will be other documentation like income proof (3 years IT return), one photograph, pan card etc.
#Filling the form
Next is the process of filling the form. This is one crucial thing that people are normally too lazy to do – so they delegate it to the agent. The life insurance form, the medical insurance form and the embarkation form when you are landing in the US or Israel should always be filled by you personally!
You know about yourself – not the agent whom you have just met. Many of them are worried that you will not be eligible to be insured. So in order to protect their commission (and to please you) will take short cuts, be careful.
#Fill details accurately
Every word, every column in the life insurance form is crucial – that is the reason why they are there in the form. All details should be accurately filled. Make sure that the name in your passport, pan card and the life insurance form are EXACTLY the same.
To the authorities K Balakrishnan is not the same as Balakrishnan Kumar. It may sound trivial, but let me assure you your nominee will not find it amusing.
Besides, check your height, weight (I have seen some agents argue with the doctor to show a few kilograms less and some doctors oblige!), number of cigarettes you smoke, the amount of alcohol you drink, parents illnesses before they were 65, and also your own medical history.
Watch this video to know the steps to buy LIC term insurance plan online:
Faith binds customer, insurer
Let us start from the very beginning. The Life insurance form that you are filling in is called a ‘Proposal form’ – which means you are proposing that you want a life insurance cover. Life insurance business is based on utmost good faith.
The Latin word for utmost good faith is Uberrimae Fidei – which means you (the applicant) is under a basic duty to disclose all material facts and surrounding circumstances that could influence the decision of the other party (the insurance company) to enter the agreement.
Non-disclosure or a partial-disclosure makes such agreements voidable – the insurance company can choose to ignore it, but they have a right to cancel the contract.
As per the contract, you are proposing and giving all your details that are asked for in the form. This includes your age, height, weight, your smoking and alcohol consumption habits.
#Be Truthful
You should be truthful because of two reasons – one it is necessary to be truthful. The second perhaps the more important reason is when you are not truthful and you were to die, your nominee will not get any money. If a person has taken a policy just say 8 months before the claim happens, there is almost a 100 per cent chance that the claim will be investigated.
Here the company literally looks at the application with a fine comb and anything that has not been correctly stated will be used against the claimant.
If for example: A person dies in a road accident – and what has been hidden was say blood pressure – Insurance companies have said ‘his blood pressure may have caused him some inconvenience while crossing the road…’
Think about your nominee
One very important thing which most life insurance buyers forget is that by lying on the proposal form they are telling a lie to their nominee, not to the life insurance company! If on death the claim amount is not paid (IMMEDIATELY), it is almost like the policy did not exist.
Cross-check copy of application form
Apart from the critical questions, there are some other questions like caste, spouse’s name, spouse’s occupation and children’s names, especially if the nominee is more than one person.
When the company issues a policy, they are bound to send you a copy of the application form – please check whether it is the same form which you had filled. A while ago I heard of a case where the agent had changed the form – and removed the illness clauses before submitting the application to the company.
As the case involved an employee of the company – the critical illness claim was paid without a murmur. What helped was the fact that the client had kept a copy of the application!
Take your time
Please remember even if you are paying a small premium (term premiums are not large), the sum assured is normally a critical amount and your dependents are waiting for that cheque to carry on their lives. It is quite all right for a person to spend some more time while taking a policy but any delay at the time of claim settlement is bound to unnerve the dependents.
Everything that you say in the form – your job, income, past illnesses are all critical to the whole process of underwriting of your policy. The life insurance company also collects data – if it finds that a certain occupation is prone to a particular type of illness, they may ask you to go through some more tests before they issue a policy.
Understand the contract
There is a big difference between a mutual fund ‘investment’ and a ‘life-insurance’ contract. In case of a mutual fund, the asset management company is making an ‘Offer’ to you. This means if you issue a valid cheque, units will be allotted to you. They are making the offer, and you are accepting.
In case of an insurance contract, you are ‘Proposing’ saying that you want life insurance. If your cheque goes through, then the life insurance company calls you for a financial and a medical underwriting process.
If they are satisfied that your life is a normal life, they will issue you a policy. Once a policy is issued by the company it means you have a contract that is binding. On you the liability is to pay the premium regularly, and on them is a duty that in case of death, they should pay the sum assured amount to the nominee.
This is critical and a very important contract which you should understand reasonably well.
Conclusion
Life Insurance is an important decision in life and each step in this whole process is critical to make the whole decision successful and free of any hassles later. Lets look at the whole steps once again through the diagram.
(This article appeared on moneymantra.co.in and has been republished on this blog with their permission. The article is written by PV Subramanyam who also blogs at www.subramoney.com)
Are investors in India spoiled a lot? Does it look like we have enough regulations for the investor to make sure his money is safe or do you think that laws still need to be made to make investing a happy experience?
The stock market looks robust and we haven’t seen a major scam for quite sometime now; IRDA and SEBI have and are still sorting out the ULIP mess; SEBI has made Mutual Funds cheap – is there more the investor wants?
Sure they do – there is always room for improvement at the top! To assist the regulators, the investor needs to increase his awareness too. Here are my top 3 wish lists for the small investor in the personal finance space which will make investing a memorable experience for him.
#1 Introduce Stringent Real Estate Regulations
A home is often the most prized possession for the small investor today. But often he finds himself at the receiving end of the deal. The modus operandi is the agent or builder will sweet talk you into booking an apartment after you have shown interest in the project.
Once you shell out the booking amount, you are locked in with the builder and the project you bought into. Future demands of money come in; you pay up through a home loan and the builder delays the apartment delivery, in many instances routing your money to launch other projects. A home is the biggest asset the small investor buys in his lifetime( Also see Tips to Buy house).
Paying the home loan is a huge burden to begin with.
Given this, it is but anybody’s guess what a nightmare he goes through when the real estate builders delay the projects by years – the investor has to pay the rent and pre-EMI together. That is a huge drain on his finances.
The regulators ought to come out with a mechanism to stem this rot. Builders need to be rated and penalized for late or shoddy delivery. There needs to be a mechanism in place to penalize builders who cannot deliver the most prized and costly possession for the investor.
CRISIL has already come out with its Real Estate Star Ratings in August 2010 – we will have to wait to whether this helps the real estate industry in a positive way or it becomes just another rating mechanism without serving any useful purpose for the buyers. Till that happens, the investor has to suffer and fight the battle himself.
#2 Sell Insurance to protect against risks, Don’t just make commissions
The old adage “Insurance is never bought, it is sold” holds true even today. Seldom does one buy insurance for protection purposes; it has been mostly sold as an investment vehicle. And whenever a product is sold, it is commissions that drive the sale, not the investor’s profits.
Call it the insurance agent’s smart tactics or the gullible investor’s ignorance, insurance, and especially ULIPs, continues to be mis-sold. This seems to be the most talked about topic in every personal finance corridor. There are regulations to stem the dirt from spreading and there are investor awareness programs out there; the regulators fight and introduce more regulations but at the end of the day, the investor continues to still suffer.
Given the history around this, I think no amount of regulation can eradicate this illness. The only answer is investor awareness. If the investor empowers himself with what is best for him, he will buy the best insurance and probably look at money back, endowment plans and ULIPs the last!
We need to get to a state where insurance is sold only for what it’s meant to be bought for – protection!
#3 Educate themselves about Equity, Don’t just have a short-term view
It’s a very old saying – “It’s not timing the market that matters, its time in the market that matters most”. Equity is meant for the long-term but most investors buy and sell equity to make profit in the short-term.
The investor’s lure is milked high and dry by brokerage houses that earn on brokerage charges which investors generate for them by buying and selling securities.
All brokerage houses will bombard you with SMSes and calls about a hot stock tip, in fact, we recently had the same brokerage house giving a buy and sell signal on the same stock on the same day, one to institutional investors and the other to retail investors.
More churning and constant buying and selling never made anyone rich except the broker. Look at what the Executive Director and COO of Pramerica Asset Managers was quoted in Money Today as saying.
Active and passive trading:
It has been proved that the amount of money that one could generate by active trading is usually less than the amount you could generate by passive investing over a long period of time.
Despite this, most of us still lose money by trading; brokerage houses still walk away with our hard-earned money and we keep thinking “How did the guy next door get rich quickly ?!”
IPO’s are issued using the book building process with the idea that the price discovery will happen by buyers but it’s anything but that. Investors still lose money in IPOs. It’s not just insurance that is mis-sold, its equities too !
As a nation bursting at it seems with a young population, the regulators, investors and product sellers need to make sure that investors can have the confidence in investing in products that suit their over all portfolio – its only then that we can pass on the baton of confident investing to the next generation.
This is the 3rd series of learning from comments ,where I handpick some of the best comments which gives some very good insight and useful information. Following four comments talk about Gold ETF’s , Education about finances to Children , Real estate prices relation to supply of land and KYC .
Gold ETF’s might not be safe
There are serious allegations on various gold etf’s & custodians like GOLD across the globe of using very high leverage for gold holdings. I was going through the fact sheet of SBI GETS & UTI GOLD FUND. Susprisingly all indian ETF are using Bank of Nova Scotia as the custodian for Gold. If you just try to find out the repute of this custodian in financial blogosphere by typing ‘Bank of Nova Scotia is the custodian for Gold’ in google search, you will get to know the kinds of risks involved in GOLD ETF’s – mainly technical risk (its a technical default if gold is not held in reality). So as they say Let the buyer beware. Since most indian families usually keep atleast one locker, i would suggest its better to buy physical 100gms /coins from a reputed jeweller with bill. Its also more easy at the time of selling if bought frm a jeweller than buying coins frm bank also its costs less. – Shared by Rahul .
Money should be discussed with Children
You are right Manish as everybody must teach the children about money but the biggest dilemma people face is how they will be treated back if they start talking about money. Our society treat Money as necessary evil with more stress on the evil so 9 out of 10 times a person is feared to be called Money minded or Kanjoos if they just try to stick to a discipline of Budget within their family. So many parents just avoid asking their kids how they spend money for the sake of their image. We have always thought money as a bad thing which must not be discussed (Mard se uski kamaai aur aurat se Umar nahin Poochte 🙂 ). In our films Rich has always been a villain but things have to be changed. I still wonder that rather than showing hero taking a loan from money lender and then becoming a Daku for revenge, why dont our films show that taking a loan to spend lavishly on your daughters wedding beyond your means is bad thing and the best solution to keep lala away. Secondly we always think that kids are not mature enough to talk about sex and money. (Often not knowing how smart they are 🙂 ). We must respect their senses and impart knowledge to them gradually. If you dont teach your kid about these things he will seek Pornography and Financial Pornography is much more dangerous. Can we compare “double your money schemes in one year” with Pr*******tes in the world of finance. So every parent has to cross these mental blocks and take up this duty to empower their kids to face the real world. – Shared by Pramod
Is Short supply of Land responsible for High Real estate prices
Who says land is in short supply in India ? It is kept in short supply in India by the builder politician nexus. Have you ever tried to look at Delhi’s satellite image from Google maps. Mind you 50 % of the land within boundaries of NCR is vacant. The mechanism is – You (Farmers or forest or something else) have land. You want to build a house over that land. Govt will not allow you and will force you to buy some expensive piece of land in an “approved” area. Once all the land is sold then the same land where you or any other ordinary citizen was not allowed to build houses (becuase the land was meant for farming, forest, green belt Archeology blah blah blah) will be captured (acquired) by the govt and will be given to builders by changing status of the land use. Then you will buy the plot at sky high price and new land will freed once all the plots are sold and the cycle goes on. If govt declares its master plan at once and free all the land which is marked for residential use in one go then there will be no shortage and no high prices. BTW All of the population lives on 30% of the land. Rest 70 % is covered by ice, deserts, high mountains etc. Just wait Global warming will ensure that if 10% of the world sinks in water 20 % will become available to mankind as ice shields will go away 🙂 Wait till Unitech starts buying Norway and Siberia. – Shared by Pramod
How to Check if you are you KYC compliant
For those who are not sure if they are KYC compliant can check the http://www.cvlindia.com/. Click on ‘enquiry on kyc’ option (Direct URL) and enter the pan card number. Invalid data means the person is not KYS compliant. Shared by Raj Panda .
From the Budget, infrastructure bonds are also eligible for additional tax exemption upto Rs 20,000 over and above Rs 1 lakh under Section 80C. IFCI Ltd was the first company to issue these infrastructure bonds and they have collected a substantial amount in the last few months. Now, IDFC Ltd has introduced its infrastructure bonds and there are a lot of investors, who are considering these bonds as an option to save additional tax for this year. Rajendran and Prashant have also asked the questions related to Infrastructure bonds some days ago on Jagoinvestor Forum. In this article, I give you brief information on IDFC Infrastructure Bonds.
The maturity period of these bonds is 10 years and the lock-in period is five years. These bonds will be listed on the Bombay Stock Exchange and National Stock Exchange. After completion of five years, you can keep these bonds for additional five years and withdraw money at the time of maturity. In case, if you need to withdraw money before maturity, then you always have an option to sell these bonds on stock exchanges. Thus, these bonds can be traded like stocks on the stock exchanges but only after the lock in period of five years is complete. You would require a demat account and Permanent Account Number (PAN) to invest in these infrastructure bonds. The face value of each bond is Rs 5,000. The minimum application has to be for two bonds and in multiples of one bond thereafter. Hence, the minimum investment required is Rs 10,000. You can invest more than Rs 20,000 in these bonds but the tax-exemption would be only upto Rs 20,000.
Taxation on Infrastructure Bonds
You will get tax exemption benefit up to Rs20,000 when you invest in these bonds. However, the interest gained will be taxable. The interest would be added to your income and taxed at the existing slab rate. this taxation rule will be same even after Direct Taxes Code (DTC) Bill comes into effect. Both, the current Income Tax Law and DTC require you to pay tax on the interest earned.
Infrastructure Bonds in different series
Note that these bonds come in 4 different flavors and they are called as Series 1, 2, 3, 4 . Each of these series is different from each other in some way. There are two main things you should understand , which might be of concern to you.
Interest Cumulative : Series 1 & 3 do not provide cumulative interest. They will pay interest annually. For example, if you invest Rs 10,000, then after completion of 12 months, the interest amount will be paid to you every year and the bonds maturity value would be same as your investment. However, bonds which have cumulative interest will keep accumulating interest. And this interest would be compounded every year. (see CAGR)
Buyback : Series 3 & 4 have buyback option. Buyback option means that you can sell your bond back to issuing company after five years; once the lock in period is complete. In return, you will get back your original invested amount and the interest accumulated for five years. You would notice that interest rates for series 3 & 4 is 7.5%, which is because they have an added advantage of buyback facility. If you don’t want buyback option, you will get 8% interest. People not opting for buy-back options will depend on secondary markets to sell their bonds if they require money urgently before maturity (10 years). Thus, after lock-in period (five years) is complete, they will have to find a buyer in secondary markets else wait till maturity, when they will get the money back from IDFC.
Other features of IDFC Infrastructure Bonds
NRI’s cant invest in these bonds (Only available to Resident Individuals and HUF’s)
The bonds don’t attract any TDS
The bonds are rated LAAA by ICRA, However high rating is not something you should be very excited about. (Link)
The interest accrued on the bonds will be credited to the respective bank registered with the demat account through ECS on the due date for interest payment
Interest on the bonds shall be payable on annual or cumulative basis depending on the series selected by the bond holders
The bonds can be pledged for availing loans after the lock-in period of 5 years
Subscribe to the Bonds in physical form
If you do not have demat account and want to apply for these bonds in physical form , you can still apply for them using these steps (link) , Thanks to Srinidhi for giving this info .
Don’t fill up the demat details in the application form
Compulsorily provide the following three documents with the application form:
Self-attested copy of the PAN card;
Self-attested copy of a cancelled cheque of the bank account to which the amounts pertaining to payment of refunds, interest and redemption, as applicable, should be credited.
Self-attested copy of the proof of residence. Any of the following documents shall be considered as a verifiable proof of residence:
Ration card issued by the Government of India; or
Valid driving license issued by any transport authority of the Republic of India; or
Electricity bill (not older than 3 months); or
Landline telephone bill (not older than 3 months); or
Valid passport issued by the Government of India; or
Voter’s Identity Card issued by the Government of India; or
Passbook or latest bank statement issued by a bank operating in India; or
Leave and license agreement or agreement for sale or rent agreement or flat maintenance bill; or
Letter from a recognized public authority or public servant verifying the identity and residence of the Applicant.
Should you Invest ?
Though, it’s mentioned that the interest rate on these bonds are 8% or 7.5%, the interest earned would reduce further to 5.5%-6% range when you count the tax paid on interest. But if you look at it from a different angle, and count your money saved due to the tax-exemption at the time of investing, in that case the return would turn out to be around 9.5%-10%, but do you think it’s the right way of looking at returns?
What do you think about these bonds ? Are you investing or not and why ?
Today we discuss two concepts in Health Insurance, generally present in the policy document, which policyholders are not normally aware about, because they don’t care to look at those clauses. We are talking about concept of Loading and Co-Pay . Let’s talk about both the concepts one by one.
What is Loading in Health Insurance ?
Loading, in terms of Mediclaim Insurance means the Insurer (Company) will charge more amount than the regular premium from the policy holder after a claim has been made. Suppose, for eg., you have an Insurance policy and you pay Rs 8,000 each year in premium, and now suppose in 3rd year you make a claim, then from the 4th year onwards, your premium increases by a certain amount which can range from 5% to even 300%. The increase depends on the company terms and the rules. If the loading is 50%, your premium will increase by 50%, which is Rs 12,000. Loading can apply with every claim you make. Please check the brochure off loading is 50% , your permium will increase by 50% , which is Rs 12,000. Loading can apply with every claim you make.
Please check the broucher of ICICI Lombard mediclaim policy stating different slabs for different amounts of claim made. One more product, I would strictly advice all the readers to stay away from, is Star Health’s Red Carpet policy for Senior citizens. This is one of the most fictitious policy, I have ever come to known. Not only is this policy, making an option of Co-pay up to 30% but also has Loading as well. So, a senior citizen, who is normally retired and must also be suffering from one ailment or the other, will be forced to shell out a huge amount of expenses for hospitalization in addition to the premium paid. According to me, it is of prime importance, for the prospective client to look for the clause of Loading in the policy document of said company.
But it doesn’t mean that all Mediclaim Policies in the market come with the Loading clause. There are a few companies in the market without such Hidden Riders like United India(Gold and Platinum only) and Max Bupa. This concept of Loading defeats the very purpose of Mediclaim. An individual takes a Mediclaim Policy, just so that he won’t pay anything extra, out of pocket but ultimately, he is spends more by way of Loading after the claim has been made..
Why Loading concept is there from Insurance Companies ?
Generally, the insurance company is of the view, that once a policyholder has made a claim due to any illness or some major illness, he might make the claim again in future (if not near then in the distant future), so just to be prepared to face those recurring claims, the company tries to safeguard itself, by procuring a larger premium by way of Loading. Sometimes, it make sense but most times, it does not! The only justification on the company’s part, is that they make this loading thing clear, at the very inception of the policy, in its brochure as well as its policy documents and they do take, a declaration from client that they knows about it with his/her signatures. If the client doesn’t read/go through these details and is later on required to shell out more from his pocket, then it is his mistake not the company’s.
So my advice for all the readers out there; Dear friends, don’t get fleeced! By the sheer laziness of not reading/going through the policy brochure or documents, we will be facing heavy Loading, both of money and of tension.
Is loading acceptable ?
On the brighter side, companies can not just have any kind of unreasonable loading in policies. These have been challenged by consumers, and often the consumer forums have taken decisions in favor of consumers. Here’s a case in point –
Amina Sheikh, an octogenarian, was insured for Rs 1.5 lakh for a decade by the National Insurance Co. Ltd. under its Mediclaim Policy. When her policy was due for renewal in 2007, the company increased the premium from Rs 5,305 to Rs 32,787. This was done to make it financially unviable to continue with the policy. Her daughter protested, so the premium was brought down to Rs 23,845, which too was very high. She was forced to pay this premium and renew the policy to avoid a break in insurance. Her daughter wrote to the company demanding an explanation for the arbitrary increase. The divisional manager replied that the policy now stood cancelled as Amina did not seem happy with the firm. He also clarified that the premium doubles immediately when a person crosses 80 years of age and for her, the premium had been loaded by another 100% in anticipation of claims arising due to advanced age.
CWA then filed a consumer complaint. Rendering the judgment on behalf of the bench, the forum president observed: “Managers of public sector undertakings are duty-bound to take decisions based on facts and not in an arbitrary and irresponsible manner based on their emotions.”
The Forum held that the loading of the premium was arbitrary, unjustified, and contradicted the terms of the policy, which is deficiency in service and unfair trade practice. The forum directed the firm to continue the policy by charging Rs 13,112 and to refund the excess premium collected. It also directed the company to continue renewals without loading as long as the insured paid regular premium in time. Also, compensation of Rs 15,000 for mental agony and Rs 2,500 as costs were granted. Source : TOI
[DDET Click to Read 2 more cases]
Case Study 2: In Dr Rupali Shirke’s case, the insurance company loaded her premium by 50%, increasing it from Rs 7,727 to Rs 11,824 and decreased the sum insured from Rs 5 lakh to Rs 2.5 lakh. This was done because of two claims lodged by her, which were genuine and settled by the company. This was considered as an “adverse claims ratio” by the firm. When she protested, the insurance firm ignored it.
CWA filed a complaint challenging loading of premium and reduction of the sum insured by United India Insurance Co. Ltd. The Forum held that the firm was bound to renew the policy on the same terms and conditions. It directed the firm to restore the sum insured and charge regular premium without loading. A compensation of Rs 5,000 and costs of Rs 5,000 were also awarded.
Case Study 3: In the case of Hoshang Khan, after a claim was lodged, the insurance firm imposed a loading of 400%, increasing the premium from Rs 10,558 to Rs 55,952. Khan could not afford the high premium, so he sent the premium cheque without the loading, but the insurance company returned it. CWA filed a complaint against United India Insurance Co. Ltd. The Forum held that loading of premium was arbitrary and unjustified. It directed the company to accept the premium without loading. On receipt of the basic premium, the firm was directed renew the policy with retrospective effect from 2006 onwards to maintain the policy’s continuity.
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What is Co-Pay in Health Insurance Policies ?
Co-pay, as the name signifies is the payment made by two parties, even if that is not in equal proportions This is another important factor to be kept in mind while selecting the Mediclaim policy for oneself. Under this clause, the insured is also required to bear a certain percentage of expenses incurred on illness/disease while hospitalized, either conditionally or under certain conditions..
Usually, in our country, the concept of Co-Pay only comes into picture after a certain age. Most of the companies levy this clause once the policyholder enters the Senior citizen category, that is after the age of 60. Mostly this percentage is mentioned as 20% pay – i.e., policyholder is required to pay 20% of the expenses out of his own pocket. For eg, if Mr X, who is 63 years old falls sick and has to be admitted to the hospital for 5 days, for which hospital bills come out to be Rs 80,000 and his Mediclaim Policy mentions 20% co-pay, then Mr X has to pay Rs 16,000 and rest Rs 64,000 will be borne by the company. The basic understanding behind this clause, is that the company is expecting an increase in claims from this particular section of the policyholders, – the senior citizens. The company’s thinking is that as the age progresses, the chances of policyholders getting sick increases. The expenses on his treatment for a given complication will also be higher as compared to the same treatment for someone who is much younger, say age 38 or 40. Looking at it from the prospective of the company, this clause seems logical but as an individual policyholder, I believe this is one of the main thorns in the flesh of the policyholder who is entering the age bracket of 60s. I believe this percentage has to go down, or associated to some very major complications/illnesses, or senior citizens should given some rebate on premium year on year just to balance out this Co-Pay clause.
Some other companies, preferably PSUs, charge this co-pay clause if the policyholder is taking treatment in out of network hospitals. Earlier, they would apply this co-pay concept, in case the policyholder chooses a higher-end hospital with air-conditioned services or someone from smaller city getting treatment in costly cities like Delhi, Mumbai, Chandigarh, Bangalore etc. At that time, co-pay clause was built in to ensure that the policyholder choose the appropriate hospital/doctor/room level relevant to his economical status as well as the premium paid by him to ensure there is no overspend just because of the existence of the mediclaim policy.
So dear all, please keep an eye for co-pay clause in the policy which you are thinking of buying for yourself as later on, it may negate the very concept of cashless or reimbursement later on as later on! And in the 60s when people have mostly retired with no real source of income, to pay even 20% of the total expenses out of own pocket would be a considerably big amount.
So should you choose a company without co-pay and Loading clause ?
No, not always , you should not make co-pay and other clause as the sole criteria for choosing the policy because even if a company does not have co-pay and loading clauses today , it can include them at later stage . As per Medimanage company
“Again in our opinion, a clear loading policy is better than those policies where there is no explicit loading clause. This is because every policy wording has a term where it clearly mentions that “all terms including premium are subject to change on renewal, based on claims or otherwise.” – this makes you exposed to an unlimited extent, when you grow older. Bajaj Allianz implemented a new loading clause in August 2010. The most scientific loading policy is that of ICICI Lombard, which has classified claims into Chronic and Non Chronic. Non-chronic claims like an accident or Malaria etc. would have a loading only above a certain threshold claim amount, which is not carried forward in the subsequent year. Whereas chronic ailments will have a loading of 75% and carried forward upto 200%.
Finally remember, even if you are buying a policy without loading this year, nothing stops the Insurance Company to add a loading clause at the time of renewal. Dont choose a company only because it does not have loading, choose a company which is stable in its services, and does not make frequent and big changes in their policy conditions.”
Please let me know your comments on this topic . Do you feel its ethical to just mention in the document and not make customers aware about it from their own side ? Do you think if companies disclose about it while selling the product face to face, it would create more respect for companies ?
The inputs are provided by Dhawal Sharma, who is an agent for Kotak and Max Bupa .
We had Mumbai and Ahmedabad meets in last month and I am sharing Presentations and Pictures of those meets . We have done around 5-6 meets in total in Pune , Mumbai and Ahmedabad as of now and we are looking forward to do more in coming months with more better structure and more enthusiasm .
Mumbai 3rd Meet Presentation
Ahmedabad 2nd Meet
Give your opinion on these meets and presentations . Readers from Mumbai/Ahmedabad are invited to Join our Facebook group and also attend future meets. We will try to do the next session by this month end or the next month end depending on how much we can do it with everyone support. We would like to hear your suggestion about the meets in cities and what you all are looking for these meets which we do face to face. Should it be more on basic level or at advanced level ? What topics should be cover in coming sessions . We would do Bangalore session soon .
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