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POSTED BY ON February 13, 2012 6:57 pm COMMENTS (64)
I am creating this thread to consolidate the common questions / FAQs related with Financial Planning. I thought it would be better if we capture this in a separate word doc. I suggest to make this document as public Google doc so that anyone can post questions and answers without uploading the doc again and again. Also I am OK to post the individual questions in the page itself. I am OK with any of the options and leave the final decision to the moderator. I am starting with 33 questions now and i request the respondents to respond either in line or specify the question for which you are answering back. Thanks a Lot.
Cheers
Sowmi
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Dear All, new queries can be added here in this discussion to add the info. so please feel free to ask more questions in this discussion.
Thanks
Ashal
Hi Ashal,
I had sought advice from one of the leading tax consultant companies on how/where to invest to help me save taxes.
I had also shared my latest salary slip, IT computation sheet,LIC receipt and also my rent receipts (Bangalore) with them so as to have an all-round information.
They had viewed the same and had responded back to me with the following suggestions:
Take Supplementary allowance as reimbursement.
Take home loan and save your tax liability.
Take car lease from your company and avail the benefits of installment paid from the company.
Invest in NPS to save your tax liability.
Also take Mediclaim policy.
Also you can invest in 80CCG i.e Rajiv Ghandhi Saving Scheme and avail benefits for tax saving
Also take rent receipts of an amount of Rs.14500 per month and save your tax liability.
Only 5yrs FD’s is eligible for tax savings its better to invested either in 5 years or some other investment.
I have my own doubts/questions related to the above suggestions (pointwise questions as mentioned below).
In my job grade, I will be eligible only for medical reimbursement as supplementary allowance & leave travel allowance (LTA). I cannot opt for LTA as I will not be in a position to submit the train tickets and take leaves for continuous 10 days at a single stretch. So the only option left with me is medical reimbursement which I am currently taking as monthly taxable. I am getting 1250 per month (1250*12=150000) credited and the same reflects in my salary slip and hence not sure of the difference it makes when the change is made from monthly taxable to reimbursement. Also note that my company does not provide any food/meal coupon for any supplementary allowance.
I am not planning to take a home loan as this is not suited for my requirement.
My job grade does not permit me to take car lease or car loan from the company.
Please let me know whether investing in NPS is a good option. If yes, let me know any recommended NPS names associated with this scheme.
Currently myself,spouse and kid are covered under my company medical insurance coverage which is quite good. If still this needs to be considered, let me know any recommended mediclaim policy. As my parents have their own medical insurance(Ex Army insurance coverage), they do not need one as of now.
Please let me know whether Rajiv Ghandhi Saving Scheme is a good scheme for tax saving. If yes, how much amount needs to be deposited.
I am paying a rent of 12000 INR (currently) and while declaring the same on my company payroll procedure, I need to declare the PAN number of my owner. So is changing the rent amount to Rs 14500 per month be a cause of concern to my owner.
I have knowledge and had invested in 5 year FDs for tax savings. Any suggestions on much more attractive schemes for this place. I have heard a lot on ELSS but not sure on the fund names and the real benefits comparing to 5 year FDs when it comes to tax savings.
Over and above all the questions, I have heard that the max amount we can show for tax savings is 1,50,000 no matter whatever the salary is credited. Does it include all the sections or is it that only for 80C. If so what about the caps for other sections like 80CC, 80 CG and all.
A detailed answer to above will be of great help. Thanks.
Dear Mani, please contact me over my email id. ashalanshu @ gmail. com
Thanks
Ashal
Thanks. I have sent a separate mail to your email ID.
Dear Swaami, you are always welcome. I’m happy that you found the discussion educative. Please feel free to post your own queries.
thanks
Ashal
Dear Sowmi, your basic understanding of each of the loan product was ok, hence did not add anything extra.
Thanks
Ashal
Dear
Ashal Jauhari,
First of all a lot of thanks for ur kind patience while answering these queries…
Many a times i visited this site, but now for Ist time im commenting over here.
Thank U to Sowmi too for raising a very good, educative questions..
Thank U guys…
Dear Ashal,
I am not getting you. Do you mean for financial contributions I need to contact Manish? Ok, Fine. I will do that.
But hope you respond to the original questions related various loan types?
Thanks Sowmi
Dear Sowmi, please Manish & do needful. 🙂
Thanks
Ashal
Dear Ashal
This is really amazing…. answer all the queries (nearly 30+) in short span of time…
Great job … thanks Sowmi for putting this queries 🙂
Regards
Nagarajan Santhan
Dear Ashal, I don’t think I can share it in the open forum. Sorry. :(. Hope you understand. Actually intention of the above question is to get a general pros and cons of each loan type and how we need to act in a above given typical situation. So as you clarified for other points I expect a overall guidelines from you. Thanks a lot. It is always pleasure to talk in this forum particularly to you.
I have one quick question and suggestion. I strongly believe there is NO free lunch. Like many others I gained so much from this site / forum without spending any single paisa. I just want to contribute some small token amount for my own satisfaction. How I can do this ? Is any way I can do like in Wikipedia.
Cheers
Sowmi
Pay it Forward!
Otherwise, ask Manish/Nandish.
Dear Sowmi, nice to have you after a long time. I want to know your current mly income, the EMI for the new home loan, the value of property you intend to LAP. income of your spouse if any, Gold valuation?
Please elaborate.
Thanks
Ashal
Dear Ashal,
I have few clarifications regarding various loans like Personal, LAP, Gold Loan and Home Improvement loan. Note: Before putting this question I thoroughly referred this site and also few more resources. But I would like to confirm with you before proceeding on this. Thanks for your help. Also I don’t want to create new thread but combining under this post will be appropriate and helpful.
Actually my requirement is I already took a home loan (assume already borrowed entire loan amount) but due to various factors I still need much more money like 10 lacs to do further interiors and finish the home. Now out of various loans like Personal, LAP, Gold Loan and Home Improvement loan which one is best and benefit to the borrower. Kindly share the pros and cons. My few bents are below.
Personal Loan – Least Preferred due to higher interest but we can easily avail this.
LAP – Next to home loan this is the most preferred way but I believe we need to pay property registration amt etc. Please elaborate the
complete procedures involved on this. I also read the below link too. Also please clarify which bank is best and cheaper one?
http://www.rupeetalk.com/finance-basics/loan-against-property-basics/loan-against-property-tips/disadvantages-of-loan-against-property.php
Gold Loan – Easy to avail but little bit costlier than LAP. Isn’t?
Home Improvement loan – We can get only for specific purposes and that too small amount. Isn’t?
Cheers
Sowmi
Dear Sowmi, As usual few more follow up answers from my side. 🙂 🙂
Q1) Since I am from Chennai and Apollo ……..
Sowmi 21-Feb-13 : I would like to merger other question Q3 also along with this. So based on your responses it seems if it is individual mediclaim policy (irrespective of whether it has only one member or having one primary member along with any no of co members like in case of my parents individual policy) even after the demise of primary proposer / member the policy will be effective for other co members. Isn’t ? In other words in case of individual medi claim policies even though there is one policy number each co member will be treated separately. Please confirm.
My take – Yes, your understanding is correct.
Q2) My FP does not want to surrender my current policy………….
Sowmi 21-Feb-13 : You are suggesting for portability so that we won’t loose the pre existing coverage of the existing policy. Isn’t? Otherwise there is no point (not advisable) in doing the portability of the old policy. Please confirm.
Yes, the porting was suggested to get continuous coverage on pre existing clause in new policy from Apollo.
Q3) My father age is 72 and mother age is 62………
Sowmi 21-Feb-13 : It is a individual medi claim policy having my father as primary insurer and mother as a co member. Each is having a coverage of one lac. Hope my mother may continue with her cover in case of demise of my father. Please confirm.
Yes. At the same time, please check with your insurer to increase the cover from existing 1L to at least 2L Rs. to fight it out against the impact of inflation.
Q4) Can you please suggest me some of the best H……..
Sowmi 21-Feb-13 : Now I am some what clear about handling myself and family members. Now the challenge and prime requirement is that I want to cover my parents with higher SI or at least my mother after my father demise ? Kindly advise for this scenario. Thanks.
Please read above.
Q6) Few months back one of my family member was .
Sowmi 21-Feb-13 : Yeah. Will think over and conclude. By the way is there is a best web site to do comparison of different HI and know the exact performance , track record of the insurance company and particular plan ? Please advise.
Please contact http://www.medimanage.com
Few more additional questions.
Q7) Can you please refer some good articles to choose the best HI or plan for it? Ex : It should cover end to end planning and implementation details like In general which one we need to choose either a individual medi claim or family floater ? .If not I humbly request you to write one NOW. .
Please read above.
Q8) You talked about raising the SI. Can we do this on our own .
You may ask your insurer to cover You & your family members based upon your requirement.
Thanks
Ashal
Thanks Ashal. As usual few more follow up questions.
Q1) Since I am from Chennai and Apollo is having strong presence My FP advised me to take a new two Health Insurance policies from Apollo Munich as I am a primary member and one of my child as a co member and similarly in the second policy as my wife as a primary member along with another child as a co member. The main idea / reasons behind this suggestion was
a) After my children’s marriage / they become major / they become employed we will remove them from the respective policy so the policy become a single medi claim from a family floater policy.
b) Second once the primary member of the policy dies the policy becomes void / expires. Is it true? Can one of the co-member can’t become the primary member and continue it?
My Take – a Good idea. Yes, after the death of the policy proposer, the policy becomes null & void & family w’d have to procure a new policy all together. so the info given to you by your FP is correct.
Sowmi 21-Feb-13 : I would like to merger other question Q3 also along with this. So based on your responses it seems if it is individual mediclaim policy (irrespective of whether it has only one member or having one primary member along with any no of co members like in case of my parents individual policy) even after the demise of primary proposer / member the policy will be effective for other co members. Isn’t ? In other words in case of individual medi claim policies even though there is one policy number each co member will be treated separately. Please confirm.
Q2) My FP does not want to surrender my current policy and he want to close it after the new Apollo policies starts covering pre existing diseases. Will the HI portability does not cover the pre existing decease?
Instead of surrendering, my take ‘ll be to check with Apollo for porting of your existing policy & then increasing the cover there. Alternatively, Purchase a new policy there for Wife as proposer & all of you as beneficiary & then port your policy there. Once the pre existing clause completes it’s term, please opt for name deletion from respective policies to make it the way as your FP suggested.
Sowmi 21-Feb-13 : You are suggesting for portability so that we won’t loose the pre existing coverage of the existing policy. Isn’t? Otherwise there is no point (not advisable) in doing the portability of the old policy. Please confirm.
What do you think about the overall above approaches?
Please read above for my take.
Q3) My father age is 72 and mother age is 62. My father having a separate medi claim (HI) from New India Assurance where my mother is co member. If you confirm HI policy will expire once the primary member dies then should I need to include my mother along with one of my Apollo policies. FYI: If I include mother also in my Apollo policy the premium is getting higher heavily . Is there is way to handle the entire situation in better and clean way.
is it Individual policy or floater? if it’s individual policy, your mother may continue with her cover in case of demise of your father.
Sowmi 21-Feb-13 : It is a individual medi claim policy having my father as primary insurer and mother as a co member. Each is having a coverage of one lac. Hope my mother may continue with her cover in case of demise of my father. Please confirm.
Q4) Can you please suggest me some of the best HI polices available in the market for the above need?
If you are asking for parents, not many are there. you w’d have to opt either from Oriental Varishtha nagrik or Max Bupa (family floater with you, although not advisable due to steep prem. & the fact that existing clause ‘ll not permit any claim as of now from this Max bupa policy).
Q5) What do you think about Apollo Munich? Can you please suggest some of the best HI policy from Apollo Munich for the above need?
Is it for parents or for you or both?
Sowmi 21-Feb-13 : Now I am some what clear about handling myself and family members. Now the challenge and prime requirement is that I want to cover my parents with higher SI or at least my mother after my father demise ? Kindly advise for this scenario. Thanks.
Q6) Few months back one of my family member was hospitalized in Apollo and the inpatient bill came as I claimed Rs 140000. The service of the TPA – Vipul Medcorp was tremendous and they cleared Rs 103000 in a lighting speed. Also I got Rs 6600 as a pre hospitalization amount out of Rs 9000 of total claim amount. So I am really hesitant to wipe out this policy / service provider. Instead can I retain this policy and take one more additional Apollo alone.
If you are satisfied with the service of your TPA as well as Insurer, please opt for sum assured increase rather running here & there for new cover
.
Sowmi 21-Feb-13 : Yeah. Will think over and conclude. By the way is there is a best web site to do comparison of different HI and know the exact performance , track record of the insurance company and particular plan ? Please advise. Few more additional questions.
Q7) Can you please refer some good articles to choose the best HI or plan for it? Ex : It should cover end to end planning and implementation details like In general which one we need to choose either a individual medi claim or family floater ? .If not I humbly request you to write one NOW. .
Q8) You talked about raising the SI. Can we do this on our own or is it restricted / determined by the Insurance company too? The reason was when I convert my policy from individual HI to family floater I requested the Oriental UW to raise it to 5 – 6 lacs (the amount suggested by my FP) but she refused to do this. Is it possible even we the customers are ready to pay the respective premium increase. Please advise.
Cheers
Sowmi
Dear Sowmi, welcome back. it’s indeed a very long time that you post your last comments before this new one. I’m trying to quench your thirst again. 🙂
Q1) Since I am from Chennai and Apollo is having strong presence My FP advised me to take a new two Health Insurance policies from Apollo Munich as I am a primary member and one of my child as a co member and similarly in the second policy as my wife as a primary member along with another child as a co member. The main idea / reasons behind this suggestion was
a) After my children’s marriage / they become major / they become employed we will remove them from the respective policy so the policy become a single medi claim from a family floater policy.
b) Second once the primary member of the policy dies the policy becomes void / expires. Is it true? Can one of the co-member can’t become the primary member and continue it?
My Take – a Good idea. Yes, after the death of the policy proposer, the policy becomes null & void & family w’d have to procure a new policy all together. so the info given to you by your FP is correct.
Q2) My FP does not want to surrender my current policy and he want to close it after the new Apollo policies starts covering pre existing diseases. Will the HI portability does not cover the pre existing decease?
Instead of surrendering, my take ‘ll be to check with Apollo for porting of your existing policy & then increasing the cover there. Alternatively, Purchase a new policy there for Wife as proposer & all of you as beneficiary & then port your policy there. Once the pre existing clause completes it’s term, please opt for name deletion from respective policies to make it the way as your FP suggested.
What do you think about the overall above approaches?
Please read above for my take.
Q3) My father age is 72 and mother age is 62. My father having a separate medi claim (HI) from New India Assurance where my mother is co member. If you confirm HI policy will expire once the primary member dies then should I need to include my mother along with one of my Apollo policies. FYI: If I include mother also in my Apollo policy the premium is getting higher heavily . Is there is way to handle the entire situation in better and clean way.
is it Individual policy or floater? if it’s individual policy, your mother may continue with her cover in case of demise of your father.
Q4) Can you please suggest me some of the best HI polices available in the market for the above need?
If you are asking for parents, not many are there. you w’d have to opt either from Oriental Varishtha nagrik or Max Bupa (family floater with you, although not advisable due to steep prem. & the fact that existing clause ‘ll not permit any claim as of now from this Max bupa policy).
Q5) What do you think about Apollo Munich? Can you please suggest some of the best HI policy from Apollo Munich for the above need?
Is it for parents or for you or both?
Q6) Few months back one of my family member was hospitalized in Apollo and the inpatient bill came as I claimed Rs 140000. The service of the TPA – Vipul Medcorp was tremendous and they cleared Rs 103000 in a lighting speed. Also I got Rs 6600 as a pre hospitalization amount out of Rs 9000 of total claim amount. So I am really hesitant to wipe out this policy / service provider. Instead can I retain this policy and take one more additional Apollo alone.
If you are satisfied with the service of your TPA as well as Insurer, please opt for sum assured increase rather running here & there for new coveer.
I lost contact of my FP and hence raising this to you.Please help.
How did this happen? Please try to establish a contact again with your FP. 🙂
Thanks
Ashal
Dear Ashal / All,
I am back and it seems exactly one year has gone. Hope you are doing fine, thanks a lot for all your guidance and others comments. Also it is very nice to see that this thread has been read by more than 1500 + viewers. I have few questions on health insurance and also like to share my experience about that in the last one year.
FYI
Currently I am having a Oriental Family Floater – Silver with SI of Rs 3 lac. Mine, Spouse and my two children are the policy members.
Q1) Since I am from Chennai and Apollo is having strong presence My FP advised me to take a new two Health Insurance policies from Apollo Munich as I am a primary member and one of my child as a co member and similarly in the second policy as my wife as a primary member along with another child as a co member. The main idea / reasons behind this suggestion was
a) After my children’s marriage / they become major / they become employed we will remove them from the respective policy so the policy become a single medi claim from a family floater policy.
b) Second once the primary member of the policy dies the policy becomes void / expires. Is it true? Can one of the co-member can’t become the primary member and continue it?
Q2) My FP does not want to surrender my current policy and he want to close it after the new Apollo policies starts covering pre existing diseases. Will the HI portability does not cover the pre existing decease?
What do you think about the overall above approaches?
Q3) My father age is 72 and mother age is 62. My father having a separate medi claim (HI) from New India Assurance where my mother is co member. If you confirm HI policy will expire once the primary member dies then should I need to include my mother along with one of my Apollo policies. FYI: If I include mother also in my Apollo policy the premium is getting higher heavily :). Is there is way to handle the entire situation in better and clean way.
Q4) Can you please suggest me some of the best HI polices available in the market for the above need?
Q5) What do you think about Apollo Munich? Can you please suggest some of the best HI policy from Apollo Munich for the above need?
Q6) Few months back one of my family member was hospitalized in Apollo and the inpatient bill came as I claimed Rs 140000. The service of the TPA – Vipul Medcorp was tremendous and they cleared Rs 103000 in a lighting speed. Also I got Rs 6600 as a pre hospitalization amount out of Rs 9000 of total claim amount. So I am really hesitant to wipe out this policy / service provider. Instead can I retain this policy and take one more additional Apollo alone.
I lost contact of my FP and hence raising this to you.Please help.
Cheers
Sowmi
Dear Pradeep, can you elaborate, what type of solution you are asking for?
Thanks
Ashal
Dear Ashal
Really its thrilled me to read out all the 30 above questions and the reply from you.
though am in the learning period of all these subject and really very interesting to get knowledge about vairous things.
thanks to Ashal & Sowmi to create this kind of conversation in this forum which gives lots of help to many people like me.
thanks
K Balaji
Dear K Balaji, I’m happy to know that the discussion was helpful to you. I do not know as on date what dear Swomi (Arjun as per dear Shashank’s Post) is doing but I do know one thing for sure, You may run this relay race now. Please accept the baton from dear Swomi & start posting your own queries (either in this discussion or elsewhere, choice is with you).
Thanks
Ashal
Dear Ashal,
I was left breathless after reading this marathon of Q&A. So neatly and aptly answered!!!
Whom should we thank for creation of the Gita? Arjun- who had all those questions to pose or Lord Krishna for answering them all? And should we equally thank Sanjay for reporting/recording those conversations?
Ashal, Sowmi and Manish(creator of this platform)-thanks to you all.
shashank
PS;I would like to add my thoughts regarding SA to be considered for life insurance planning.
Dear Shashank, please feel free to express yourself in this discussion. the forum belongs to each of you.
Thanks
Ashal
Thanks a lot Ashal. Will revert back with my questions later.
Dear Sowmi, till this point, I have answered all of your FAQs. if you still want some clarifications or do you have some more FAQs, post the same.
I ‘ll be happy to answer it.
Thanks
Ashal
FAQ – 31) How to avoid the long term capital gains from a real estate sale ? If we invest the gains in a debt fund and do a STP to equity fund will it attract tax ?
Ans – Please read section 54 of Income Tax Act, 1961.
32) What is your view on considering investing in a plot as a strategy to meet the children’s marriage or retirement goals ?
Ans – Although already discussed a bit for real estate investment for retirement planning, I’m trying to add more. Children education goal is short term in nature when we compare to retirement planning. So there ‘ll be less time available for our investment to grow in to any meaningful return. Add the liquidity & taxation issues & the initial high investments & then answer yourself.
At the end of the day, you are free to chose any vehicle you want to use to ride to your destination.
FAQ – 33) Pros and cons of taking liability insurance.
Ans – Already discussed in followup queries. Hence not repeating the same.
Thanks
Ashal
FAQ – 30) How to avoid paying taxes from the rental income of second house ?
Ans – Can you please clarify it. What do you want to do or know?
In my opinion, you should ask, how to minimize tax outgo on rental income from the 2nd house? My dear friend, Govt. of India or rather Income Tax Act has already provided a window in the form of full interest benefit against the home loan for a rented house & addition to that there is standard deduction of 30% of the rental income for the upkeep & the maintenance of the house. So where is the need to look around for unethical things?
Thanks
Ashal
FAQ – 29) Of Course no one knows what our children are going to pursue ? it could be engg / medical , commerce , pure economics or any other degree ? But if you compare the fee associated you can see a very huge difference on this ? Ex : a cost of doing a commerce degree would be a one tenth of medical or MBA even though both have equal earning potential. Is there any way to handle this so that we don’t end up in paying over or under covered SA ?
Ans – Please read the reply given in FAQ – 28 again. It’s always better to pin point a figure we are comfortable at &then we should try to get it.
Thanks
Ashal
FAAQ – 28) How can we ensure the education cost inflation is taken care properly so that we end up in not having under / over SA to meet the future value of the education fee requirements ?
Ans – When we are saving for future, we are never sure that we are saving enough or ‘ll fall short. Only at the end of our investments & when the actual goal happens, we ‘ll come to know that we overtake it comfortable or fall short. If we overtake it with some extra money in hand, it’s good that now we may divert this extra money for some other goals. If we fall short, again it’s good that we were able to save some if not all & the balance amount can be arrange from education loan for the specific purpose of education.
Thanks
Ashal
FAQ – 26) Please explain about pros and cons of investing in Real Estate and using rent as a retirement solution.
Ans – Investing in real estate for pure investment reasons & specifically to be used as a tool for retirement income from rent, is a plan to fail. In general, the rental yields are very poor all across India. Now add the risk of a wrong person occupies your house what ‘ll you do being an old man? In my opinion, liquidate your real estate investments before the age of 65 or at most 70 & keep the money invested in traditional debt products with a tint of Eq.
FAQ – 27) Reg : Rebalancing the Asset Allocation.
Don’t you think doing asset allocation looks like similar to timing the market and seems to be more complex ? Because as per my understanding it seems that we need to monitor the various asset classes of our portfolio say A and B. Assume at some point of time (i.e. at a predefined date) we need to look both the asset classes and identify which is doing better. The one which gives superior returns is the one from which we need to pull away the profits and re invest it in another asset class which performs least. Assume A is doing best and asset class B doing average. so we decided to move the profit from A to B. Now what is the guarantee that the asset class B will do better in future and beat the asset class A. This is applicable for vice versa scenario too. I think I am communicating and hope you understand. Please confirm.
I believe the above suggestion works well if two asset allocation growths are mutually exclusive. i.e. if asset class A grows then B will definitely perform low and vice versa.
Ans – Asset allocation is a dynamic thing & the same may be change based upon your age, situations, risk taking abilities, over all economic condition all around. If you are re balancing your asset allocation at a chosen interval of say every 18 months or 24 months, it means you are making corrective actions. For example your Eq. part has performed very well, it’s time to book some of the profits & reinvest these profits into Debt to maintain the original asset allocation. In case Eq. is not performing well, you ‘ll redeem from Debt to increase exposure in Eq. In effect, you are buying low & selling high & as far as I know this is the only mantra to create long term wealth in the market.
Thanks
Ashal
FAQ – 25) Please explain about pros and cons of various retirement solutions like NPS, saving through PPF and pension funds.
Ans. – NPS is a relatively new kid on the block. Started with good intentions but poor planning & that’s the reason it’s not taking off yet. Not commenting on NPS any more as at the time of writing this answer, PFRDA is planning to bring some more changes in NPS & the answer given for present situation may become useless. Just FYI – I’m not investing my own money in NPS.
PPF is one of the best product due to it’s EEE structure & the inherent guarantee given by govt. of India. Within the Debt space it’s a must have.
Pension Funds – I assume you are talking about Pension policies from life insurance cos., well my dear friend, again as on date IRDA is making drastic changes & for those changes as on date, no Ins co is able to provide a plan (read policy to investors).
Thanks
Ashal
Dear Raja, thanks for tha fact that you found the discussion useful. You may add your own queries in this discussion.
Thanks
Ashal
Pretty useful stuff…… Thanks sowmi and Asha!
FAQ – 22) Also while doing FP or calculating insurance taking life expectancy as 85 seems to be quite un realistic. I believe 75 is the correct one. Does this have any impact in the arrived figures ?
Ans – If you are asking to pin point your Term cover sum assured, please consider your retirement age or may 3-5 years more i.e. age 65 a max. as by that time all of your financial liabilities ‘ll (& it should) be over.
FAQ – 23) Please explain about validity of Indian insurances in US and vice versa.
Ans – If you mean Life Insurance, yes the coverage is global. if you mean medical insurance, it’s limited to geographical boundaries & separate policies are issued for overseas mediclaim.
FAQ – 24) Please explain about pros and cons about switching from individual mediclaim to floater policy and vice versa.
Ans – If you mean, keeping Individual policies in year 2012, converting to family floater in 2013 & back to individual in 2014. No such switching is not possible as the underwriting norms are different for individual & family floater policies.
Thanks
Ashal
FAQ – 20) From a Customer perspective , What are the pro active steps we need to take to ensure hassle free claim processing ? Ex : What is the core information we need submit to the insurance company voluntarily.
Ans – Discussed already in follow up queries.
FAQ – 21) Will there be any process available to ensure our policies are updated with up to date information ? In other words , Does any one of the insurance companies provide a report like ‘what-if I claim now – status report’. i.e. t periodic intervals I would like to receive a report from the insurance company confirming that my policy have all the pre-requisite details as of that report date and there won’t be any issue involves when the claim happens.
Ans – Discussed already in follow up queries.
Thanks
Ashal
FAQ – 18) Need to identify the Health Insurance product which has large insurance cover i.e. cost effective OPD which covers dental treatment etc. (By the way please let me know the definition of OPD too !!).
Ans – OPD – Stands for Out Door Patient Department. In simple words, the treatments for which you need not to be hospitalized. Say Chemotherapy in case of cancer treatment, is an OPD procedure.
Please ceck several online portals & specially the reviews of policies from general public to pin point your policy.
FAQ – 19) Need to identify the best rated Motor Insurance and also the ‘must have’ riders we need to have ? I took a rider ‘bumper-to-bumper cover’ last year in my last motor insurance ? Is it worth to take this ? Any Suggestions ?
Normally Car insurance is provided as a comprehensive policy. Now a days some insurers are trying to differentiate themselves from the clutter. That’s why some innovations are used like your own case, ‘ Bumper to bumper’. How is it good for you, only you can decide after filing a claim. 🙂
Thanks
Ashal
FAQ – 16) Need to identify the ‘must have’ riders in Health Insurance?
Ans – Can you elaborate it? As far as I know there is no such things like Rider in a health plan aka Mediclaim.
FAQ – 17) Need to know the correct Health Insurance amount for me? Is there is any tool classes and identify which is doing better.
Ans – Like Term cover, again there is no fixed method. You may start with a low sum assured say 2-3L if you found yourself in a healthy zone. You may increase the sum assured over the period as you age & health also starts indicating problems.
Thanks
ashal
FAQ – 15) Need to identify the best rated Health Insurance. Where to look out ?
Ans – Please check the various online portals as well as http://www.jagoinvestor.com to pin point your best. My best may be differ from your best for the reason, people are handling these services & person to person the quality of service may change a lot within a same co.
Not directly related one with this Health insurance query but my personal experience for my IDEA post paid in Gujarat & Idea Post paid in Uttar Pradesh is as different as chalk & cheese.
Thanks
Ashal
FAQ – 14) – OK. Yes you are correct. It should be from insurer. One follow up question.
a) Assume the policy is not mandating for medical test but as a customer can we force the company and volunteer our self for complete screening ? what do you think about this approach ? Yes in this case of course most probably we need to bear the cost but I think this is the best way to increase the chance of getting a smooth claim. The reason for this that i heard many cases that during claim the insurer company will bounce back saying that we clients has suppressed the information intentionally etc.
Ans – Most Insurers do have a cut off sum assured below which normally medical test are not conducted. One reason for this practice is the low prem. for that low sum assured that cost factor plays it’s part. On our part as a policy seeker, we may opt to go for a higher sum assured where medical test is compulsory. For non medico policies, we may request only & can’t force the insurer to do a medical test for non medico policy.
b) From a Customer perspective , What are the pro active steps we need to take to ensure hassle free claim processing ? Ex : what are core information we need submit to the insurance company voluntarily.
Ans. – Please declare each & every detail of your health & job profile with out fearing for prem. loading. If you are honest enough to declare all the materiel information, chance of declining claim on some flimsy grounds by the insurer are almost nil.
c) Will there be any process available to ensure our policies are updated with up to date information ? In other words , Does any one of the insurance companies provide a report like ‘what-if I claim now – status report’. i.e. t periodic intervals I would like to receive a report from the insurance company confirming that my policy have all the prerequisite details as of that report date and there won’t be any issue involves when the claim happens.
Ans. – At the time of entering in the contract (your policy is a contract between you & your insurer) both of you are declaring some material facts & entering the contract. Once the contract is active from your side as a policy holder if a change occurs be it in your health, habits, job profile, it’s not applicable for a cause of claim denial if it happens. For example @ age 30, you took a term cover of 1 Crore & medical test were conducted, no sign of diabetes observed but at the age 38, you are diagnosed with diabetes & ultimately death occurs due to it @ age 40. Your family ‘ll get the claim because at 30, the time of start of policy, you were not diagnosed of diabetes.
Sprite! Clear hai…….. 🙂
Thanks
Ashal
One more follow up question on Online policies. Your responses is logical and i am wondering why the insurers are NOT making / offering all the existing policies
online. what is stopping them ? Definitely it reduces cost for the both the parties. Isn’t ?
Ans – Slowly more & more Insurers are offering more & more plans be it term cover or investment oriented ones. Choice is now with the person (read policy seeker) to go offline or online.
Thanks
Ashal
Dear Sowmi, I’m trying to answer your raised queries against my replies –
FAQ – 7) – I am talking about Liability Insurance. i.e. taking the insurance for my home loan and the premium will be added as part of the home loan EMI. I think this has many disadvantages and not recommended method. The liability amount needs to be added as part of the term insurance as you suggested above. Isn’t ?
Ans – let me understand it, you are talking about the Mortgage term cover offered by lender (home loan provider) to the customer under a tie up from an insurer (most of the time from a group company) where the prem. is paid as a single prem. & the prem. amount is added into loan amount.
I do not advice for such arrangement for 2 reasons –
1. The single prem. loss against regular prem. as discussed already above.
2. The single prem. is added to you home loan & thus it impacts your EMI & over the period you are paying back your prem. in the form of principal & added interest which in effect is a very costly insurance to have.
In my opinion, opt for a plain vanilla term cover under regular prem. mode.
Thanks
Ashal
Dear Ashal,
FAQ1 to 5 – Closed. Great Answers.
FAQ – 6) – OK.
FAQ – 7) – I am talking about Liability Insurance. i.e. taking the insurance for my home loan and the premium will be added as part of the home loan EMI. I think this has many disadvantages and not recommended method. The liability amount needs to be added as part of the term insurance as you suggested above. Isn’t ?
FAQ – 8) – NO Sir. This is enough.
FAQ – 9) – OK. Excellent Reply and eye opener for me. Unfortunately i can’t select best answer for this because that reverts back the old best answer i have chosen earlier which i don’t want to do. Thanks again.
FAQ – 10) – OK. I have not thought about front line office costs. Nice thinking and Great Answers. Reg identifying major difference in the features of the online & Offline policies i will definitely do my level best and update you back.
One more follow up question on Online policies. Your responses is logical and i am wondering why the insurers are NOT making / offering all the existing policies
online. what is stopping them ? Definitely it reduces cost for the both the parties. Isn’t ?
FAQ – 11) & 12) – OK. Understood. But i feel both the govt and IRDA should think loud / practical about this and make these types of riders as a mandatory riders or part of base plan itself. Please understand meeting death event is far more better option than become disabled , unable to earn and huge burden to both family and society. It is really a pathetic situation and we can’t express the agony behind that. Hence i talked about this. Let us hope for best soon.
FAQ – 13) – Nice Explanation.
FAQ – 14) – OK. Yes you are correct. It should be from insurer. One follow up question.
a) Assume the policy is not mandating for medical test but as a customer can we force the company and volunteer our self for complete screening ? what do you think about this approach ? Yes in this case of course most probably we need to bear the cost but I think this is the best way to increase the chance of getting a smooth claim. The reason for this that i heard many cases that during claim the insurer company will bounce back saying that we clients has suppressed the information intentionally etc.
b) From a Customer perspective , What are the pro active steps we need to take to ensure hassle free claim processing ? Ex : what are core information we need submit to the insurance company voluntarily.
c) Will there be any process available to ensure our policies are updated with up to date information ? In other words , Does any one of the insurance companies provide a report like ‘what-if I claim now – status report’. i.e. t periodic intervals I would like to receive a report from the insurance company confirming that my policy have all the prerequisite details as of that report date and there won’t be any issue involves when the claim happens.
The above questions are already raised but i would like to group it here as part of claim related discussion. Hence please ignore that later.
Thanks.
Sowmi
FAQ – 14) I believe we need to the below items from the insurance company once the policy is issued. Hope you agree this is a good practice to follow… Please add if any.
14.1 Need to get the Medical Reports from your advisor and keep the copy of that with
policy Bond. Company doesn’t even charge from you for this only you need to give a
request letter for the same.
14.2 Policy bond must come with any photocopies of your Form Filled so that means
the company can’t play any game with you.
Ans – Just a small correction, the medical reports should also be demanded from the Insurance co. itself & not the agent/advisor. Rest is OK.
Thanks
Ashal
FAQ – 13) What are the pros and cons of single and regular premium payments methods?
Ans – Regular prem. are always beneficial in both cases –
1. You died in between & claim is received by your family. In this case you are at loss as you have already paid the prem. for full term in a single prem.
2. You survived the policy term. In this case you are alive. As you are alive, you ‘ll try your maximum to create sufficient wealth for you & your family. Once that wealth is already there, the requirement of that term cover is not there so you have the option to stop paying the prem. once the financial security is already there for which you had taken that term cover.
Thanks
Ashal
FAQ – 11) Similarly Permanent disability should be part of basic term insurance by default. Isn’t? why companies are treating it as a rider.
Ans – Please read some prev. replies of mine. The benefits of riders are limited so some people may like it to have it as a bundled one where as some may prefer to go solo. So as rider, we have a choice to opt or not to. Also Rider involves a cost.
12) I think coverage of critical illness should be basic part of Health Insurance. Isn’t? Why it s offered as a rider?
Ans. – Same reply as for 11 no.
Thanks
Ashal
FAQ – 10) Why the mode of taking the insurance plays a role in deciding the premium and riders offered on the scheme. Taking online policy is equal to taking the policy from the company directly from its payroll employees. Isn’t? Again irrespective of whether the customers are taking it online or offline the insurance company is going to get the premiums and then why there is some difference among the features they are offering? It looks like very ill logical. Please correct me if I am wrong.
Ans. – The main difference lies in the cost of the product to both Insurer & to be insured (Insurance Co. as well as person seeking insurance). Why? In case of direct dealing, There is no agent commission as well as frontline office costs are involved that’s where the saving pitches in, in the form of reduced prem.
Apart from cost, please do quote any major difference in the features of the online & Offline policies.
Thanks
Ashal
FAQ – 9) I believe all the Term insurance covers accidental death. Then why there is an accidental benefit rider? It is really surprising to me. The whole idea of term insurance is to cover the death. It could be natural or through different external events like accidents etc. Please read again at any life insurer’s site for ADDBR. In case of accident there may be 2 case –
1. You are dead
2. You are alive but disable
For case 1, there ‘ll be extra sum assured provided other than routine sum assured.
For case 2, partial or full ADDBR sum assured ‘ll be provided as per the disability.
& to add more, this case 2 is the reason I asked to opt for WoPR only. You are disabled but still alive so in this case, you are not earning & hence can’t pay prem. but since you are alive, no claim for your death as of now, Who ‘ll pay the prem. due to your disability? It’s the WoPR which ‘ll save the day for you & your family.
Thanks
Ashal
FAQ – 8) Which are the most trusted site / ratings that we need to look for Insurance related products?
Ans – Please post the policy you want to discuss here in this forum or in the jagoinvestor main site & you ‘ll get a lot of inputs. should I say more?
Thanks
Ashal
FAQ – 7) Also instead of taking (static / depreciating) term loans what are the pros and cons of taking the mortgage cum insurance loan? By this way the depreciating part will be taken care automatically? What do you think?
Ans – Can you please elaborate it as I’m unable to understand it.
thanks
Ashal
FAQ – 6) Instead of taking one single BIG term insurance why can’t we split and take it as two for the below reasons? What do you think about this? It seems logical to me. Kindly provide link or discuss the pros and cons of this.
Ans – Yes Instead of a very big single cover, one may go for a split in covers from 2 insurers of his/her choice. In my view it’s ok to opt this way.
Thanks
Ashal
Dear Sowmi, Whatever calculation you try to reach to your sum assured requirement, at the end of the day, it should fulfill your family’s need. All I can say for FAQ 4 & 5.
Thanks
Ashal
Dear Sowmi, a small correction I want to make in your reply – My name is Ashal & not Vishal as repeatedly typed by you. 🙂 🙂
Regarding the queries raised by you here are my answers.
FAQ 2) – a) You mean to say the wiver of premium alone needs to be taken along with base term insurance and all other riders needs to be taked as a separate policy. Isn’t ?. so are saying riders alone available as a separte policy / plan or product ?
Please read my prev. reply again where I asked to purchase these policies as separate cover from general insurers & not life insurer.
b) also you are saying by this way the riders can be claimed any no of times.
one further question on this taking riders. Can we go for same insurance house wher we took the base plan or we can take from the best one as we think from any insurance house?
Again please read my original reply. The plain vanilla plans offered by gen. insurer are like mediclaim policies or say car policies, where we may claim Nth no. of time. Where as in case of Riders associated with a life insurance policies (Be it Term cover or ULIP or Traditional endowment) are one time affair. Once you file a claim, you can’t restore your rider, even if you are ready to pay prem. for the same.
Thanks
Ashal
Thanks Vishal. My responses up to this point.
FAQ 1) – OK
FAQ 2) – a) You mean to say the wiver of premium alone needs to be taken along with base term insurance and all other riders needs to be taked as a separate policy. Isn’t ?. so are saying riders alone available as a separte policy / plan or product ?
b) also you are saying by this way the riders can be claimed any no of times.
one further question on this taking riders. Can we go for same insurance house wher we took the base plan or we can take from the best one as we think from any insurance house ?
FAQ – 3) & FAQ – 4) – I think it should be a) identify monthly expense, annualise it . then multiply it with remaning retiment years. add all other laibilities + future expenses like all your goals say childern education , marriage etc . Finally add your health insurance need and 10 to 20 % of this amount for meeting unexpected expenses as a buffer.
FAQ – 5) – OK
FAQ – 5) I think we must also consider taking decreasing term plans based on above important events like children education / marriages or closure of loans etc. Please list out these types of Term Insurances too and also the best rated ones.
Ans. – Although decreasing term plans are available but in general due to continuous increase in prices for all the things & costs of future expense (Inflation in other words). It’s advisable to have a constant cover large enough to fight with inflation for next 10-15 years.
Thanks
Ashal
FAQ – 4) I believe while determining the correct Sum Assured we need to consider all the current loans, future expenses like children education, marriage plus 3 to 5 times of current annual expense of the family. What do you think?
Ans. – Yes you are right on these thinking lines. One should calculate for each of the financial liabilities/costs as mentioned by you & then only we ‘ll get a personalized sum assured defined for us only. Just a small addition, keep at least 10 times of living expenses for basic cover as you are not considering the impact of inflation.
Thanks
Ashal
FAQ 3) Need to know the correct Sum Assured for me? Is there is any tool available for this?
Ans. – Please try to understand that we are talking here about future uncertainty for our life. So it’s a kind of guess work. There are a lot of calculators available online to quantify the term cover one should have but each calculator ‘ll only throw a No. which may be common or not. In the end it’s up to us to calculate on our own how much is to much. A very crude method is 15-18 times annual income + as on date loan liabilities.
Thanks
Ashal
FAQ 2) Need to identify the ‘must have’ riders in Term Insurance? I believe these are all the most popular ones.
a) Accident benefits
b) Disability Benefit
c) Critical Illness benefit
d) Waiver of Premium
e) Income loss cover
Ans. – the only rider which should be opted is Waiver of Prem. for anything else, please purchase plain vanilla policies from general insurers. Why? Riders in a term plan, have a one time pay out for a claim, where as plain vanilla policies from general insurers are similar to mediclaim policies, where we are free to file & receive claims Nth no. of time as & when it happens.
Thanks
Ashal
FAQ 1) On what basis do we need to identify the best rated Term Insurances? Please let me know the same and the best ones. Is there is any organization is providing the ratings or methodologies for this?
Ans. – there is nothing called best in term insurance. The best term cover is one which process your family’s claim in minimum possible time & honor it in full with out making any obstacles. But to judge it, you ‘ll not be here as claim is already filed after your death.
Yes in general, people normally base their choice of selection for a term insurance in this order –
1. Prem. demanded for the cover
2. Claim settlement ratio
3. Term availability (30 or 35 or 40Y)
4. Rider associated with the basic cover or not
5. Pan Indian Presence
6. Own comfort level with the insurer
Out of the above 6 (some people may add some more), in my opinion, Point no. 6 is the most important one.
Thanks
Ashal
Dear Sowmi, I’m first posting all of your FAQs in the discussion & then I ‘ll answer once by one.
Financial Planning related FAQs
1) On what basis do we need to identify the best rated Term Insurances? Please let me know the same and the best ones. Is there is any organization is providing the ratings or methodologies for this?
2) Need to identify the ‘must have’ riders in Term Insurance? I believe these are all the most popular ones.
a) Accident benefits
b) Disability Benefit
c) Critical Illness benefit
d) Waiver of Premium
e) Income loss cover
3) Need to know the correct Sum Assured for me? Is there is any tool available for this?
4) I believe while determining the correct Sum Assured we need to consider all the current loans, future expenses like children education, marriage plus 3 to 5 times of current annual expense of the family. What do you think?
5) I think we must also consider taking decreasing term plans based on above important events like children education / marriages or closure of loans etc. Please list out these types of Term Insurances too and also the best rated ones.
6) Instead of taking one single BIG term insurance why can’t we split and take it as two for
the below reasons? What do you think about this? It seems logical to me. Kindly provide link or discuss the pros and cons of this.
7) Also instead of taking (static / depreciating) term loans what are the pros and cons of taking the mortgage cum insurance loan? By this way the depreciating part will be taken care automatically? What do you think?
8) Which are the most trusted site / ratings that we need to look for Insurance related products?
9) I believe all the Term insurance covers accidental death. Then why there is an accidental benefit rider? It is really surprising to me. The whole idea of term insurance is to cover the death. It could be natural or through different external events like accidents etc.
10) Why the mode of taking the insurance plays a role in deciding the premium and riders offered on the scheme. Taking online policy is equal to taking the policy from the company directly from its payroll employees. Isn’t? Again irrespective of whether the customers are taking it online or offline the insurance company is going to get the premiums and then why there is some difference among the features they are offering? It looks like very ill logical. Please correct me if I am wrong.
11) Similarly Permanent disability should be part of basic term insurance by default. Isn’t? why companies are treating it as a rider.
12) I think coverage of critical illness should be basic part of Health Insurance. Isn’t? Why it s offered as a rider?
13) What are the pros and cons of single and regular premium payments methods?
14) I believe we need to the below items from the insurance company once the policy is issued. Hope you agree this is a good practice to follow… Please add if any.
14.1 Need to get the Medical Reports from your advisor and keep the copy of that with
policy Bond. Company doesn’t even charge from you for this only you need to give a
request letter for the same.
14.2 Policy bond must come with any photocopies of your Form Filled so that means
the company can’t play any game with you.
15) Need to identify the best rated Health Insurance. Where to look out ?
16) Need to identify the ‘must have’ riders in Health Insurance?
17) Need to know the correct Health Insurance amount for me? Is there is any tool available for this?
18) Need to identify the Health Insurance product which has large insurance cover i.e. cost effective OPD which covers dental treatment etc. (By the way please let me know the definition of OPD too !!).
19) Need to identify the best rated Motor Insurance and also the ‘must have’ riders we need to have ? I took a rider ‘bumper-to-bumper cover’ last year in my last motor insurance ? Is it worth to take this ? Any Suggestions ?
20) From a Customer perspective , What are the pro active steps we need to take to ensure hassle free claim processing ? Ex : What is the core information we need submit to the insurance company voluntarily.
21) Will there be any process available to ensure our policies are updated with up to date information ? In other words , Does any one of the insurance companies provide a report like ‘what-if I claim now – status report’. i.e. t periodic intervals I would like to receive a report from the insurance company confirming that my policy have all the pre-requisite details as of that report date and there won’t be any issue involves when the claim happens.
22) Also while doing FP or calculating insurance taking life expectancy as 85 seems to be quite un realistic. I believe 75 is the correct one. Does this have any impact in the arrived figures ?
23) Please explain about validity of Indian insurances in US and vice versa.
24) Please explain about pros and cons about switching from individual mediclaim to floater policy and vice versa.
25) Please explain about pros and cons of various retirement solutions like NPS, saving through PPF and pension funds.
26) Please explain about pros and cons of investing in Real Estate and using rent as a retirement solution.
27) Reg : Rebalancing the Asset Allocation
Don’t you think doing asset allocation looks like similar to timing the market and seems to be more complex ? Because as per my understanding it seems that we need to monitor the various asset classes of our portfolio say A and B. Assume at some point of time (i.e. at a predefined date) we need to look both the asset classes and identify which is doing better. The one which gives superior returns is the one from which we need to pull away the profits and re invest it in another asset class which performs least. Assume A is doing best and asset class B doing average. so we decided to move the profit from A to B. Now what is the guarantee that the asset class B will do better in future and beat the asset class A. This is applicable for vice versa scenario too. I think I am communicating and hope you understand. Please confirm.
I believe the above suggestion works well if two asset allocation growths are mutually exclusive. i.e. if asset class A grows then B will definitely perform low and vice versa.
28) How can we ensure the education cost inflation is taken care properly so that we end up in not having under / over SA to meet the future value of the education fee requirements ?
29) Of Course no one knows what our children are going to pursue ? it could be engg / medical , commerce , pure economics or any other degree ? But if you compare the fee associated you can see a very huge difference on this ? Ex : a cost of doing a commerce degree would be a one tenth of medical or MBA even though both have equal earning potential. Is there any way to handle this so that we don’t end up in paying over or under covered SA ?
30) How to avoid paying taxes from the rental income of second house ?
31) How to avoid the long term capital gains from a real estate sale ? If we invest the gains in a debt fund and do a STP to equity fund will it attract tax ?
32) What is your view on considering investing in a plot as a strategy to meet the children’s marriage or retirement goals ?
33) Pros and cons of taking liability insurance.
Thanks
Ashal
Hello ashal jauhari,
Its a very nice article you have posted. Please guide me about business retirement.
Now i can able to see the attachment and let me know if you able to access it. Thanks.
Ashal,
I attached it yesterday itself and wondering why it is still not getting listed ? In fact i believe most of the questions are in very generic nature only and no questions regarding anything related personalized solutions etc.
[file]http://localhost/jagoforum2/readers-files/FPRelatedFAQs-1.docx[/file]
Dear Sowmi, where is the attchment dear?
Thanks
Ashal
All,
Here is the attachment containing the questions.
Thanks
Sowmi