Things to Know about Health Insurance

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

Call 0 94 8300 8300 (India)

When taking health insurance, what we have noticed is that most people don't actually do any sort of structured research. Luckily, that's what we're here for. This article will go into the salient features of a mediclaim policy that you need to know, address types of mediclaim policies (individual and floater), and also run a brief comparison between mediclaim policies from some popular insurers - all in easy-to-read FAQ format.



Let's get started.

1. What is a Mediclaim policy?

A Mediclaim policy is a health insurance policy which covers all medical treatment expenses up to the sum assured in case you are hospitalized due to an illness / accident.

Mediclaim policies are issued for a period of one year and are renewed annually.

2. What are Pre - Hospitalization Expenses?

These are expenses you incur before you are hospitalized. They can include doctor's consultation fees, medical tests, medication, and related expenditures. Mediclaim policies generally cover 30 days expenses immediately before you have to be hospitalized.

3. What are Post - Hospitalization Expenses?

These are expenses you incur once you are discharged from hospital. They can include things such as doctor's consultation fees, medication, further tests (checkups), and even physiotherapy. The medical expenses you incur in the 60 days immediately after you are discharged from the hospital are usually covered by your mediclaim.

4. What is the Tax Benefit of taking mediclaim?

While this is not a reason for taking mediclaim, it does help that you also get a tax benefit on your health insurance. The premium paid for these policies are deductible under section 80 D of Income Tax Act up to a maximum limit of Rs. 15,000 and Rs. 20,000 in case the person insured is a senior citizen. In case an individual pays health insurance premium for his or her dependent parents then an additional deduction up to a maximum limit of Rs.15,000 is allowed and in case parents are senior citizen then Rs. 20,000 is allowed. To know more about various tax deductions you can avail

So if you are paying for yourself and your senior citizen parents, you can claim a maximum of Rs. 35,000 p.a. under Section 80D.

5. What is Cumulative Bonus / No Claim Bonus?

In short, it is the insurer's way of rewarding you for paying a premium and not making any claim. Generally Mediclaim policies provide an additional cover of 5% of Sum Assured in the subsequent renewal of the policy in case there is no claim in the current policy year. This increase in sum assured of 5% every year is restricted to a maximum of 50% of the initial Sum Assured for most policies. If there is a claim in the policy then this additional cover is decreased by 10% on the next renewal. These percentages can vary depending on the insurer and the policy you choose.

6. What are the types of mediclaim policies available?

Mediclaim policies are of two types:

a.  Individual Mediclaim Policy

Individual policy covers only one single person under one policy. The premium in this type of policy is calculated according to the age of the person to be covered under the policy. Under this policy, if the sum assured is Rs. 5 Lakhs then the person insured can claim up to the maximum limit of Rs. 5 Lakhs.

b.  Family Floater Mediclaim Policy

Family floater policy covers the entire family i.e. self, spouse and the dependent children under one single policy. The premium under this type of policy is calculated according to the member with the highest age in the family. Under this policy, if the sum assured is Rs. 5 Lakhs then any one person individually or the entire family jointly can claim up to the maximum limit of Rs. 5 Lakhs.

7. Can you briefly compare some key insurer's mediclaim policies?

Definitely. Below is the comparison between features of Mediclaim policies provided by different insurance companies:

COMPANY	ENTRY AGE	RENEWAL UP TO AGE	PRE-EXISTING DISEASES COVERED FROM	NO CLAIM BONUS	CASHLESS FACILITY AVAILABLE	FAMILY DISCOUNT
NEW INDIA	18 - 60	Lifetime	5th year	5% of SA	Yes	10%
UNITED	1 - 60	Lifetime	5th year	5% Discount every year (max 25%)	Yes	5%
ORIENTAL	18 - 45	Lifetime	5th year	-	Yes	-
BAJAJ	1 - 65	80	5th year	-	Yes	10%
NATIONAL	18 - 59	80	5th year	5% of SA every year (max 50%)	Yes	-

 

The policy you choose will depend on the cover you require, the features you feel will be most beneficial to you.

8. What is a Top Up plan?

Earlier, most insurance companies limited their mediclaim to Rs. 5 lakhs. This is no longer the case, there are many insurance companies which allow even more than Rs. 10 lakhs of health insurance cover. However, this was not always the case. And also, some of the companies that allow higher cover might not be your first choice of insurer. So earlier, if you wanted more than Rs. 5 lakhs cover, your best option was to go for a Top Up Plan.

Top Ups provide you additional coverage at a low cost. Top up plan covers medical treatment cost over and above the actual Mediclaim policy and thus increase the total sum assured. Top up plan can be taken for an individual as well as for the entire family. However top up plans are available only if the sum assured taken in the Mediclaim policy is between Rs. 3 to Rs. 5 Lakhs.

For example:

Our favourite fictional character, Mr. Shah has taken a Mediclaim policy for a sum assured of Rs. 3 Lakhs and a top up plan for Rs. 7 Lakhs, so his total sum assured is Rs. 10 Lakhs. If a claim arises for a sum of Rs. 8 Lakhs then the first 3 Lakhs has to be borne by the Mediclaim insurance company and next Rs. 5 Lakhs is to be paid by the company from which top up plan has been taken.

Remember that the Insurance Company from which the top up plan has been taken will not be responsible for claims arising up to the sum of Rs. 3 Lakhs.

Top up insurance plans are targeted by insurance companies to those customers who already have Mediclaim insurance policies but find their cover to be low and hence these customers want to add additional cover. Now, if you are also thinking that your Mediclaim policy is not sufficient to cover your expenses in case of hospitalization and the present insurer is not ready to increase the cover, then a top up policy from another insurer is the solution for you.

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                        OR

You can write back to us at prajnacapital [at] gmail [dot] com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

When Should you prepay Home Loan ?

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

Call 0 94 8300 8300 (India)

Owning a property is, perhaps, one of the most important goals of any salaried person.

However, buying one has become more difficult in the last few years.

With the Reserve Bank of India changing the loan-to-value ratio from to 80 per cent, buyers have to cough up at least 20 per cent of the property price. In addition, the apex bank has also said that banks should not include registration and stamp duty fees in the loan-to-value, thereby increasing the demand for cash substantially. And then, there is the loan repayment aspect as well which one has to provide for a number of years.

No wonder, there are times that one just wants to repay the entire loan at one go. For one, there is a sense of relief that there is no debt. Two, there is a freeing up of cash that one can use to invest or for other purposes.

But there is another aspect of it. There is a tax advantage that one gets –Rs one lakh of principal payment under Section 80C and Rs 1.5 lakh under Section 24. So it is a key call when to repay and exit the home loan. If you are considering prepaying, If that is questionable, servicing an equated monthly instalment (EMI) over the years to come can pose serious problems. The self-employed such as entrepreneurs and other professionals can find the income varying a great deal – surging at some points and dwindling at other times For such people, it makes sense to keep a lower income to EMI ratio (see next sub-head) because the loan repayment should not burden them during tough times.

Then, there are ones with erratic incomes such as sportspersons or film actors who can have purple patches in their career which is soon followed by long periods of lack of success. The second category, preferably, should make the best of the good times and make the big purchase and payment at the earliest.

Even for the employed, some jobs are more stable than others. In such situations, every endeavor should be made to reduce the loan amount, at every possible point, irrespective of the tax savings and other considerations. Bonus/ exgratia or any other inflow can be used to retire outstanding loans. This will bring down the exposure.

EMI: Income Ratio

Point number two would be loan can be reduced also when the home loan EMI as a percentage of take-home salary is beyond 40 per cent. When the amount is higher than this, it exerts a lot of pressure on ones cash flows, which is not healthy.

Bringing the EMI amount to 40 per cent of the take-home income or less is desirable. It is even more necessary if there are other EMIs for vehicle loans or personal loans to consider. If the EMI goes below the 40 per cent threshold and does not pose cash flow problems, it can be continued, subject to effectively low interest rates.

People such as entrepreneurs or professionals who have uncertain cash flows should try and keep the EMI : income ratio to below 40, preferably 30 or 20, because it will not pressure them during tough times.

Interest Rate Woes

Thirdly, consider the effective rate of interest that you are paying. In case of home loans, the deductions for repaying the principal portion falls under Section 80C and deductions for the interest portion falls under Section 24.

After accounting for all the benefits, calculate the cost of loan. If the interest cost is above what you can earn from investments in a fixed income instrument, then prepaying the loan is desirable. For instance, if the net interest cost amounts to 9.75 per cent and the post-tax returns from any fixed income instrument is at best only 8.20 per cent, then it is preferable to prepay any extra amount one has.

On the other hand, if the rate of interest is below the earnings on investment, prepaying is better so that the cash is deployed better. However, remember that interest rates are cycles that will go up and down.

Loan Term

Next, consider is the loan tenure. If due to the increase in interest rate, the tenure extends beyond the superannuation age, consider it a red signal. It is desirable to bring the tenure down so that you can pay-off the loans before retirement. It would be safer.

Home loan is a comparatively low cost loan. If one wants to access loans for other purposes, say for a vehicle, it may make sense to instead not prepay the home loan and use the cash to reduce the vehicle loan. This will reduce the overall costs.

Say you want to buy a ~4.5 lakh car in 2 years from now, and you also have a home loan of ~25 lakh at a rate of 9.75 per cent. It may be a good idea to not prepay the home loan in the next two years. Instead invest the amount that could have been used for prepayment to reduce the vehicle loan to be taken at a later date. Vehicle loans would charge anywhere between 2 and 4 per cent more than a home loan and they offer no tax breaks for salaried.

After these considerations, you could decide whether to keep the home loan or part-pay it. You could also tweak the EMI. That is, you could keep the EMI high, in spite of the prepayment, to bring down the loan tenure. Or, you could allow the EMI to come down as the loan exposure amount goes down, if a long tenure does not pose a problem for you.

The main aspect to keep in mind is that do not get obsessed with closing the home loan at the earliest. Consider properly before taking a final decision lest you repent later.

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                        OR

You can write back to us at prajnacapital [at] gmail [dot] com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

Due date for Filing Income Tax returns for the Assessment Year 2012-13 is extended to 31st August 2012

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Tax Saving Mutual Fund Application Forms

Call 0 94 8300 8300 (India)

On consideration of the reports of disturbance of general life caused due to failure of power and further in consideration of the fact that the e-filing of returns for a specified category of individuals and HUF has been made mandatory, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income Tax Act, 1961, hereby extends the 'due date' of filing of returns of income for the Assessment Year 2012-13 to 31st August 2012 in respect of assessees who are liable to file such returns by 31st July 2012 as per provisions of section 139 ofIncome Tax Act, 1961.

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                                                OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund