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Blog Article 2022 (14)

9 steps to Financial Freedom

How incredible would it be to quit your day job and retire early, spending the rest of your life doing things you love? When you become financially independent, the income your assets generate for you are greater than your expenses, meaning your job is no longer necessary. Sound appealing, right? 


Let’s go through all the 9 steps that will help you achieve your Financial Freedom. We have linked all our 9 videos below- you can check them out to learn more about it: 


1. START NOW.

Still believe that small savings cannot generate big wealth? Think again. If you plan well, then even small savings can help you generate a good amount of corpus, as starting is important even if it means taking baby steps. Check out our YOUTUBE video - to know more about it. 


Video Link -  https://youtu.be/9Xh5FRaA0cE 


2. AVOID DEBT.


While balancing the rising expenses and lifestyle changes on a day-to-day basis, it becomes difficult to save for our own financial goals. However, there is often a simple solution which can help you achieve some of your life goals: LOAN. But remember, borrowing should not be your go-to option always, you should opt for it only when it is extremely crucial and you are out of options.


Debt is one of the biggest roadblocks in your journey toward financial independence. Plan for it wisely! When you aspire to get to a state of financial independence or stability, living within your means is the best advice you can follow. We are not challenging you to adopt a minimalist lifestyle - It simply means learning to distinguish between the things you need and the things you want—and then making small adjustments that drive big gains for your financial health.


Video Link - https://youtu.be/X1F-GcyyA_g 


3. JUST SAVE.

It is easy to say that saving can easily be done on a monthly basis, but it becomes very difficult when you actually start saving practically. The habit of saving regularly cannot be developed in a day. You only need to make sure that you end up developing this habit no matter how much time it takes. The more you save, the earlier you save - the faster you can become financially free - Your savings will act as fuel in your financial journey.


Video Link - https://youtu.be/_GE8iDjkn6k 


4. GET GULLACKING.

Rent, utility bills, debt payments and groceries might seem like all you could afford when you're just starting out. However, you can still save a good amount of savings if you get your finance in place and give it a direction. Try our Gullacking Approach! Through this method, you will be able to start your investment journey in a better way. 


Video Link - https://youtu.be/1Ajk5rKY6Sg 


5. MORE IS BETTER.


“I am very happy with my salary and I don’t think I need a raise,” said no one ever. Most of us usually find ourselves thinking that the income we earn through our jobs or business is not enough. The bottom line is that no matter what we earn, we’d like to earn more. There are multiple ways to set up additional sources of income today - check out our YOUTUBE video to know more. 


Video Link - https://youtu.be/jB8WQDEQaR4 


6. TAKE RISKS.


Not focusing on risk is like not focusing on the amount of salt you put in food, it is very important. Risk is what you have to bear to get any return in life or investments. It is important to know the different types of risk that you have to bear when you make investments and how you can manage those risks to achieve your financial goals. 


Don’t hesitate to take risks. Rather than being afraid, learn to manage it. Start taking Measurable Risks!


Low Risk = Low Return.

High Risk = High Return.


Video Link - https://youtu.be/tsoPAOVyT3g 


7. SAFETY FIRST


We never know what the future holds for us, Right? So it's always best to be prepared by putting money aside. This will help you to avoid taking on an additional financial burden, without the clarity of how you would pay it back.

Let's go over the three most common contingencies that you could come across:

Financial emergencies → Emergency Fund.
Untimely Death → Life Insurance.
Health Issues → Health Insurance.

Video Link - https://youtu.be/XlCqCbokJAw 


8. STAY AWAY

There is nothing known as ‘QUICK MONEY.’

Avoid taking shortcuts!


Video Link - https://youtu.be/5d1BtheuEXo 


9. DON’T STOP LEARNING.

Money is something that we need to deal with every day. We have ample information ready on Youtube as well as various websites. We always suggest you never stop learning about it. Because if you do not learn about it or research about it - you will have to learn the hard way from your mistakes. 


You can check out our courses to learn more about how to manage your money at https://courses.wealthcafe.in/s/store   


Video Link - https://youtu.be/fQ14nVIdD-4 


Wealth Cafe Advice:

Knowing exactly what you want to achieve makes achieving financial freedom a million times easier. But, financial freedom isn’t just about having enough money today – it’s about knowing that you’re covered in the future. Once you’ve got an emergency savings fund and you’re making progress towards short and medium-term goals, it might be time to think about diversifying your savings through other types of investments. If you’re a young investor with a steady job, you can consider higher-risk investments, such as stock funds, that offer higher potential returns in the long run. If you’re at a more conservative stage in life, close to retirement for example, then lower-risk options may be what you’re looking for. Either way, always consider how to make the most of the available tax advantages on investment and retirement accounts.

Therefore, financial freedom can help you take ownership of your finances and, more importantly, your life. It’s about living within your means, being a bit frugal, and making sure that money is spent on things you really need like food, shelter, and yup even vacations (relaxation is important too, you know). By following the financial freedom tips mentioned above, you’ll inch closer to achieving the financial freedom you deserve. Hence, take a look at those finances, build additional streams of income, pay down that debt, and before you know it you’ll be free.

So, how close are you to achieving financial freedom?

Blog Article 2022 (12)

Do You Believe Any of These 5 Health Insurance Myths?

Health insurance can be difficult to understand. 


Not only is there an ocean of information and products, but there are also numerous myths and misconceptions floating around. So, don’t let false beliefs prevent you from getting the financial protection you need. To help you understand the ins and outs of health insurance, below are the 5 myths busted!


Insurance is not required for young and healthy 


‘The chance of something happening to me is low, also, I have no dependents, so I don’t need health insurance’ is something that we listen from most of our clients for not having insurance. Do you relate to them? This is the biggest myth of health insurance. You have nothing to lose by getting Health Insurance at a young age. In fact, when it comes to insurance premiums, young and healthy = cheaper premium. In other words, you save lots of money! Insurance can be expensive if you have existing health issues, or if you are older. For instance, as you get older - there is a chance to get chronic diseases - because of this you might face difficulty to opt for health insurance or might have to pay higher premiums - therefore to avoid this it is better to have health insurance when you are young and fit. 


Benefits of health insurance start from  Day 1


All health insurance plans come with an initial waiting period of one month, during which you cannot make any claim. At least 30 days waiting period is required - However, some policies cover accidental hospitalisation from Day 1. Basically, you cannot get diagnosed with something and then get health insurance. However, when you renew your existing health insurance plan - there is no waiting period. There is an additional waiting period of up to 2-4 years for pre-existing diseases.  It is advisable to read the policy wording and compare different health insurance policies to decide whether or not the policy is suitable for you.


Employer-contributed health insurance will suffice


“I have a corporate plan for me and my family, I don’t need individual insurance” - do you think the same? No doubt, organisations provide you with corporate health insurance - the best one at times, but it doesn’t mean you should underestimate the importance of personal health coverage. If truth be told, mostly corporate insurance tends to be one-size-fits-all, which is typically not suitable for your specific needs. Also, your corporate policy is valid only till you are an employee of the organisation - once you quit the job, you will no longer be covered under the policy. Furthermore, buying individual health insurance coverage in the later stage of life would be expensive and might not be available for you if you have severe health conditions. This is why having your own insurance plan is critical to prevent any gaps in your coverage for the long term. If cost is a concern, you can start with a basic sum-assured personal health insurance policy and then move on to increasing the amount as your finances improve.


A minimum of 24-hour hospitalisation is mandatory to claim health insurance


Apart from in-patient hospitalisation, health insurance can be claimed in the case of day-care facilities also. There are 20 to 50 daycare facilities including chemotherapy, dialysis, cataract surgery, tonsil surgery, etc. With medical advancements, some medical surgeries and procedures requiring prolonged hospitalisation are completed within 24 hours. Also, many health insurance companies have started providing coverage for OPD expenses as well which includes out-of-the-pocket expenses like doctor's consultation fees, pharmacy expenses, cost of spectacles and contact lenses, etc.


If I disclose everything, insurance will become expensive. 

When opting for health insurance, many people worry that they will be hit with higher premiums if they disclose the whole truth about their medical condition and history. This isn’t the case! By disclosing all information about your health and history, you will be in the best possible position to get the right plan for you and your requirements. Also, your insurer can cancel your policy or reject your insurance claim in case they find important facts being hidden or misrepresented at the time of buying the policy. Be very honest about your existing health issues, and your lifestyle habits of alcohol or tobacco consumption, so that any ailment which is even slightly linked to these happens, and the claim of the same is not rejected.

 

Conclusion: 


In case you have your health insurance in place - GREAT JOB! - but just like your investments, you need to revisit your insurance. As you grow old you might need extra health coverage or there might be a better product for you with a cheaper premium - therefore revisit your insurance every year. 

Blog Article 2022 (5)

This Diwali - financial importance - deep clean your portfolio

Bursting crackers, playing card games, or decorating the house--a lot of customs are associated with the festival of Diwali. Among these typical Diwali rituals, there is one aspect which we may dread or enjoy, but cannot avoid i.e. Deep cleaning our house. Every single drawer, wall or corner, is washed, cleaned and dried. 

15 days before Diwali, my mother would stop going anywhere and her sole focus would be to clean everything around our house. My sister & I would find every way to avoid it. As we grew older, I have now started looking forward to this deep cleaning experience :D. Let us tell you why and how it affects you and maybe it can also be applied to your finances! 

It helps you to declutter your mind, it just relaxes you the way many 2 therapy sessions would (or not). You just have this dopamine rush of completing some tasks. And also, it's great to be in a house that is dust-free and has more space.

Take stock of everything: It helps you understand what you have and how much. Take a stock of everything you own - clothes, books (I found some great books I got and I haven't read yet, finishing it before the year ends), home decor, candles, and shoes (omg not used them for 2 years now).

Discard all that you don’t need - Simple rule - what you don't use please discard. I am everything but a hoarder and I love my mother for this. If I don't use something, I discard it and then I buy less of things I don't want to use because discarding them is extremely painful. Thus, becoming a smart shopper. I do not decide after shopping, I decide before shopping.

No mindless Diwali/Festive Shopping - Ugh I hate it when people buy things just because it is Diwali. Yes, it was great when you did that only once a year. But now we are shopping literally all the time. We always have Myntra or Amazon tabs open on our phones. Hence just shop what you want or don't shop.

Set budgets - Diwali is all about budgeting guys. Look closely, you will see savings everywhere but Marketing is only showing Spending more. So be careful.

Once your regular expenses and savings are taken care of. Lets understand how you can deep clean your portfolio. 

Ways to Deep Clean your Portfolio

Let's put everything together: Collect all the data about all your investments, this is the most time-consuming process if you have not been maintaining it properly. However,  if you have maintained your data well it shouldn't take much of your time. You can check Mprofit software to maintain your investment information - it is available for free for up to 50 lakhs portfolio value.

Review your existing investments: Just like your clothes, some of your investments would hold more emotional place than real value in your wardrobe. Therefore, if it does not match your risk profile or your financial needs, it is time to book your profit (or losses) and remove such investments from your portfolio.  Things which have gone bad have to go. Investments which are not a good option anymore have to go. Learn to identify the weeds of your portfolio.

Now check your Asset Allocation - You can evaluate your Asset Allocation by knowing your Risk Profile - a basic analysis to understand your risk appetite. Once you calculate your Risk Profile and have identified the investment you do not need - Check how much you have in debt, equity , gold and other asset classes.  It’s time to evaluate your portfolio! 

Rebalance or reallocate your Investments: Rebalancing, primarily means, buying and selling different asset classes to build your ideal portfolio mix in order to meet your risk tolerance and financial goals (basically your asset allocation). Once you know your ideal asset allocation start rebalancing your portfolio in order to achieve it. 

Declutter your Investments - When we are talking about decluttering, remember that one of the first things to do is to stop hoarding on mutual funds, buying every other mutual fund is going to make your portfolio messy, and having too many things of one type is only making your diversification worst. So ensure that you have 5 to 6 mutual funds and not more than that and have 1 fund in each category. Time to declutter your mind, wardrobe, and portfolio.

Read the following article to understand this in more detail - When to exit from a Mutual Fund or a SIP

So remember, let it be cleaning your house or your portfolio, both ways you would be welcoming more Laxmi in your life 🙂

Blog Article 2022

5 Insurances that every individual must have

Insurance is your safety net, once it is built then you can invest comfortably without worrying about any contingency that may or may not dip into your savings. Insurance as the name suggests means protecting yourself and your family ‘financially’ from any contingent (things which may or may not happen) events.

Let’s build this safety net for you and your family. The basic 5 insurances that you must have in place are as :

1. Health Insurance- Insurance you absolutely need.

With a steep rise in the medical cost and diseases not being age-specific, having a health insurance policy is a number 1 priority. Where most individuals would have health insurance from their employer, it is advisable to have your own mediclaim as well and where you are self-employed, health insurance becomes a must. You can opt for an individual policy or for the family, or opt for a family floater plan under which the whole family gets covered in one policy. Do remember to get health insurance that covers most of your health needs and also has a cashless claim in your neighbourhood hospital.

You can know more about health insurance by going through these articles.

2. Life Insurance - Term Insurance

You obtain life insurance for the ones who continue to live after an untimely death and to secure them financially. Life Insurance must replace you financially and can be around 10 to 12 times your yearly income.

Generally, investors end up looking at how much would you get in return from the insurance policy rather than the sum assured and for how long to have the insurance policy. A small reminder that term insurance is a must for everyone who has or would eventually have any dependents financially. And for returns and investments, you have many investment options available.

You can know more about Life insurance here

3. Personal Accidental Insurance

Personal accidental insurance is the least opted insurance, especially in India - this is due to the lack of awareness of the various benefits accompanied with this insurance. It provides financial coverage against accidents that may cause bodily injury, permanent partial disability or permanent total disability and accidental death. It covers hospitalisation, pre and post hospitalisation, and offers a daily cash allowance of up to 30 days, depending on the insurer. In case of loss of income, it even covers you for a certain period, depending on the insurance you choose. Also, when it comes to the cost of premiums, this insurance has the least premiums against an exclusive range of coverage.

Given the raging accidents, we see every day this policy becomes a must-have too.

4. Critical Illness Insurance.

Generally, health insurance plans do not provide cover for critical illness or life-threatening diseases such as cancer, tumours, paralysis, bypass surgery, heart disorders as well as organ transplants. Treatment for these illnesses is also quite expensive. With some of these illnesses, hospitalizations are not required, and regular hospital visits are required over a long period of time. Therefore, having critical illness insurance can help you stay financially equipped for such medical emergencies.

However, these critical illness plans offer fixed benefits where a lump sum amount is paid to you for the treatment. The amount can be used not only towards treatment but towards your other financial responsibilities.

5. Home Insurance

A house is one of the most valuable and precious possessions that holds many priceless memories and belongings. Therefore, it is extremely essential to protect this prized possession against numerous unexpected damage that may not be in your control for eg, theft, natural calamities and so on.

Property insurance is calculated based on the value of the objects insured. For a homeowner, it may be the current value of the house, and the furniture and other items that have to be insured whereas for a shopkeeper, it will be the value of goods that are currently lying in the shop.

With the ever-increasing costs of electronics and other items at home, it is crucial you protect yourself financially from that extra loss, and obtain home insurance. Generally, for apartment societies, the co-operative buildings already cover the structure so your home insurance is only for the contents of the home. It would be a good practice to check with your society if the building and structure are insured or not.

Wealth Cafe Advice

Insurance policies work as a shield to protect you and your valuable possessions against numerous

Fun is like Life Insurance, the older you get the more it costs - Kin Hubbard. Buying insurance today will not only protect your family & yourself from the contingent expenses and loss of income but also be cheaper for you. Make the shift in your understanding of insurance and take it to build your safety net.

Where you wish to learn more about insurance - check out our course NM102: Build your Safety Net. You can use code SAVE20 for a 20% discount.

    Get your weekly dose of Money Masala from us.


    Pradhan Mantri Jan Arogya Yojana (PMJAY)

    Pradhan Mantri Jan Arogya Yojana(PM-JAY) also known as Ayushman Bharat Yojana is a pioneering initiative of Prime Minister Modi to ensure that poor and vulnerable populations are provided health cover. This initiative is part of the Government’s vision to ensure that its citizens – especially the poor and vulnerable groups have universal access to good quality hospital services without anyone having to face financial hardship as a consequence of using health services.

    How does it work?

    The Ayushman Bharat Yojana scheme offers health insurance cover to beneficiaries without any premium cost, treatment cost during and after the hospitalization. Ayushman Bharat scheme covers both pre and post-hospitalization expenses in addition to the in-patient charges.

    And all the impaneled hospitals under PMJAY Scheme would have appointed Ayushman Mitra's, who will aid the patient by coordinating with the hospital’s beneficiary in order to cut the expenses. You will find these Ayushman Mitra at their help desk where they will be verifying the eligibility criteria, documents, and the enrolment process. They provide letters to all the beneficiaries with respective QR codes.

    Furthermore, this QR code is scanned and verified for authentication to check the eligibility for people to avail Ayushman Bharat Yojana benefits.

    And the best part about the Ayushman Bharat scheme is that it offers coverage across PAN India and offers cashless hospitalization benefits to the enrolled families in both public and private hospitals.

    What is Covered under Pradhan Mantri Jan Arogya Yojana?

    PMJAY covers the following expenses during the treatment:

    • Provides coverage for medical examination, treatment, and consultation fee
    • Pre-hospitalization expenses are covered 
    • Post-hospitalization expenses are covered for 15 days
    • The policy also covers the cost of medicine and medical consumables
    • Hospital accommodation charges are also covered
    • Non-intensive and ICU services
    • The expenses incurred on the Diagnostic procedures are also covered
    • Medical implantation services are covered where required
    • Expenses incurred on complications arising during the medical treatment
    • Food services

    List of Critical Diseases covered under PM Jan Arogya Yojana (PMJAY)

    PMJAY offers nearly 1,350 medical packages at any of the private network hospitals and all the public hospitals. Below are some of the critical illnesses that Pradhan Mantri Jan Arogya Yojana covers:

    • Carotid angioplasty with stent
    • Prostate cancer
    • Coronary artery bypass grafting
    • Skull base surgery
    • Pulmonary valve surgery
    • Double valve replacement surgery
    • Anterior spine fixation
    • Tissue expander for disfigurement following burns

    How to apply online?

    Here is a step by step guide on how you can apply for Pradhan Mantri Jan Arogya Yojana

    Step 1: Visit the official website, mera.pmjay.gov.in.

    Step 2: Now you have to log on to the government website.

    Step 3: On the homepage enter your mobile number.

    Step 4: Just below that you will see the captcha, enter the captcha in the empty box.

    Step 5: After that click on Generate OTP option.

    Step 6: An OTP number will be sent to your mobile, by which you can go to the website and verify.

    Complete the necessary details to get the most benefits out of this scheme. So, these were some initial steps you need to follow for Pradhan Mantri Jan Arogya Yojana registration.

    Documents Required to Apply For Ayushman Bharat Yojana Scheme

    • Age & Identity Proof (Aadhaar Card/PAN Card)
    • Contact details (mobile, address, email)
    • Caste certificate
    • Income certificate (maximum annual income to be only up to Rs. 5 lakh a year)
    • Document proof of the current status of the family to be covered (Joint or nuclear)

    Note: After your name is registered on the Pradhan Mantri Jan Arogya Yojana(PM-JAY) website, with the help of your ration card or mobile number, you can know that you are not getting the benefit of this scheme.

    How to Check your Name in Ayushman Bharat Yojana Scheme List?

    There are various methods to check your name in the PM Jan Arogya Yojana -PMJAY beneficiary list. Listed below are some of the ways that you can try:

    • Online Method- Ayushman Bharat online list can be checked by the beneficiaries. All you need to do is visit the official online site of the National Health Authority for Ayushman Bharat Yojana.
    • Common Service Centres (CSC)- If you are a beneficiary of Ayushman Yojna you can also visit the nearest Common Service Centres. If it is not possible to do so you can also visit any of the impaneled hospitals to collect the information form. You can check the Ayushman Bharat hospital list on their site or in your policy documents.
    • Contact their Helpline No.- You can call on any of the government of India provided helpline numbers (e.g. 1800111565) to contact their customer care and seek the information about PMJAY Scheme, Ayushman card/e-card, Ayushman card apply, Ayushman card download, and even Ayushman Bharat Scheme registration.

    If your name is there on the list, then only you will get the Ayushman Bharat Card.

    How to Download your Pradhan Mantri Jan Arogya Yojana Card Online?

    It is important to apply for the Ayushman card as it consists of a dedicated family identification number. AB-NHPM is provided to every beneficiary household. Below are the steps that you can follow to apply or download your Ayushman card online-

    • Firstly, visit Ayushman Bharat Yojana official website - https://pmjay.gov.in/
    • Now login with your email id and generate a password
    • Enter your Aadhaar number to proceed further
    • Click on the approved beneficiary option
    • It will be redirected to their help center
    • Now enter your password in CSC and the pin number
    • It will be redirected to the home page
    • You will see the download option form where you can download your Ayushman Bharat golden card

    Wealth Cafe Advice

    It is good to stay updated about this scheme where you or your family are eligible and could be a part of the scheme. As per the terms, you cannot apply for it on your own. Let's wait and see how it works out and soon most of the people would get covered under it. Until then apply for the other government schemes that are available to you. 

    1. Atal Pension Yojana
    2. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
    3. Sukanya Samriddhi Yojana
    4. Pradhan Mantri Shram Yogi Maan-Dhan

     

    Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

    A large portion of India’s population (80%) is without insurance of any kind i.e health, accident, or life. Therefore in the year 2015, the Finance Minister announced PMJJBY along with 2 other schemes in his budget speech.

    Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a life insurance scheme in India backed by the Government. The life insurance scheme is valid for one year and is renewable from year to year, offering coverage in case of sudden death.

    How does the scheme work?

    The scheme is applicable for a period of one year. The scheme will be offered by the LIC and all insurers who are willing to join the scheme. Bank will be the master policyholder and will execute the claim and issue the scheme on the insurance company’s behalf.

    This cover is only for death and hence the benefit will accrue to the nominee on death of the policyholder. Therefore, it covers morality and no investment component. 

    The current risk period is from the 1st of June to the 31st of May. . The same will be renewable yearly.  Delayed enrolment for prospective cover is possible with payment of pro-rata premium as described below;

    Simply put the premium amount that you have to pay will depend upon in which quarter you enroll for the scheme. Where you enroll in:

    • June, July & August: Annual Premium of INR 330 is payable
    • September, October & November: Annual Premium of INR 258 is payable
    • December, January & February: Annual Premium of INR 172 is payable
    • March, April & May: Annual Premium of INR 86 is payable

    A Lien period of 45 days shall be applicable from the date of enrolment. However, deaths due to accidents will be exempt from the lien clause, the Reserve Bank of India said in a note.

    The cover shall be for a one-year period stretching from 1st June to 31st May for which the option to join/pay by auto-debit from the designated individual bank / Post office account on the prescribed forms will be required to be given by 31st May of every year. Delayed enrollment for prospective cover is possible with payment of a pro-rata premium as laid down in the above parameter. 

    There is a waiting period of 30 days in the insurance policy when you first apply for it, which means, If you are enrolling for the first time on or after 1st June 2021, the insurance cover shall not be available for death (other than due to an accident) occurring during the first 30 days from the date of enrolment into the scheme (lien period) and in case of death (other than due to accident) during lien period, no claim would be admissible. 

    If you exit the scheme at any point you may rejoin the scheme in future years. 

    In future years, new entrants into the eligible category or currently eligible individuals who did not join earlier or discontinued their subscription shall be able to join while the scheme is continuing, subject to the 30 days lien period described above.

    Coverage

    The total death benefit provided is INR 2 Lakhs. In case of death of the insured, the nominee can claim the amount, which would be tax-free. The claim process is also simple and hassle-free. 

    Eligibility

    To avail of benefits, you must fulfill the below requirements:

    1. Must be a citizen of India.
    2. Must be between the age of 18-50
    3. Must have a bank account/post office account linked with your Aadhar
    4. Must have a valid mobile number

    Note: The PMJJBY may be terminated if:

    • An insured person crosses the age of 55 years
    • Closure of accounts with the Bank/ Post office or insufficiency of balance to keep the insurance in force.

     

    Pradhan Mantri Suraksha Bima Yojan (PMSBY)

    Pradhan Mantri Suraksha Bima Yojana offers a renewable one-year accidental death and disability cover of Rs 2 lakh at Rs 12 premium every year. You will get Rs 1 lakh in case of partial permanent disability.

    The entry age of the scheme ranges from a minimum of 18 to a maximum of 70 years old.

    How to apply?

    You can get PMJJBY as well as PMSBY via LIC or any other life insurance company in India. Also, many banks have the facility for PMJJBY & PMSBY at their branches. 

    The enrollment process is quite simple:

    1. Download the application form from jansuraksha.gov.in/FORMS.aspx 
    2. Submit the duly filled form with your bank
    3. Submit the necessary documents
    4. Upon verification, you will be successfully registered

    Most banks also offer an SMS-based enrollment process.  Check with your banks for the details on the same and proceed with the application. You can also apply for it from your bank's official website.

    How to get the benefit? 

    1. Nominee to approach the bank where the subscriber opened the scheme with a 'savings bank account' along with the death certificate of the member.
    2. Nominee to collect claim form, and discharge receipt from the bank or any designated source like insurance company branch, hospital, etc. including from designated website
    3. After that, the nominee will have to submit the filled claim form and the discharge receipt, along with the death certificate with a photocopy (Xerox copy) of the canceled cheque of the nominee's bank account or the subscriber's PMJJBY linked bank account. 

    Then the bank will start the procedure of insurance claim. The bank is expected to process it within 30 days to forward the completed claim form to the insurance company. 

    The union government has incorporated all the insurance-related information on this website - www.jansuraksha.gov.in

    Wealth Cafe Advice:

    Let us take an example of a regular life insurance scheme vs PMJJY and understand its benefits in a better way:

    RegularPMJJY
    Current Age2727
    Years of contribution until age  552828
    CoverINR 5,00,000INR 2,00,000
    Annual ContributionINR 5000INR 330
    Total contributionINR 1,40,000INR 9,240
    Annualized Return5%12%

     

    Please note that this to give you an idea that INR 2 lakhs may not seem enough for your insurance needs but the scheme is a very good scheme in perspective of the benefits it is providing to a larger section of the society who do not have any access to any insurance currently.  It is a great option to cover yourself and your loved ones, you must apply for it, in fact, ask your team member, help and other people around you to also apply for this scheme. 

    Having a government-backed scheme to financially protect your loved ones in case anything were to happen to you is a wise decision, especially if you belong to the low-income category. 

    You can also check for other 2 benefits provided by the government:

    1. Atal Pension Yojana
    2. Pradhan Mantri Jan Arogya Yojana (PMJAY)
    3. Sukanya Samriddhi Yojana
    4. Pradhan Mantri Shram Yogi Maan-Dhan
    Article headers

    When should one opt for a loan against a life insurance policy?

    A life insurance policy is designed to provide a protective cover. However, life insurance is a far more versatile option nowadays. While they are primarily aimed at providing financial cover for the family in case of the death of the breadwinner, insurance policies can also be used to raise money for urgent needs. At times, one may need to take a loan when a financial emergency comes up. In such a situation a personal loan is one of the quickest options. But is it the best option? Instead of going for an expensive option like a personal loan, there is another option you can consider. This is taking a loan against a life insurance policy. So, not only does it provide security, but it also helps when one is going through a cash crunch.

     

    What is a loan against an insurance policy?

    A loan against an insurance policy is an arrangement where a borrower can avail loan by pledging their insurance policy as collateral with the insurance company. If the borrower is unable to pay back the loan on time, then the company reserves the right to hold on to the policy until the debt is realized in full.

     

    Which insurance policies are eligible for a loan?

    You cannot avail of loans against every type of life insurance policy. Therefore, it is better to check with your insurance company before buying any plan. Policies such as whole life policy, money-back policy, and endowment plan provide a loan against a life insurance policy. However, such loans are not available against term insurance policies and unit-linked plans. (This does not mean you do not take term insurance policies. The use of insurance is to protect your loved ones after you are gone, hence, a term insurance policy is a must)

     

    Eligibility

    When borrowing a loan against an insurance policy, you are essentially borrowing from yourself. You can thus borrow the money for any kind of expenses without having to provide an explanation, and you do not have to undergo intense scrutiny or a stringent approval process. Though the income of the borrower is also not a deciding factor for deciding the eligibility, the creditworthiness is considered nevertheless.

     

    How much loan can I get against my insurance policy?

    You can get a loan against an insurance policy starting at Rs 2 lakh, and up to 80% of the surrender value of the policy you pledge. Surrender value is the amount that a policyholder gets if he/she decides to exit the policy before maturity.

     

    On what basis is the interest charged?

    The interest rate charged in the case of a loan insurance policy is based on the premium already paid and the number of premiums that have been paid, the more the premium amount and the number of premiums paid, the lower the rate of interest charged. Usually, the interest rates are charged around 10% p.a., for loans taken against insurance policies.

     

    What are the documents required?

    To avail of this loan, a policyholder will have to submit:

    • A loan application form
    • The original insurance policy document along with your address proof, ID proof, and income proof
    • 'Deed of Assignment’ which will assign your insurance policy in favor of your lender
    • A copy of a canceled cheque
    • Payment receipt for the loan amount

     

    What happens if you fail to repay?

    If you fail to repay the loan taken against your policy, then the interest will keep adding to the balance amount. If the loan amount exceeds the insurance policy’s surrender/cash value, then this can become a reason for your policy lapse. The insurer can recover the loan amount and interest from the surrender value of your policy and may also terminate your insurance plan.
    Be extremely careful when you are choosing this option, do not take a loan on an insurance policy if you know you won't be able to repay it. In this case, you will lose all the benefits of the policy.
    Note: In the event of a policy lapse, taxes must be paid on the cash value.

     

    Conclusion

    Note that when you opt for a loan against the life insurance policy, like any other secured loan, the collateral is assigned to the lender. This means that the lender has the right to deduct the interest and principal amount in case of the death of the policyholder. This could compromise the financial security that you had placed in mind for your family. Therefore, before you plan to avail of such loans, make sure to go through the terms and conditions of the lender to avoid any discrepancies at the time of applying for a loan against an insurance policy
    Ideally, opt for such a loan if the loan has a short tenure and you are unable to seek an alternative source of borrowing. You may also opt if you have a term insurance policy in place to secure your loved ones' future.

     

    To learn more - you can check our course - NM 102: Build a Safety Net. Use code SAVE20 for 20% off.

     

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      EDLI Scheme 2021: Features & Benefits

      The scheme of the name EDLI or Employee Deposit Linked Insurance is not one that many are familiar with. It is a Life Insurance of Rs.2.5 lakh that is built into your EPF Life Insurance of 7 Lakh.

      Earlier the maximum ceiling was Rs.6 lakh, Government increased the maximum limit to Rs.7 lakh with effect from 28th April 2021.

      Features of EDLI Scheme 2021

      • All employees who are members of EPF are automatically eligible for EDLI.
      • This Life Insurance coverage is irrespective of whether the death occurred during working hours or non-working hours.
      • It covers the death of an employee, irrespective of the cause of death.
      • There are no exclusions under this plan.
      • Coverage and premium will be purely based on your salary but not on age or gender.
      • Earlier there was a condition that one must complete a year to be eligible for EDLI. Recently they removed such restrictions. Hence, you are covered from the first day itself.
      • There is no maximum age set for this insurance.
      • You no need to add nominees separately. Your EPF nomination itself is considered for this scheme.
      • Your Employers can also set up a separate insurance scheme for their employees with approvals from the EPFO if they find that the current coverage is low.
      • You get covered even if you shift jobs and work for another employer covered by the EDLI scheme before you complete one year of service. Earlier, 12 months’ service was applicable under one establishment.


      EDLI Scheme 2021 – EPF Life Insurance of Rs. 7 Lakh

      Under new changes, now EPF offers Life Insurance of Rs.2.5 lakh to Rs.7 lakh. The employee will not contribute to EDLI. Only your employer will contribute to it. It is 0.5% of Rs.15,000 or Rs.75 per month to the maximum (based on your actual Basic+DA). The maximum amount payable by the employer is Rs.75.

      How is Employees’ Deposit-Linked Insurance (EDLI) calculated?

      The average monthly salary (Basic+DA) drawn (subject to a maximum of Rs 15,000), during the last 12 months preceding the month in which the employee dies, is first multiplied by 35 times (Earlier it was 30 times). This is added to 50% of the average balance in the account of the deceased in the provident fund during the preceding 12 months or during the period of his membership subject to a ceiling limit of Rs.1.75 lakh (previously it was Rs.1.5 lakh), is also paid to the beneficiary family. 

      Note that Rs.15,000 is the ceiling under the EDLI scheme for the purpose of this calculation even if your basic salary exceeds this amount.

      The minimum payable will now be Rs 2.5 lakh while the maximum will be Rs 6 lakh.

      Let us assume that Mr.A’s salary (Basic+DA) at the time of death is Rs.10,000. Then assume his last 12 months’ average salary was Rs.10,000. Then we have to multiply this by 35. This will be Rs.3,50,000.

      Now we have to add 50% of the average balance in the account of Mr.A during the preceding 12 months. Assume his EPF balance for the last 12 months is Rs.1 lakh. Then 50% of this is Rs.50,000. However, the maximum ceiling is Rs.1.75 lakh. Hence, his nominee will receive Rs.50,000 as a bonus but not Rs.1.75 lakh.

      So in total, his nominee will receive Rs.3,50,000+Rs.50,000=Rs.4,00,000.

      Now let us assume a simple calculation like one’s salary is Rs.15,000, then 35 times of Rs.15,000 is Rs.5,25,000 and the bonus added to the maximum is Rs.1,75,000. Hence, the total maximum benefit under the EDLI is Rs.7,00,000. The benefit will not go beyond this amount.

      How to claim the EDLI Benefit?

      • A nominee can claim the amount.
      • In case there is no nomination, then the legal heir can claim the amount.
      • If the nominee or legal heir is a minor, then a guardian of the minor nominee can claim the amount.
      • You have to fill the forms like Form 20 (for EDLI), Form 10D/10C (for claiming the Provident Fund dues and Pension/Withdrawal Benefit as applicable).
      • All details should be in BLOCK LETTERS.
      • Provide bank details (better to attach a cancelled cheque copy for accuracy of bank details).
        Attach the death certificate of a deceased employee.
      • Guardianship certificate (If the claim is on behalf of a minor family member/nominee/legal heir is by other than the natural guardian.)
      • Succession certificate (in case of a claim by the legal heir).
      • In case the members were last employed under an establishment exempted under the EPF Scheme 1952, the employer of such establishment should furnish the PF details of the last 12 months under the Certificate part and also send an attested copy of the Member’s Nomination Form.
      • You have to send such a filled application to the EPFO Commissioner through the employer.
        In case the company closed or they are not cooperating for a claim, then you have to get the claim form to be attested by any one of the following officials-Magistrate, A Gazetted Officer, Post/Sub-Post Master, President of the Village Panchayat, where there is not Union Board, Chairman/Secretary/Member of Municipal/District Local Board, MLA or MP, Member of CBT/Regional Committee EPF, Manager of the Bank in which the Bank Account is maintained or Head of any recognized educational institution.
      • A claim must be settled with 30 days of such submission.
        However, if there is any fault in filling the form or processing, then you will receive the letter from EPFO for the same and that too within 30 days.
      • If EPFO does not settle the claim within 30 days, then EPFO Commissioner will be liable to pay the 12% per annum interest on such claim amount from the date of the set period for claim settlement.

      Conclusion: For some, this Rs.2.5 lakh to Rs.7 lakh insurance may be a small amount. However, for many families, in case of the sudden demise of an employee, this amount would help a lot.

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      Are ULIPs Taxable Like Mutual Funds? Budget 2021 Update

      Hi there

      Until last year many people invested in ULIPs (Unit Linked Insurance Plans) to make the most of the tax benefit that one would get from it. They gave you insurance and investment benefits along with no taxation. However, this loophole is now covered in Budget 2021, which has made ULIPs taxable.

      However, to bring equality between ULIPs and Mutual Funds, during the Budget 2021, the Finance Minister proposed the changes in the taxation of ULIPs. Let us take a look at the new taxation rules of ULIPs.

       

      Taxation of ULIP

      There are three aspects of taxation that we have to consider while investing in ULIPs.

      1. At the time of Investing
      2. When you surrender or ULIPs mature
      3. At the time of death

       

      1. Tax deduction at the time of Investing

      This is still applicable up to INR 1,50,000 per annum towards your premium for ULIPs under section 80C of the Income-tax Act,1961.  You can claim a deduction for the investment made for himself, spouse, or children (dependent or independent) and HUF can claim a deduction for the investment made for any member of HUF.

      The deduction under section 80C is restricted to 10% of the sum assured. It means suppose the sum assured is Rs.10 Lakh, then the premium that you pay under the ULIP should be up to the maximum of Rs.1,00,000. If the premium is beyond 10%, then it is not eligible for deduction under Sec.80C. Only INR 1,00,000 will be eligible for deduction.

      One more important point to understand here is that, If you stop the premium payment before the expiry of five years or you terminate your participation by notice to that effect, the aggregate of deductions allowed to you in the earlier years shall be considered as your income and will be chargeable to tax in the year in which such termination or cessation occurs as per your income tax slab.

      Do remember that you can pay the premium as much as possible. However, the benefit in Sec.80C is limited to Rs.1,50,000 a year and the premium must be 10% of the sum assured.

       

      2. Taxation at the time of Maturity 

      This is where the budget has made a change

      Before the Budget 2021

      Any sum received under ULIP including the bonus on such policy was not taxable (exempt) under section Section 10(10D) of the Act. However, if the premium payable for any of the years during the term of the policy exceeds 10% of the actual sum assured, then no exemption is allowed.

      After the Budget 2021

      Effective from 1st February 2021, no exemption is allowed under Sec.10(10D), if the amount of premium payable for any of the previous year during the term of the policy exceeds Rs. 2,50,000.

      However, if the total premium payable during any financial year is less than Rs.2,50,000 (including all the multiple policies), then you still enjoy the tax-free maturity benefits under Sec.10(10D).

      The budget 2021 states that any amount allocated by way of bonus on such policy, then, any profits or gains arising from receipt of such amount by such person shall be chargeable to tax under the head “Capital gains” in the previous year in which such amount was received.

      The manner in which the income will be taxed is not yet notified.

      Under ULIPs you have the option to select if you are investing under the debt funds or the equity funds, now given the taxation of debt and equity is different there was a question on how your gains from ULIPS be taxed. In the Finance Budget 2021, it is proposed to cover ULIPs to which exemption under Section 10(10D) does not apply on account of the applicability of the fourth and fifth proviso thereof. Thus, the high premium ULIPs shall be considered as Equity Oriented Fund even if a portion of the fund is invested in the debt-based scheme.

      Thus, the long-term capital gains, in excess of Rs. 1,00,000, shall be taxable at the rate of 10% without indexation under Section 112A. Whereas the entire amount of short-term capital gains shall be taxable at the rate of 15% under Section 111A. The ULIPs shall be considered as a long-term capital asset if they are held for more than 12 months and short-term capital assets if held for 12 months or less.

      One more important aspect to consider here is the taxation about the switching. As of now, switching from one fund to the other provided the maturity/redemption of units of ULIPs are exempt under Section 10(10D). However, as per the new proposal, if the premium is more than Rs.2,50,000, then they are not eligible to claim the exemption under Sec.10(10D). In such a situation, we have to wait for clarity about the taxation on switching of the policies whose premium is more than Rs.2,50,000.

       

      3. Taxation of ULIPs at death

      In the event of the death of the policy-holder, the exemption shall not be denied under Section 10(10D) from either of the policy, that is, excess premium policy (more than 10% of sum assured) or higher premium policy (more than Rs. 2,50,000).

      Hence, irrespective of the premium amount, the death benefit is always tax-free in the hands of the nominee.

      If you are considering investing in ULIPs now, ensure that you account for taxation of the same going forward.

       

      To learn more - you can check our course - NM 102: Build a Safety Net. Use code SAVE20 for 20% off.

       

      Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

       

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        5

        Things To Do After You Buy A Health Insurance

        Hi there

        Usually, we have health insurance and discuss how to get health insurance. In this article, we discuss things to do after you buy a health insurance plan.


        1.  Understand claim procedures

        In the case of emergency hospitalization and in the case of planned hospitalization find out the documents and steps necessary to intimate the insurer. Copy this information from the insurer or TPA’s website onto a word processor, print it, and keep it along with the policy document and policy ID card.


        2. Recognise that ‘cashless’ is not a right!

        Health insurance comes with a right to claim reimbursement. However, cashless claims are more of a privilege than a right. It is quite possible that the insurer may either deny cashless or allow it partially and ask the insured to claim the rest of the expenses via reimbursement after the hospitalization is complete.


        3. Prepare for the next premium

        Even if you choose not to increase the cover each year, do not assume the premium will be the same next year. The premium could increase due to other reasons – age of individuals, the risk profile of the entire group covered by the group, underwriting test, and perhaps medical checkups too. Start an online recurring deposit that matures 6-8 weeks before the premium is due.  If you are comfortable, you can choose to put money aside in a liquid fund for your insurance.


        4. Understand the implications of sub-limits

        There is nothing wrong with buying a policy with room-rent sub-limits. The only precaution is to ensure that the room-rent is always lower than that allowed by the sub-limit. This is because every kind of hospital fee (medicines, doctor fees, etc.) is linked to the room rent. So if you choose a room rent higher than that allowed by your policy, you will only be reimbursed (or paid via cashless) a portion of the hospital bill.


        5. Recognize the impact of non-medical expenses

        Hospitalization is not only about paying hospitalization fees! There is a huge list of non-medical expenses that any patient could incur. There are some administrative expenses, household expenses (while you are hospitalized), support staff expenses, and some expenses which get rejected in your insurance. Even if you believe that your health insurance cover is sufficient, these expenses have to be paid. This is where your emergency fund will come in handy. So ensure that you have one in place.


        6. Health Cover for family members

        If you are the earning member it is very crucial to have your own insurance but it is equally important to have health insurance for your family members, as any medical emergency for them would result in a financial setback for you and the entire family.

        If the budget is a constraint you can consider taking up a family floater plan - watch our youtube video on this.
         https://www.youtube.com/watch?v=F0JNvA5a_eQ&ab_channel=WealthCafeFinancial 

        Health Insurance could be considered as one of the trickiest insurances to buy as the health issues are very different for each person and then each insurance company has varied insurance needs. As a practice, do understand the various clauses of your insurance and have an emergency fund in place to be stress-free of any unforeseen health issues.

        Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

        To learn more - you can check our course - NM 102: Build a Safety Net. Use code SAVE20 for 20% off.

         

         





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