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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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      Article headers14

      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.

      Article headers2

      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.

         

         



        9

        Indian Stock Market timings

        Indian Stock Market Timings

        Trade in the stock market can only be undertaken during a specific time interval in India. Retail customers have to perform such transactions through a brokerage agency between 9.15 a.m. to 3.30 p.m. on weekdays. Most investors undertake the purchase/sale of securities listed on the major stock exchanges in India – Bombay stock exchange (BSE) and National Stock exchange (NSE). Indian stock market timings are the same for both these major stock exchanges.

         

        Indian stock market timings for trade is divided into three segments:

        Pre-opening Timing

        This session lasts from 9.00 a.m. to 9.15 a.m. Orders to purchase or sell any securities can be placed during this time. It can be further classified into three sessions:

        • 9:00 a.m. – 9.08 a.m.

        During this stock market opening time in India, orders for any transaction can be placed. The order entry is given preference when actual trading begins, as these orders are cleared off in the beginning. Any requests placed during this time can be changed or canceled according to need, which is beneficial to investors, and no orders can be placed after this period of 8 minutes during the pre-opening session.

        • 9:08 a.m. – 9.12 a.m.

        This segment of Indian share market timing is responsible for the price determination of security. Price matching order is done by corresponding demand and supply prices to ensure accurate transactions among investors who want to purchase or sell a security, respectively Determination of final prices at which trading will begin during normal Indian stock market timing is done through a multilateral order matching system.

        Price matching order plays a vital role in determining the price at which the security is transacted during a normal session of Indian stock market timing.

        However, the benefits of modification of any order already placed in not available during this session.

         

        • 9:12 a.m. – 9.15 a.m.

        This time acts as a transition period between preopening and normal Indian share market timing. No additional orders for transactions can be placed during this time. Also, existing bets already placed from 9.08 a.m. – 9.12 a.m. cannot be revoked as well.

        Normal Session 

        This is the primary Indian share market timing lasting from 9.15 a.m. to 3.30 p.m. Any transactions made during this time follow a bilateral order matching system, wherein price determination is done through demand and supply forces. The bilateral order matching system is volatile, thereby inducing several market fluctuations which are ultimately reflected in security prices. To control this volatility, the multi-order system was formulated for the pre-opening session and was incorporated in Indian stock market timings.

        Post-closing Session 

        Stock market closing time in India is marked at 3.30 p.m. No exchange takes place after this period. However, the determination of closing price is done during this time, which has a significant effect on the following day’s opening security price.

        Stock market closing time in India can be divided into two sessions –

        • 3:00 p.m. – 3.40 p.m.

        The closing price is calculated using a weighted average of prices at securities trading from 3 p.m. – 3.30 p.m. in a stock exchange. For determining the closing prices of benchmark and sector indices such as Nifty, Sensex, S&P Auto, etc. weighted average prices of listed securities are considered.

        • 3:40 p.m. – 4 p.m.

        This period is post stock market closing time when bids for the following day’s trade can be placed. Bids placed during this time are confirmed, provided adequate buyers and sellers are present in the market. These transactions are completed at a stipulated price, irrespective of changes in opening market price.

        Thus, capital gains can be realized if the opening price exceeds the closing price by an investor who has already placed their bids. In case closing price exceeds opening share price, bids can be canceled during the narrow window of 9.00 a.m. – 9.08 a.m.

        The overall stock market operating time in India can be demonstrated by the following table:

        S. No. NameTime 
        1.Pre-opening session9.00 a.m. – 9.15 a.m.
        2.Normal session9.15 a.m. – 3.30 p.m.
        3.Closing session3.30 p.m. – 4.00 p.m.

        Aftermarket Orders

        Post this time frame. No transactions can take place. However, investors can place aftermarket orders, for securities of chosen companies, which would be allocated at opening market price the following day.

        Muhurat’ Trading 

        Indian stock market is generally closed for any transactions on Diwali, as it is a religious festival celebrated all across the country. However, a one-hour trading session is conducted from 5.30 p.m. to 6.40 pm as it is considered to be auspicious.

         



        Income tax Feature Image

        Income-Tax Relief For Home Buyers

        Hello fellow investors
         
        As a part of various relief measures taken by the Government in response to the economic slowdown post-COVID-19, the Finance Minister (FM) has announced a very attractive income tax relief for home buyers (new residential properties of value up to Rs 2 crore). Here is what you need to know.  
         
        Income Tax relief for home buyers 

        In case the declared purchase consideration of the land/building is less than the stamp value (circle rate) by up to 20%, there will be no additional tax outgo for both the seller and the purchaser for the period 12th November 2020 to 30th June 2021. Earlier, the acceptable difference was 5% which was to be enhanced to 10% with effect from 01 st April 2021.

        This move will also help developers in selling off their unsold inventory at up to 20% below the circle rate and the buyers in getting cheaper homes without any additional tax burden on either party. Let’s look at the relevant provisions of the Income Tax Act to understand the applicable tax relief.

        Section 43CA of the Income-tax Act - for the seller

        This section provided for deeming of the stamp duty value (circle rate) as sale consideration for the transfer of real estate inventory in the case the circle rate exceeded the declared consideration. The circle rate is the minimum rate per unit area fixed by the state governments for the sale of land or property and is
        aimed at reducing stamp duty evasion by declaring lower sale values in the sale-purchase deeds.

        Thus, even if the real estate was sold at a price below the circle rate, the circle rate was considered as the sale value for the calculation of the business profits of the seller. For example, if a house is sold by a developer for Rs 80 lakh but its value as per the circle rate is Rs 96 lakh, the developer is supposed to take Rs 96 lakh as the sale value for
        calculating his profit.

        Through Finance Act 2018, a difference of 5% between the two rates was declared to be acceptable. This was increased to 10% through Finance Act 2020. Now, the FM has raised this acceptable difference to 20%. Thus, in the above case, the difference is exactly 20% as seen below and the developer can consider Rs 80 lakh for calculating his profits from the sale. 

        Section 56(2)(x) of the Income-tax Act for the buyer

        This section is applicable to the buyer and provides for stamp duty value to be deemed as purchase consideration even if the purchase was made at a lower price. As per the above example, the buyer is deemed to have received Rs 16 lakh (the difference between the stamp value and the sale consideration) and was supposed to declare this amount as ‘Income from other sources and pay tax on the same. Now, he will not have to pay any tax if the difference is up to 20% as is the case in the above example.

         

        In summary, this announcement by the FM comes as a major relief to real estate developers who were struggling to offload their inventory due to lower demand in the market. The benefit is applicable, however, only for the primary sale of residential properties and not for commercial and secondary sales.



        11

        Health Insurance: Single Plan or a Family Floater Plan?

        Hello fellow investors

        With COVID-19, the one thing that everyone has realized is Health insurance is a must! We all need adequate Health Insurance cover and at a good price. Because whether to have Health Insurance or not is no longer a point of discussion. In fact, now we want to ensure that everyone in the family also has Health Insurance.

        We have been asked many questions about whether you should opt for a stand-alone health plan or a family health plan; and whether to opt for a top-up plan afterwards. We are going to break down these concepts for you.

         

         

        How much Insurance should you have?

        Before getting into the discussion of what type of plan, it is important that you know how much insurance is enough for you. Ideally, if you live in a tier 2/3 city you must have a cover of at least 5 lakhs and if you are in a metro/tier 1 city you must have a cover of at least 10 lakhs. These are indicative numbers based on the cost of health incurred in different places and you can always take a higher cover.

         


        What is an Individual Health Insurance policy?

        In the case of individual cover, the policy provides specific health cover for each member covered in the policy. You can decide to have a higher cover for the working member and a smaller cover for the children. Each family member will have a dedicated sum assured under the policy.

        For example, you can buy an Individual Health policy that gives a cover of INR 10 lakhs each to yourself and your spouse and INR 6 lakh for your elder kid aged 15 and INR 3 lakhs for your younger kid aged 10. The cover amount is specific to each person and not shared among the different members.


        What is a family floater plan?

        In the case of a family floater policy, all family members are covered in a single policy. Unlike individual policies where there is a dedicated sum assured, here there is a single “floater” sum assured which is shared between all members of the family. 

        For example, if the family in the above example takes a family floater policy with a sum assured of INR 10 lakhs, all the four members of the family share the INR 10 lakhs sum assured. That means the insurer’s maximum liability towards the entire family for a particular year (irrespective of which individual gets hospitalized) stands at INR 10  lakhs.

        Under the family floater policy, medical reimbursements can be availed by any or all of the members subject to the total sum Insured.

        Let us compare the prices of family floater and individual policies to understand better:

        Case 1 - A couple

        Family floater plan premiums are determined based on the age of the older person. Given that this is a relatively younger couple, their premiums are not very different.

        Case 2 - Parents with 2 children


        In case 2, for older parents, there is a significantly higher premium being paid for a family floater plan. In case there is a predetermined illness that would further push the premium for the entire family. However, the 20 lakhs cover under the floater plan would be available to each family member thus increasing the cover amount at a higher premium.

        However, where you have a cash crunch, you can go for a floater plan of 5 lakhs wherein the cover of 5 lakhs is available for all members with a reset clause for a cheaper price. You save around 10 K per annum in the premium costs where you go for a floater plan of 5 lakhs for the family. 

        The reset clause: Family floater plans come with a reset clause that allows for a 100% reset of the sum insured once in a policy year. This option automatically comes into operation when the sum insured (including the accrued additional sum insured, if any) is already used by one insured person and hence is insufficient for the other. The reset of the policy happens only for an unrelated illness.

        For example: In the case above if the husband is sick for malaria and makes a claim of 3 lakhs in a year and later wife gets admitted for a different health issue like blood pressure and has a hospital bill of 4 lakhs. The floater plan will cover it as it would have reset the sum assured. But if the wife is admitted for malaria itself and the bill is of 4 lakhs, only 2 lakhs (to the tune of the original sum assured of 5 lakhs less 3 lakhs claimed by husband) will be payable by the insurance company.

        A Family floater policy is value for money and comes a bit cheaper compared to individual policies and that’s a plus, especially for young families who are tight on budget for their insurance spending. 
         
        No claim bonus: If you do not make any claims under the policy any year, a percentage of your sum insured, say 10%, is added each year to your sum assured. So if in 2019, I do not make any claims under my policy which has a sum assured of INR 5 lakhs, in 2020 when I renew it, my sum assured is increased to INR 5.5 lakhs without any increase in my premium amount. The negative of a family floater plan is that in case of a claim by even one member under a family floater, the entire No Claim Bonus (NCB) is nullified for the year under the policy whereas the same is not true for individual policies.


        Top-Up Plan

        A top-up plan is a regular health insurance policy that covers hospitalization costs but only after a threshold limit, known as a deductible, is crossed. A deductible is that portion of the claim amount that is not covered by the insurer and has to be paid by the policyholder before the benefits of the top-up policy can kick in.

        A top-up plan, therefore, is a cost-effective way to increase your health insurance. You can take a base policy and a top-up over above that policy. This way you can use your base health insurance policy to make a claim up till the deductible amount and use your top-up plan for any payments over that.

        Where you want to increase the sum assured of your policy, you can do that only when the policy is due. Top up gives you the option to increase the sum assured at a minimal cost during the year. Hence, Top-up helps you to increase the base sum assured amount for your insurance needs.

        What should you do?

        The health insurance that you would take would depend upon the age of the oldest member in your family, the number of members, and the premium you are comfortable paying for the same. It would be interesting to check various options and choose which one best suits your needs and pockets.

        It is advisable to have separate health insurance for older people or those who are susceptible to illness/hospitalization. By doing that, you are protecting the no-claim bonus clause of the policy and also not paying a higher premium for other insurance.

        Hope this helps you understand your insurance needs better.

        Happy Investing!

        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.

         

          Get your weekly dose of Money Masala from us.


           





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