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Best Advice for Senior Citizens for a Valuable Health Insurance

Best Advice for Senior Citizens for a Valuable Health Insurance
by Nutan Gupta 10/05/2016

With the ever increasing cost of health services, it is progressively becoming difficult for employers to maintain parental coverage in the group cover schemes. Many are either closing that option or introducing restrictions such as co-payment to manage their costs. Standalone policies, on the other hand, contain several exclusions of pre-existing conditions. For the senior citizens already in insurance several factors come into play that may affect your policy.

Lifestyle and Medical History

A healthy lifestyle accompanied by healthy diet is a key to any insurer to take up a senior citizen. A medical history with not so many claims would at times translate to premiums not increasing by over 20% during renewal.

The Age of Insured could also affect the insurance cover. For those defined as senior citizens, a generally accepted axiom of health insurance is the older you are, the higher the risk on the cover. Increased restriction on pre-existing conditions such as higher co-payment is introduced with advanced age. Insurance companies tend to charge premiums on health insurance based on age bands and are also known not to be enthusiastic to pick up new clients over the age of 65. By getting coverage early, one can avoid getting entangled in restrictions of the next age band.

Employer Covers are typically generic and standard, although they cut across several employees, they are considered not viable for enhancement at an individual level. Such covers are limited to the extent of the existence of the employment. These covers, though still offered through some employers are often limited and discriminatory to the senior citizens due to their ‘generic’ nature.

Notwithstanding all these, being without medical insurance cover is not advisable. A single visit to a hospital can exhaust a person financially. It might seem costly to buy a medical insurance for a senior citizen, however, not taking insurance, on the other hand, is not an option. Sky high medical costs make a decent corpus look inadequate for one hospital admittance in future. Do not bite nails on medical insurance. Know the factors that affect the health cover for senior citizens and keep topping it up

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How to Maximize your Tax Benefits on Your Life Insurance Policy

How to Maximize your Tax Benefits on Your Life Insurance Policy
by Nutan Gupta 10/05/2016

Many people purchase life insurance plans not only to safeguard their loved ones financially in the event of death or permanent disability but also to claim the related income tax benefits. Section 80C of the Income Tax Act provides for various relief / claim avenues through which investors and those who have life insurance policies can claim. However, making these claims is not a matter of simple form filling exercise. One has to meet certain conditions and meet certain obligations. Here’s how you can maximize your tax benefits on your life insurance policy.

Which type of policy qualifies?

According to section 80C of the Income Tax Act, the only policy which provides cover to an individual and his/her immediate family (excluding parents) can be accounted for as being duly qualified for the requisite deductions when claiming tax. Other policies that may relate to other people such as parents, siblings or workers are considered not valid for this purpose.

It always helps to be conscious that if yours is a keyman insurance policy, then the proceeds from it are taxable.

What amounts qualify for claims?

The total amount that can be claimed for deduction from gross total income under section 80C currently stands at Rs 1.5 lakh. This includes life insurance premiums and investments in other avenues as specified in the act. It is also important to make sure that annual premium paid including any other sums such as service tax should not surpass the recommended limits of 10 percent, 15 percent or 20 percent of the actual sum assured.

When to Claim Tax Benefits on your Life Insurance

The tax claim on the premium can be made as a deduction in the same financial year in which the premium was paid. Furthermore, in order to retain benefits accorded by section 80C, it is important that you don’t surrender or leave to lapse, or terminate, a policy that you may be dissatisfied with before the expiry of the minimum lock-in period.

Provide your insurer with your Permanent Account Number

To avoid a higher tax deduction at source (TDS) where TDS is applicable. TDS is deducted at a higher rate of 20 percent for accounts without PAN rather than 2 percent.

To maximize on the tax benefits claim of your life insurance, you ought to be prudent on your policy features, claim amount and timing.

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Top Life Insurance Myths to Get Rid Off

Top Life Insurance Myths to Get Rid Off
by Nutan Gupta 10/05/2016

Most people look at insurance as something that helps them reduce taxes and save for future. Unfortunately, these are secondary benefits of insurance and not the primary reason why it should be bought.

Insurance is bought to provide financial security to dependents in case of death of the policyholder. It should be large enough to provide income replacement of the policyholder and help clear off all outstanding debts. But when it comes to insurance, there are many more myths that people believe in. Lets see the reality behind some of these myths.

A very big myth doing rounds is that life insurance is costly. The main reason behind this belief is that people think of survival benefit plans (like endowment, money-back, etc.), when they want to buy insurance. These are of course costly as these are products with dual benefit of insurance and savings. But one can easily buy insurance policies with large enough covers at very low prices, if one goes for plain term plans. A plan with insurance cover of Rs 50 lac just costs about Rs 6,000 a year! So it’s not that costly after all.

Now the young and single believe that they don’t need any life insurance cover as the product is mainly marketed for its importance for those with families. But it must be noted that at young age, insurance policies are more economical since premiums are low for low-age groups. Premiums tend to grow higher later in life as the life expectancy risks increase with age. More importantly, this cover can be extended to the family when one starts it in future.

Working professionals are also plagued by a myth that the insurance provided by their employer is enough for them. Unfortunately, if the job is discontinued or the person retires, they will lose their insurance covers. And since premiums are very high at later stage of life, it can be very costly to buy sufficient coverage later on.

These are some of the myths that people have and that cause a lot of harm to people’s financial lives. So sooner these are busted and necessary actions taken, better it is.

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Comparing Life Insurance & Investment Plans

Comparing Life Insurance & Investment Plans
by Nutan Gupta 10/05/2016

It’s very common to find people quoting about their insurance policies, when asked about investments for future. This is because of a misunderstanding that leads most people to take wrong financial decisions.

Even though people use the terms Investment and Insurance interchangeably, in reality they are not similar. Insurance is a product that covers the risk of policyholder’s death by paying lumpsum benefits and helps financially secure the dependents. Investment on other hand is used for wealth creation and to provide for additional sources of income in future. So to put it very simply, investment is about growth whereas insurance is about financial security.

Unfortunately, there are many hybrid financial products that offer both insurance as well as investment benefits. Though it might look attractive to handle both aspects of personal finance using just one product, fact is that these products are mostly expensive and return on investment is also quite less, when compared with other pure investment plans. People tend to avoid plain term insurance plans because they are not used to the concept of 'No benefit' in case of policyholder’s survival. But what they forget is that plain term plans are very cheap when compared to hybrid products and money saved on premiums can be invested in pure investment products.

People tend to avoid plain term insurance plans because they are not used to the concept of 'No benefit' in case of policyholder’s survival. But what they forget is that plain term plans are very cheap when compared to hybrid products and money saved on premiums can be invested in pure investment products.

Let’s take an example to better understand it.

As of today, you can buy a hybrid product (insurance+investment), which gives a cover of Rs 5 lacs for an annual premium of Rs 30,000. Compare this with a term plan of Rs 50 lacs that you can buy for just Rs 5000. So essentially, you are getting a 10 times bigger insurance cover for 1/6th the price. You might argue that you won’t get any money on survival in term plans. But you can always save the difference amount (Rs 30,000 – Rs 5000 = Rs 25,000) in pure investment products every year. That will take care of investment part.

This is a very simple reason why it makes sense to keep insurance separate from investments. But beware that insurance sellers will try very hard to push hybrid products as it offers higher commission. So make sure you understand why it’s beneficial to go for term plans.

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Why Insurance is Being Sold as Investments

Why Insurance is Being Sold as Investments
by Nutan Gupta 10/05/2016

Have you ever thought why your agents, bankers and brokers call you to sell insurancepolicies? This is the time of the year when you might be getting the maximum number ofcalls because most of us are looking to save tax.

When was the last time you quoted your insurance policies when someone asked you about your investments? A lot of people use the terms insurance and investment interchangeably. But in reality, these terms are not similar.

But, where does this confusion come from? Most of the people think that buying insurance is equal to investing because they are being told so by their agents. Have you ever thought why you keep getting frequent calls from your bank executives to sell insurance policies? They convince you till the time you buy a policy. This is because they get a fat commission for selling each insurance policy. Insurance policies are being sold in the name of investing for your future. While the truth is that insurance is not an investment product. The sole purpose of buying an insurance is to secure your loved ones financially.

One of the major point of differentiation between insurance and investment is that insurance does not give you any return (apart from securing your family financially),while investments give you high returns in the long run. Life insurance demands premium either annually or semi-annually, and these premiums are not very low. So it does notmake sense to pay high premium for a product which is not even deriving any profit. It is better to opt for term insurance which has lower premium and serves the purpose of insurance as well. A bank fixed deposit earns you a return of around 9 percent while the return on insurance is just around 3-4 percent.

The ideal way of differentiating insurance and investment is by identifying the basic purpose they serve. A person opting for any of these should be very clear what he wants. If you want to secure your family, go ahead with insurance. If you are looking to make a profit, go ahead and invest. Insurance distributors are paid to sell you policies, and it is a part of their job to convince you to buy insurance policies. It is you who will decide if you want an insurance or an investment. Choose wisely!

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Get Tips on How to Make a Successful Insurance Claim

Get Tips on How to Make a Successful Insurance Claim
by Nutan Gupta 10/05/2016

The bureaucracy of insurance companies, coupled with the threat of insurance fraud while bearing the loss of a loved one, makes the process of making an insurance claim a painstaking experience. The Insurance Regulatory and Development Authority (IRDA) provides guidelines for settling insurance claims. These guidelines provide that, insurance companies are obligated to settle claims within 30 days of receipt of all claimant documents. Insurance companies, on the other hand, employ claim investigators and legal advisors who scrutinize claim applications thoroughly. A feedback of possible fraud or malpractice would result in either an extension or a denial of the claim settlement. Whenever claimants choose to take legal action and prove their case, the matters take up to six months to settle. However, there are thousands of cases that have dragged for years in the courts. Below are some tips to make a successful insurance claim.

Successful Claims Begin At The Point Of Purchasing the Policy

When applying for an insurance policy cover, it is important to make all disclosures honestly. Hiding some ‘unpleasant’ habits such as smoking or pre-existing diseases will only complicate the claim process as it will be discovered then and the insurance company may decline to pay a claim on the basis of non-disclosure of material information.

At the occurrence of a Death or Hospitalization

In the event of a health cover, it is vital to alert the insurance company by sending a claim within the shortest time possible. Insurance companies take delays as reasons to arouse suspicion and elicit deeper investigation

Comprehensive Information Should Be Given To The Insurance Company Accurately

All the relevant information on the claim application including the name of the policyholder, date, location, and reason of death, and any other appropriate information required by the insurance company, omission or inconsistencies can cause jitters in the insurance company when processing your claim.