Top 5 Financial Tips you must follow on the auspicious occasion of Diwali in 2022

The Diwali season is here and most households are fervently engaged in the Diwali cleaning procedure, a tradition that is carried out every year. While you try to shine every nook and cranny of your home, do you ever think about cleaning your investment portfolio?

Unconventional – yes, irrelevant – no!

Your investment portfolio also needs regular review, just like the ignored places of your home. You need to assess whether the portfolio is aligned with your financial goals and is giving you the best returns. This assessment involves –

  1. Review of existing investments
  2. Plugging of gaps in financial planning
  3. Reducing or eliminating liabilities
  4. Investing in new opportunities.

Cleaning your portfolio is a simple task. Here are some tips on how you can go about doing it –

  1. Say goodbye to bad debts

    Some loans are just bad for your finances. They involve high-interest charges, provide no tax benefits and even one default hampers the credit score considerably. Common examples are credit card debts and personal loans. If you happen to have these debts to your name it’s time to weed them out.

    What to do?
    Eliminate your credit card debt by paying the credit card bills, in full, within the due date, every month. For other loans, do not default on EMIs as such defaults are hazardous for your financial health. This is bad for your credit score as well!

    Try and close these debts if you have sufficient funds at your disposal. If not, ensure that their repayment is not disturbed, ever!

  2. Save for those rainy days

    Emergencies can be financially threatening. The pandemic is the most recent example. When they strike, you need to be financially prepared.

    1. Emergency Corpus IS important
      So, create an emergency corpus if you don’t have one. Not only theoretically, but you must also have an emergency corpus for any medical or other exigencies.

      What to do?
      Set aside 3-6 months’ worth of your income for emergencies and invest it in liquid avenues, like liquid mutual funds. Also, remember to update your family about how to access it so that if you are not around in case of emergency, they can use it as well!

    2. Adequate term insurance coverage:
      Moreover, insurance plans are a must. Adequate is the key here, as you might be having insurance but whether it is adequate or not is the point of consideration.

      What to do?
      Take a good term life insurance policy to secure your family against the financial threat of premature death. Opt for a high sum assured so that your family gets optimal financial assistance in your absence.

      Thumb rule for Health Insurance Coverage: Annual Income + total amount of money spend on hospitalization in the last 3 years

    3. Protect your health:
      Once you are done with life insurance, invest in a comprehensive health insurance policy. It covers your medical bills and proves extremely relevant in medical emergencies.

      What to do?
      Opt for a high sum insured because the medical costs are rising steadily and optimal coverage is essential for reducing your out-of-pocket expenses. You can step up your existing coverage with a super top-up health insurance plan as well.

      Thumb rule for Term Insurance Coverage: 10 times the annual income

    If you have invested in life and health insurance plans, check their sufficiency, especially when it comes to the coverage level. You need high coverage plans for complete financial security. So, if the coverage is falling short, supplement it now, before an emergency strikes. After all, crying over spilled milk is useless, isn’t it?

  3. Align your portfolio to your goals

    Once you take care of the aforementioned steps, the next step is checking how your portfolio measures up to your financial goals. Identify and list your goals and then earmark your existing investments to them.

    What to do?
    Check if you have planned for each goal and whether the investment is sufficient for fulfilling it. If not, step up your investments to ensure that the goals get fulfilled. Similarly, if any goal is left behind, incorporate it into your portfolio and start investing towards it.

    If your goals have changed over the year, the change should also be incorporated into the portfolio. All in all, you need to ensure that your portfolio is relevant to your financial goals and creates a corpus for them.

  4. Switch unprofitable investments

    Many times, the investments you thought were the best might not prove to be so. In such cases, a switch becomes important. Check how your investments are performing. If there are less profitable instruments or loss-making ones, substitute them with better alternatives.

    For instance, if you have invested in mutual funds, compare their performance with other funds in the same category. If other funds are performing better than your choice, consistently over the years, switch to them. This would help you enhance your returns.

    Note:
    Remember that switching should be a well-thought-out affair. Consider the switching costs, if any, and the tax implication before you switch. The switch should not cost you more than the profit that you would stand to make from it.

  5. Explore new avenues

    Lastly, keep yourself open to new investment avenues for portfolio diversification. Assess your portfolio composition and see if you can include other investment avenues for larger exposure. For instance, if you invest in gold, open yourself up towards digital gold or gold mutual funds. Similarly, if you invest in FDs and PPFs, explore debt mutual funds.

    The addition of new investment avenues to your portfolio might prove profitable. Moreover, they would also increase portfolio diversification, a trick to mitigate investment risks without compromising on the returns.

    Checklist for your Diwali Cleaning of your Investment Portfolio:

     

    Yes

    No

    Have you repaid your High-Interest Loans, if any? (Credit Card revolving)

       

    Do you have a proper well-defined “Emergency Corpus”?

       

    Is your family “AWARE” of how/where to access the Emergency Corpus in case of a “REAL” emergency?

       

    Is health insurance adequate according to the Thumb Rule?

       

    Is life insurance adequate according to the Thumb Rule?

       

    Each investment aligned to any specific financial goal?

       

    Is your investment portfolio in line with your IDEAL asset allocation?

       

    If any of the above answers are NO, then you must revisit your investment portfolio this Diwali, without any further delay!

  6. Keep your asset allocation in mind and align your investment portfolio with your risk profile. This Diwali, start with these steps to get a clean and effective investment portfolio. As the festival marks new beginnings, let it mark the beginning of a better portfolio too.

This World Heart Day Understand The Value Of A Cardiac Insurance Policy

Celebrated on 29th September each year, World Heart Day aims to educate and spread awareness about Cardiovascular Diseases (CVD), a healthy heart, and a healthy lifestyle. Introduced by the World Heart Federation in 1997, the date came to be known by its name in the year 2000, and people across the globe have celebrated it ever since. 

The theme for World Heart Day 2022 is ‘Use Heart For Every Heart’. Over the world, more than 17 million people die of CVD yearly¹. Apart from this being a disheartening fact, it is also the lack of knowledge on CVD that is constantly leading to a hike in this figure. Fuelling the ideas of practical and proven ways of a healthy lifestyle and the basics of CVD management is essential in curbing it. Saying no to smoking, unhealthy food habits and embracing daily physical exercises are simple mantras that let you win over CVD. 

Along with healthy habits, a crucial aspect of fighting such diseases is having the cover of a health insurance plan. While gathering sufficient knowledge about a healthy heart and lifestyle is essential for everyone, planning for a safer future with the right insurance plan is equally important. Heart strokes and heart attacks often come as a silent killer. After the coming of Covid-19, the worldwide condition of CVD has further deteriorated. Here comes the role of cardiac insurance that ensures financial security in any heart-related medical emergency.

What is a cardiac insurance policy?

Heart attack insurance is health insurance that covers acute heart diseases like myocardial infarction, heart attack, etc. and the medical expenses incurred for the treatment of the same.

Importance of Cardiac Insurance Policy today:

Considering the high rate of deaths due to cardiovascular diseases, it would be a wise decision for all those individuals planning to purchase insurance for heart patients.

Here are some of the common benefits of heart insurance-

  1. Financial Stability During Hospitalisation:

    Critical illnesses like heart disease can push you to dig deep into your savings if any medical emergency arises. However, having heart attack insurance ensures you do not have to worry about medical expenses.

  2. Pre and Post-Hospitalisation Cover:

    Cardiac insurance covers hospitalisation expenses and a few days/ weeks before and after hospitalisation.

  3. Tax Benefits:

    Like various other insurance policies, the insurance for heart patients also provides the insured with tax benefits. Under Section 80D of the Income Tax Act, the insured can avail of tax deductions.

  4. Coverage Beyond CVD:

    Most health insurance plans that include heart attack insurance also include various other coverages. It may include a comprehensive cover for critical illnesses like cancer. So, under one plan, you would get a wide range of benefits

  5. High Sum Insured:

    Because critical illnesses like a heart stroke or CVD require hefty medical expenses, the sum insured by cardiac insurance is also high. It ensures your family does not have to run to your savings account while receiving the treatment

  6. Need of the Hour:

    The changing lifestyle and eating habits of people across the globe have led to a further hike in need for cardiac insurance. So, to be on the safer side, you must have one

Best Cardiac Insurance Policies:

The market is full of several options when it comes to insurance for heart patients. In the table below, you can check out and compare some of the leading companies offering heart insurance-

Policy Name

Highlighting Features 

Care Heart Plan

  • Cover for pre-existing heart illnesses 
  • Cover up to INR 10 lakh
  • Annual heart health check-ups

Star Cardiac Care Plan 

  • Cardiac treatment covered along with a few non-cardiac treatments and accident cover
  • Sum insured up to INR 4 lakh
  • Hospitalisation cover and outpatient coverage 

ICICI Pru Heart 

  • Discounts given for existing customers
  • Get a heart cover of up to INR 25 lakh
  • Diagnostics expenses covered

Future Generali Heart and Health Plan 

  • Death benefit from the first day or policy
  • Covers all the stages of 59 critical illnesses along with heart diseases
  • A sum insured of up to INR 50 lakh can be availed 

Niva Bupa CritiCare Plan 

  • A cover up to INR 2 crore
  • Covers 20 critical illnesses including heart illnesses
  • Cover available for both individual and family

Conclusion

This World Heart Day, educate yourself, your loved ones, and also your community about the inevitable need of a healthy lifestyle. 80% of heart problems can be kicked out with a balanced life where you eat healthily, think positive, drink plenty of water, and exercise daily. Also, do not delay purchasing the right heart insurance for yourself and your family.

What Are Preventive Health Check-Ups

According to the World Health Organization (WHO), health means physical, mental, and social well-being and not only the absence of disease and infirmity. Physical health plays a significant role in one’s life, but currently, our lifestyle has become so inundated with frail habits and inactive routines that being disease-free is an ultimate challenge now. That’s why it’s been suggested by doctors to go for routine preventive health checkups. So one can get to know about the disease at an early stage and avoid complications.

What are Preventive Health Check ups?

Sometimes, despite taking all the necessary precautions, such as having a balanced diet, getting adequate sleep, and exercising, our bodies can risk catching a disease. As the name suggests, a preventive health check-up is done to detect and recognise any health issue early. Preventive health checkups identify and reduce the risk early. These checkups, when done regularly, can help detect and recognise infection, medical condition, and behaviour of the disease before it reaches a critical stage. 

Preventive health check-ups detect lifestyle diseases

By detecting the disease at an early stage, preventive health checkups also help in reducing the financial burden by saving the expensive treatment required at the critical stage. Thus, preventive medical or health checkups are the key to a healthier life.

What are the benefits and essential factors of Preventive Health Check ups

Preventive health checkups are essential in making our lives healthier and better.

  • Timely detection:

    They provide early detection of diseases which can be immensely harmful in future. They also help to assess your rate of getting sick.

  • Keep track of your health:

    Regular checkups allow one to be involved in active health care. They help you stay up-to-date and endowed with the latest medical data and technologies while providing essential and ethical health education.

  • Encourages you to have a healthy lifestyle:

    Preventive checkups help adopt a healthy lifestyle which further helps in increasing longevity.

  • Keep medical expenses under control:

    Preventive health checkups can greatly help in reducing sudden and unforeseen medical expenses. When a disease is detected at the initial stage, it can help manage it. A delayed detection can result in expensive treatment and prove fatal.

Tax deductions on preventive health check-ups 

When getting health insurance, one should be aware of the Income Tax Act 1961. Under Section 80D of the Income Tax Act, one claims an overall deduction of INR 25,000 and an additional deduction of INR 25,000 for the insurance of one’s parents. And if parents are senior citizens, the amount for deduction will be INR 50,000.

With preventive medical checkups, one can get up to INR 5,000 worth of tax benefits under Section 80D of the Income Tax Act, 1961.

Things to keep in mind when going for preventive health check-ups:

If you go for preventive health check-ups regularly, you can reduce the risk of serious diseases to a notable extent. It will make you lead a healthy lifestyle in the long run. Hence, the following things you should keep in mind when going for preventive health check-ups:

  • Ask your doctor whether you should come with an empty stomach or not for the testing. Patients are called with an empty stomach for most medical examinations. Therefore, it will be better for you to confirm it with the doctor beforehand
  • Wear comfortable clothes when you are going for a routine health check-up
  • If you are going for an X-ray, CT-SCAN, and ultrasound, then you should remove the metallic accessories. Otherwise, they will obstruct the clear image.
  • Never miss regular health checkups to live a healthy and happy life till old age. 

Preventive Health Check up to consider for different age groups:

Preventive health check ups are a series of medical tests undertaken to comprehend the measures need for disease prevention. Following are some command tests that should be included in one’s preventive health checkups, as per their ages-

  • Infants & Children (0-10 years)

    The major test that should include in this stage are

    • Auscultation
    • Palpation
    • Newborn jaundice 
    • Ophthalmic Test.
  • Adolescence (12-19 years)

    Teenagers should prioritise healthy lifestyle choices to be protected from diseases. However, diseases caused at this stage are dependent on a lot of factors, so the tests that should include at this stage are- 

    • Obesity 
    • Diabetes
    • Anaemia
    • Hepatitis B
    • Tuberculosis 
    • High Cholesterol
  • Between 20 to 40 years

    The tests that should include in one’s preventive health checkups between the age of 20 and 40-

    • Blood Pressure 
    • Liquid Profile 
    • Pelvic exam and pap smear( only for women)
    • Hepatitis C
    • Testicular Examination(only for men)
    • Eye Examination 
    • Dental exam
    • Skin self-exam for skin cancer.
  • Above 40 years

    Tests that should include if one is above 40

    • Cholesterol Screening 
    • Heart Disease Screening 
    • Cancer Screening 
    • Infectious Disease Screening 
    • Osteoporosis Screening
    • Bone mineral density test (only for women)
    • Diabetes
  • Above 60

    People may be 60 and above but can still live their lives to the fullest and healthiest. However, they must be well informed about their body and its workings. The tests that are recommended at this stage include –

    • Prostate cancer screening
    • Colorectal cancer screening
    • Hearing test
    • Aneurysm
    • Immunisations

So, these are the basic tests that should be included in preventive health checkups. Moreover, the specifics of one’s health checkup can also differ depending on age, gender, and family medical history.

Who should opt for preventive health checkups?

Ideally, people of all ages could go for preventive (medical) health checkups at least once a year. Many medical problems and diseases can be diagnosed in childhood and adulthood if provided with proper care and medicines.

  • It should be required for people above the age of 30 to go for preventive health checkups without fail, as they fall under the category of harmful diseases such as obesity, cancer, diabetes, and cardiovascular diseases.
  • If people invest in preventive checkups, they can have a better chance of recovering from those diseases, as preventive health checkups help detect disease early.

List of preventive healthcare packages in India:

Many insurance companies today provide free annual preventive checkups depending upon the policy’s terms and conditions to promote the importance of preventive care. You should check if the company is providing free health checkups with the insurance policy. Also, confirm which kind of healthcare package is being provided with the policy.

Broadly, the following health care packages are available in the market. The details of each package may differ from plan to plan or company to company-

  • Basic Health Package

    This package includes all the basic health tests such as random blood tests, chest X-rays, Cholesterol, ECG, and consultation with a physician.

  • Full Body Package

    This package includes full-body screening to check for various diseases and medical conditions. It includes lipid profile, blood count, and blood sugar level test.

  • Diabetes Package

    This package is specially designed for diabetic patients who need regular checkups for their diabetic levels to avoid any complications in the future. This package includes kidney function tests and fasting blood sugar tests.

  • Cardiac Package

    This package is designed to examine the risk of cardiovascular diseases like heart attack and stroke and take immediate action to avoid its severity. It includes chest X-rays and ECG tests.

  • Cancer Package

    Screening patients for various cancers and reducing the risk. It includes blood tests, pap smears, and clinical examinations.

  • HIV Package

    HIV packages are designed to screen patients for HIV and take immediate measures to deter the disease. This package consists of HIV 1&2 bodies test, fasting blood sugar tests, and a complete hemogram test.

  • Fertility Package

    This package is devised for couples struggling to convince and who require fertility-related checkups. This package comprises random blood sugar tests, pelvic scans, and AMH tests.

  • Family Package

    The family package is a complete body checkup package for the entire family. In this, all the family members are screened for varied diseases. It includes a complete blood count, lipid profile, and liver function tests.

  • Women Package

    Women’s packages are designed to examine the health-related problems faced by women and detect life-threatening diseases in them at an initial stage. It comprises breast mammography and pelvic examination.

  • Pediatric Package

    This package is meant to examine the health hazards faced by children till the age of 13. It includes pediatric examination, ophthalmic examination, and dental examination.

  • Dental Package

    As the name suggests, a dental package is designed to assess an individual’s dental health. It helps eliminate the risk of oral cancer, plaque cavities, and tooth decay.

Conclusion:

It can be summarised that a preventive health checkup is a method for detecting changes in one’s body early. In most cases, the body doesn’t show any disease symptoms early on. Early disease detection is a significant benefit of preventive health checkups, as it helps diagnose the disease at an early stage, making the disease more manageable and the treatment more effective. Section 80D of the Income Tax Act of 1961 makes preventive health checkups more advantageous.

Frequently Asked Questions:

  1. I am 30 years old and healthy. Should I also go for preventive health checkups?

    Yes, you should surely go for preventive health checkups. Our stressful life has increased the risk of many serious diseases like cardiovascular, hypertension, diabetes 2 etc. Preventive health checkups help to detect these problems at an early stage. 

  2. Do health insurance schemes cover the cost of preventive health checkups?

    Yes, most health insurance schemes cover the cost of preventive health checkups, but you should compare the premium and benefits of different health insurance policies of different companies before buying.

  3. I have health insurance coverage for my medical expenses. Should I still go for complementary health checkups?

    You should attend the complimentary annual health check-up as health should be a priority. These annual health checks help doctors diagnose the physical problem early. In this way, a few visits to the doctor’s clinic and some medications will help you recover as soon as possible.

DISCLAIMER

This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs. Insurance is a subject matter of solicitation. For more details on policy terms, conditions, exclusions, and limitations, please refer to/read the policy brochure before concluding a sale.

Difference Between Annuity & Life Insurance

Life is full of surprises. Understanding and planning before any unforeseen events give you the benefit of financial stability. Knowing your financial requirements and retirement plans can give you an upper hand in choosing the optimal insurance scheme. Both life and annuity insurance are great long-term insurance schemes. However, they differ in their meanings, benefits, terms and conditions.

Life insurance provides financial support to your loved ones after your death. It has monthly premiums, and rider advances. Annuity, on the other hand, is a retirement scheme that provides financial security to you after your retirement age. 

In other words, life insurance is helpful if you die before your policy term period, whereas the annuity is helpful if you outlive your tenure period.

What is a life insurance policy?

Life insurance is a contract between you and your insurer. The contract sets out how much coverage you have purchased and any other important details. A life insurance policy consists of many different components that fit together to create the overall insurance contract. The information you provide when you apply for a policy is one of those components. To enforce the contract, the life insurance application must correctly state the insured’s previous and present health issues and high-risk behaviours.

How does a life insurance policy work?

When working out annuity vs term life insurance, it is important to understand the working of each. The life insurance policy provides financial support to the insured individual’s family after the individual dies. The insurance policies are secured contracts. They provide financial benefits to help the family bear the financial loss that the death of the insured would cause.

  • The insured individual must pay a premium in instances of 12 or as yearly premiums, depending on his/ her preference
  • If the insured individual dies during the term of the policy, then the assured sum goes to the appointed beneficiaries
  • Some types of insurance plans also provide maturity benefits. The insurance company pays the assured funds if the individual outlives the policy tenure
  • The beneficiaries must make a claim to receive the assured sum
  • The funds can be claimed by providing the death certificate of the insured individual. Once verified, the beneficiaries receive the funds.

Types of life insurance policies

Life insurance is important and offers a broad scope of coverage. A life insurance policy’s principal goal is to safeguard your family’s financial security when you pass away. Thus, before deciding to take the life insurance, check on the types of life insurance and what each life insurance has to offer.

The different types of life insurance plans are:

  1. Term Life Insurance:

    Term life insurance provides basic coverage that allows you to select the length of time you need it. This is a great way to protect your family in the event of your untimely death. Term policies are great for financially independent adults who don’t want or need coverage beyond the amount selected. Term plans are pure life insurance plans with no maturity benefit.

  2. Endowment Plans:

    There is a death as well as maturity benefit in endowment plans. It provides coverage for your untimely death along with an element of savings. These plans can be pure endowment plans, money-back plans, child plans, etc. However, these plans are traditional insurance plans with guaranteed benefits along with bonuses, if applicable.

  3. Unit Linked Insurance Plans:

    In these plans, the policyholder can choose to participate in the market through investments. Here there are no guaranteed benefits as both the death as well as maturity benefit would depend on the market performance, subject to a minimum of the pre-defined sum assured.

Benefits of life insurance policies

Let us take a look at the benefits of a life insurance policy that you can expect to receive:

  1. Protection against Mishaps

    Having a life insurance policy gives your and your family a secure future. It also safeguards the interest of people whose incomes are slightly decreasing with increasing age.

  2. Tax Benefits

    This area of life insurance policy provides the policyholder with tax benefits. The Income Tax Act under Section 80C provides that the death benefit, or amount received as proceeds under life insurance, is exempt from tax. The premium paid toward the life insurance policy can also be claimed up to INR 1.5 lakhs.
    Also, the maturity benefit, wherever payable, is tax-free under section 10(10)D subject to the terms and conditions.

  3. Loan Options

    Most life insurance companies, especially endowment plans, give you the benefit of taking a loan against the policy if you are in need of money upto 80-90% of the surrender value of the plan.

  4. Assured Income

    This section provides your family with an assured income. You can choose a lump sum payout at the time of your death, at a regular time interval or a combination of both. With this money, they can pay electricity bills, house rent, children’s school fees and many other things. This means even after your death your family will be fully financially secure.

What is the meaning of Annuity?

An annuity synonymously with ‘pension’ is a series of regular, predictable cash flows guaranteed for the rest of your life. This is done by making a lump sum/ systematic investment. The payment you receive is generated from the investment that is done by the financial company. This is a good choice of income after retirement that gives you the freedom to plan your retirement. You can choose the frequency of your pension, it can be monthly, quarterly, half-yearly or yearly. 

How does an annuity work?

An annuity plan is a long-term investment scheme. Here the insured individual must pay a lump sum or a series of payments and receive funds regularly from the insurance company.

  • An annuity is an income provided to the annuitant after the vesting age.
  • So, once you invest in an annuity plan, you need to choose the age from when you wish to receive the annuity. Usually, that is closer to 55 to 60 years of age. This is called the “Vesting Age”
  • The time from when you invest till the vesting age, is called the Accumulation Phase, wherein you are expected to create your annuity corpus from where you would be provided with an annuity according to your choice.
  • At the time of vesting, you have the option of choosing the “type” of an annuity from the available options such as:
    • Life Annuity, i.e. annuity would be paid to the annuitant as long as he lives but nothing would be paid to the nominee after his death
    • Joint Life Annuity, i.e. annuity would be paid to the annuitant as long as he lives and after his death, the annuity would continue to be paid to the spouse as long as she survives. However, once both die, the policy would be terminated and nothing would be paid to the nominee
    • Life Annuity with Return of Purchase Price, i.e. annuity would be paid to the annuitant as long as he lives and after his death, the nominee would receive the entire purchase price as death benefit and the policy would be terminated.
    • Joint Life Annuity with Return of Purchase Price, i.e. annuity would be paid to the annuitant as long as he lives and after his death, the spouse would continue to receive the annuity. When both die, the nominee would receive the entire purchase price as a death benefit and the policy would be terminated.
    • Annuity Certain of 5/10/15/20 years, i.e. the annuity would be paid for a minimum of 5/10/15/20 years and then as long as the annuitant survives.

Types of Annuities 

Annuity is classified into two main types: immediate annuity and deferred annuity

  1. Immediate Annuity

    Immediate annuity gives you the benefit of immediately receiving the payments after your very first investment. Unlike other types of annuities, the payment can be received immediately, often with interest, which makes this instrument attractive to people who want to plan their future pension income.

  2. Deferred Annuity

    A deferred annuity agreement is a form of an annuity in which the annuity/ income is not available to the investor until a date in the future, at the vesting date. At the time of vesting, the annuitant can withdraw a maximum of 1/3rd of the total corpus tax free under section 10(10)A and need to opt for an annuity from the remaining 2/3rd of the corpus.

Benefits of Annuities

Buying an annuity has many benefits, the biggest being the peace of mind for retirement or as a way to supplement retirement. Some of the major benefits of annuity include

  1. Tax-efficient:

    The premium paid towards deferred annuity plans is tax-free under section 80CCC of the Income Tax Act 1961 upto INR 1.5 lakhs a year.

    At the time of vesting, the annuitant receives an option of withdrawing 1/3rd of the entire corpus tax-free u/e 10(10)A which can take care of the immediate retirement expenses. The remaining amount has to be converted into an annuity, which is taxable in the hands of the annuitant.

  2. Flexibility

    The timing of starting your annuity is flexible, allowing individuals to defer the purchase of an annuity until later in life when their retirement income goals may have a smaller impact on lifestyle adjustments.

  3. Growth in income

    Annuities can provide the substantial income that individuals are seeking to supplement or replace their income.

  4. Intergenerational equity

    An annuity allows the annuitant to be provided with dependable income for its expected lifespan. You have the confidence that even after you stop working, you will be able to live your second innings with pride without having to depend on anyone else financially

Differences between life insurance and annuity plan

Both annuity and life insurance are great financial plans. Despite the saving options and similar ideologies, they differ in many aspects. Understanding these differences will help you make the best choice to invest your funds.

Annuity plan

Parameters

Life insurance plan

Annuity provides income support for the spouse and oneself.

Benefits

Life insurance benefits the loved ones/ family members.

An annuity can be deferred after a few years of investments

Defferability 

Life insurance cannot be deferred.

It works after you or your spouse outlive the tenure period

When does it work?

It works after the death of the insured individuals.

It holds benefits of life cover also

Possibility to convert in future

Does not provide annuity cover

Annuity payouts are taxable

Tax benefits

Payouts are not taxable u/s 10(10)D

Premiums are based on the insured individual’s life expectancy

Premiums

Premiums are based on the mortality of the insured individual

Ensure income for the insured individual and their spouse during their lifetime

Income security 

Ensure income to the family member or loved ones after the insured individual dies.

 

What to choose between life insurance and annuity?

When comparing life insurance vs annuity, the key factor is to determine the purpose of buying the financial product. Before choosing any such plan, assessing your financial well-being and requirements is ideal. Knowing your future needs and priority, you can opt for life insurance or an annuity plan. 

Life insurance provides financial support to the family after your death. It can take care of your loved ones’ everyday expenses and other financial needs. Annuity plans provide a regular income to you and/ or your spouse once you retire/ stop working. It is a retirement plan to benefit yourself in your elderly age when you are no longer employed.

Life insurance benefits your family if you die prematurely, whereas annuity benefits you to live comfortably in your retired life. 

Conclusion

Financial stability is vital in all phases of life. Depending on your priority and financial requirement, you can opt for life insurance or annuity plans. Both plans provide great benefits to the insured individual one way or another. 

Tackling unexpected events can be difficult, especially if it’s a matter of life and death. Make sure you plan on how you save your funds so that when such unforeseen events occur, you have the basic support to control the extent of damage that might occur. 

If you want to provide financial stability for your family in your absence, then life insurance is a great choice. However, an annuity will be the ideal option if you want to secure your retirement plan.

FAQs

  1. What if the insured individual dies in an annuity plan?

    Depending on the kind of policy opted, the assured sum is provided to the beneficiaries on the insured individual’s death. Similarly, the annuity may/may not continue for the spouse. For the same reason, it’s important to mention the details of the beneficiaries in the annuity plan to ensure it reaches the right hands instead of landing in any financial institution.

  2. Can annuity plans be considered life insurance?

    Even though an annuity can cover death after the individual dies, it cannot be considered life insurance. It’s rather the exact opposite of life insurance. In life insurance, you ensure to get benefits after your death, whereas in an annuity, you provide financial benefits when you outlive your life expectancy.

  3. What are the benefits of buying life insurance instead of an annuity plan?

    Life insurance provides death benefits and tax exemptions, whereas annuity plans do not provide such benefits. However, one would not be able to suffice and thus it is suggested that you weigh the pros and cons of each before making an investment.

DISCLAIMER

This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs. Insurance is a subject matter of solicitation. For more details on policy terms, conditions, exclusions, limitations, please refer/read policy brochure before concluding sale.

Sukanya Samriddhi Yojana (SSY): How It Works, Benefits & Features

Though the evil of gender discrimination still exists in India, things are changing slowly yet steadily. With girls competing in just about every field, be it academics, sports, or competitive fields. The societal role of girls is evolving. From time to time, the government also takes initiatives to uplift the status of girls and women. The “Beti Bachao aur Beti Padhao” campaign has been aggressively encouraged to abolish discrimination against girls. Sukanya Samriddhi Yojana plan is one such highly-applauded initiative by Prime Minister Narendra Modi for the welfare of the girl child. 

The scheme gives an investment opportunity to the parents of the girl child under the age of 10 years for their education and marriage finances. The program offers a doorway for every girl in the country to access education without financial constraints.

Sukanya Samriddhi Yojana benefits and features 

Along with educational and marriage financing, the Sukanya Samriddhi Yojana plan has many other advantages making it one of the best investment schemes for the female child.

  • Sukanya Samriddhi Yojana scheme is a small savings-based government scheme initiated in 2015 and the Beti Bachao, Beti Padhao Yojana campaigns. 
  • The scheme aims to protect and save the future of girl children by providing financial support.
  • Parents or guardians can start investing in the Sukanya Samriddhi Yojana plan on behalf of their girl child and save money for her future.
  • You can withdraw 50 % of the SSY account balance for higher education or school fees by submitting the educational organisation admission proof to cover the maximum education financing burden.
  • Affordable monthly investment, with a minimum deposit of INR 250
  • You can also enjoy tax exemption benefits on the amount received at the maturity under section 80 C of the Income Tax Act
  • Competitive interest rates, compared to other government investment schemes, the Sukanya Yojana has a high return interest rate of 7.6% p.a.
  • Flexible instalments, pay whenever you want and any amount according to your convivence
  • Available at any every government bank and post office near your home
  • Anyone with a girl child under 10 years of age can apply for the scheme
  • The scheme is suitable for people from every walk of society.
  • The deposits accumulate along with high-interest rates and can be withdrawn fully after 21 years or partially once the child turns 18 years.

Key Highlights Of Sukanya Samriddhi Yojana Scheme

Interest rates 

7.6% interest per annum 

Minimum deposit per annum

Rs. 250 per year 

If no deposits are made during a financial year, the accounts become default or dormant. To activate the account, a penalty of Rs.50 must be paid.

Maximum deposit per annum

INR 1,50,000. 

Maturity span

Tenure period extends for 21 years or until the girl child is 18 or married. However, deposits are required only until the first 15 years.

Eligibility criteria

Girl child 10 years or younger. Only two SSY plans are allotted for one family. Exceptions are given when twins or triplets of girls are born in the same family.

Tax benefits

  • Tax deduction up to INR 1.5 lakhs is allowed under Section 80C per year
  • The interest earned does not attract any tax
  • The maturity amount is tax-free

Interest rates offered by Sukanya Samriddhi Yojana:

To provide the maximum benefits for the girl child in terms of financial and educational benefits, the government allocates high-interest rates for the SSY scheme. 

  • Government usually assigns the interest rates every quarter of the annum
  • When it was introduced in 2015 the government gave an interest of 9.2% per annum
  • As of the financial year 2022 – 2023, the interest rates are 7.6% per annum
  • Regarding interest on the ‘Account under default’ accounts (those accounts where no minimal deposits were made during the entire financial year) the interest is added using the post saving accounts. However, this doesn’t apply when the guardian who opened the account is dead.

Calculation of Sukanya Samriddhi Yojana interest 

To understand the Sukanya Yojana benefits, it is important to understand the calculation of the Sukanya Samriddhi Yojana’s interest. With a fixed return of 7.6%, let’s see how the maturity amount can be calculated. The formula to calculate the amount is:

Amount = P(1+r/n)^nt

Here, 

  • A stands for the Compound Interest
  • P stands for the Principal Amount
  • n is the number of times the interest is compounded in one year
  • t is the number of years
  • r stands for the rate of interest.

Sukanya Samriddhi Yojana Calculator 

The manual calculations may be cumbersome and quite time-consuming. However, if you wish to get an idea of the variable or the maturity amount, the best way to do so is through the Sukanya Samriddhi Yojana calculator. This free online tool comes in very handy and helps you plan ahead. 

You simply need to feed in the following details:

  • The yearly investment you wish to make
  • The age of the girl child 
  • The starting date/ period of the plan

In a matter of seconds, the calculator will show you: 

  • The total investment that you will make
  • The tidal interest that you will earn
  • The year of maturity of the scheme
  • The total maturity value

The calculator will give you an error-free output and you can use it changing the variables time and again. The online tool works efficiently on all kinds of devices. 

Working of Sukanya Samriddhi Yojana Account

Sukanya Samriddhi Yojana is a long-term scheme where a deposit of a minimum of INR 250 and a maximum of INR 1.5 lakhs can be made in a year. The tenure of the scheme is 21 years and it can be purchased for a girl child who is aged 10 years or less. Lets us take this example:

Rajiv and Sonali Mishra were recently blessed with a baby girl. They invested in the Sukanya Samriddhi Yojana when their daughter Megha was just a few months old. Till Megha turns 15, Rajiv will make a monthly/ annual deposit in the SSY. The money can, however, be withdrawn once Megha turns 21. It is for Rajiv to decide if he wants to pay after Megha turns 15, as the 15 to 21 years span requires only voluntary contributions. Once Megha turns 21 they can withdraw the entire amount.

There are also certain circumstances, where partial withdrawals can be made. We will discuss them ahead.

Let us take another scenario. If Rajiv and Sonali invested in the Sukanya Yojana, after Megha turned 5, then the plan would mature only when she completes the age of 26. Rajiv would have to make the contribution till she turns 20, and for the next 7 years, if he wishes to.

Withdrawal rules of Sukanya Samriddhi Yojana

On the maturity of the Sukanya Samriddhi Yojana scheme, the policyholder will get the amount directly to her bank account. But, in case of premature withdrawal, the deposit amount can be withdrawn before maturity only after five years of opening the account. Also, to claim a sum before maturity, you need to meet some criteria, let us take a look:

  • If you need money for your daughter’s higher education you can withdraw 50% of the account balance till the last financial year 
  • You can make a partial withdrawal if you are planning your daughter’s wedding

You can opt for premature closure of the Sukanya Samriddhi Yojana in the following circumstances: 

  • Death of the girl child
  • Death of the guardian of the girl child
  • The girl child becomes a citizen of another country
  • The policyholder is suffering from a life-threatening disease.

Eligibility criteria for Sukanya Samriddhi Yojana

To apply for Sukanya Samriddhi Yojana, there are a set of eligibility criteria for the girl child and the parent.

  • The girl child must not be older than ten years of age. Even though a one-year grace period of 1 year is offered, the parent can apply for the scheme before the girl turns 11.
  • It is imperative that the person opening and operating the account on behalf of the girl child can be her biological father or her legal guardian.

Documents required to open a Sukanya Samriddhi account:

To open a Sukanya Samridhhi account, you need to submit a set of documents for verification and authentication of the information filled in the application form.

  • Account opening application form
  • Birth Certificate of the girl child, as the age proof
  • Photocopies of the parent or the legal guardian
  • KYC documents for ID and address proof
    • PAN card
    • Driving Licence
    • Passport
    • Voter ID Card of the parent/legal guardian 
    • Job Card signed by a government authority
    • Adhaar Card.

Steps to open a Sukanya Samriddhi Yojana account:

Adults can collect the Sukanya Samriddhi Yojana scheme application form from the post office or any registered bank. They can also download the applications directly from the online portals. The adult is expected to fill the form with details needed and submit it back along with the reference proof documents. These include 

  • Name of the account holder or the child’s name
  • Name of the joint account holder or the name of the parent (or the guardian)
  • Child’s birth certificate
  • Identity proof of the parent’s or the guardian’s (like passport, Aadhaar card, driving license etc)
  • Details about the present and permanent address along with its proofs 
  • Details about the child’s medical history
  • Mentioning the initial deposit amount and its details like cheque or DD number and date.

Steps to fill Sukanya Samriddhi Yojana account form for the post office:

To open a Sukanya Samriddhi account, you can visit any authorised bank or post office branch associated with this scheme. Here are the steps you might have to follow when you apply in person.

  • Collect the application form from the authorised bank or post office.
  • Fill and submit the form with necessary details like the name of the child, name of the guardian or parent, address and contact information. 
  • You must also submit the supporting ID and address proofs
  • Deposit the first investment amount of Rs.250 up to Rs.1.5 lakhs to open the account
  • Once the details and funding are approved, the bank or the post office will activate your SSY account
  • Once you receive the passbook for the account, you can continue the scheme for the next 21 years.

How to make payment for Sukanya Samriddhi Yojana online?

To open a Sukanya Samriddhi account online, you must install the India Post Payments Bank (IPPB) application on your smartphone. Using this application, you can open and maintain your SSY accounts.

  • Download the IPPB app
  • Transfer funds from your bank accounts to the IPPB account
  • Open DOP products and click the Sukanya Samriddhi Yojana plan
  • Fill in the SSY account details and DOP user ID
  • Choose the instalment duration and investment amount
  • The app will inform you once the account is opened.
  • You can use the same application to deposit the funds every year.

Investment frequency under Sukanya Samriddhi Yojana :

You can either choose to deposit once a year or in instalments throughout the year. But, the minimum annual amount that you must deposit is INR 250. To keep the account active, you must deposit the minimum amount every year for 15 years. Payment intervals between instalments are flexible, and you can pay whenever you want. Furthermore, there is no limit to how many instalments you can make per year.

Sukanya Samriddhi Yojana Details in the passbook 

When you open a Sukanya Samridhhi Yojana account you get a passbook. There are no extra fees for the passbook. However, you should carry the passbook with you for depositing your regular or annual instalments at the bank. It is also necessary to submit the passbook at the time of account closure. Furthermore, make sure you update your passbook regularly to record every update of your SSY account. 

List of banks offering Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana plan can be availed from most government and private sector banks in India. It is also available at local post offices, making the scheme available even in remote and rural areas. You can also apply for the Sukanya Samriddhi Yojana online. Check out this list to know banks that offer the Sukanya Samriddhi Yojana.

  • Punjab National Bank
  • ICICI bank
  • Axis Bank
  • Bank of Maharashtra 
  • Dena Bank
  • Vijaya Bank
  • IDBI Bank
  • Bank of Baroda
  • Bank of India
  • Canara Bank
  • Allahabad Bank
  • Indian Bank
  • Punjab and Sind Bank
  • UCO Bank
  • State bank of India
  • Central Bank of India.

Difference between PPF & Sukanya Samriddhi Yojana, and which one is better?

When planning your investments, it is only prudent that you compare the options in detail before committing for the long term. While both the Public Provident Fund and Sukanya Samridhi Yojana are government-initiated, there are many differences in their features as well as the outcome. SSY is basically a welfare scheme for the girl child whereas the PPF allows the investor to earn tax-free interest. Let us take a look at their differences and then analyse their benefits:

Public Provident Fund

Parameters 

Sukanya Samridhi Yojana 

7.10%

Rate of Interest

7.60%

Minimum: INR 500

Maximum: INR 1.5 lakhs

Annual Deposit

Minimum: INR 250

Maximum: INR 1.5 lakhs

Up to INR 1.5 lakhs

Tax Savings

Up to INR 1.5 lakhs

15 years

Term of the Policy

21 years

Partial withdrawal can be made after 15 years

Withdrawal

Partial withdrawal can be made after 21 years

Loan facility is available

Loan

Loan facility is not available

Available

Nomination 

Not available

Now that you know the differences between the Public Provident Fund and Sukanya Samridhi Yojana, you would be in a better position to plan your finances. While the interest rates may seem quite similar, long-term investment can bring a lot of difference to the final corpus. Keep the pros and cons of both in mind when you compare them and make a well-informed decision.

Difference between Children’s Mutual Funds & Sukanya Samriddhi Yojana:

When it comes to planning for your child’s future, you would always want to make the best decision. With the rising costs of education, it is imperative that you start saving at the right stage. Investing in Children’s Mutual Funds or Sukanya Samriddhi Yojana can be a recurring question in your mind. Let us take a look at their key differences:

Sukanya Samridhi Yojana 

Parameters 

Children’s Mutual Funds 

SSY can only be opened for a girl child by a parent/ guardian

Account Opening

Parents can start investing in their child’s name

Done by parents/ guardian till the child turns 18, thereafter the child can assume control

Management of Account

Managed by the parents. Children’s mutual funds come with a 5-year lock-in period or till the child turns 18

Account can be opened only till the child is 10 years or below

Age Criteria

This kind of mutual fund can be opened for a child under 18 years

Sukanya Samriddhi Yojana is a government-backed scheme that offers you guaranteed returns. Children’s mutual funds on the other hand may seem lucrative because of the high returns they offer, but the element of risk cannot be ignored. So, what should you choose in such a scenario? 

While Sukanya Samriddhi Yojana is an excellent saving scheme, it may not be entirely sufficient keeping in mind the unabated increase in the cost of higher education. Financial experts advise that you follow a more balanced approach and invest in both these options. You have the security and tax-saving benefits of Sukanya Samriddhi Yojana, while Children Mutual Funds can offer you better returns. 

Steps to download the Sukanya Samriddhi Yojana statement

You can download the Sukanya Samriddhi Yojana statement from the bank’s online portals. However, all banks don’t provide these services. If the bank your SSy account is linked with allows you to download statements, then request the bank executives regarding the online account login details like the login ID and password.

  • Using the account details, log in to the SSY account from the online portals of the bank.
  • The dashboard or the homepage will provide you with your account statements
  • Download the details from the same page.

What happens upon less/excess payment for Sukanya Samriddhi Yojana account 

  • Less than the minimum deposit
    When the account holder doesn’t pay the minimum value of Rs.250 within a financial year, then the account becomes a ‘default account’. In order to activate the account, the account holder must pay an additional INR 50 as a penalty.
  • Excess the maximum deposit
    When the deposits made are over INR 1.5 lakhs then no interest will be included in the additional money deposited. You can withdraw the excess funds anytime you want.

How to transfer an SSY account?

You can transfer the SSY account from one branch to another within the country. Here are the steps you need to follow during the process

  • Visit the post office or the bank where you have opened your existing SSY account and request the transfer application
  • Fill in the details of the new branch you are planning to transfer the funds and submit it along with the passbook for approval.
  • Once approved, the bank will close the existing account and give the customer their bank statements and other details regarding the existing account. 
  • You must submit these documents to the new branch where you will transfer the account.
  • While opening the account in the new post office or bank, you must also submit additional KYC documents for further verification.

Conclusion

The SSY aims to uplift the lives of the girl child in India. With the Sukanya Samriddhi Yojana benefits like tax reduction and high-interest rates, the girl child is secured with financial support over its tenure phase of 21 years. 

Easy application and minimal investment options make these schemes viable for an average household. Joining the scheme can be the next best thing you can do to financially secure the future of your daughter.

FAQs

  1. What is the online payment method for the Sukanya Samriddhi Yojana?

    SSY payment instalments can only be made online if you have IBPP installed on your smartphone.

    • Visit the IBPP app, navigate to the DOP products section and click on the Sukanya Samridhhi Yojana
    • Enter your DOP customer ID and SSY account number
    • Make the payment of the amount you wish to deposit
  2. How many accounts can be opened in Sukanya Samriddhi Yojana?

    Only one account can be opened for a female child. Also, only two girl children from a family can opt for Sukanya Samridhhi Yojana. But in the case of twins or triplets girls, more can two accounts can be opened.

  3. What are the steps to open the Sukanya Samriddhi Yojana account at the post office?
    To open a Sukanya Samriddhi Yojana account, you need to:

    • Visit your nearest Post Office
    • Fill in an application form and submit the required documents along with it
    • Pay the minimum deposit fee
    • The post office will check the form and approve your application
    • After approval, your account will be opened
  4. What is the Sukanya Samriddhi yojana transfer procedure?

    In order to transfer the account, follow the steps given below:

    • Visit the Post Office or Bank in which you have your SSY account
    • You will need to fill in the account transfer form, submit the required KYC documents
    • The bank/post office will verify and send the original KYC documents to the bank/post office you want to transfer your account in
    • When the target bank/post office receives your documents, you can have your SSY account there.
  5. Is there a maximum amount that I can invest in the Sukanya Samriddhi Yojana?

    Yes, in a year you can make a maximum deposit of INR 1.5 lakhs.

  6. DISCLAIMER

    This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs. Insurance is a subject matter of solicitation. For more details on policy terms, conditions, exclusions, limitations, please refer/read policy brochure before concluding sale.

Post Office Monthly Income Scheme: All you need to know

What is Post Office MIS?

Under the administration of the Ministry of Finance, the Post office is offering its most reliable services to the citizens of India with the help of its more than 1,55,000 branches across the country. Amidst various schemes issued by the Post office, the Post Office Monthly Income Scheme (POMIS) is considered the most popular because it gives the investors a guaranteed return on their deposited money at the rate of 6.6% per annum. This is their fixed monthly income which the investors who invest in the POMIS get despite the uncertain domestic and global market conditions.

Those investors who are interested in POMIS have to start a POMIS scheme in the post office. It can be owned by a single holder or a joint holder. If the POMIS account holder is minor, then his/ her account is operated by the guardian.

Features of the POMIS scheme

Mentioned below are some of the highlighting features of the Post Monthly Income Scheme

  1. Risk-Free Investment

    The biggest advantage of the Post Monthly Income Scheme is that it is a risk-free investment. The investors can invest a minimum of INR 1000 in the scheme. The maximum amount that can be invested in the scheme is INR 4.5 lakh. The investors can get guaranteed returns on their money as the volatile market conditions wouldn’t influence the investment returns of the POMIS.

  2. Joint Account

    The Post Office Monthly Income Scheme account can be opened as a joint account. One feature that is added to the joint account is that the investors can invest up to INR 9 lakh in this scheme to get the highest amount of returns.

  3. Monthly Income

    The investors receive interest from the Post office Monthly Scheme every month. In this way, the investors get a monthly fixed income on their invested amount.

  4. Nominee

    The investor has to fill out the nomination form while opening the POMIS account. If the investor passes away, the nominee will be to claim the invested money of the account holder.

Limitations of the POMIS scheme

As beneficial as the POMIS scheme is with its fixed returns and monthly payments; there are still a few limitations tagging along with the benefits such as,

  • The funds invested in the POMIS scheme don’t provide any tax reduction benefit under Section 80C of the Income-tax Act. Individuals must pay the tax for the invested funds.
  • If the interest income from every month isn’t withdrawn, they stay idle and do not generate any interest on those additional funds.
  • The money income paid by the scheme also falls under the taxable section.

Working of the Post Office Monthly Income Scheme 

  • In the POMIS scheme, an individual can invest a minimum of Rs.1000 or multiples of Rs.1000 up to INR 4.5 lakhs per annum. 
  • During its tenure period of 5 years, the individual receives an interest calculated income every month.
  • The two or three individuals can also open a joint, but the maximum investment limit here would be INR 9 lakhs per annum.
  • On the maturity of the funds, the individual can withdraw the entire investment funds without any additional charges.
  • However, there are penalties included during the premature withdrawal of the funds. Depending on the year joining, the penalty fee can vary between 1% – 2% of the investment funds.

Let us see this example:

Suppose Mr Rajesh, a 39-year-old bank manager, plans to open a POMIS scheme account at its maximum deposit range of INR 4.5 lakhs for a period of 5 years. Then for that period at the end of each month, he will receive a monthly income of INR 2,475 based on the 6.6% interest rate. The monthly payment continues until his entire tenure phase. Once the account reaches its maturity after 5 years, he can withdraw his total investment of INR 4.5 lakhs without any extra charges. If he wants he can also renew his account. 

Eligibility Criteria for the Post Office Monthly Income Scheme

The following criteria have to be fulfilled to qualify for the scheme:

  • Any Indian adult above 18 years can open a POMIS account
  • They must be a resident of India; NRIs are not eligible
  • Minor who are 10 years of age or above can also have an account on a legal guardian or parent’s name
  • The minors can change their account name and claim the funds once they reach the majority.

Difference between Monthly Plans vs Post Office Monthly Income Scheme

When the monthly plans of the mutual funds are compared with the Post Office Monthly Income Scheme, it is analysed that the POMIS scheme is a risk-free investment plan that gives a guaranteed return to the investors. Monthly Income Plans or MIPs of mutual funds are debt-oriented mutual funds but are subject to interest rate sensitivity, which does not exist in the POMIS scheme. Since a part of the investment in MIPs is in equity as well, the element of guarantee is lesser than in POMIS schemes.

Also, MIPs have a tax advantage as investors get to avail of indexation benefits over the POMIS scheme. Both allow liquidity before the end of the term but with a charge. In Mutual Fund Monthly Income Plans, there is no limit for investment whereas in the POMIS scheme one can invest upto a maximum of INR 4.5 lakhs per PAN number.

POMIS scheme is a traditional investment and is trusted by many. Hence it has gained popularity over the years. With the facility of online transactions between post offices and banks according to the announcement in the Budget 2022, the POMIS scheme is expected to gain more popularity.

What are the Post Office Monthly Income Scheme interest rates?

  • The account holder of POMIS accounts receives a 6.6% interest on their investments.
  • A calculated interest value is given to the account holder on completion of the month from the joining date. This continues until the scheme attains maturity (5 years).
  • If the account holder fails to collect the interest, the leftover claim will include no additional interest funds in these funds.
  • If the deposit value exceeds the maximum deposit limit, the excess funds are returned, and the interest is calculated only up to the allowable deposit limit.
  • The funds received from the scheme are taxable.

Post Office Monthly Income Scheme account opening procedure

It is very easy to open a Post Office Monthly Income Scheme (MIS). If you want to invest in the scheme, a Post Office Savings Account is mandatory. If you don’t have a savings account, you can open it with the Post Office. After that you can go with the following procedure:

  • Get a POMIS Application Form from your nearest post office
  • You need to submit the form with a photocopy of ID proof, a photocopy of address proof, and 2 passport-sized photographs. 
  • You need to submit original ID proof and address proof too for the verification process.
  • You need to get the signatures of witnesses or beneficiaries.

Penalty against early withdrawal in POMIS scheme in post office

You are allowed to withdraw prematurely from your POMIS scheme but at a cost. Here are certain norms that need to be followed:

  • The account holder must submit the bank passbook and a withdrawal application form at their registered post office to withdraw the funds.
  • Individuals cannot withdraw the funds until the scheme attains its 1-year maturity. 
  • If the individual withdraws the funds between 1 – 3 years of the tenure period, the scheme will charge a penalty fee of 2% on the initial deposit, and the remaining will be paid.
  • If the individual withdraws between 3 – 5 years of the tenure period, then a penalty fee of 1% will be deducted from the initial deposit, and the remaining will be paid.

Who should invest in POMIS?

  • The Post Office Monthly Income Scheme is generated by the post office for those investors who are unwilling to take any risk. They prefer to keep their capital intact. They are not very conscious of getting high investment returns.
  • Those investors who want a reliable and fixed source of getting monthly income should choose the Post Office Monthly Income Scheme (POMIS).
  • The locking period of the POMIS is one year. After one year, the investors will be able to withdraw the money by paying the penalty charges of 1-2%. Those who plan to invest for the long term should invest in the POMIS.
  • For those who are uncomfortable investing in the stock market, mutual funds, etc due to the volatile market conditions, the post office monthly scheme (POMIS) is the best option to invest in for the long term. Investors don’t need to analyse the market daily.

Maximum deposit limit under the POMIS scheme

The maximum deposit limit varies depending on the type of account and the account holder’s age.

If the account holders are adults, then,

  • Single account – maximum investment is INR 4.5 lakhs
  • Joint account – maximum investment is INR 9 lakhs (the individuals must make equal shares of investment. However, each individual’s contribution cannot exceed a maximum of INR 4.5 lakhs)

If the account holder is a minor, then,

  • Minor account – maximum investment value is INR 3 lakhs.

Documents needed for POMIS

The documents required for POMIS include:

  • Identity Proof

    Photocopy of original government-approved IDs such as Passport/Voter ID card/Aadhar card/ Driving Licence, etc.

  • Address Proof

    Original government-issued ID or recent utility bills.

  • Photographs

    2 Passport size photographs.

Conclusion 

Government-based schemes always provide you with security for your money. By investing in the POMIS scheme, the individual can enjoy the benefits of complete return along with their monthly income. With its decent interest rate of 6.6%, the scheme allows the account holder to enjoy their money benefits instead of letting them stay idle in their bank accounts. No wonder the elder communities and risk-free investors welcome the POMIS scheme so warmly.

FAQs about the POMIS 

  1. Does the Post Office Monthly Income Scheme come with a lock-in period?

    Yes, the POMIS scheme offers a lock-in period of 5 years. After this tenure period, the individual can withdraw their investment. Early withdrawal is possible after 1 year of lock-in; however, it can cause a penalty.

  2. Can I purchase the Post Office Monthly Income Scheme for my 10-year-old daughter?

    Yes, for minors aged 10 and above an adult can open a minor account in the POMIS scheme. Once the child reaches the majority, she can transfer the account to their name and claim the funds.

  3. If I open a Post Office Monthly Income Scheme joint account, how will the income be distributed?

    The contributors of the joint account receive equal shares of the income transferred to their independent accounts. The joint accounts begin with equal claims of investment made by 2 or 3 investors and equal distribution of the income money generated.

  4. Will I be able to reinvest my accumulated fund, once it reaches maturity?

    Yes, you can. Once the funds reach maturity, you can reinvest the accumulated funds in the same scheme for another 5-year tenure. Reinvesting assures you to enjoy the financial benefits for another 5 years.

DISCLAIMER

This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs. Insurance is a subject matter of solicitation. For more details on policy terms, conditions, exclusions, limitations, please refer/read policy brochure before concluding sale.

6 Reasons For The Rise Of Health Insurance Premiums In India

Have you recently renewed your health insurance policy and suddenly seen a rise in the premiums? Well, let’s just say, you are not alone. There is an increasing trend in health insurance premiums in India. Here’s why:

  1. Higher instances of illnesses

    The environment has become increasingly unpleasant for human life to thrive, from climate change to increased pollution, we are all seeing the worst happening to the environment. This has led to a rise in diseases and critical illnesses. 

    Heart attacks and cancer cases in today’s times are much higher than what it was during the earlier years. It has also become increasingly prevalent among younger individuals, you hear of young individuals as less as 30 years losing their lives to heart attacks. The instance of hospitalisation among the younger population is also on the rise. The illnesses could also stem from increased stress levels, with the advent of social media, there are also increased mental health issues. Health insurance plans are slowly recognising this aspect and offering coverage for such illnesses as well. 

  2. Increasing lifestyle diseases

    There is the curious case of, ‘sitting becoming the new smoking’, with desk jobs being the trend these days, the number of people actively exercising is very low. This has also caused many lifestyle diseases such as thyroid, obesity, cholesterol, and diabetes. India is among the top nations in terms of the number of diabetic patients.

    Many youngsters fall prey to lifestyle diseases and are put on medication at a very young age. The increase in lifestyle diseases has led to more outpatient disposition/treatment instances. Many health insurance plans offer coverage for OPD treatment as well. The increase in claims has also led to an increase in health insurance premiums. Almost 75% of one’s medical treatments are usually OPD related, hence, there is a need for health insurance policies to offer coverage for lifestyle diseases. 

  3. Medical inflation

    Medical inflation in the last couple of years has hovered around 7.5% p.a to 8% p.a which is much higher than the regular inflation rate. However, in the year 2021, India saw medical inflation shoot up to 14% as per a report on Indian Health Insurance by Motilal Oswal Financial Services Limited (MOFSL). The inflation rate was the highest among Asian countries.

    In fact, among all Education costs and medical inflation costs are the two expenses where the inflation rates are rising at an unprecedented pace. The entire medical system including hospitals, research labs, lines of treatments, pharma etc., are all experiencing a very competitive environment. There is increased effort to stay competitive and manage to hold the market share, this has resulted in increased incurrence of cost due to advanced tech investments, higher / better customer service practice, and better marketing etc. This results in an increase in overall medical costs as the companies are eventually pressured to pass on the costs to the end consumer. 

  4. Claim statistics

    As per the report by MOSL, the covid related claims went up sharply, the claims accounted for 6% of the total claims paid out by all health insurance companies in India in the year 2020-21. The number is expected to be around 12% of total claims in the year 2021-22.

    These statistics indicate that Covid has been a game-changer and has exposed the vulnerability of people in terms of them being exposed to health hazards. It also made the health insurance companies relook at their risk factors, during the covid waves, several otherwise healthy individuals had to undergo hospitalisation and extreme lines of treatment.

    The risk factors were reassessed and the risk premiums were revised to accommodate these new environmental factors. Thus, increasing premiums across the board.

  5. Higher hospital charges

    Hospitals are constantly innovating and upgrading to provide best-in-class experiences to their clientele. A stay in the hospital has become synonymous with a stay at a luxury hotel with healthy and sumptuous food at its disposal.

    Hospitals are also investing heavily in technology to ensure that they cater to customers in the best possible way. The space is becoming extremely competitive, and with increased demand, the hospitals are also able to up the price of the services which are in limited supply.

    This calls for a higher quantum of the sum insured for the individual to ensure that he is adequately covered for any unforeseen hospitalisation. This results in the payment of higher premiums. 

  6. The increasing cost of sophisticated treatment

    The focus has always remained on a better line of treatment which eventually translates to a better patient success rate. The treatment costs are quite huge, compared to the earlier days. To be able to afford such treatment, there is a need to avail a higher sum insured for the policyholder.

Further, there are many alternate treatment lines like AYUSH which are undertaken in parallel to ward off any possible side effects from the mainline of treatment, especially in cases of critical illnesses. Many health insurance plans allow such parallel claims, these factors have contributed to the increase in premiums. 

These are only some of the factors which have contributed to the increase in premiums of health insurance plans. There is a major chasm between medical treatment accessibility and the general, middle-income public without health insurance. There are efforts to address this gap by the Government. However, all these aspects only point to one thing, the growing need for health insurance. There are different types of Health Insurance available as per your needs and if you have not hedged your health risk comprehensively, then it is time to do so!

Contact Turtlemint Health Insurance Advisor to get protection from rising costs and help you with your insurance needs now!

DISCLAIMER
This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs.

Everything First-Time Car Buyers Must Know About Car Insurance

Your first car always brings a sense of euphoria, it brings a sense of freedom and independence. It also means that now you are responsible to inculcate good driving practices and ensure the upkeep of your car. Among the many decisions that you need to make, one additional decision would be regarding the car insurance that you need to avail yourself of. Insurance is a very vast world with multiple technical terminologies. We first decipher the technical terms and then get into the nuances of car insurance for your benefit. 

Technical terminologies you should know

  1. NCB (No claim bonus): 

    It is a discount offered when you renew your car insurance provided you have not made any claims during the previous policy year. NCB is extended for every claim-free year, it normally is given as a discount on the insurance premium (up to 50%) or may also be extended in the form of an increased sum insured in some cases.

  2. IDV (Insured declared value):

    This is the amount that your vehicle is valued at, in the first year of purchase of a new vehicle it will be valued at 95% of the ex-showroom price. This is also the value at which your car will be insured, also called the sum insured.

    As your vehicle ages, the depreciation catches on and the sum insured reduces. This is the amount which will be paid to you in the event of total loss or damage to the car that is insured.

  3. Deductibles:

    Under deductibles, there are two types:

    1. Compulsory Deductible:

      The minimum quantum of funds should be paid to begin an insurance claim.

    2. Voluntary Deductible:

      An amount that the policyholder is willing to pay during the occurrence of an unfortunate event. This would translate to policyholders sharing the financial burden.

To know more about the top Insurance Terms, click here. 

Types of car insurance policies

There are various types of car insurance which may often overwhelm you, here is a brief on each of these to help you understand what they cover. This will help you assess the suitability and accordingly choose the plan that best aligns with your requirement.

  1. Third-Party Insurance Plans:

    As per the Motor Vehicles Act, 1988, third-party car insurance is mandatory. This offers coverage for liabilities or claims that may arise out of any unfortunate incident like an accident where a third-party individual or property is involved. It is illegal to drive in India, without third-party insurance, you are likely to be severely fined or imprisoned.

  2. Own Damage Insurance Plans:

    This policy is to cover the damages that may be caused to the insured vehicle (own vehicle). Third-party insurance does not offer coverage to your vehicle, it covers the damage for the counterparty in an accident or unfortunate incident. You can avail of this plan only if you have a valid third-party-only car insurance plan.

  3. Comprehensive insurance:

    To put this in easy terms, it is both third-party insurance and own damage insurance put together. It covers damages to your vehicle and that of the third party. It also offers coverage against theft, fire, natural calamities, explosions etc.

    It is also termed the ‘all-in-one’ policy which offers complete coverage under a single policy with a single premium. There are add-on riders available to cover all bases. You can choose them based on your requirements.

Once you know about the basic terminologies and the type of car insurance that you need, it is time to consider other aspects such as:

  1. Assessment of insurance requirements:

    You must assess your requirement before you zero in on the type of insurance and the quantum of insurance that you may need. Two important considerations that you need to assess are the purpose of the vehicle, if you are likely to use the vehicle frequently for long-distance travel under heavy traffic or travel in accident-prone zones, then a higher quantum of the sum insured and wide coverage would be required. If you are likely to use it for short distances with minimal traffic, then lower coverage would suffice.

    Tip: All types of insurance, including car insurance, has to be budgeted, to ensure that you do not go overboard by adding riders unnecessarily. Insurance companies tend to upsell, hence, having an assessment and budget of your own always helps. Your insurance premium should be such that it aligns well with your requirement and does not hurt your monthly budget overtly.

  2. Product comparison:

    Before you buy any insurance policy, ensure to do a product comparison, there are umpteen websites which offer comprehensive comparisons across products. This is a cardinal rule that you should not miss. Further, whilst comparing, don’t just watch out for premium rates, ensure to go through every product feature to ensure that the product that you eventually choose aligns well with your requirement and offers optimal coverage for the premium rates.

    Tip: Read through the product features, understand the claim procedures, and also sift through the customer reviews and their experiences with claim settlement to gain a comprehensive idea about the insurer you wish to associate with.

  3. Inclusions and exclusions in the policy:

    A very important aspect that people tend to miss is understanding in detail the inclusions and exclusions. Complete and comprehensive coverage is what you typically should aim at. This can be achieved by understanding the gaps and evaluating if there are any add-ons which will help you bridge the gap. Of course, all this is based on your assessment of the need for such coverage.

    Tip: Try to pick car insurance which offers a wider coverage and has minimal exclusions, also one with no loose ends. In case you have inhibitions or doubts, do not hesitate to reach out to the insurer and clarify your doubts, always look for documents which substantiate the claims, this will help you keep them for future reference. 

Finally, you need to enhance the coverage of your car insurance plan with add-ons.

What are add-ons?

A host of add-ons are available for achieving comprehensive coverage of the policy by paying an extra premium.

Here are some add-ons that you may consider if it aligns with your requirement:

  1. Zero depreciation cover:

    This is also called the bumper-to-bumper or nil depreciation cover. The insured will not have to account for the depreciation value of the car or account for damages, replaced parts etc., the coverage is over and beyond the IDV.

  2. Roadside assistance cover:

    If you are stranded in the middle of nowhere, your insurance company will immediately send assistance. This is around-the-clock coverage.

  3. Engine protection cover:

    The engine replacement in your car can be an expensive affair, there is an add-on which helps you deal with this without any financial stress.

  4. Consumables cover:

    Any ad-hoc replacements, nuts and bolts purchases, engine oil replacement etc., can be claimed under this add-on.

    All these add-ons come at an additional cost, hence it is important to avail only those ride-ones that are necessary.

Also, read the 5 Best Add-on Car Insurance Covers in 2022

This is a comprehensive note intended to give a holistic picture of car insurance and its nuances. Hope it eases your anxiety as you embark on your journey to buy your first car insurance. If you need help in choosing the right policy, you can also contact Turtlemint’s expert advisor!

DISCLAIMER
This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs.

5 Reasons Why A Health Insurance Is The Best Father’s Day Gift

Fathers have always been the silent pillars of the family, protecting and fighting against all odds to support us. In fact, his endeavour has always been to safeguard the interests of the family much before his own. Now, with Father’s Day round the corner on 19th June 2022, most of you must be wondering what is the best Father’s Day gift to show your love.

There are many traditional gifting ideas including chocolates, flowers, greeting cards, and personalized items; but how to make this year unique? Why not try and safeguard your father’s retired life so that his health can be protected just the same way as he has been protecting your life forever?

The simple solution to this could be gifting a Health Insurance Plan to your dad this year which could be utilised by him forever. In fact, this could be your best Father’s Day gift to your dad, ever! Don’t just take our word for it. Here are five reasons that show why health insurance proves useful and fits the bill –

1. It offers a wide scope of coverage

Health insurance plans offer a wide scope of coverage against possible medical expenses. They cover hospitalisation costs, pre and post-hospitalisation costs, ambulance expenses, daycare treatments, organ donor treatments, and the like. 

Thus, in the case of a medical emergency, the health insurance plan would cover most of your father’s medical bills. This would help him avail of quality medical treatments without worrying about their costs.

2. It would cover both existing and potential illnesses

In their middle age, parents tend to develop various lifestyle illnesses like diabetes, hypertension, etc. These ailments can cause further medical complications for which health insurance coverage becomes important. Health insurance plans cover these existing ailments after a waiting period and provide an inclusive scope of protection.

Furthermore, health plans also cover unexpected illnesses or injuries giving your father the security of affordable healthcare in unforeseen situations too.

3. The plan offers lifelong renewals

One of the best parts about health insurance is lifelong renewability. Your father can enjoy coverage even in his golden years when illnesses become all the more common and frequent. All he has to do is renew his policy timely and the coverage would continue, uninterrupted, for as long as your father lives providing him with a comprehensive scope of protection.

4. It has tax benefits

When talking about health insurance how can one forget the tax benefits?

Health insurance plans prove tax-saving in nature. If your father pays the premium for his health insurance plan, he can enjoy a tax deduction of up to Rs.25,000 (Rs.50,000 if he is aged 61 years or above). This deduction can help him save a tax of up to Rs.7500 (Rs.15,000 if he is a senior citizen) if he falls in the 30% tax bracket.

Alternatively, if you pay the premium, you can claim this deduction over and above the deduction that you can claim for the health insurance plan for your family. In this case, thus, you can give your father comprehensive coverage and also save your tax in the process. A win-win!

5. It gives your father financial security

Lastly and most importantly, health insurance gives your father financial security in the face of a medical emergency. It is no secret that medical costs are increasing day by day. In such cases, a medical emergency might put an immense strain on your father’s finances. By taking care of the medical bills, health insurance can alleviate this strain and give your father the financial security that he needs. 

So, go a little unconventional this Father’s Day and choose a gift that would actually make a difference to your father. Opt for a health insurance plan and gift him financial security against unforeseen medical emergencies. 

Some tips to buy the right health insurance coverage for your father are as follows –

  • Opt for a sufficient sum insured so that most of the medical costs get covered
  • If your father has a pre-existing condition, choose a policy with a lower waiting period
  • Opt for a comprehensive scope of coverage complete with sum insured restoration, annual health check-ups, OPD cover, etc. so that your father can enjoy a 360-degree protection
  • Nudge your father to renew the coverage for lifelong protection

Compare and pick the right health plan for your father who has always been the knight in the shining armour and make this Father’s Day the best one. 

DISCLAIMER
This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs.