Know your health insurance plan’s exclusion

Health insurance plans provide a comprehensive scope of coverage. You not only get coverage for hospitalisation related expenses but also for expenses which are incurred before and after hospitalisation as well. Moreover, day care treatments, domiciliary treatments, organ donor expenses, AYUSH treatments, etc. are also covered in most health plans. However, though the coverage under health plans is quite comprehensive, it is not all-inclusive. There are some medical expenses and treatments which are not covered by most health insurance plans. These are called exclusions and the list of exclusions usually remains the same across most health insurance policies.

Many of you don’t know about the common health insurance exclusions but you should. You should read the policy document of your health insurance policy to know what is covered and, more importantly, what is not covered under the plan. Knowing the exclusions would help you understand the exact coverage of your health insurance plan. Moreover, you can avoid making a claim for excluded expenses and suffer claim rejections. So, here are some of the most common health insurance exclusions for you to know –

  • Pre-existing conditions

If you suffer from any medical complications at the time of buying the policy, such complications are called pre-existing conditions. Coverage for pre-existing conditions is not available from the start of the policy. Such conditions are excluded for 2-4 policy years after which they are covered. So, if you suffer from any pre-existing condition and make a claim for the same during the waiting period, the claim would be rejected.

  • Cosmetic treatments

LASIK surgeries, cosmetic reconstruction and other cosmetic treatments are not included in the scope of coverage unless they are medically necessary. For instance, if you want plastic surgery, the surgery would not be covered in your health plan. However, if you suffer from third-degree burns and plastic surgery becomes a necessity, the same would be covered.

  • HIV/AIDS or other venereal diseases

Sexually transmitted diseases are not covered in health insurance plans

  • Attempted suicide or self-inflicted injuries

If you deliberately harm yourself or attempt suicide, the medical expenses incurred consequently would not be covered

  • Congenital diseases

Congenital diseases are also not covered under health insurance plans

  • Dental treatments

Dental treatment form part of OPD coverage and are usually excluded unless they become medically necessary because of an accidental injury. In some plans, however, OPD coverage is available and dental treatments might be covered under OPD expenses.

  • Pregnancy-related expenses

Health plans exclude maternity treatments and related expenses unless maternity cover is built in the plan or taken as an add-on.

Know more about Maternity health insurance.

  • Mental disorders

Treatments for mental disorders are not covered

  • War and related perils

Injuries or medical expenses which result due to war, riots, mutiny, civil unrest, nuclear contamination and other related perils are not covered.

  • Unproven treatments

Treatments which are unproven, experimental or unconventional are not covered under health insurance policies.

These are the most common exclusions which you can find in health insurance plans. You should read your policy document and understand the exclusions which are applicable in your health insurance plan. After all, you should know what your health plan covers and what it doesn’t.

Read more about Day care treatment vs Outpatient treatment.

Read more about How to choose a health insurance plan?

8 financial instrument you can quickly buy online to save tax in India

Are you confused with the word tax? And “tax saving instruments” and sections etc. Here I try to simplify all terms that about the most relevant easy, safe instruments for you to invest and just be relaxed about your money.

Here are 8 financial instruments which you can invest immediately online through the click of a button.

1) Provident Fund

Provident Fund has been the preferred savings instrument for people for many years. Perks such as minimal risk, guaranteed return, and ease of contribution makes it one of the most commonly used tools to earn returns as well as save tax. There are multiple variations such as Public Provident Fund (PPF), Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) that one can choose from. The last two categories are applicable for salaried individuals. Another point which makes it a favorable option (when compared to bank deposits) is that the interest earned is exempt from tax.

Tax Benefit for investment in Provident Fund: up to INR 1,50,000 p.a. is tax-free U/S 80C

Maturity Amount: is also completely tax-free.

How to track your EPF investment online through UAN:

  1. You need to visit the EPFO official website
  2. Click on the “Know your UAN status” tab
  3. Fill in your details like the EPF number or your member ID, if you have along with your basic details like Name, Registered Phone Number, Email ID, Date of Birth, etc.
  4. The OTP would be sent to your registered mobile number for login
  5. Once you under the OTP, the UAN details would be emailed to your registered email id
  6. Then you can check your EPF details online with the UAN no.


2) National Pension Scheme (NPS)

In recent years, NPS has emerged as the dark horse amongst all the tax saving schemes. The changes in government regulations have made it a more lucrative and profitable option for investors. NPS subscribers can claim a tax deduction of 10% of their gross income. Additionally, an extra deduction of Rs. 50,000 is offered for NPS (Tier 1) account. This benefit is over and above the Rs. 1.5 Lakhs limit under Section 80C. In the last five years, the average return has been around 10.8% for NPS investors.

Taxation: Tax Benefit is given to Tier I Account and not to the Tier II Account.

Tax Benefit: Total INR 2 lakhs p.a.

  • Up to INR 1,50,000 p.a. is tax-free U/S 80CCD(1) and
  • Additional Tax Benefit of INR 50,000 p.a. U/S 80CCD(1B), over and above INR 1.5 lakhs of 80C for individuals contributing towards NPS

Maturity Amount:

  • 40% of the entire corpus can be withdrawn tax-free at vesting when the annuitant is 60 years old,
  • 40% of the corpus needs to be used to buy the annuity from a PFRDA listed insurance company (an annuity is taxed as per slab) and
  • The remaining 20% of the corpus can be used to buy an annuity or withdraw as a lump sum and taxed as per slab.


3) Traditional Life Insurance

Most of us equate life insurance with peace of mind and savings. However, there is a third underlying benefit associated with these policies: How to save tax? Section 80C allows tax deduction for premium paid for self, spouse and children’s policy. The only condition is that the sum assured should be at least 10 times the value of one premium installment.

Tax Benefit: 

The premium till INR 1,50,000 p.a. is tax-free U/S 80C.


4)Unit Linked Insurance Plans:

Who says you can’t have your cake and eat it too. ULIPs are a classic example. They have combined two great benefits – insurance and wealth appreciation. Investors have the flexibility to move between equity and debt as per their preference. From a tax standpoint, the premium paid and the maturity proceeds are exempt from taxation.

Tax Benefit:

The premium till INR 1,50,000 p.a. is tax-free U/S 80C.

Maturity Amount:

The maturity amount is tax-free U/S 10(10)D provided sum assured is at least 10 times the premium.


5)Equity Linked Savings Scheme

ELSS is a great choice for investors with a long-term focus. What makes it more lucrative (apart from the attraction of high returns) is the fact they help the investors how to save tax and provide an option to opt for growth or dividend as per their preference. Just remember that ELSS investments are high-risk investments as its invested in equity markets but should be looked at from the long-term perspective and it will give you high returns.The online tax calculators provide a return on investment for your ELSS schemes for a better understanding.

Tax Benefit:

The investment till INR 1,50,000 p.a. is tax-free U/S 80C.

Maturity Amount:

The maturity amount is taxed at a flat rate of 10% for capital gains of more than INR 1 lakh p.a.


6)Sukanya Samriddhi Yojna (SSY)

With this initiative from the government, there are double reasons to celebrate when you are blessed with a girl child. Started under the “Beti Bachao, Beti Padhao” campaign, this scheme enables parents to start a deposit scheme for the child. Investment in this scheme helps you how to save income tax under 80C. Additionally, the maturity proceeds are also exempt from tax. Currently, the scheme offers 8.5% interest per year. Also, as per the government rules, the SSY interest rate will always be maintained higher than what is offered by PPF.

Tax Benefit:

The investment till INR 1,50,000 p.a. is tax-free U/S 80C. The interest that compounds annually is tax-free.

Maturity Amount:

The maturity proceeds are completely tax-free.


7)Fixed Deposits with banks

These deposits come with a lock-in period of five years. Though the returns are not as high as some of the other options, they provide benefits such as ease of operation, digital banking, etc. There are some online tax calculators which provide an estimate on the return on investment for tax saving bank FDs.

Tax Benefit:

The investment till INR 1,50,000 p.a. is tax-free U/S 80C.

Maturity Amount:

The interest is tax-free till INR 10,000 p.a. in FY 2018-19 and till INR 40,000 from FY 2019-20 U/S 80TTA. The interest more than the 80TTA limit is taxed as per slab.


8)Medical Insurance

Health insurance as a concept has still not penetrated in the Indian market. As per a study was done by the National Health Profile in 2017, only 27% of people in the country had opted for health cover. However, with the increasing medical costs and a sea of lifestyle diseases plaguing us these days, it is a must-have for each individual. And what makes it a win-win proposition is the tax savings that one can enjoy with the schemes. Under Section 80D, individuals can claim the tax deduction for medical cover premium. It can be for self and family members (spouse, kids and parents). The benefit is capped at INR 25,000 (if age is less than 60 years) and INR 50,000 for senior citizens.

Tax Benefit: The health insurance premium is tax-free U/S 80D till a specified limit.

health insurance

Maturity Amount:

Not applicable as there is no maturity amount is health insurance plans.

So, whatever is your risk appetite and financial goal, there is something out there for you to invest your money and save tax. Go make your choice.

Click on a video to know the facts about tax saving products:

Below is a table giving a summary of all the benefits of Tax savings instrument
save tax instrument

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Read also Complete guide on how term insurance policy can help you save tax

Things to know before investing in an endowment policy

Life insurance plans come in different variants so that the different needs of different individuals can be met by one or the other life insurance plan. Endowment plans are one popular variant of life insurance plans which are designed to create savings for the policyholder. Let’s understand what endowment plans are and the important things that you should know about these plans before you invest in them.

What are endowment plans?

Endowment plans are savings oriented life insurance plans which promise guaranteed benefits. The plan pays a death benefit if the insured dies during the term of the plan. Moreover, on maturity of the plan, a maturity benefit is also paid if the insured is alive. Endowment plans also pay additional returns to enhance the benefits payable.

Also watch our video to know the basics of endowment plans

Things to know before buying endowment plans:

Here are some important aspects of the plan which you should know before you invest in one –

  • Nature of the plan – Endowment plans are traditional life insurance plans which have guaranteed benefits. The plans are long-term in nature and are usually offered for a term of 10 years to 30 years.
  • Returns provided– Endowment plans come as participating plans or non-participating plans. Participating plans are those that participate in bonus declarations while non-participating plans do not earn a bonus. Besides bonus, endowment plans might also provide other returns like –
      • Guaranteed additions – these additions are guaranteed and paid for a particular time period. The rate is pre-determined and is calculated on the sum assured of the policy
      • Loyalty additions – these additions are added to long-term endowment plans if the policyholder continues the policy for 10 years and more. Loyalty additions are added one time at a pre-determined rate. The rate is calculated on the sum assured of the plan.
      • Tax benefit – you can get tax exemption on premium payments, maturity and final payouts under section 80c and section 10(10D) of the Income tax act
  • Returns are not inflation-adjusted-

    Though endowment plans provide the above-mentioned returns which enhance the plan’s benefits, the returns are not inflation-adjusted. Given that endowment plans are long-term plans, the ultimate return generated after the end of the tenure might not have substantial real worth due to the effect of inflation.

  • Paid-up value, surrender value and policy loan are available-

    Endowment plans provide you with the option of making the policy paid-up, surrendering the policy or availing a policy loan. You have to pay premiums for a minimum period to avail these benefits. Usually, if the premium paying term of the plan is up to 10 years, the first two years’ premiums are required. If, however, the premium paying term is 10 years or above, three full years’ premiums are required to avail these benefits.

Know about Insurance terms you should know while buying life insurance.

How to decide to buy an endowment plan?

Now that you know what endowment plans are and their important aspects, you must be wondering whether you should buy the plan or not. The answer is in your requirements. If you are a risk-averse investor looking to create guaranteed savings with life insurance cover, you can buy an endowment plan. However, if you need inflation-adjusted returns which help you maximise your wealth, you should choose unit-linked plans instead as they provide market-linked returns. So, assess your risk profile and the return potential of endowment plans to find out if the plan is suitable to you or not.

Which plan to buy?

If you want to invest in an endowment plan as it suits your investment needs, choose a participating endowment plan which promises a bonus. Bonus additions would help you earn good returns. Choose a term which helps you accumulate a corpus for a particular financial goal. The sum assured should be optimal and the premium should be affordable.

So, understand these things about an endowment plan, what it offers, its important aspects and its suitability before buying the plan. You wouldn’t want any nasty surprises after purchasing the plan, would you?

Read more about Types of life insurance

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Do I need multiple insurances in 2021 if I have more than one car?

We are aware of the fact that a car insurance policy is legally mandatory in India. The Motor Vehicles Act, 1988 mandates that every car which is driven on Indian roads should have a valid insurance cover attached to it. That is why car owners are supposed to buy a car insurance policy on their cars if they want to drive their car on Indian roads.

But what if you have two or more cars? You must be aware of the rules of your car insurance coverage for multiple vehicles, but there is a change in the norm in 2019. Are you aware of the recent development? Do you need independent insurance covers for each of them?

In order to understand the changes in the car insurance norms in 2019, an in-depth understanding of the car insurance policy and the law governing it needs to be well understood.

In the parts of car insurance coverage. These include the following –

  • Third party liability cover – this covers any third party financial liability which you face if you physically harm an individual or damage someone else’s property. Third party cover is mandatory as per the Motor Vehicles Act, 1988
  • Own damage cover – This covers the damages which are suffered by the car itself. This cover is not mandatory and is available in comprehensive car insurance policies
  • Personal accident cover – this covers accidental death and accidental permanent disablement suffered by the owner/driver of the car while using the car. This cover is also mandatory in car insurance policies and available in the third party as well as comprehensive car insurance plans.

Now that you have understood the various aspects of coverage offered by car insurance plans, let’s understand what happens when you have multiple cars. Different covers have different implications in case of having multiple cars. Let’s understand how –

  • Third party cover – Independent third-party cover is required for each car that you own. So, if you have three cars, you should have a separate third party policy for each car.
  • Own damage cover – Own damage cover is optional. If you have third party cover, your legal obligations towards car insurance are fulfilled. However, if you want comprehensive protection for your cars, own damage cover is advised as it covers the damages suffered by the car itself. Own damage cover also works independently like third party cover. You would have to buy the cover separately for each car you own if you require. So, if you have multiple cars try having own damage cover on each car for wider coverage. However, if affordability is an issue, you can be selective. You can choose own damage cover for one or two cars which are used extensively. For other car(s), if they are not used very much or if they are quite old, you can skip own damage cover and make do with only third party cover. The choice would be yours to make.
  • Personal accident cover – In case of personal accident cover, the newly updated rules of IRDAI (Insurance Regulatory and Development Authority of India) would apply. As per the new rules, having a personal accident cover totaling at least INR 15 lakhs is enough. You can buy this cover with your car insurance policy or as a standalone personal accident policy. Whatever you do, if the cover is at least INR 15 lakhs, you don’t need to buy multiple personal accident covers with multiple car insurance policies. Say, for instance, you have an independent personal accident policy worth INR 20 lakhs. In this case, when you buy a motor insurance policy for your cars, you don’t need to opt for the personal accident cover. Moreover, if you have bought a new car on or after 1st September 2015 you would get a personal accident cover of INR 15 lakhs as per the updated rules of IRDAI. Thereafter, if you buy another car or renew the car insurance policy of your older cars, you don’t have to buy another personal accident cover with the policy. So, in the case of multiple cars, you don’t need multiple personal accident covers for each car as long as the aggregate cover in your name is INR 15 lakhs.

So, to sum up, you should know about the insurance requirements on your multiple cars and fulfill these requirements so that you don’t face any legal complications when caught driving without a valid insurance cover.

Read more All you need to know about car insurance

Read more Car insurance terminologies you should know

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CNG Fitting vis-à-vis car insurance – What you should know

Petrol and diesel prices have skyrocketed in the past few years and it is becoming increasingly unaffordable for many. On the other hand, cars have become a necessity for convening and many of you are buying a car for your travel needs. But how do you afford driving a car with the increasing fuel prices?The answer is simple – by opting for CNG fuel kit and reducing the fuel costs. CNG is quite affordable and that is why many individuals opt for CNG kits for their cars to reduce their fuel costs especially when the car is used quite frequently. While fitting CNG kit is a good option to lower your fuel costs, you should know that CNG fitting affects your car insurance policy and its premium. Do you know how?

CNG fitting is an additional modification to your car. As such, you need to modify the associated car insurance policy too. You can opt for two ways of getting your car a CNG kit –

  1. You can fit a new kit in your old car
  2. You can buy a new car with a pre-fitted CNG kit

The way you choose would determine how you should go about making changes in your car insurance policy. Let’s understand –

Way #1 – Fitting a new kit in an old car

If you fit a new kit in an existing car you own, you have to inform the insurance company of the fitting so that the kit gets covered under the policy. Your existing insurance policy would not be valid and you would have to change it to reflect the modification done to your car. After you inform the insurance company, the company would issue a new policy covering the CNG kit and the premium would be increased. You would have to pay the additional premium for insuring the CNG kit so that you can make a claim in case of any damages suffered. Besides informing the insurance company and getting your car insurance policy changed, you should also inform the RTO of the CNG fitting so that the RTO puts a CNG seal on your RC book approving the fitting. This seal would be necessary to authenticate the CNG kit you have fitted in your car. In fact, many insurance companies insist on the RC Book with the RTO’s seal before they change your car insurance policy to cover the CNG kit.

Way #2 – Fitting a new kit in a new car

If, at the time of buying the new car, you want to get a CNG kit fitted, the process is much simpler. The registration of your new vehicle would be done after the CNG kit is fitted into the car. As such, the RC Book would reflect the CNG seal. Thereafter, when you go for a car insurance policy, the company would know of the CNG fitting to your car and would issue you a policy covering the kit and the premium would also be charged accordingly.

Implications of not getting CNG kit covered under the insurance policy

In the first instance where you install a CNG kit in an old cart, many of you choose to avoid upgrading your insurance policy fearing the burden of additional premium. While upgrading your policy is not compulsory, it is important. Here’s why –

  • Only if the policy is upgraded do you get coverage for the damages suffered by the CNG kit
  • Since CNG cars are more fuel efficient, you might use the car more frequently. This would increase the chances of claim and to get maximum claim settlement, upgrading the cover to include CNG kit is recommended
  • If the policy is not upgraded and you make a claim, there is a possibility of claim rejection.

The additional premium payable for upgrading the policy is a fraction of the cost which you would incur if your claim is rejected or if your claim doesn’t cover the damages to your CNG kit. Fitting your car with a CNG kit would reduce your fuel costs. Why don’t you direct a part of your savings to upgrading your insurance policy? The scope of coverage would increase and you can also get your kit covered. It would be a smart move, wouldn’t it?

Read more about how modification will affect your car insurance

Read more about how much car insurance do you really need

Read more about car insurance in detail

Common causes of road accidents and what can you do to avoid them

According to the Ministry of Road Transport and Highways, India accounts for about 12.5% of road accidents worldwide. The number of road fatalities is more than 1.45 lakhs in a year and one accident occurs every four minutes (Source: ). The numbers are alarming. As the number of vehicles has increased on Indian roads, the number of road accidents and fatalities has also gone up. Some common causes which lead to road accidents involve the following –

1. Speeding – driving at very high speed levels for seeking thrill or to reach somewhere quickly

2. Driving under the influence of alcohol and/or drugs

3. Talking on the phone when driving the vehicle

4. Violating safety rules like not wearing helmets when driving bikes or not wearing seatbelts in cars

5. Violating traffic rules – not stopping the vehicle on ‘red’ traffic light, driving the opposite way in one-way lanes, etc.

6. Giving your vehicle to minors who have no driving license and experience to drive the vehicle safely

Any of these reasons can result in a major accident which would not only cause severe injuries and/or death to you, it would also damage the vehicle involved.

Watch a video on the top common cause of road accidents in India :

How to avoid road accidents

Some safety tips and tricks are all you need to avoid causing or being involved in road accidents. These tips are as follows –

– Follow safety measures

Safety rules and measures are there for one specific purpose – to reduce the possibility of accidents. They should, therefore, not be ignored. Always follow the safety rules when driving. Don’t talk on the phone, wear a helmet or a seatbelt, install airbags in your cars and do everything possible which makes driving safe.

– Follow traffic rules

Violating traffic rules not only cause accidents, they incur heavy fines too. Do you want to pay such fines?

Always follow traffic rules to safeguard yourself from hefty fines and also to avoid possible accidents.

– Have a valid driving license before you drive

A valid driving license is a must for driving the vehicle. Since the license is issued to adults and after imparting driving skills, it ensures that the individual holding the license is aware about the basic road traffic rules and safety measures. If you are caught without a license, you face severe fines. So, ensure you have a valid driving license before you venture out to drive a vehicle.

– Don’t drink and drive

Alcohol and driving don’t go hand in hand. If you have been drinking it is best to take a cab rather than drive because driving under the influence has a very high chance of accidents.

These measures help you avoid road accidents. However, despite observing all safety tips, accidents can happen due to uncontrolled elements. For instance, if you are driving safely but a drunk driver rams into your vehicle, there would be a major accident. Similarly, if the tyres of your vehicle burst or the brakes fail, accidents are unavoidable. As such, insurance becomes a necessary requirement. There are two insurance policies which help you deal with the implications of a road accident. They are –

i.   Motor insurance
ii.  Personal accident insurance

Motor insurance policies are mandatory as per law. Every vehicle should have a valid motor insurance cover to be eligible to run on Indian roads. In the context of motor insurance policies, a comprehensive policy is recommended. The policy not only covers the mandatory third party liability, it also pays for the damages suffered by the vehicle.

Besides the mandatory motor insurance policy, a personal accident policy also proves to be a great help against road accidents. The policy covers accidental deaths, accidental permanent disablements and also temporary total disablement due to an accident. As such, the policy helps in taking care of the financial loss you suffer in an accidental contingency. The premiums are low and the policy can also be enhanced to cover medical expenses through extensions available.

You now know the reasons of road accidents and also the tricks to avoid them. Along with knowing the tips, you should also invest in a motor insurance and personal accident insurance plan to be prepared if an accidental contingency does strike. After all, it is always better to be prepared, isn’t it?

Read more about steps to take when your two wheeler meets an accident

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ULIPs undergo a makeover – low charges, high returns

Unit linked insurance plan (ULIPs) were launched by life insurance companies to provide market-linked returns to policyholders along with life insurance coverage. Though the concept of the plan was good, the high charges associated with it impacted the returns. Thereafter, in 2010, ULIP regulations were changed and ULIPs underwent a major makeover.  Then came the internet and today ULIPs are more customer friendly and popular than ever before. Let’s see how ULIPs have changed over the years –

Changes made in ULIPs

         – Lower charges

The major change which was introduced by SEBI in 2010 was reduction of the charges associated with ULIPs. While earlier the charges went as high as 90% of the annual premium, today, the charges have come down to as low as 5%. In fact, many new age unit linked plans have abolished the premium allocation from their ULIPs making them more attractive and customer-friendly.

         – Online availability

One of the main factors which have resulted in lower charges has been the online platform of selling ULIPs. Insurance companies are selling unit linked plans online thereby eliminating the need of a middleman. As the middleman is removed, commission costs have reduced and the plans have very low charges.

Effect of the changes

The above-mentioned changes in ULIPs have had a positive impact on the product. Due to the changes the following effects have been noticed –

          – Higher returns

Since the plan’s charges have become very low, maximum of the premium amount is being allocated to the chosen funds. As the premium allocation has increased, the returns have increased too. Customers are getting attractive returns from modern day ULIPs.

          – New benefits

New age ULIPs are also providing additional returns in the form of guaranteed returns, loyalty additions, wealth boosters, etc. These returns are added to the fund value at specified intervals and they help in increasing the aggregate returns generated by the plan.

          – Ease of purchase

The online medium helps policyholders buy a ULIP instantly by providing their personal details and paying premiums online. Moreover, insurance aggregator websites have also made it easy for potential customers to compare different ULIPs and then choose one. The online platform has, therefore, made the whole process of buying ULIPs easy and convenient.

           – Tax advantages

After the Union Budget 2018 imposed long term capital gains tax on equity returns exceeding INR 1 lakhs, ULIPs have become the most preferred choice of investors. Though ULIPs provide equity investments and returns, such returns are exempted from the new tax regime on equity. Moreover, switching done in ULIPs is also tax-free giving ULIPs a tax advantage over other investments.

Times change and adapting to the changing times is necessary. Modern day ULIPs have become better. The charges are at an all-time low which has made returns attractive. The plans are easily available and the tax advantage cannot be ignored as well. So, bank on the benefits of new age ULIPs and invest in one today.

Read more about best ULIP plan to invest in 2018

Read more about different types of ULIPs before you buy one

Read more about all you need to know ULIP in detail 

Is your policy amount unclaimed if so it is your loss

You often blame the insurance company if there is any dispute regarding the settlement of your insurance claims. But what if you don’t avail claim settlement from the insurance company yourself? Whose fault is it then? Unclaimed policy amount represents the claims which the insurance company has incurred but for which the policyholder has not availed a settlement. As such, the claim amount remains with the insurance company and is called unclaimed policy amount. As of 31st March 2018, INR 15, 167 crores worth of claims is sitting unclaimed with 23 of life insurance companies in the market. LIC has the major share of this unclaimed amount at INR 10, 509 crores while the other private players have the remaining. A substantial amount, don’t you think?

Source: The Economic Times 

Some of the common reasons why the policy amount remains unclaimed are as follows –

The nominee is not aware of the insured’s policy. In case of death the nominee does not make a claim and the claim remains with the insurance company.

The policy documents are lost or misplaced due to which the policyholder does not know the benefit details and fails to make a claim

There has been a change in address which has not been notified to the insurance company. As such, the company’s correspondence doesn’t reach the policyholder

Check out our video below to know about life insurance claim procedure

How to avoid unclaimed claims

Any unclaimed amount is your loss as you do not get the rightful settlement of your insurance claims. That is why it is advised that you take measures to avoid your claim going unclaimed. These measures include the following –

      – Informing the nominee

The first step which you should take after buying the insurance policy is to inform your nominee. When the nominee knows about the policy details and the claim process, he/she can make a death claim in your absence and get successful settlement of the claim.

     – Preserving the policy documents

Life insurance policies are long term contracts. As such, the physical policy documents should be preserved properly to know the policy details. In case of loss or damage of the original policy bond, you should request the insurance company for a duplicate one so that you have the policy details with you.

     – Notifying of the changes to the insurer

If your address or contact details change you should get such changes endorsed in your insurance policy. Only when the insurance company knows about your updated details can it correspond with you regarding the policy claims. So, keep the company abreast of any changes in your contact details to get regular notifications.

Unclaimed policy amounts prevent you to reap the benefit of your insurance policy. You don’t get the rightful settlement of your claim and incur a loss. So, always take the corrective measures mentioned above to ensure that your policy claim is settled and your policy pays you what it promised.

Read more about cashless claims

Read more about complete guide to car insurance claims

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Do you know all the tax benefits of your life insurance policy?

A life insurance policy has distinct tax advantages. The premiums you pay for the policy are tax-free under Section 80C up to a maximum limit of INR 1.5 lakhs. That is why insurance is a preferred mode of investment for many tax-payers who try and maximise their 80C contributions. What’s an added advantage is that the maturity or death benefit paid under the plan also qualifies for tax deduction. Yes, you heard it right! Not only do you get tax benefits on the premiums paid, the policy proceeds are also tax-free under Section 10 (10D). Policy proceeds are the benefits which you receive from your insurance policy. Moreover, there is no limit on the exemption allowed on policy benefits. The entire benefit received, whatever be the amount, would be tax-free. But is that all that you should know?

Though the policy benefits qualify for tax exemption under Section 10 (10D), there are some eligibility criteria which the policy should qualify on to get the tax exemption. These criteria are listed below –

  • If the policy is issued between 1st April 2003 and 31st March 2012

If the life insurance policy is issued after 1st April 2003 but on or before 31st March 2012, the premium for the policy should not be more than 20% of the sum assured. Only if the premium is up to 20% of the sum assured, the maturity or death benefit received under the plan, including sum assured and any bonus or additions declared, would be tax-free. If the premium of the plan is more than 20% of the sum assured, the entire benefit paid would be taxed.

For example, if the sum assured under the life insurance policy is INR 10 lakhs, the premium should not be more than INR 2 lakhs. If the premium is below the specified limit, the maturity or death benefit received would be completely tax-free. However, if the premium is INR 2.10 lakhs, the policy benefit would be taxable completely.

Exception to the rule

Even if the premium is more than 20% of the sum assured, if the insured dies during the policy tenure and a death benefit is paid, no tax would be applicable on the death benefit paid.

  • If the policy is issued on or after 1st April 2012

 If the policy has been issued on or after 1st April, 2012, the maximum premium should not be more than 10% of the sum assured. Only if the premium is limited to 10% of the sum assured is the plan benefit allowed as tax-free under Section 10 (10D)

Like the same example, if the premium of the plan is up to INR 1 lakh, the plan benefit would be allowed as tax-free income. If the premium is INR 1.10 lakhs or anywhere above INR 1 lakh, the entire proceeds paid under the policy would be taxable.

Exception to the rule

Just like in the above-mentioned instance, even if the premium is more than10% of the sum assured, the death benefit paid would be completely tax-free.

  • Section 80U and 80DDB

If the life insured suffers from a severe disability as defined under Section 80U or has a disease specified in Section 80DDB, the tax-free limit on premium is 15% of the sum assured. So, for such individuals, the premium could be up to 15% of the sum assured for the plan benefits to qualify for exemption under Section 10 (10D).

In the example where the sum assured is INR 10 lakhs, the maximum premium should be up to INR 1.5 lakhs so that the benefits received are tax-free.

  • TDS on life insurance proceeds

There is also a concept of TDS being deducted from the benefits payable under a life insurance policy. According to Section 194DA of the Income Tax Act, life insurance policy benefits are subject to a TDS @ 2%. However, this TDS is applicable only if the policy proceeds are not exempted under Section 10 (10D). If the policy proceeds are exempted under 10 (10D), no TDS would be charged. Another exemption from the TDS rule is that if the policy proceeds are not exempted under Section 10(10D), but are below INR 1 lakh, no TDS would be applicable.

Example – A policy is issued after 1st April, 2012 with a sum assured of INR 50, 000. The premium is INR 6000. Since the premium is more than 10% of the sum assured, the sum assured of INR 50, 000 would not be exempted under Section 10(10D) if it is paid as a maturity benefit. However, TDS would not be applicable on INR 50, 000 because the benefit is below INR 1 lakh.

The rate of TDS increases to 20% if the policyholder does not submit his PAN to the insurance company.

So, don’t take your life insurance policy proceeds for granted when it comes to tax exemption. Know the rules of tax exemption to find out whether your policies would provide tax-free benefits or not.

Read more about taxation facts about your life insurance policies

Read more about tax benefits of life insurance policy

Read more about know more about the benefits of life insurance policies before buying one

Read more about TDS on life insurance policies.
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