How to buy most suitable Health Insurance ?

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Do you want to purchase a health insurance plan, but the cumbersome procedure of getting it is keeping you at bay? Are you tired of looking through lists of health insurance policies to find the perfect one that will suit your needs? Do you want to buy health insurance on your own easily? You are in the right spot as I am going to list a few ways to make purchasing a health insurance policy easy for you.

The health insurance industry has gone through tremendous change over the past few years. The millennials no longer buy health insurance just to save tax. A majority of them are aware of the benefits of buying health insurance on their own.

While all health insurance policies are now issued for the lifetime, many features are added that makes it possible for an individual to buy health insurance without a job, purchase family health insurance plans, and easily compare health insurance plans before making a final decision.

While purchasing health insurance keep these points in mind as they will help to make the process easier:

Avoid delaying the process of buying health insurance

It is understood that buying a health insurance on your own doesn't happen overnight. One needs to understand all the features in the package and them finalise the plan. There is a catch that if you cross the age limit, the insurance company will deny you the cover or you may catch a disease and hence the insurance company will not agree to take you under their wing.

Without a medical cover, individuals end up spending for the treatment cost by themselves which leaves a huge hole in their pockets. Many times we do not have huge amounts in our accounts during emergencies. By having a family insurance health plan you don't need to have cash as the policy you invested in all these years will have your back covered.

Understand what you need and what your health insurance covers

If you don't compare health insurance plans before purchase and buy the one you have a hunch will suit your needs, you might end up spending more than you need to. You need to thoroughly understand the policy even before you have a chance to use it. Are you looking to purchase a personal health insurance or is a family insurance plan the best one for you?

Health care costs are rising globally. Having a medical insurance plan will help you spend lesser and have an easy claim process at the end. There are various health insurance plans with plenty of features which help you purchase an affordable one. They include:

# Critical Illness Insurance Plans

# Maternity Insurance Plans

# Insurance Plans for Senior Citizens

# Insurance Cover for Pre-existing Medical Conditions

# Group Health Insurance Plans and others

Work out the premium and realise the sum assured

While you compare health plans, you need to work out what is the premium charged as you have to shell this amount every month from your pocket. A premium calculator will give you the exact amount which is required to be known before the purchase is made. An affordable insurance is the one which gives a good sum assured after you have religiously paid your premiums.

Sum assured refers to the maximum amount an insurer guarantees to the policyholder when a claim is made. It is a pre-determined amount.

If you choose a very high amount as the sum assured, the premium of your insurance plan will also increase.

Pull out your past medical bills and figure out an estimate of how much you have spent in recent years and then draw an estimate of how much you would require as sum assured.

Check for online reviews and compare the policies and their flexibility

Go online and check for its reviews before you decide which health insurance plan to purchase. Do a bit of research.

You may end up finding something that will either assure you that the insurance you selected is perfect for you, or that you need to change the plan. That's when you need to compare again.

Comparison of health insurance companies and their policies is very easy because of online websites. In every plan check what's included and what's excluded, individual cost limit of every room, claim amount for treatments and the transferability of the plans.

Hospital tie-ups

All insurance companies have a list of hospitals they have tie-ups with and have different claim settlements procedures. In case an emergency comes your way, are you going to travel all the way to the network of hospitals that support your insurance or will you go to a reputed hospital close to your residence?

Also, let's not ignore the scenario where in the future, you or your family members covered under your insurance plan develop an illness which requires conventional treatment. Are you going to travel to your local hospital or will you want your insurance to have specialised hospitals under your wing too?

The process of buying health insurance has been made easier due to online websites that allow comparisons. While most health insurance portals follow similar steps, there might be a few changes as per the insurance company. Steps to purchase an affordable health insurance are:

# Log in to the company website.

# Select your gender and who all do you wish to insure.

# Input the age of all the individuals you want to insure and your annual income.

# A list of insurance policies will appear. Compare.

# Purchase an affordable health insurance plan that fits your budget keeping the points mentioned above in mind.

# Pay via card or through your bank account.

The best health insurance policies available may not be cheap, the premium may be higher but the sum assured is promising. Read all the clauses before you make the final decision and if you cannot decide which insurance to go for, meet an unbiased expert. Make sure you keep an eye for what services are not included in the plan, the network of hospitals covered by the insurer and the post-hospitalization cover.

While buying health insurance on your own, don't forget that you are planning for the future. The room charges will increase and so will the bills. Will the sum assured be enough to cover those bills? The best time to buy a health insurance is when you are healthy and believe you don't need one.

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How to Close Insurance Products

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Want to exit a ULIP or a traditional insurance product? Let us show you the way

On the insurance side, one of the most common problems we encounter is the existence of Ulips and traditional products (endowment and moneyback plans) that are meant to serve as two-in-one, investment-cum-insurance products. We, on the other hand, firmly believe that investors should keep insurance and investment apart, and that their interests would be best served through a combination of term plan and mutual funds. You can read the article Say no to endowment policies and ULIPs for further clarification

Why go for term plan-MF combo
The term plan-mutual funds combination is financially the most efficient. Ulips levy a number of other charges besides the fund management charge (that a mutual fund also charges) and mortality charge (that a term plan charges). They levy a premium allocation charge (PAC), an administrative charge, and so on. The cost structure of Ulips is also complicated. While charges levied under endowment plans and money back policies are unknown, charges under linked policies are clearly mentioned in policy brochures and policy document available on company website. Investors are either unaware or they do not take pain to go through the policy details before making a final purchase. Insurance companies, agents and advisors take benefit of investor attitude and sell them otherwise not recommended policies.

Therefore, in the first place, the mutual fund-term plan combination scores by having a lower and more transparent cost structure.

Another problem with Ulips is that an insurance company offers only a limited number of fund options. If the funds offered by the insurance company underperform, the investor does not have the option to exit his current fund and invest in a high-return fund from another company (until the lock-in period is over). On the other hand, if he invests in mutual funds, he can easily exit his current underperforming fund (most mutual funds do not have an exit load after one year), and choose from any one of the hundreds of funds available in the market.

Traditional products such as endowment plans and moneyback plans too have drawbacks. The biggest is that they offer simple interest, whereas if you invest in a mutual fund or even in a PPF, your investments grow through compounding. As we well know, the effect of compounding is powerful, especially over the long term. The second disadvantage of traditional products is that they have a high allocation to debt products. This, too, affects their returns: over the long term, as we know, returns from equities trounce those from debt.

Another disadvantage of insurance-cum-investment products belonging to insurance companies is that despite paying a hefty sum of money as premium, the family could still be under-insured. Since term plans are inexpensive, one can buy adequate amount of cover through them.

What should you do

Exit and bear the losses upfront: If a person has invested in a Ulip or in traditional products, and especially if he has paid the premium only for two or three years, the ideal solution would be for him to exit these policies right away. In the older Ulips, there was a lock-in period of three years, which has now been extended to five in the new Ulips. If an investor exits from an old Ulip after paying two premiums, he will lose out on his premiums completely. If he exits an old Ulip after three years, all he is likely to get is the third-year premium; the myriad charges in Ulips would eat up the rest. According to Pune-based financial planner Veer Sardesai, 'Over a 20-25 year span the investor is likely to be better off exiting these policies, even if it means entirely forfeiting his premium, and going with the term plan-mutual funds combination.' However, only investors who are financially savvy would perhaps agree to pursue this course of action.

Stay put: At the other end of the spectrum, you would have investors who are not at all financially savvy. They would have little knowledge of term plans (because agents do not push them) and mutual funds (especially in smaller towns, there tends to be greater awareness about insurance products than about mutual funds). Such investors would be wary of these options.

These investors would prefer being in a Ulip rather than in a term plan-mutual fund combination because a Ulip, being a product from an insurance company, would offer them a greater sense of security (especially if it is from the public-sector behemoth). Such investors could stay put in the Ulip. Even if the Ulip is not a financially-efficient product, it would still benefit these investors by offering them equity exposure, which would boost their returns over the long term.

The middle path: Next, you have investors who are financially savvy and who understand the logic behind promptly exiting a Ulip or a traditional product. Despite this, they might shy away from the option of writing off their premiums in the Ulip entirely. Very often the premiums they have paid are as high as Rs1 lakh or more per year, so bearing the loss upfront becomes difficult.

Making the policy 'paid up'. Enquire from the insurance company the minimum period for which premiums must be paid. Pay till then and then stop. Thereafter, the policy will continue to exist. The insurance company will deduct its annual charges from the corpus that has accumulated within the policy and keep it alive. The paid-up policy would offer a lower sum assured, but the investor would at least be saved from throwing good money after bad. The advantage of this course of action is that the investor feels he has not lost his money entirely, though if one were to do the mathematical calculations, the first rather than this third option would be optimal.

As you can see, once you have entered these high-cost insurance-cum-investment policies, there can be no painless exit. Taking your losses upfront, especially if you have not been in these policies for long, would be the best course of action if you are keen to get your financial portfolio back on track.

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How to Pass On Your Mutuaul Fund Investments

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Nomination is a facility that enables an individual unitholder (including sole proprietor of a sole proprietary concern) to nominate a person who can claim the mutual fund units held, or the redemption proceeds, in the event of the unitholder's death

Is nomination mandatory while investing in a mutual fund?

Nomination is the process of appointing a person to take care of your assets in the event of an unfortunate event — death. A nominee can be any person — a family member or a friend or any other person whom you trust. Nomination facility is mandatory for new folios/accounts opened by individuals, where the mode of holding is single. Fund houses now do not allow new folios/ accounts for individuals in single holdings without nomination.

How does one nominate?

Whenever you make an investment in a mutual fund, in the form there is a space, which asks for the nominee details. You can enter the nominee's name there. Individuals holding accounts either singly or jointly can make nomination. Non-individuals including society, trust, body corporate, karta of Hindu undivided family (HUF), holder of power of attorney cannot nominate . The nominee appointed has to be an individual only. Nomination for joint holders is permitted, however in the event of death of any of the holders the benefits will be transmitted to the surviving holder's name. In the case of death of all holders the benefits will be transmitted to the nominee account.

Can an investor make more than one nomination?

Yes, an investor has an option to register up to three nominees in a folio and specify the percentage of the amounts that will go to each nominee in case of his death. If the percentage is not specified, each nominee will be eligible for an equal share.

What are the benefits of registering a nomination?

When a nomination is registered, it will facilitate easy transfer of funds to the nominee(s) in the event of demise of the investor. However, in the absence of nominee, the heirs/claimant will have to produce a host of documents like a will, legal heir certificate, no-objection certificate from other legal heirs etc. to get the units transferred in his/her name.

Can a nomination be changed?

The nominee can be changed/added/subtracted anytime should an investor wish to do the same

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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Do not mix Insurance and Investment

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Keep Insurance and Investment Separate

Insurance is for Protection and Investment is for Capital Growth

The mindset of getting 'something' on maturity is driving many individuals to costly insurance plans that offer very little insurance and modest returns

Some time back, a reader informed us why pure life insurance goes against his religious beliefs.

According to him, it works like a betting game. Let's say you insure yourself for Rs 10 lakh at an annual premium of just Rs 2,000. What it means, according to our reader, is that you are willing to bet that you would die this year and so willingly cough up Rs 2,000. The insurance company bets that you will not die and is willing to pay your family Rs 10 lakh if you do. If you survive - which, we're sure, you would really love to - you lose the bet and the insurance company walks away with Rs 2,000. If you win the bet, you know what happens.

This bet goes on over a period of 10, 15 or 20 years, whatever the term of the policy. And so, he concluded, that it goes against his faith to lay a wager on his life. That forced him to arrive at the conclusion that a policy which gave him a return would be a good option because he could view it more as an investment.

Well put, undoubtedly. But not a wise conclusion.

Insurance is not an investment

When you put your money somewhere, you expect something back. Not so with pure term insurance. If you die, your nominee gets something. If you live, no one gets anything. Now that may sound like a raw deal. But, hey, that's what life insurance is all about. Ironic as it may appear, life insurance is not about life but about death.

In their bid to get something out of the money given to the insurance company, investors opt for insurance policies that give you 'something back' even if you do live. And, in the bargain, give pure term insurance policies the cold shoulder. While everyone is entitled to their own personal views, we are of the opinion that term insurance is the purest, cheapest and best form life insurance.

The math behind it
Let's assume a profile.
Age: 30-year old male
Life cover: Rs 1 crore
Tenure: 20 years.

Now let's look at the Super Savings Plan from the same company. Here, in the event of death, the beneficiary will get the sum assured of Rs 1 crore. Also, if the insured person outlives the policy, he will get the sum assured plus bonuses at the end of the policy term. In addition to the sum assured, depending on its performance, the company pays a simple reversionary, interim bonus and terminal bonus. Please note, these are not guaranteed payments. However, the person will have to pay an annual premium of Rs 5,57,368 for a Rs 1 crore cover in this policy.

If he had taken a basic term policy with an annual premium of Rs 8721, he could have invested the balance amount of Rs 5,48,647 (Rs 5,57,368 minus Rs 8,721) in an investment of his choice.

Let's say he invested Rs 45,720 (5,48,647/12) every month for 20 years via a Systematic Investment Plan (SIP) in Franklin India Prima Plus Fund. At the end of 20 years, he would have made over Rs 19 crore. Yes, the fund has given an annual return of 22.39 per cent in the last 20 years. Even at 12 per cent annual return, he would have made Rs 4.21 crore after 20 years. An endowment plan like Super Savings Plan would pay him only Rs 1.78 crore (Sum assured of Rs 1 crore plus an assumed bonus of Rs 78 lakhs). As you can see, it is really lower than what he would have got had he separated his insurance and investment needs. Let's look at another type of term insurance policy which is not an investment option but one that only returns premiums.

A basic term insurance policy from SBI Life known as Smart Shield- will have an annual premium of Rs 11,925. But SwadhanPlus, a term insurance policy with a guaranteed refund of the premium paid on survival at the end of the policy term, has a premium of Rs 61,800 for the same cover.

So at the end of 20 years, he would get the premium returned to him. This will amount to Rs 12.36 lakhs (Rs 61,800 x 20 years). Once again, let's take the difference in the two premiums which amounts to Rs 49,875 (Rs 61,800 minus Rs 11,925). If he had invested Rs 4,156 (Rs 49,875/12) every month via a SIP in an equity mutual fund scheme, he would have got Rs 38.23 lakh on maturity, assuming a conservative 12% return. So instead of getting Rs 12.36 lakhs at the end of 20 years, he could have still had an insurance cover and beaten the return on life insurance policy by investing the balance.

How insurance companies operate

The entire amount you pay to the insurance company is not what is invested. The premium you pay has three components.

• Expenses (including commissions earned by the agents as well as expenses and distribution costs).
• Mortality premium
• Investment amount

And, to top it all, the amount permitted to be invested in equity may just be around 8 to 10 per cent of the total investment. So one cannot really expect a great return from their insurance product.

Moreover, the money may sound good now but may not be that great when you finally get it. Let's say you are promised Rs 2 crore 20 years down the road. Taking inflation at 8 per cent per annum, that would be worth around Rs 42 lakhs in today's prices.

Getting underinsured

The problem with money back polices is that the premium is much higher and one may end up getting underinsured.

Say, you are a 25-year-old male looking for a life cover of Rs 1 crore for 30 years. If you took the Shield cover - the premium would be Rs 12,250 per annum.

But, not comfortable with the premiums being 'lost,' you opt for Swadhan plus. Now, the premium goes up to Rs 42,600 for the same cover.

If you cannot afford Rs 42,600, you might be tempted to go for a policy of only Rs 50 lakh that would cost Rs 21,300 a year. So in one stroke, you have halved your life's financial worth!

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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FRANKLIN INDIA PRIMA PLUS

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FRANKLIN INDIA PRIMA PLUS fund has an impressive long term track record, but has faltered slightly in the past few years. Having mostly outperformed its category since 2010, the fund's return profile has slipped in the last two years.

This is partly due to its heavy large-cap tilt, even as several peers have favoured mid-caps. While biased towards growth picks, the fund managers are comfortable taking contrarian calls in sectors and focused bets in select stocks, as evidenced by the FRANKLIN INDIA PRIMA PLUS fund's overweight position in healthcare and large exposure to HDFC Bank.

The FRANKLIN INDIA PRIMA PLUS portfolio has been pruned compared to two years ago. Although it has underwhelmed of late, its track record under its skilled fund managers should provide comfort to investors willing to invest for the long haul.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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ICICI Prudential Balanced Advantage Fund

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ICICI Prudential Balanced Advantage Fund

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Closed End Funds

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While AMCs vigorously promote closed-end schemes, here is what they will strictly keep under wraps

Even five years ago, everyone associated with the Indian mutual fund industry - AMCs included - was convinced that open-ended mutual funds are the future of the industry and that closed-end funds are dinosaurs of the past. But closed-end funds have risen phoenix like from the ashes to make a comeback in the last three years. If you look at the line up of new fund offers this month, closed-end funds easily outnumber open-ended funds, with over eight new schemes set to tap the market in the next couple of months.

What AMCs say
If you ask AMCs why they've gone back to closed-end equity funds, they have many pat explanations to offer.

By locking in your money for three years, closed-end funds make sure that you stay invested long enough for equities to pay off. As retail investors are behaviourally inclined to jump into equities in bull markets and pull out in panic during market dips, closed-end funds save investors from such wealth-destroying behaviour.

Without the distractions of inflows and outflows, the fund manager gets to buy and own long-term picks in his portfolio without worrying about short-term performance.

Lately, there's also the argument that closed-end equity funds allow managers to own concentrated positions in high-conviction bets, a strategy which is getting harder to implement in many of the jumbo-sized open-ended schemes.

But if all these arguments are tempting you to apply for some of the recent closed-end NFOs, you should first be aware of the following aspects of closed-end funds, which AMCs and advisors may not like to talk about.

Timing problem
Most fund houses in India warn that timing the market is a dangerous sport. Not only do most AMCs refuse to time the market in their own schemes, they also persuade investors to take the SIP route so that they aren't hurt by bad timing.

But closed-end funds, by offering you only a limited window of opportunity, force you to make a lump-sum investment and not an SIP. If you lack the flexibility to take the systematic route while investing in closed-end funds, you also have the same problem when the units are redeemed.

As closed-end funds are not permitted to automatically convert into open-ended schemes at maturity, both your investment and your exit from the fund are timed to a specific market level. Your returns will heavily depend on point-to-point performance between the fund's opening and closing dates.

Steep expense ratio
If their small size helps closed-end funds hold concentrated portfolios, the flip side of a tiny size is a high expense ratio. While SEBI sets clear limits on the maximum expense ratio that funds may charge from their investors, its slab structure allows AMCs to charge their highest expense ratios to their smallest funds, with the expense limit shrinking as fund size increases.

Given that closed-end funds often collect very small sums in relation to their open-ended peers, they often end up with high expense ratios. Sifting through the expense ratios of closed-end funds on the Value Research database, the average ratio worked out to a steep 2.62 per cent, with over half a dozen schemes easily topping the 3 per cent mark.

Levying these high costs helps AMCs in two ways. One, they can offer high upfront commissions to distributors to market their closed-end funds. Two, the AMC gets to pocket a much larger fee by managing 10 closed-end funds of Rs 100 crore each than one Rs 1,000 crore open-end scheme!

No skin in the game
Three years ago, SEBI ushered in an important new rule to ensure that AMCs and fund sponsors had a sufficient stake in the schemes they managed. It required all AMCs or sponsor companies to invest either 1 per cent of the assets or Rs 50 lakh in every fund that they launched. This very sensible rule was designed to make sure that sponsors and AMCs had their own skin in the game when they sold any fancy new schemes to investors.

For some reason though, this rule was made applicable only to open-ended funds and not closed-end funds. Ever since the skin-in-the-game norms have come into force, closed-end scheme launches have really picked up in number vis-a-vis open-end schemes.

Black-box working
With open-ended funds, you can do a real-time comparison of any scheme with its peers and benchmarks and exit it if it fails to deliver the goods. Closed-end funds are constrained on both. Given that closed-end funds are not open to investors after their initial offer period, most independent ranking agencies do not include them in their rating exercises. Sporadic disclosures from closed-end funds also make analysis of their metrics difficult. Because most closed-end funds have a definite start date, they don't lend themselves to a rolling-return or trailing-return analysis. This lack of scrutiny can lead to complacency for the managers of closed-end schemes.

Worst of all, while investor pressure and frenetic competition have forced AMCs to clearly define their mandates and investment strategies for their open-ended schemes and to stick more closely to their labels, closed-end schemes enjoy a free hand both in naming and loosely defining their mandates. In fact, with vague names like 'Equity Opportunities', 'Focused Equity', 'Capital Builder', 'Long-Term Advantage' and so on, you are hard pressed to gauge a closed-end fund's mandate from its name. The presence of multiple schemes under a series from the same AMC also compounds the confusion on mandate and performance.

No SEBI clean-up
SEBI has recently mooted a very important set of rules to tighten the labelling norms for mutual funds, enforcing truth in labelling and simplifying the roster of schemes by consolidating similar ones. But as these norms don't apply to closed-end schemes, they may continue with their black-box style of working!

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

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