5 Reasons Why Your Company Health Insurance is Not Enough

Does your company cover you under their health insurance plan? However, in the wake of increasing medical inflation, frequent job switching, lay-offs and early retirements, it is important to have a good backup in the form of a suitable Individual Insurance Policy.

Let’s talk about the limitations of a corporate group policy.

When You Switch Companies or are out of Job

If you are depending on your company’s health insurance plan then if you are switch companies, you lose all the benefits earned on the previous policy. In a crisis situation wherein you lose your job then you will be without insurance.

When you Retire or Age

Once you retire, your company policy ends too. At a later age, it is difficult to get an insurance policy and the premiums are very high. Moreover, if you develop an ailment like diabetes, getting a policy of your choice will be nearly impossible. But, if you invest in a good policy earlier, you can enjoy the benefits of claim free years. Your sum insured will increase gradually and you can reap the benefits in your later years and post retirement.

Extended hospitalization

If you happen to be in a situation of an extended hospital stay, the major charges are the room rent and the medical bills. The limited sum insured of your company’s health policy, may not be adequate to cover these charges, leading to heavy financial investment from your end. Your individual policy benefits can be added to your corporate policy and save you from a major financial blow.

No Claim Bonus (NCB) not earned

With a corporate policy, you do not get any advantage for a claim free record. With your individual policy, you get a good history with the insurance companies and you get the No Claim Bonus reward. This is especially helpful, as the according to WHO, the current medical inflation in India is at 20% per year, whereas income increase is at 10%. Accruing a good NCB amount will keep you on top of your medical expenses. As the years go by, you will have a high sum Insured along with NCB with a gradual and affordable increase in premium.

Limited Flexibility

A group insurance policies are constructed according to the company’s policies and at the will of your employer with little or no flexibility to accommodate your health needs unlike an individual one.

The table summarizes the major differences between the two policies. You can get a fair sense of what you can expect from each of them.

	Individual	Corporate
Sum Insured	Flexible- at par with medical inflation	Totally at the discretion of the corporate
Extended hospitalization	A decent sum insured usually covers it	The sum insured will not be able to cover it
Pre-existing conditions	24-48 months waiting period	Covered from Day 1 onwards
Maternity Cover	2-4 years waiting period	Covered from Day 1 onwards
Retirement/Job Switching	Not affected	Ends with employment and had high conversion premiums
Flexibility	Completely flexible	None
Cover for Parents	Separate	May be included. But most companies are excluding it in current times
No Claim Bonus	Accumulates after every claim free year	Not Available

During claims, make sure you use your corporate policy and run a claim free individual policy for unforeseen and post retirement medical treatments.

The Right SIP Amount

As you keep investing it is natural for the question, “Am I saving enough?” to pop up once in a while. The last thing you would want is to have an acute shortage just before you need a corpus for the fulfillment of a financial goal; while all the years you had the opportunity to add more funds but you did not. Hence, you will not be able to reach the ‘right’ SIP amount. Despite continued investments, the failure to reach the right amount keeps gnawing at an investor.

Systematic Investment Plans or SIPs are mostly done by investors who are looking to fulfill a certain goal or goals with a stipulated amount. Investors invest with the mindset that they will get a certain elevated amount but whether the amount will be the right amount is the gnawing question. Hence, let us see a few ways which could help you to get the right SIP amount. As an investor you must keep in mind there are no sure shot way just options for possible trial and error investments to get the right amount.

Link SIPs to a Goal

You may not have a particular goal in mind while investing in SIPs. You could just be testing investment waters and making small investments. While there is no harm in doing that, not linking a certain investment with a particular goal often devoid the investor of personal motivation. Soon you might start to miss out on the monthly payments and small corpus that you had started to accumulate will dwindle. Suddenly you will require the corpus for a personal need and you might not have one to speak of. Linking the SIP to a goal does the simple task of ensuring that you do not lag behind the investment because that would imply lagging behind an important goal. Hence, to get the right amount you need the right goals.

The Future Value

The simplest way to get the right amount is to know the right amount, which is future value of the goal. A fatal investment mistake is not knowing the future value of your goals and investing to get a matured corpus of the present value. During investments the rising factor of inflation has to be considered which will affect the prices in the economy in the future. The Mutual Funds are known to give inflation adjusted returns. Hence, after estimating the future value along with the returns, you might be able to keep inflation at an arms distance.

Future Value Estimations Due to Inflation
Expense	Present Value	Future Value (10 Yrs)	Future Value (20 Yrs)
Household Expenses	100000	206103	424785
Private Schooling	300000	618309	1274355
Higher Studies	2500000	5152579	10619628
Foreign Holiday	300000	615000	1215000
Rate of Inflation assumed @ 7.5%. The Present values are estimates and could vary from individuals to individuals

Given above are some future value estimations. Hence, you can see that the future value is nowhere near the present value and it is time you started calculating the future value estimates for your investments. Once you reach a step closer to figuring out the right amount you will be a step closer to getting the right SIP amount

Investments are not a one time activity; it requires your constant vigilance. You may need to rebalance your portfolio or stop current investments and make fresh ones. To reach the right SIP amount you need to get your asset allocation done with the help of a financial adviser and keep rebalancing it as and when your needs change or your age progresses. Investors often fall prey to readymade asset allocation plans or tools and calculators that show asset allocation mix. While these might give you an idea about asset allocation they are a sure way to deter you from getting the right amount. Asset allocation has to be customized as every investor is different. Hence, to reach the right amount you need to start allocating assets based on your needs and goals and not a predetermined plan. Reaching the SIP amount is more than just making investments. It is also about making the right and informed choices.

ELSS to Build Wealth - 28/07/2016

                                          EQUITY-LINKED SAVING SCHEMES

Regular Income Option in Mutual Funds (Systematic Withdrawal Plan)

What is Systematic Withdrawal Plan (SWP) in Mutual Funds?

Systematic Withdrawal Plan or SWP, as popularly known, is a service offered by Mutual Funds which provides investors withdrawal of a specific amount of payout at a predetermined time frequency, like weekly, fortnightly, monthly, quarterly, half-yearly or annually.

ELSS V/s Other Tax Saving Products - The Game of Real rate of Returns

Traditionally, our investments start to save tax under section 80 C, which includes PPF, Life Insurance, Bank Deposits etc. By doing this, are we making the right selection of an asset class that can help us beat Inflation ?? 

The answer is NO....

The illustration below is self explanatory wherein Equity Linked Saving Schemes (ELSS) which is also a tax saving scheme, has given the best possible real rate of returns (Gross Returns -  Inflation).

While comparing with PPF, the lock-in in ELSS is just 3 years, wherein in PPF on needs to wait for 15 years for maturity. The historical returns in ELSS have been over 15% or more whereas in PPF the returns have been going down and today it is 8.1%.

PPF (Public Provident Fund)	ELSS (Tax Saving Funds)
PPF is very safe, backed by Goverment of India.	ELSS invests in equity(stocks). So, it's volatile and risky by nature.
Return is also fixed @ 8.7% (Annual)	You can expect 15% or higher returns (Annual)
Tax exemption : EEE	Tax exemption : EEE
Lock in period : 15 years  (Partial withdrawls can be made after 5th year)	Lock in period : 3 years.
Maximum duration : 15 years	There is no such limit.
One can deposit (upto 1.5L) a year in 1 to 12 installments	No such limits, however, the section 80C limit(1.5 L) will be applicable for claiming deductions
Better suited for risk averse investor who wants an assured return of 8.7%.	Better suited for young investor who can take risk and aim for a higher return (15% or more)

To share an example :: 

Had an investor invested 70,000/-per annum in PPF since 1999-2000, and 70,000 per annum in ELSS fund of HDFC ,

The wealth created in PPF account = Rs. 25,02,501 after 15 years

The wealth created in ELSS = Total No. of Units * NAV

23410 * 276.85 = 64,81,058/- 

The investment in ELSS would have given almost 2.5 times returns than in PPF. 

ELSS is an instrument which helps you save tax and helps in long term wealth creation.

Jago Investor Jago

Start Saving Early to Achieve Child Education with Ease

We are now in the age where salary increases by 10% or not per annum, the expenses rises by over 10% per annum. Take School Education, it seems Inflation Index does not consider annual fee hikes by the schools. If it is included in the index, our inflation could easily surpass 10% which is currently at 6%.

Lets Start ::

A Child is born in the family, the parents have to save for the admission fees of the child for nursery admission when the child turns 3/4 years. The monthly fee structure accounts to close to over 10% of families budget, if not more. One has to need savings for that. Then it comes annual excursions / activities at schools. Over and above the rise in fee structure by over 10% by most of the schools.

So, if a child's nursery fee is Rs. 3000/- per month, by the time he/ she comes out of 12th the monthly school fees rises to whopping 15,000/-  in today's scenario. Is there planning for that - NO.

This makes planning and budgeting for Higher Education all the more very very important.

Start Saving for child's higher education as Early as possible. Need to realise that pretty soon . Since hike in Higher Education is much more steeper than expected and that too if you plan to send your child abroad. The Rupee is depreciating at an average of 5% p.a. . We need to take into account as well.

We need to PLAN, SET GOALS and EXECUTE them. Also REVIEW the performances of assets invested on annual basis. We are entering into much tougher times than we anticipate.

Visit us at www.DhanCreators.com