TAX DEDUCTION ON TWO PROPERTIES

Can I claim tax deduction on housing loan taken for two properties in the same financial year? If yes, what is the limit? Will the deduction apply if the loan is taken from different institutions?

Yes, you can claim deduction for the repayment of principal component of the loan under Section 80C in respect of both the houses in the same financial year subject, however, to the overall limit of Rs 1 lakh.
This deduction is allowed even in case you take loan from two separate institutions. Repayment of interest component can be claimed under the head income from house property. For the self-occupied house, the limit is up to a maximum amount of Rs 1.50 lakh and for the rented house there is no limit, that is, actual amount of interest paid during the financial year can be claimed as a deduction from the rental income. For claiming these deductions you need to obtain certificates from the bank/ financial institutions from whom you have taken the home loan stating the amount of principal and interest component paid.

MEDICAL SECURITY

Don’t forget to make your entire family medically secure

The volatility in the stock markets as it has affected all of us in some way or other – mutual funds, property, even unit-linked insurance plans. However, there is one product which is least affected by recent developments – medical insurance.
This is not an investment option but an actual necessity as it ensures cover against hospitalisation costs.
COMPREHENSIVE PLAN
This traditional plan, as the name suggests, provides cover to the entire family. The maximum insurance cover under this product is Rs 5 lakh, and the premium is fixed on the basis of the senior-most family member’s age. The premium also varies with age-slabs. So the premium for a person in the age group 35-40 would be lower than 45-50. Comprehensive plans also include another product called ‘floaters’ which allows you to opt for total cover but does not fix the limit for individual family members. For instance, when a family opts for a cover of Rs 3 lakhs, the father can incur a medical expenditure of Rs 2 lakhs and wife can incur Rs 1 lakh in a year. This is not the case in the case of traditional medical plans as the cover per individual is fixed.
CRITICAL ILLNESS COVER
In recent times, leading public and private life insurance companies have also entered the medical insurance arena.
Their policies are typically aimed at providing higher insurance cover for hospitalisation. As a result, even the premium amount is higher.
These companies provide cover for as much as Rs 20 lakh to even Rs 80 lakh. Another interesting feature is that the premium is fixed for a period of 20 years. In other words, if an individual pays a premium of Rs 15,000 at the time of signing up, he will be required to pay the same amount for the next 20 years. This makes the product ideal for those in the age group of 40 and above.
However, the premium you pay is per individual and therefore one can look at this product in addition to any existing policy, like a top-up to your company’s mediclaim. Having an additional independent cover of your own has two advantages: First, it provides tax benefits under Section 80D, and second, you will have mediclaim even if you switch jobs or your firm’s mediclaim lapses.

SCOOTER ACCIDENT CLAIM WITH MEDICAL CLAIM

My father was hit by a scooterist and he suffered injuries. The person who hit him is refusing to pay. Can my father claim from the insurance company? Also what is the legal procedure for filing for compensation?
If the vehicle which hit your father was at fault, primarily he is responsible for compensating your father for the injuries inflicted. However, if the scooter had a third party insurance cover at the time of accident, the liability will get passed on to the insurers provided certain conditions are met. You can file your complaint with the Motor Accidents Claim Tribunal (MACT), which deals with matters related to compensation of motor accidents. Also, inform the police about the accident. It is also advisable to keep track of the eyewitnesses to the accident, if any.

WHAT TO KNOW THE AGENTS

What points should be kept in mind before deciding in favour of any particular insurance agent or a broker?
First, the insurance advisor must have the requisite qualification and a mandatory license issued by the Insurance Regulatory and Development Authority (Irda). Second, the advisor should be capable enough to understand your needs and offer suitable products. Associate with an advisor who can provide the entire range of products.
Insurance companies offer a wide range of products and a good advisor needs to have thorough knowledge of all these. Moreover, he should be informed about the competitors’ products so as to provide unbiased and meaningful recommendations, regardless of how much he stands to gain by way of commissions.
An agent represents one insurer and therefore is bound to sell products of a particular company whereas a broker represents a client and is authorized to sell all the products available. In this respect brokers score over agents.

Workmen’s Compensation (WC) policy

A housing society is looking to insure its staff, that is, night guards and gardeners. Which policy do you recommend?
Your society as employers of night guards and gardeners is responsible for any accident or unfortunate happening while they are on duty. The liability in such cases is determined under the Workmen’s Compensation Act, 1923. Therefore, as employers, you should cover them under a Workmen’s Compensation (WC) policy. This policy will cover your society against any liability under the WC Act. Apart from this policy, you may cover them under a Personal Accident policy and a mediclaim policy. Both personal accident cover and the mediclaim policy will require 24 hours of hospitalization by the claimant.

PAYMENT OF PREMIUM IN GRACE PERIOD

If one pays the life insurance premium during the grace period offered by insurance company, does it affect the risk cover under the policy?
Every life policy states the dates on which the renewal premium is payable. The policies also provide for a grace period for payment of premium. It is different for different modes of premium payment. The period is normally one month where the premium payable is yearly, half-yearly and quarterly. It is 15 days in case the premium is payable on a monthly basis. During the grace period, the policy remains in full force, even if the due premium is not paid. Also, there is no additional interest charged on the premium paid during this time. Even in the case of a claim, on account of death of the insured during the grace period, the claim is payable in full. However, it is subject to the deduction of the unpaid premium amount.

TERM INSURANCE COVER

What is a term insurance cover? Does one get any benefit when it matures?
A term insurance plan is a pure risk cover, wherein a very low cost is paid towards the coverage of life risk for a specific term. If the insured person survives the term, then normally he/she gets nothing. However, if the insured person does not survive the term, the legal beneficiaries get the amount equivalent to the sum insured. However, some insurance companies have devised term policies with the benefit of return of premium on the maturity of the policy. Therefore, whether one gets the premium back, or not, will depend on the type of the policy. The premiums for policies that give a lump sum at the end of the term are higher as compared to the policies that do not promise any returns at the end.

MONEY BACK POLICY

What are money-back and endowment policies?
An endowment policy covers life risk for a specified period. Under this, the sum assured is paid along with the accumulated bonus at the end of the term. Money-back plans are endowment plans that periodically return a certain percentage of the sum assured instead of giving a lump sum at the end of term. The percentage, the number of installments, and the intervening period between installments depends on the term and the policy. If a policyholder outlives the term, he gets the remaining corpus with accrued bonus. However, if the policyholder dies within the term, the death claim comprises the full sum assured—any survival benefit that may have already been paid as a money-back component is not deducted. The bonus is also calculated on the full sum assured. Because of the benefit of assured returns, the premium for money-back policies is higher.

DEBIT CARD PROTECTION

Is there a way by which I can prevent transactions being done from my debit card by someone else?
When you shop offline, while swiping the debit card, a pin number is not required to validate the transaction. Online purchases with a debit card are much safer because transactions take place on the bank’s website rather than the merchant’s. Here, only the customer identification number and the net banking password are required which is known to the customer only.
To protect you card, you should first keep it in a secure place and report loss of the card immediately to the bank to block it. At the same time you should also put in a request for a fresh card so that you can resume you banking transactions immediately.

LAPTOP INSURANCE

Can I take insurance for a laptop, which I received as a gift? If yes, please suggest some policies and also explain the exclusions under such policies.
Once the asset belongs to you, you can procure the insurance cover for it. The policies available for laptops are generally known as ‘special contingency policies’ or ‘all risk covers’. These policies are designed to cover the risk of fire, theft, accidental breakdown and such other risks as given by the insurer. These policies will provide compensation in event of a loss or damage to the equipment based on cost of repairs or replacement based on market value. The exclusions under the policy are manufacturing faults or defects and loss due to normal wear and tear.

CAR ACCIDENT CLAIMS

My car met with an accident recently. The damages are huge. How should I claim the loss from the insurers?
The first step is to notify your insurance company regarding the accident and not to start the repairs till an insurance surveyor is appointed by the company to assess the loss. The insurers normally depute a surveyor within 24 hours of being intimated by the claimant.
You should remain present during the survey to answer the surveyor’s questions along with the relevant papers. You shall be required to fill a claim form and give a copy of your insurance policy, a copy of registration certificate of vehicle and driving license of the driver at the time of accident, a copy of estimate of repairs given by the garage, an FIR or a police report in case there was an injury or any other person or the property of any third-party was damaged. The surveyor will assess the loss and recommend a claim amount to the insurer. If you do not agree with the assessment made by the surveyor, you can ask your insurer to appoint another surveyor.
If you have signed up for cashless insurance, all you have to do is take your vehicle to a service centre authorised to settle a claim. The service centre will follow up with your insurer to settle your claim amount.

EARTHQUAKE COVER

I have bought a new flat and took a standard fire and special perils policy for it. Will my policy automatically cover the risk of earthquake? If not, should I take a new policy or the risk can be added to the existing policy?
The standard fire and special perils policy does not automatically cover the risk of earthquake. The risk of earthquake, however, is listed in the standard fire special perils policy as an additional peril that can be covered under the same policy by making additional payment on account of premium. You don’t have to consider taking another policy to cover the earthquake risk; you can only advice your present insurers to include the risk of earthquake in your existing insurance policy. They will calculate the additional payment to be deposited by you for securing the cover.

PREMIUM OF CAR INSURANCE IN INSTALLMENTS

Do car insurance companies accept premium in installments? If yes, which are these companies?
The Insurance Act, 1938, governs the payment of premium on car insurance. According to the Section 64VV of the Act, in all general insurance contracts, the insurance premium must be paid in advance. By implication of this section, no insurer can accept the premium on a motor policy in installments. As per the general regulations of the India Motor Tariff also, the insurers must collect the full premium before the commencement of the insurance cover. Further, this India Motor Tariff specifically prohibits the collection of premium in installments. Therefore, since the government prohibits the payment of premium in installments, no insurance provider will agree to receive the car premium in installments.

CRITICAL ILLNESS

I wanted to take a critical illness (CI) rider with a sum assured of Rs 10 lakh along with a term insurance policy of Rs 30 lakh. But my insurance agent says that since the premium of the CI rider can’t be more than 30 per cent of the basic cover premium, the sum assured of my CI rider can’t be more than Rs 5 lakh. Is there such a rule?
Yes, the IRDA (Protection of Policyholders’ Interests) Regulations, 2002, has put a cap on the maximum amount of a critical illness rider benefit. It stipulates that the additional premium that can be charged for a rider (optional extra benefits) cannot exceed 30 per cent of the premium charged on the main product.
The main idea behind this rule is to stop insurance companies from selling policies with very small death benefits and huge rider benefits. The premium for a rider is generally higher than what it would be if an individual opts for a separate policy. The idea of taking an additional rider is to save costs for a customer to include several covers, such as critical illness and hospital cash benefit, within a basic life insurance policy rather than setting them up as standalone products with their own separate administrative charges. However, it restricts the scope of an additional rider benefit.

PENSION PLANS IN INDIA

What are the pension plan options in India?
There are two kinds of pension plans—immediate annuity plans and deferred annuity plans. In case of immediate annuity plans, the annuity/pension commences within one year of having paid the premium (usually a one-time premium). The premium paid for the immediate annuity policy is also known as the purchase price. In India, very few insurers offer immediate annuity plans.
In case of deferred annuity, the annuity/pension does not commence immediately; it is ‘deferred’ up to a time decided by the policyholder. For example, if an individual buys a pension plan with a tenure of 30 years (also known as the ‘deferment period’), then his annuity will begin 30 years hence. For deferred annuity, you can pay either a ‘single premium’, or regular premiums. At present, most pension plans available are deferred annuity plans.

DIFFERENCE BETWEEN PENSION AND LIFE INSURANCE PLAN

In which ways a pension plan is different from a normal life insurance plan?

Normal insurance plans are meant to cover the risk of life, while pension plans are predominantly investment plans. In case of life insurance plans, the individual receives the sum insured on the maturity of the policy, or the nominee receives the sum insured on the death of the policyholder. Pension plans, on the other hand, provide a regular source of income by way of annuity on its maturity.
Pension plans also have the option of withdrawing up to one-third of the commuted value at the time of vesting. In case of an eventuality under life insurance plans, the nominees receive the sum assured plus the bonuses/additions, if any. Not all pension plans offer a life cover. In case of a pension plan, the nominee has the option of receiving the entire amount on maturity in cash and buying an annuity with the same. Premium paid up to Rs 1 lakh per annum is eligible for deduction under Section 80C in case of insurance plans. However, premium payments towards pension plans are eligible for deduction under Section 80CCC up to a maximum of Rs 10,000 only. The maturity amount in case of conventional insurance plans is treated as tax free in the hands of the individual. However, it is slightly different in case of pension plans. Up to one-third of the maturity amount, which can be withdrawn, is treated as tax free in the hands of the individual. The pension, from the remaining two-thirds amount, is subject to tax.