GROUP INSURANCE

My employer gives me medical cover under a group insurance scheme. The insurer reimbursed a claim for an expense of Rs 40,000 incurred by me for my mother’s surgery by depositing the amount in my salary account. Will this money be added to my total income? Is it taxable?
Claims under medical policies are of the nature of reimbursement of expenditure already incurred by the policyholder. Since medical insurance is a contract of indemnity and there is no profit element in the claim received by the insured, it is not taxable in his hands. Thus, the medical expense reimbursement credited in your salary account will not be included in your total income for tax purposes.

WRONG ACCOUNT NOS ON CHEQUE

My income tax refund cheque has the wrong bank account number. What should I do?
The bank account details in income tax refunds are usually the same as those mentioned in the return of your income. If the income tax office (ITO) has entered incorrect account details, you can resolve the matter by personally visiting your ITO with copies of the acknowledgement of your return and a bank statement carrying the account details. However, if you made an error in filling the account number, the ITO, in addition to the above documents, may also ask you to furnish a letter of indemnity before making the endorsement. In either case, the ITO will endorse the correct account detail on the cheque.

REVERSE MORTGAGE

Which institutions offer reverse mortgage products? Is there a minimum age to qualify for the products? Can I pledge ancestral property for reverse mortgage?
Reverse mortgage made its entry into India in August 2006, when Dewan Housing Finance launched the first reverse mortgage product (Saksham). However, since then, other institutions have started offering reverse mortgage products. These are Bank of Baroda, Central Bank of India, Dewan Housing Finance, LIC Housing Finance, Punjab National Bank and State Bank of India.
The minimum age to qualify for a reverse mortgage product for all financial institutions is 60 years. You, however, cannot pledge ancestral property under reverse mortgage.

MOBILE BANKING

Heard a lot about mobile banking transactions. What is mobile banking?
Transacting various banking services like banking, credit cards, bill payment and pre-paid mobile recharge from your mobile phone anytime and anywhere, is what is called mobile banking. Not just the balance enquiry and the details of previous transactions, one can also transfer funds within or outside bank accounts. Even requests for cheque books or cheque stop payments can be made. Banks normally do not charge a fee for this service, but certain transactions can be done only through GPRS enabled phones, which means you have to pay the airtime usage charges.

HEALTH COVER

I am 45 and have a health cover. Is there any way by which I can enhance this cover?
Yes, you can enhance the cover on your existing mediclaim policy. All insurers have their internal policies for the amount to which they will allow the insured to enhance the coverage. Normally, if you propose to increase the sum insured by 25 per cent at your age, insurers will allow it without any fuss.
However, if you want to increase the sum insured substantially, say by 100 per cent, the insurers may ask you to undergo some medical tests with their panel doctors and, depending on their report, they will allow the increase in the sum insured. If you find the procedure a little cumbersome, you also have an option to buy one more mediclaim policy from another insurer.

FAMILY FLOATER

All general insurance companies offer mediclaim policies with a family floater clause. Is it advisable to go for this clause?
In case of a normal mediclaim policy, you specify the sum insured against each family member and, in the event of a claim, if the expenses go beyond that amount, one has to bear the expenses that are over and above the sum insured. The family floater clause in a mediclaim insurance policy provides each family member the benefit of the entire sum insured under the policy. It is, therefore, better to go for mediclaim policy with a family floater clause. The premium in case of floater policies is slightly higher than the normal mediclaim policies.

CHILD POLICY

I want to invest some money for my three-year-old son to meet his college expenses later. What insurance policy would you suggest that will give me maximum returns in this period to meet the expenses?
You can opt for specific child-care insurance plans meant for the benefit of children to save money for their education and marriage. The benefits under these policies are designed to coincide with the requirements of the children at different stages of life, that is, at the time of higher education, settlement in profession or marriage, among others. The main feature of a child care plan is that the life of the parent as well that of the child is insured. Repayments are made at crucial stages at the age of 18 to 21 years with bonuses.
In addition, these plans also provide for an immediate payment of basic sum assured amount on death of the parent during the term of the policy and the future premiums are waived and the policy continues to run uninterrupted. During the endowment term if anything happens to the child, the premiums paid are refunded.
Before committing to a child care plan it is important to know that there is no provision for surrender of policy at any stage and if the premiums are not paid for any reason other than death or disability of the parent, the policy lapses.

TERM POLICY

I purchased a term insurance policy from SBI Insurance two years ago. At that time, I had to undergo a medical test but I with didn't disclose that I was an occasional smoker and drinker.I had also stated that my parents are in good heath, though my mother had diabetes and high BP, but both in check. If any claims arise in the future, say 15-20 years down the line, can the insurance company reject the claim saying that I withheld information?
Life insurance policies follow the principle of good faith, that is, the insured must disclose all facts material enough for the issuance of a policy. In case the insured hides a fact, which is material to the assumption of risk by the insurers and it comes to light at a latter date, insurance company can cancel the policy or reject the claim depending on the circumstances. So, it is advisable to disclose all possible facts at the time of taking the policy and answer the questionnaire with complete honesty to avoid hassles at a future date.
Also, it is important to understand that you have taken a term insurance in which medical tests are conducted to check your fitness level and rule out the existence of any disease at the time of issuance of the policy.
Your current health status and family medical history has the impact of changing your premium amount but would not make you ineligible for life insurance. So, in your own interest, it is advisable that you disclose all facts to your insurance company.

NOMINEE FOR INSURANCE POLICY

What is the procedure for changing the nominee of an insurance policy?
Yes, you can change the nomination of your life insurance policy at any time after its commencement by sending a request to your insurance company. For this, you shall be required to submit the change in nomination form duly filled, signed and witnessed.
When you make a nomination, you continue to be the owner of the policy and the nominee does not have any right under the policy as long as you are alive. Further, the nominee only has the right to give a valid discharge to the policy in event of death of the policyholder and the nominee may not be the rightful owner of the policy proceeds. In such a case, the legal heirs may also have the right to claim their share from the nominee. Generally, insurers suggest only close family members should be named as nominees.

NOC OF SOCIETY

I plan to transfer my home loan from Standard Chartered Bank to Federal Bank. The bank is insisting on obtaining a no objection certificate (NOC) from the society in which I live. Is an NOC required from the society in this matter?
Yes, the new lender will require an NOC or a consent letter from the society to be able to take over your loan. The existing NOC from the society would be in favour of Standard Chartered Bank, which needs to be replaced by an NOC in favour of Federal Bank.

RULES REGARDING CREDIT CARDS

I have a Citibank credit card. Recently, they offered me a personal loan on 22 per cent interest per annum. However, according to the terms and conditions, the amount can not be invested in mutual funds or the stockmarket and can be used for domestic purposes only. Does RBI have any rule in this regard?
Yes, RBI rules require that any loan taken from the bank can not be used for ‘speculative purposes’. You have to, therefore, give an undertaking to the bank accordingly.

HOME LOAN WITH LONG TERM

Is it fine to apply for a home loan with a longer term to get low EMI and then do part pre-payment with existing funds? Or, should one apply for a short duration loan instead?
The basis of choosing the home loan tenure is based on your income and age of retirement. If loan eligibility is a constraint, go for the longest possible tenure (some banks allow 25 years though most banks allow only up to 20 years). The maximum tenure is also restricted by your age at the end of the tenure. In case you are self-employed, the age of retirement assumed by most banks will be 65 years.

Even if loan eligibility is not a constraint, you should opt for a longer tenure with no prepayment penalty option. This way, you retain the flexibility of low EMIs and prepay the loan whenever you have surplus funds.
As far as partial-prepayments towards the home loan are considered, the decision depends on the availability of surplus funds. Also, please check the loan agreement to know the clauses regarding prepayment. Most banks allow partial-prepayment towards home loan after a certain period of time; without prepayment penalty. This can also reduce your EMI burden.

LOAN PREPAYMENT

I want to surrender my two months old personal loan. Is there any way by which I can avoid paying unnecessary interest?
Most banks have a clause related to the minimum period, after which the loan can be foreclosed. Unfortunately, there is no way of avoiding the interest you will pay on the loan for the specified time period. Also, the bank will charge a pre-payment penalty on foreclosure of a loan. These terms and conditions are clearly laid out in the loan agreement and you have no option but to pay off accordingly.

HEALTH INSURACE FOR ENTIRE FAMILY

Please suggest me a health insurance plan for my entire family comprising my spouse, two kids, my 56-year-old father and my 45-year-old mother.

You may take a family floater health insurance plan for your entire family, which means a single policy takes care of the hospitalisation expenses following sickness or accidents for the your entire family. Health insurance is available between the ages of five and 80 years. Children in the age group of 3 months to 5 years can also be covered if the parents are insured. The benefit of taking such a plan is that, unlike a traditional health insurance plan, where the insurance coverage of every member is decided separately, each member of the family is covered under a blanket amount. It will give you the advantage of total sum insured. The premium under floater policies is slightly higher, but it does have merits in terms of coverage available.

MY FAITH OF CONTRACT

I have worked for an insurance company as an agent for five years. If I stop selling policies now and also do not renew my agent licence with the company, will I still get commission on the policies I have sold in these five years?
As per general practice, insurance agents continue to receive the renewal commission on the policies sold by them even after they quit their job. The insurance regulatory authority has determined the maximum amount of renewal commission which shall be payable to any insurance agent. Nothing, however, has been specifically provided for the agent who quits his job before a specified time. Payment of renewal commission depends on the contract between the insurance company and the agent. So, in your case, you need to check with the insurance company you are currently working with, as to what are the company policies for payment of renewal commission with regard to the kind of policies sold by you after you quit.

HEALTH INSURANCE FOR MY PARENTS

I am planning to take a health insurance policy for my parents. The policy will be in the name of my parents, but I will be paying the premiums. Will I get tax deduction on the premiums?
Yes, you are eligible for tax deduction in respect of the premium paid for medical insurance of your dependent parents under Section 80D of the Income Tax Act, 1961. The condition is that your parents should be financially dependent on you. Also, the payment of medical insurance premium should be through cheque and not in cash to be eligible for this deduction. The payment should be made out of taxable income and not from exempt sources such as agriculture income or any other source of income which is exempt from tax. The maximum tax deduction for the actual amount of premium paid is Rs 15,000.

CALCULATION OF PREMIUM OF MEDICLAIM POLICY

What is the basis of charging the premium under a personal accident and a mediclaim policy by insurance companies?
For a personal accident insurance policy, the insured individual’s occupation is the main criterion for charging the premium. Based on the profession of the individual, he or she is placed in a risk group and the premium is charged accordingly. People in hazardous working conditions are charged higher premium compared to people in other professions. In personal accident policies, the age of the proposer is not of much importance. In mediclaim policies, on the other hand, the age of the proposer and his health condition are the prime consideration for determining the premium to be charged.

LOCAL CHEQUES

I bought an insurance policy from Reliance Life two years ago. Earlier, I used to make premium payments through outstation cheques, but now the company is demanding local cheques. Is the company justified in its demand?
Normally, all insurance companies insist on local cheques for payment of premium because the credit for premium is available to them within two or three days. An outstation cheque not only takes longer to clear, but also involves some collection charges. Acceptance of outstation cheques earlier could be a matter of oversight by the company. There are plenty of options for the payment of premium these days. For your convenience, you may exercise the option to pay online or through credit card.

ARE ULIPS BENEFICAL POLICY

What is a top up contribution in a unit-linked investment plan? Is it beneficial to a policy holder?
In certain unit-linked plans, the policyholder has an option to contribute additional amounts over and above the regular premium payable under the plan. These top-ups do not alter the original sum assured under the policy. However, top-up amount allows the policyholder to increase his investment and savings at his own pace.
This facility is definitely beneficial to the policyholder because it gives him an opportunity to invest the surplus funds. Also, the top-ups are generally first adjusted against the following year’s premiums and save the policyholder against late payments or inability to pay in future years and increase the total investment amount giving you higher returns on your investment.