ATM Usage Goes Free

From 1 April 2009, you will be able to withdraw cash free of cost from any bank’s ATM. Balance enquiry at all ATMs have been made free already.
The Reserve Bank of India (RBI) had found that ATMs were mostly being used for cash withdrawals and balance enquiry, even though they offer more services. Earlier, charges varied bank to bank and were also based on the ATM network used. The customer was not aware of the charges that could be levied for using another bank’s ATM, and this discouraged him from using the ATMs of the other banks.
The RBI has, however, allowed banks to decide the service charges for cash withdrawn using a credit card and cash withdrawals from ATMs located abroad. In a draft proposal in February, the RBI had proposed that ATM transactions be free of cost, and had sought public comments in this regard. Based on the feedback a framework of service charges will be implemented by all banks

PRE EXISTING DISEASES INSURANCE POLICY

I am suffering from mild haemophilia. Does any insurance policy cover pre-existing diseases?
Pre-existing diseases are not covered by any insurer immediately at the commencement of the first policy because it means that there is a 100 per cent chance of the insured making a claim and is against the basic principle of insurance, which provides covers for uncertain eventualities. You can still take a medical cover, but it will exclude expenses incurred on the treatment of any pre-existing disease. Some insurers, however, cover diseases which exist at the time of taking the first policy provided the policy is continuously renewed for a specified number of years. This period varies from insurer to insurer and is generally between two and five years. Such policies are obviously slightly more expensive than normal medical covers.

PROFESSIONAL IDEMNITY POLICY

Are there professional indemnity policies for doctors?
Yes, there are professional indemnity insurance covers for doctors which primarily cover losses or liability arising out of professional negligence or, more particularly, a genuine error of judgement, for instance, error in diagnosing a patient. The policy covers all sums which the insured professional becomes legally liable to pay as damages to the third party on account of any error or omission on his part while rendering professional service. The legal expenses incurred in defence of the civil cases (criminal cases are excluded), with the prior consent of the insurance company, are also payable, subject to the overall limit of indemnity selected. The policy excludes wilful or deliberate acts of negligence. Financial setbacks due to loss of goodwill as a fallout of such cases and other similar acts specified by the insurer are also excluded from the policy.

KEYMAN INSURNACE

I am a partner in a security equipment exporting firm. We have been recommended to procure a Keyman’s insurance policy. Can you explain the policy and also who can buy it?
In insurance parlance, a person who is a major contributor to the growth of an organisation and whose absence may affect the continuity of the business is a Keyman. Keyman Insurance policy is mostly a pure term life cover to protect the organisation from adverse financial consequences arising due to death of the key person and ensure continuity of the business. If keyman leaves the company either the policy can be surrendered or assigned absolutely to the keyman. Your firm can also take such policy on your life.

LIC A GOVERNMENT ENTERPRISE

Is LIC a government enterprise and that our money is backed by a government guarantee?
Majority of the capital of Life Insurance Corporation has been subscribed by the government, and the Corporation makes an actuarial surplus of 5 per cent available to the government every year.
The Section 37 of the Life Insurance Corporation Act 1956 reads: The sums assured by all policies issued by the corporation including any bonuses declared in respect thereof... shall be guaranteed as to payment in cash by the Central Government. Therefore, LIC policies enjoy a sovereign guarantee to the extent of covering the basic sum assured and the guaranteed returns. The bonuses are guaranteed only once they are declared.

HRA

I have taken a home loan and am paying Rs 20,000 EMI. My wife jointly owns the house with me. We are living in that house. How should I declare my HRA to get maximum tax benefit?
You can claim the benefit against the house rent allowance (HRA) only if you are actually paying the house rent. Since you are living in the owned accommodation, you cannot claim the benefit of HRA. Your co-owning the house with your wife does not make any difference to the tax status. In your case, HRA is fully taxable.

TAX

I recently changed my job. As per the terms of employment, I had to pay my employers about Rs 2 lakh towards notice pay. This amount was reimbursed by my new employers. While making the payment they deducted the tax at source. If I am paying the tax on this amount, am I eligible for deduction on the payment made to my previous employers?
In terms of the Section 17(2) of the Income Tax Act, 1961, any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the employee is treated as perquisite and, hence, taxed as salary income. Your present employer is under obligation to deduct tax on this payment.
On the other hand, you will not get any deduction on the payment made as it was made to meet your contractual obligation with the former employer.

FIXED EPOSIT

I have terminated a Rs 2-lakh, three-year fixed deposit (FD) from a bank after just one month of making it on 30 April 2008. The bank paid me only Rs 50 as interest, stating the 4 per cent interest was adjusted for penalty charges for premature withdrawal. Is the bank justified in doing so?
Yes, the bank is justified in charging you a penalty if you withdraw the FD before the maturity period. The reason being that when you open an FD the bank invests the money in a manner that the returns are much higher than the rate what the bank has promised you.

PROCEDURE OF CLAIM

A couple of days back my shop was gutted in a fire. All the books of accounts and the computer were inside the shop at that time. I am insured for the last 10 years and there has been no claim till date. How will insurers compensate me without producing any records?
To assess the loss under any policy, insurance companies depute surveyors who are qualified professionals like chartered accountants or engineers. Depending on the case, they can devise a method to assess the losses.
In cases like yours, where there are no books of accounts, surveyors can assess losses on the basis of volumetric analysis of the shop such as the shop area and the shelf space utilised for keeping the items. A list can be drawn whereby the quantum of stock that can be stored can be determined. On the basis of this and the present price, the value of the stock can be ascertained.
They can also draw their conclusions on the basis of your transactions recorded in bank statements, sales tax returns, or IT returns, copies of which can be obtained.

ALL RISK COVER POLICY

I have taken a loan to construct a house. What kind of insurance can I get for my property while the house is still under construction? Please also explain the insurance policies available in the market for my house after it is ready.
While your house is under construction, you can get a contractor’s All Risk Policy which will provide a comprehensive cover for the risk exposures during the construction period. Among other risks the policy will cover the property against the risks of theft of construction material, damages due to vehicle impact and liability towards third parties.
Once the building is constructed you can insure the building against the risks of fire and allied perils like flood, storm, cyclone, earthquake, inundations, and others. Usually all general insurance contracts are for one year, but for a residential building you will also have an option to get a policy for 10 years at a time. Besides this, when you occupy the house you can insure its contents with a householder’s policy.

DOUBLE INSURANCE

My car was inadvertently insured twice with two different insurers. I feel there is no point in keeping both the policies. Which one should I cancel?
You are right in thinking that there is no point in keeping both the insurance policies. You should cancel the policy which was issued later. You will, in that case, get proportionate refund of premium. However, if due to some requirements of banks/financial institutions, you need to cancel the policy issued earlier, then refund of premium will be allowed only after retaining it at short period scale for the duration for which the policy was in force.

MEDICAL HISTORY OF MY FAMILY

Why is the medical history of my family relevant to an insurer issuing a medical cover to me?
Family medical history is taken into account before issuing health covers because the chances of the prospective policyholder contracting diseases such as heart ailments, diabetes and high blood pressure, which are considered to be hereditary, increases if members of his family suffer from them. However, you will be in no way become ineligible for getting health insurance, nor would your premium amount increase substantially if you do not suffer from any disease. You will only be placed in the high-risk category for diseases which run in your family. Most insurance companies seek information on the family health history of the person seeking insurance and the answers should be given with complete honesty to avoid any complications in the future.

COMPLETE LIFE COVER

I am 28 and about to get married. My annual income is Rs 7 lakh. I have a life cover of Rs 2 lakh. Should I buy more plans? If yes, which ones?
As you will be married soon, you should take adequate cover to protect the needs of your dependents. A number of factors will have a role in deciding the amount of cover you should take. Payment of premium might not be a constraint in your case, so you can choose from a variety of policies—term plans, endowment policies or Ulips, to name some. Ideally, you should buy a pure risk policy to take a high cover and also a pension plan to secure your retirement. Pension plans require long-term commitment and are best taken in the early stages of life. You may buy the covers from any insurers of your choice. You should ideally also have adequate health cover. A family floater health cover will suit you well.

PROPER DOCUMENT

My actual date of birth is 22 November 1967, but the date mentioned on all documents is 22 November 1965. Can I have an insurance policy issued to me on the basis of my actual date of birth? I do not have a birth certificate.
No, insurers require documentary proof of the date of birth of the insured before issuing a life cover because his age at the time of taking the policy forms the basis for determining his eligibility to take the policy and affects the premium amount. Mortality charges also depend on the age of the insured. Only documents such as the matriculation certificate, driving license, passport and PAN card are accepted as proofs of age. Also, in the absence of a birth certificate that validates your actual date of birth, insurers will take into account the date of birth given on other available documents.

FREE LOOK PERIOD

What is the free look period insurance companies provide to buyers of life covers?
The insured can cancel any insurance policy within 15 days of its receipt. In insurance parlance, this is called the free look period. The amount paid by the insured will be refunded with nil, or, in certain cases, marginal deductions by the insurer if the insured decides to rescind the insurance contract in this period after examining it. The Insurance Regulatory and Development Authority has made it mandatory for all insurers to grant a free look period of 15 days to policyholders from the date they receive the policy. A life insurance policy is a long-term contract and requires the insured to commit himself financially over a long time span. It is due to this fact that a free look period of at least 15 days is made available to the insured.

LOAN AGREEMENT

I took a loan from LIC Housing Finance, but I was not sanctioned the whole amount. My processing fees was also higher compared to others. I have not received the completed and signed copy of the loan agreement. I do not know what is the loan amount, the rate of interest, the period and the EMI. How can I get the copy of loan agreement and refund of excess processing fee?
Loan sanction is based on your loan eligibility and income. Also, banks provide up to 90 per cent of the cost of property. Hence, there may be a difference between the loan amount sanctioned and disbursed. Please approach the bank for a copy of the loan agreement to get details relevant to your loan.
Make an official complaint in writing and obtain an acknowledgement for a copy of the agreement, which is your right. If you do not get a satisfactory response within 2-3 weeks, you can complain to the National Housing Bank (NHB). It is a regulator for housing finance companies. Details are available on http://nhb.org.in/.

REINSTATEMENT OF SUM INSURED

What is meant by ‘reinstatement of sum insured’? Does it figure in all cases where the insurers settle the claims?
On payment of a claim under a policy, the sum insured automatically gets reduced by the amount of claim paid. In order to bring back the sum insured to its original level, the insured has to reinstate the sum insured by payment of a pro-rata additional premium on the amount reinstated. Reinstatement of sum insured does not figure in all claims. Particularly in insurance contracts pertaining to liability where the limits of the liability are specified against any one year and any one incident, the sum insured cannot be reinstated.

MEDICLAIM INSURANCE POLICY

Why should one buy a mediclaim insurance policy? What does it cover?
Technological advances and more effective medicines have driven up the cost of healthcare. Think about the enormous medical costs you would incur if you suffered a major accident or were suddenly struck by an illness. Uninsured people live with such risks every day.
Health insurance seeks to shield you from that risk. It provides the much needed financial relief in case you are faced with a medical emergency. The premium to take health (medical) insurance for self and family also gives a tax benefit as it is allowed as a deduction from income under Section 80D of the Income Tax Act. In a contract of health insurance, the insurer provides either direct payment to the institution or reimburses the expenses associated with illnesses and injuries requiring hospitalisation. The insurer normally provides a list of all the diseases and emergency situations covered under the plan.

NEW HOUSE INSURANCE

I want to get my new house insured. What are the various types of insurance products available in the market?
A s a house owner, you can insure the building against the risk of fire and allied perils and the contents against various risks. Both can come under a householder’s package policy. For the building only, you have an option to buy a long-term policy of 10 years at a time, for which insurers offer a discount of 50 per cent on the premium. The policy for a building covers perils like flood, cyclone and inundation and an optional cover against earthquake. The package policy covers almost all risks associated with a household, such as third-party liability and liability under Workmen’s Compensation Act towards house help, among others.

PARTIAL WITHDRAWL IN ULIP

I have a unit-linked insurance plan (Ulip) from Bajaj Allianz. The agent told me that I could partially withdraw money from it. Can I withdraw anytime? As I shall be claiming tax benefit for this policy, how long should I continue it to avail the tax benefit?
Partial withdrawal is allowed only after the completion of the lock-in period, which varies from 3-5 years depending on the policy. The sum assured will be proportionately reduced by the amount of partial withdrawal made. As per the Income Tax Act, if a person discontinues a Ulip before the premium for five years has been paid, no deduction shall be allowed for the premium paid in the year of termination and the deductions allowed in the past shall become income of the person in the year in which the Ulip is terminated.

VESTING TIME IN PENSION PLAN

How much pension can I commute at the time of vesting? If I don't exercise this option at vesting time can I do it later?
Generally speaking, up to one third of the accumulated corpus at the time of vesting can be commuted to give you a lumpsum. This means that if the corpus is of Rs 30 lakh, you can get a commutation amount of Rs 10 lakh. Pension will be paid on the balance amount of Rs 20 lakh. The exact amount available for commutation, however, depends on the terms and conditions of the specific pension plan.
The option to commute pension can be exercised only at the time of vesting of the pension policy, and not later, when one actually starts receiving the pension.
As this policy is taken on the life of the child, it does not provide protection if the parent dies. Ideally, one should take a policy in one’s own name instead of the child’s. Take the premium waiver rider to ensure that the policy continues even if the premium-paying parent passes away.

MEDICAL COVER

I am 31 and my net annual salary Rs 2.1 lakh. I can invest up to Rs 15,000 per year for medical cover premium. Please give details of changes made in this year’s Budget to the tax benefits on medical cover taken for parents. What kind of policies should I invest in to save tax?
First, ensure that you have adequate life cover. Ideally, it should be five to seven times your gross income. Then, buy a floater medical policy to cover all family members. Buying a medical cover with an annual premium of Rs 15,000, which is the upper limit for deductions you can claim for health insurance under Section 80D, could fetch you a very high sum insured. See if you need that much before buying. The Budget has proposed a hike in the maximum deduction one can claim for health policies taken for parents to Rs 15,000 if they are aged below 65 years and to Rs 20,000 if their age is 65 years or above.

JOINT CLAIMS

I have taken a joint home loan with my wife. Both of us are working and jointly own the house. How should we claim tax deductions? Can we split the total loan repayment of Rs 2.50 lakh between us?
As you and your wife are joint owners and have taken a joint loan, both of you are eligible for tax concessions in the ratio of ownership. If the house is a joint property and the percentage of ownership is not mentioned (which is normally the case when a couple own a property jointly), it is presumed that the ownership is equal.
Both you and your wife can claim a deduction separately of up to Rs 1 lakh from your respective gross total income for the return of principal amount under Section 80C of the Income Tax Act, 1961. Each of you can also claim deduction for interest component paid under the head ‘Income from house property’. The maximum deduction both of you can claim separately is Rs 1.5 lakh in case the property is self-occupied. There is no restriction on the amount that can be claimed as deduction for a rented property. You and your wife can divide the total interest paid equally and claim deduction for it in your return.

HRA DEDUCTIONS

My son, who gets HRA from his employer, stays in my house and pays rent to me. Will the rent be included in my income? Can a son pay rent to his father if he resides in his house and claim tax exemption for it?
Yes, your son can pay you rent for staying in a house owned by you and can claim exemption for it from the HRA paid to him by his employer. The basic condition for claiming this exemption is that he should be actually paying the rent to you. The rent he pays you will be included in your income under the head income from house property and taxed as per the applicable rates.