ABC - All 'bout Critical Illness Cover

Our last week's article on four pillars of financial well being brought in light, a new realization for us. A friend of mine called up asking “Ami,don't health insurance plans cover the critical illnesses? Aren't they both the same?”. This question raised my eyebrow and i thought it was wise for the benefit of many to clarify the same. Today, I would to share the conversation that took place between us on this topic.

Some of the questions raised by my friend were as follows:

Q1-Don't health insurance plans cover the critical illnesses? Aren't they both the same?

Saarthi – No, Critical Illness policy is not same as Health Insurance policy. But, some health insurance policies offer critical illness coverage as an additional rider for a marginally higher premium. Health insurance covers only the hospitalization expenses for any illness including for the critical illness.

Q2- So, what is a Critical Illness Policy?

Saarthi- A Critical Illness policy is a policy covering life threatening diseases and making a lump sum payment to the insured on the diagnosis of the same. The list of illness include -

• Cancer of Specified Severity, First heart attack of specified severity
• Open chest CABG
• Open heart replacement or repair of heart valves
• Coma of specified severity
• Kidney failure requiring regular dialysis
• Stroke resulting in permanent symptoms
• Major organ/bone marrow transplant
• Permanent paralysis of limbs
• Motor neuron disease with permanent symptoms
• Multiple sclerosis persisting symptoms
• Aplastic anemia
• Bacterial meningitis
• Loss of speech
• End stage liver disease
• Deafness
• End-stage lung disease
• Fulminant viral hepatitis
• Major burns
• Muscular dystrophy (listed compiled from www.policybazaar.com)

Since, these are medical terms, you can ask your TPA or family doctor for their commonly used terms.

Q3 – Is it necessary to present bills in critical illness policy to the insuring company for claim like in health insurance?

Saarthi- Unlike in health insurance, it is not necessary to prove hospitalization or expenses to claim the benefit. In Critical Illness policy, benefit is received once the insured is diagnosed with the life threatning disease if it meets the general conditions attached to it.

Q4- What are the conditions attached to it?

Saarthi – Like every other policy, this cover has got a 90 day waiting /gestation time before the cover actually begins. Also, if the insured dies within 30 days of inception from any listed critical illness/ surgery , he would not receive the benefit. Beyond this there are other conditions, which deny the cover under critical illness policy. They are common across all insurers. You can read about them in detail in the brochure.

Q5 – I am healthy and except viral fever,I have never even been hospitalised. Do you think I should have a Critical Cover at my age?

Saarthi- Yes, it is helpful. These ailments which are covered under critical illness are majorly silent killers. They don't show symptoms till aggravated. So, you can never claim that you are free from any illness. Also, not all ailments are hereditary. Most of these diseases are outcome of our sedentary and stressful lifestyle. Also, the increasing work pressure makes it necessary to keep our guard on for safety.

Q6 – How do I select my Critical Illness Cover?

Saarthi – You should get Critical Illness cover for atleast 4-5 times your annual income. Also, whenever you are considering any policy, please look into the inclusions and exclusions under the policy. Also, study the sub -limits under the policy and the waiting period under the policy .Since, these policies are 15- 20 year contracts(depending on your current age), it is better to know the age upto which you can renew it.

Q7 – Who issues a Critical Illness Cover? Is there any tax benefit for it?

Saarthi – All the major general insurance companies provide Critical Illness Cover. Also, the premium paid under these policies can be claimed under Sec 80D of IT Act,1961 along with health insurance.

I hope the above discussion is useful for all of you to make your decision simple and quick. Send in your queries relating to critical illness at saarthifp@gmail.com

Ek lakh apni khushi ke Naam...

We, Indians, are emotional people, who thrive on love of our family, acceptance by society and you might not agree but to a great extent on fear of failing. We breed this fear in our system making it imperative for us to take any step to fulfill the parameters to success. We might give up our hair if we are told that this might bring success to our business. We might donate away half of our wealth if it could earn blessings for our children or even armor all kinds of ornaments, which is supposedly good luck charm. So, even if you say I am not of the above kind, don’t you cross your heart if you see a patient being carried away? Or don’t you take special blessings from your elders on your some special day? We all do. It’s not only respect that makes take this step but also fear of something going wrong. 

So, when we do so many small gestures just out of fear then why can’t we have this inquisitiveness in our financial lives too? Why can’t we just spend a lakh a year over our life and just forget it as an offering towards our life safety?  Yes, you read it right donating away a Lakh to secure your and loved ones’ life. 

Stop the horses of your mind, before you start thinking that I am talking about giving away charity to someone needy or trust. You may do that but that wouldn’t get you any security for your family finances in case of uncalled event in future. What I am talking about is simple four pillars, which will give guaranteed financial aid to your family in case of your absence.

·         Life Insurance

a)   Get yourself a minimal life cover or sum insured of at least 10 - 15 times your annual income. If your current age is above 40 years, then even 8 -10 times is sufficient. Please remember, I have mentioned the word “minimal” in the first line.

b)   Never forget to take a life cover your loans and liabilities to protect your assets in future.

c)   If you are in beginning of your career, cover yourself for your monthly expenses.

·         Health Insurance

a)   Medical expenses are shooting up, so have a handy health insurance in place to protect yourself and family from huge hospitalization expenses.

b)   Never ignore your children from this policy, even if it means including them in your expensive policies. A new born is also equally vulnerable to these expenses.

·         Personal Accident Cover

a)   The adrenaline rush of quick success can sometimes cause big trouble to our future life. Roads are full of uncalled dangers and it is necessary to protect ourselves from them.

b)   A permanent disability leaves us paralyzed for life to earn a decent livelihood. Make note of all your “happening and cool stunts” before your fix a figure for this policy.

 

·         Critical Illness Cover

a)   Call it lifestyle disease or gift of civilized society, stress and unhealthy family eating habits can give us many not so cool illness. These illness are sometimes never even heard by us but when they occur, it can flush out all our life savings.

b)   Don’t be shy to talk to elders about the various hereditary diseases, which might even be passed on to you. It might seem a little stretched but its’ worth the lakh you spend on it.     

Now just what I mean when I say, a lakh for your safety !!!

Policy type**	Premium Range Rs. pa	Sum Covered	Coverage age/ number
Life Insurance	18000-36000	2 crore	Up to age 65
Health Insurance	7000- 32000	5 lakhs - 12 lakhs	2 adults + 2 children
Critical illness	8600 - 25000	20 lakhs
Personal Accident	4000-6000	20 lakhs

**- the comparison is taken for a 35 year old person with a family of four and monthly earnings of Rs1.5 lakhs. All premiums are indicative and not exact.

All about NRI Taxation

Following our current series on NRI, this week we will discuss about NRI taxation. When does an NRI become liable to pay taxes to Indian government? Under what circumstances is an NRI liable to pay taxes for his earnings? 

Residential Status

The major condition on which the income to be taxed depends is the residential status of the individual. As per Income Tax Act 1961, an individual is defined as an NRI, if:

• If you reside outside India for a period of 182 days or more during the relevant previous year.

·         If you are not present in India for 60 days or more during the previous year and again for a combined total of 365 days or more during the previous 4 years prior to the previous year.

If the individual doesn’t fulfil any of the above conditions, he is liable to be taxed as an Indian resident and liable to be taxed. Otherwise an NRI, is only liable to be taxed for income or capital gains made in India during the previous year. 

What is the taxable income for NRIs?

a) Salary – Any salary earned for services for any Indian entity during the previous year is taxable in India.

b) Property & Assets – Any income generated from renting, leasing or sale of property or any asset is subject to tax in India. A tenant who pays rent to an NRI owner should deduct TDS at 30%. The income can be received to an account in India or the NRI's account in the country he is currently residing.

c) Investment & Securities – any income earned or gains made (long/short term) is subject to taxation

Investment	TDS Rate Applicable
Bank Savings account : NRE, NRO, FCNR	NRE /FCNR: no TDS;                     NRO: 30.9%
Fixed Deposit: NRE, NRO, FCNR	NRE, FCNR: no TDS; NRO: 30%
Dividends, shares and mutual funds	No TDS
Equity -Capitals gains	No TDS on long-term gains (long term: more than 1 year); 15% on short term gains
Debt: Debt mutual funds, debenture gains	Long-term: 20% with indexation or 10% without indexation
	Short term gains added to your income and taxed at your income slab
Property, Gold gains	20% on long-term (gains from sale after 3 years )
	30% on short term gains

In short, any income earned or accrued in India is taxable in India.

Deductions allowed to NRIs

80C- A deduction of Rs. 1,50,000 is allowed under section 80C. However, the allowable areas of expenses and investments are limited as follows:

·         ELSS investment

·         ULIP investments

·         Life insurance premium – for self, spouse and children

·         Principal loan repayment for any housing loan in India

·         Children tuition fees – fees for any school, college or university in India. It is limited up to two children. 

80D- The benefits are similar to benefits made available to ordinary Indian resident. The health insurance can be taken for self, spouse, children and dependent parents. (i.e 15000 for below 60 years and 20000 for above 60 years)

80E – This deduction is allowable for interest on education loan. The loan can be taken for self, children or even for any one for whom NRI is guardian.

Other than section 80G and 80DD benefit can also be enjoyed by an NRI.