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

New Year Resolutions for Personal Finance

To ensure that your loved ones enjoy a good, healthy life it is necessary to follow the below mentioned simple mantras of Personal Finance

1. Keep a monthly home budget and track your daily expenses.
2. Keep your life insurance cover adequate to match your earnings to support your family well being after you.
3. Invest in assets you have good understanding about. Avoid all un-neccessary loans.
4. Prepare a personal asset list (balance sheet) with its latest market value from time to time.
5. Keep a list of all your bank accounts and lockers.
6. Keep all life insurance policies intact and store in one safe place. Also, maintain all paid premium receipts it is required for claims. Keep all contact details of your policy advisor available with your family.
7. Involve your spouse / parents in all your financial investments.
8. Keep a nominee to all your investments, insurance policies and assets.
9. Clear all personal liabilities or mortgages at earliest.
10. Keep your financial planner aware of your financial decisions time and daily.
11. Do not leave any paper work incomplete and keep an up to date records of your regulatory requirements.
12. Plan your estate distribution at appropriate time to avoid disputes ahead.

Buying Health Insurance ... Remember to Check these points

Health Insurance is an important risk cover which majority of individuals need to avail of considering the present conditions we live in and it plays a crucial role it plays in our Financial Life. Basically Health Insurance is taken to protect you and your family against Medical Expenses incurred in case of hospitalization.

The spiraling cost of Medical expenses (i.e Hospital charges, diagnostic expenses, medications, surgical procedures and above all Doctors fees) leaves behind an indelible mark on an individual’s finances if a medical emergency were to arise and the insurance / funds are not planned for.

 Points to be considered while taking a Health Insurance

 a)   Take adequate cover - There is no fixed formula / method to determine the exact amount of health cover required but as per existing general parameters it is suggested for individuals between the age of 25 – 45 years to have a health cover of anywhere between Rs.5.00,000/- Rs.10,00,000/-. Children / Teenagers / Youth should have a cover of Rs.1,00,000/- Rs.5,00,000/-. It is advisable to increase the health cover substantially before you turn 40 and stretch it to the maximum years possible, as the older you get it becomes difficult to get a substantial health cover. While deciding the health cover amount, the general family health history also needs to be considered

 b) Be aware of the riders and fine print - The fine print and features of the intended Health cover to be taken, need to be understood by the individual prior to finalization of the policy as there could be many exclusions / clauses  stated by the company. If not understood properly, it could cause financial discomfort while the policy is being executed in time of need. You should also look out for value added benefits such as ambulance charges, hospital cash, domiciliary hospitalization, as these benefits come handy at the time of trouble.

c) Don’t suppress any medical history - You need to be candid while disclosing your medical history while filling up the Health Insurance for.

d) Check the network of hospitals covered and also available in cashless mode of hospitalization in your locality.

          e) Check the insurer background – Although the regulatory body keeps a good amount of scrutiny and check on the insuring company providers, it is always better to re verify ourselves or take an expert’s advice. There are certain things such as the claim settlement ratio and the solvency ratio.

Health Insurance is an annually renewable Insurance policy which can lapse if premium is not paid on time. It is too costly a lapse for one to overlook and could have serious implications on one’s wealth and finances if neglected.

Thanks and Regards

Team

Saarthi Financial Planner

Email: saarthifp@gmail.com

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Tax Planning Beyond the Regular 80C Deductions

There is a general tendency among individual tax payers to be curious about additional ways to save tax and avail of eligible deductions. Most of the times we are unaware of such less popular deductions or in certain cases our chartered accountant might unintentionally overlook these details while computing our tax liability. Generally we limit our deductions to popular 80C. We would like to share some of the uncommon deductions which one can avail as per applicability.

•  Section 80D: Since A.Y 2013-14, a sub-limit has been introduced in Sec 80D to claim benefit of preventive health checkup up to Rs.5,000/- p.a.This benefit is in addition to the deduction you get under the medical insurance premium payable for yourself, spouse and parents. The health premium payment deduction for senior citizens is Rs 20,000/- pa under Sec 80D. The same can also be claimed by the person who pays premium for them. i.e. their children.

• Section 80TTA:An individual can claim up to a maximum of Rs. 10,000/- p.a as deduction in respect of interest earned in savings account with a bank.

• Section 80E: The entire amount of interest paid on an education loan taken for higher studies or vocational curses qualifies for deduction. The deduction benefit on interest is allowed for maximum eight years, or till the interest is fully paid.
•     Section 80GG :A Deduction to the extent of Rs 2,000 per month or 25 per cent of total income (whichever is less) is available under Section 80GG of the I-T Act in respect of rent paid by an individual on his accommodation, provided the individual does not get any House Rent Allowance (HRA) from his company. 
• Section 80U: An individual who is certified by a prescribed medical authority to be a person with disability shall be allowed a deduction of Rs 50,000 and an individual, who is certified as a person with severe disability, shall be allowed a deduction of Rs.1,00,000/-.

Hence, we would suggest that as you start collecting your investment proofs for tax saving for the current financial year, also remember that there could be more tax benefits like above you can avail.However, the applicability and usefulness of each benefit is subjective and may vary with every individual.  Please contact your planner today to get a more personalised tax plan for yourself.

Thanks and Regards

Team

Saarthi Financial Planner

Email: saarthifp@gmail.com

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