Job Loss Insurance Cover in India: An In-depth Exploration

Job Loss Insurance Cover in India: An In-depth Exploration

In the dynamic landscape of India’s job market, uncertainties loom large, with factors like economic fluctuations, technological advancements, and industry disruptions often leading to unexpected job losses. Such situations can throw an individual’s financial stability into disarray, emphasizing the need for a safety net to cushion the blow of involuntary unemployment. Job loss insurance cover, a relatively recent addition to the insurance sector in India, serves precisely this purpose. In this comprehensive guide, we delve into the intricacies of job loss insurance cover in India, examining its features, benefits, and considerations for potential policyholders.

                                                                                                                         Subas Tiwari

What is a job loss insurance cover?

Job loss insurance is not available separately. You can usually take it with a home loan or with a critical illness or personal accident cover.

  • This is a kind of add on cover that is taken with other insurance.
  • If you take this facility with a home loan, then with the help of this insurance in India, your EMI of three months is repaid.
  • This facility works as an income option on the way to the job.
  • No insurance company offers a separate stand-alone job loss insurance cover.

Due to increasing job instability, mergers or sales between companies, cost-cutting plans or any illness, surgery, one can lose their jobs and be unable to meet their financial liability. Job loss insurance cover helps anyone to meet their financial liability in such a situation.

Key Features of Job Loss Insurance Cover

  1. Coverage Period: Job loss insurance cover typically offers financial assistance for a predefined period, ranging from a few months to a year, depending on the policy’s terms and conditions.
  2. Eligibility Criteria: To qualify for job loss insurance cover, individuals usually need to meet specific eligibility criteria, including factors such as employment tenure, age, and income level.
  3. Premiums and Deductibles: Policyholders are required to pay premiums to maintain their job loss insurance cover. The premium amount is determined based on various factors, including the coverage amount, duration, and the individual’s risk profile. Some policies may also include deductibles, which represent the initial amount that the policyholder must bear before receiving benefits.
  4. Waiting Period: Most job loss insurance policies come with a waiting period, during which no benefits are payable. This waiting period serves to prevent misuse of the policy and helps manage the insurer’s risk.
  5. Coverage Limits: Job loss insurance cover typically comes with certain coverage limits, including the maximum amount of financial assistance payable and the total duration of coverage.
  6. Exclusions: Like any insurance policy, job loss insurance cover may have certain exclusions. These may include voluntary unemployment, termination due to misconduct, or job loss resulting from pre-existing health conditions.

Benefits of Job Loss Insurance Cover

  1. Financial Security: Job loss insurance cover provides a crucial safety net, offering financial security and peace of mind to individuals facing involuntary unemployment.
  2. Debt Management: It helps policyholders manage their debts and financial obligations, such as loan repayments, mortgage instalments, and utility bills, during periods of unemployment.
  3. Maintaining Lifestyle: By providing a regular income stream, job loss insurance cover enables individuals to maintain their lifestyle and meet their day-to-day expenses without significant disruptions.
  4. Job Search Support: Some job loss insurance policies offer additional benefits, such as career counselling, job search assistance, and training programs, to help policyholders find new employment opportunities.

Companies Offering Job Loss Insurance Cover

  1. ICICI Lombard’s Secure Mind Critical Illness Plan
  2. HDFC Ergo’s Home Security Plus (Home Protection Plan)
  3. Royal Sundaram’s Safe Loan Shield (Critical Illness Plan)

Who can claim job loss insurance cover?

  • If someone has lost his job due to non-medical reasons
  • When opting for an additional cover, insurance protection remains available even if you leave your job due to medical reasons.
  • If the company is suddenly closed, declared bankrupt, then the cover is provided through the Add on Service cover.
  • It’s important to note that the job loss insurance cover provided through the home protection plan is valid for only five years. This means that the entire duration of the home loan tenure may not be covered.
  • Prior to filing a job loss insurance claim, it’s essential to have a thorough understanding of your add-on cover.

    Who cannot claim job loss insurance cover?

    • If you have your own business or are already unemployed, then you cannot claim cover.
    • If you face suspension due to poor performance, fraud, retirement, termite damage, or company-related reasons, including being on probation, the job loss insurance cover cannot be claimed.
    • Job loss from any disease not mentioned in the add on cover.
    • No cover is available if you take early voluntary retirement.
    • People working temporarily or on contract will not get cover.

    Considerations for Potential Policyholders

    1. Policy Terms and Conditions: Before purchasing job loss insurance cover, it’s crucial to thoroughly understand the policy’s terms and conditions, including coverage limits, exclusions, waiting periods, and premium payments.
    2. Comparison of Policies: It’s advisable to compare multiple job loss insurance policies offered by different insurers to find the most suitable coverage that meets your specific needs and budget.
    3. Financial Assessment: Evaluate your financial situation and assess whether job loss insurance cover aligns with your overall financial plan and risk management strategy.
    4. Claim Process: Familiarize yourself with the claim process and documentation requirements to ensure a smooth and hassle-free claims experience in the event of unemployment.
    5. Review Existing Benefits: If you already have certain benefits through your employer, such as severance pay, unemployment benefits, or group insurance coverage, consider whether additional job loss insurance cover is necessary.

    In conclusion, job loss insurance cover serves as a crucial financial safety net for individuals navigating the uncertainties of the job market in India. By providing a buffer against the financial impact of involuntary unemployment, this insurance product offers much-needed support and stability to policyholders and their families. However, it’s essential to carefully evaluate the terms, coverage, and suitability of job loss insurance policies before making a purchase decision. With the right approach, investing in job loss insurance cover can offer valuable protection and peace of mind in an ever-changing job market scenario.

    Supply Chain Finance (SCF) by Banks in India

    Supply Chain Finance (SCF) by Banks in India

    Supply Chain Finance (SCF) by Banks in India

    In the intricate realm of business operations, Supply Chain Finance (SCF) has emerged as a pivotal financial instrument, fostering collaboration, and enabling seamless transactions among stakeholders. This article aims to delve into the intricacies of Supply Chain Finance offered by banks in India, providing insights into its processes, features, advantages, challenges, and its overall impact on businesses.

                                                                                                                                  Subas Tiwari

    Participating Banks: The following banks were included in the comparative analysis:

    1. State Bank of India (SBI)
    2. HDFC Bank
    3. ICICI Bank
    4. Axis Bank
    5. Punjab National Bank (PNB)
    6. Bank of Baroda

    Defining Supply Chain Finance

    • Understanding Supply Chain Finance

    SCF is a financial solution designed to optimize cash flow within a supply chain, allowing businesses to unlock working capital trapped in payables or receivables. It involves leveraging financial instruments to enhance supply chain efficiency, benefiting both buyers and suppliers.

    • Evolution of Supply Chain Finance in India

    SCF in India has evolved from traditional trade finance to address diverse financial needs across industries, driven by technological advancements and shifts in business dynamics.

    • Regulatory Framework

    The regulatory landscape, governed by entities such as the Reserve Bank of India (RBI), ensures transparency, security, and fair practices in SCF transactions.

    Dynamics of Supply Chain Finance

    • Features of Supply Chain Finance

    SCF includes features like Invoice Financing, Dynamic Discounting, and Vendor Financing, tailoring financial solutions to meet the diverse needs of supply chain businesses.

    • Types of Supply Chain Finance

    Encompassing Reverse Factoring, Payables Finance, and Inventory Finance, SCF offers various types to cater to the specific requirements of businesses.

    • Comparison with Traditional Financing

    Compared to traditional financing, SCF provides enhanced liquidity and risk mitigation, improving the overall financial stability of businesses involved in the supply chain.

    Advantages of Implementing Supply Chain Finance

    • Improved Cash Flow Management

    SCF facilitates enhanced cash flow management, optimizing working capital and ensuring the smooth functioning of the supply chain.

    • Strengthened Supplier-Buyer Relationships

    By offering early payment options and favourable financing terms, SCF fosters stronger relationships between buyers and suppliers.

    • Mitigation of Financial Risks

    SCF helps businesses mitigate financial risks associated with the supply chain, providing timely access to funds and improving overall financial stability.

    Challenges and Risks in Supply Chain Finance

    • Technological Integration

    The integration of technology in SCF processes poses challenges for businesses in adopting and adapting to new digital platforms.

    • Regulatory Compliance

    Compliance with evolving regulatory frameworks can be challenging, requiring businesses to stay abreast of changes and adhere to guidelines set by regulatory authorities.

    • Counterparty Risks

    Inherent counterparty risks in SCF transactions, particularly related to the financial stability of buyers and suppliers, necessitate effective risk management practices.

    The Digital Transformation of Supply Chain Finance

    • Digital Platforms in SCF

    The digitalization of SCF processes is a significant trend, streamlining transactions, enhancing transparency, and providing real-time access to financial information within the supply chain.

    • Blockchain Technology

    The implementation of blockchain technology in SCF ensures secure and transparent transactions, reducing fraud risks, and enhancing the efficiency of the entire supply chain financing ecosystem.

    Collaboration and Innovation in Supply Chain Finance

    • Collaborations Between Banks and Corporates

    Increasing collaborations between banks and corporates tailor SCF solutions to specific financial needs, fostering innovation and efficiency.

    • Technology-Driven Innovations

    Integration of advanced technologies like artificial intelligence and machine learning drives continuous innovation in SCF, offering more sophisticated solutions to businesses.

    The Need for Standardization in Supply Chain Finance

    • Enhancing Efficiency

    Standardization eliminates unnecessary complexities and variations, leading to a more streamlined and efficient system. Banks adopting standardized practices contribute to faster processing times and reduced administrative burdens.

    • Ensuring Consistency

    In India’s diverse business environment, standardization ensures consistent application of SCF practices. This consistency contributes to a more predictable and reliable financial ecosystem, benefiting both buyers and suppliers.

    1. Improving Transparency

    Standardized documentation and processes enhance transparency in SCF transactions. This transparency is crucial for all stakeholders, providing a clear understanding of terms, conditions, and responsibilities.

    Key Components of Standardization in SCF

    • Uniform Documentation

    Standardized documentation includes agreements, invoices, and financing terms. Uniform templates ensure clarity and reduce the risk of misinterpretation, facilitating smoother communication.

    • Streamlined Processes

    Standardizing SCF processes involves creating a consistent framework for activities such as invoice verification, payment approvals, and fund disbursement. This contributes to a more efficient workflow.

    • Common Terminology and Definitions

    Adopting common terminology and definitions minimizes confusion and miscommunication. Standardization ensures a shared understanding of terms related to financing, discounts, and payment schedules.

    Benefits of Standardization in SCF

    • Improved Access to Finance

    Standardization simplifies the onboarding process for businesses seeking SCF, enhancing their access to finance, especially for small and medium-sized enterprises (SMEs).

    • Risk Mitigation

    Standardized processes and documentation contribute to better risk management, reducing the likelihood of errors, disputes, and misunderstandings within the supply chain.

    • Interoperability

    Standardization fosters interoperability among different SCF platforms and systems, creating a more interconnected and resilient financial ecosystem.

    Challenges in Implementing Standardization

    • Diverse Business Practices

    India’s diverse business practices pose a challenge in aligning them with standardized SCF processes. Adapting to and aligning these practices requires careful consideration.

    1. Technological Integration

    Successful standardization in SCF depends on effective technological integration. Ensuring seamless communication and data sharing among diverse platforms is critical.

    1. Regulatory Compliance

    Navigating the regulatory landscape and ensuring alignment with evolving requirements can be complex. Close collaboration with regulatory bodies is essential to address compliance challenges.

    Future Trends and Developments

    • Adoption of Technology

    The future of SCF standardization in India involves increased adoption of technology, including blockchain, artificial intelligence, and data analytics, enhancing transparency, security, and efficiency.

    • Collaborative Initiatives

    Banks, businesses, and regulatory bodies may engage in collaborative initiatives to establish industry-wide standards for SCF, contributing to a more unified approach and widespread adoption.

    Conclusion

    Standardization in SCF offered by banks in India is a crucial step towards building a more efficient, transparent, and resilient financial ecosystem. While challenges exist, the benefits of standardizing processes, documentation, and terminology far outweigh the complexities. As the Indian business landscape continues to evolve, the adoption of standardized SCF practices is poised to play a pivotal role in shaping the future of financial transactions within the supply chain.

    Securing the Best Deal on Supply Chain Finance: 30 Tips

    To optimize working capital and foster financial efficiency within the supply chain, securing the best deal on Supply Chain Finance (SCF) from banks in India is essential. Here are 30 tips to guide businesses in obtaining favourable SCF terms:

    • Understand Your Needs: Clearly define your business’s financial needs within the supply chain to identify the most suitable SCF solutions.
    • Research Banks: Conduct thorough research on banks offering SCF in India, comparing offerings, reputation, and customer reviews.
    • Compare Interest Rates: Compare interest rates offered by different banks for SCF, considering variations based on your specific financial situation.
    • Assess Eligibility Criteria: Understand eligibility criteria set by banks for SCF, ensuring your business meets income, creditworthiness, and other requirements.
    • Review Fees and Charges: Examine fees and charges associated with SCF, including processing fees and hidden costs, opting for banks with transparent fee structures.
    • Evaluate Repayment Terms: Look for banks offering flexible repayment terms for SCF, aligning with your business’s financial capabilities.
    • Check Prepayment Options: Understand prepayment terms and conditions, considering penalties or allowances for prepayment.
    • Maintain a Good Credit Profile: Strengthen your business’s credit profile for improved chances of securing favourable SCF terms.
    • Review the Agreement: Carefully read and understand terms and conditions of the SCF agreement, ensuring transparency in all clauses.
    • Avoid Multiple Applications: Submitting multiple SCF applications simultaneously can impact your credit profile negatively; apply to one or two suitable banks.
    • Consider Collateral: Evaluate if opting for secured SCF with collateral benefits your business, influencing interest rates and terms.
    • Explore Online Platforms: Consider banks with user-friendly digital interfaces, as many offer convenient online SCF platforms.
    • Read Customer Reviews: Look for reviews and testimonials from businesses using SCF from banks you’re considering for valuable insights.
    • Negotiate Terms: Don’t hesitate to negotiate terms with the bank, leveraging a good credit history for more favourable conditions.
    • Calculate Total Costs: Before finalizing any SCF deal, calculate total costs, including interest, fees, and other charges for informed decisions.
    • Plan for Cash Flow: Assess your business’s cash flow and plan for SCF repayments, aligning with operational and financial needs.
    • Keep Documentation Ready: Have all necessary documents ready before applying for SCF, expediting the application process.
    • Be Wary of Scams: Verify the legitimacy of the bank to avoid fraudulent practices and ensure regulatory approvals.
    • Utilize Customer Support: Reach out to the bank’s customer support for questions or concerns, assessing responsiveness and helpfulness.
    • Maintain Financial Discipline: Ensure timely payments, responsible credit usage, and sound financial management to enhance the business’s stability.
    • Review Competitive Offers: If multiple banks provide competitive offers, meticulously review and compare them before choosing the most suitable one.
    • Stay Informed on Market Trends: Stay informed about SCF market trends to negotiate better terms and adapt to evolving financial landscapes.
    • Consider Long-Term Impacts: Evaluate how SCF terms impact your business in the long run, considering scalability and sustainability.
    • Explore Cross-Border SCF: If your supply chain involves international transactions, explore banks offering cross-border SCF solutions, considering currency exchange rates and geopolitical risks.
    • Seek Professional Advice: Consult financial experts or advisors to navigate complex SCF terms and make informed decisions if needed.
    • Diversify Funding Sources: Consider exploring SCF options from multiple banks to diversify funding sources and enhance flexibility.
    • Assess the Bank’s Reputation: Consider the bank’s reputation, as a strong reputation indicates reliable and customer friendly SCF services.
    • Stay Compliant: Ensure your business adheres to all regulatory requirements for a smooth SCF process and a positive relationship with the bank.
    • Explore Value-Added Services: Some banks offer additional services alongside SCF, such as risk management or financial consulting. Explore these value-added services.
    • Review Periodic Reports: Periodically review reports provided by the bank regarding your SCF transactions, staying informed about performance and impact on your supply chain.

    By incorporating these tips, businesses can enhance their chances of securing the best deal on Supply Chain Finance from banks in India, optimizing financial processes within the supply chain.

    Supply Chain Finance (SCF) furnished by NBFCs

    Supply Chain Finance (SCF) furnished by Non-Banking Financial Companies (NBFCs) in India assumes a pivotal role in bolstering businesses by fine-tuning working capital, enriching cash flow, and nurturing collaboration within the supply chain. Below is an overview of Supply Chain Finance extended by NBFCs in India:

    Understanding Supply Chain Finance (SCF) by NBFCs:

    Supply Chain Finance is a financial remedy that empowers businesses to refine cash flow within their supply chain. NBFCs, serving as financial entities providing banking services without conforming to the legal definition of a bank, present SCF solutions customized to the distinct needs of businesses involved in supply chain activities.

    Key Features of SCF by NBFCs:

    • Invoice Financing: NBFCs furnish financing based on invoices generated within the supply chain, enabling businesses to access funds ensnared in receivables and enhancing liquidity.
    • Dynamic Discounting: SCF by NBFCs frequently incorporates dynamic discounting options, allowing businesses to extend discounts for early payments, thereby nurturing improved relationships between buyers and suppliers.
    • Vendor Financing: NBFCs extend credit to suppliers, contributing to augmented liquidity and fortifying the overall financial health of the supply chain.

    Types of SCF Offered by NBFCs:

    • Invoice Discounting: NBFCs may present invoice discounting options wherein businesses can receive early payment against outstanding invoices, aiding in effective cash flow management.
    • Supplier Finance: This involves extending financial support to suppliers, ensuring timely access to funds to fulfil orders and uphold operational efficiency.
    • Payables Finance: NBFCs may facilitate payables finance, allowing buyers to extend payment terms while offering suppliers the choice to receive early payment from the NBFC.

    Advantages of SCF by NBFCs:

    • Enhanced Cash Flow Management: SCF by NBFCs ameliorates cash flow for businesses within the supply chain, empowering them to operate more efficiently.
    • Strengthened Supplier-Buyer Relationships: By providing early payment options and favourable financing terms, NBFCs play a role in cultivating collaborative and mutually beneficial relationships between buyers and suppliers.
    • Mitigation of Financial Risks: SCF aids businesses in mitigating financial risks linked to the supply chain, such as delayed payments, by ensuring timely access to funds and enhancing overall financial stability.

    Challenges and Considerations:

    • Risk Assessment: Businesses need to evaluate the risks associated with SCF provided by NBFCs, considering factors like interest rates, repayment terms, and the financial stability of the NBFC.
    • Regulatory Compliance: Adhering to regulatory guidelines and ensuring compliance with legal requirements is imperative when engaging with NBFCs for SCF.

    Technological Integration in SCF by NBFCs:

    • Digital Platforms: Many NBFCs leverage digital platforms to streamline SCF processes, enhancing transparency, efficiency, and the accessibility of financial information.
    • Blockchain Technology: The incorporation of blockchain technology in SCF by NBFCs ensures secure and transparent transactions, reducing fraud risks, and amplifying the overall efficiency of the financing ecosystem.

    Case Studies and Success Stories:

    • Demonstrating Positive Impact: Scrutinizing real-life case studies and success stories involving SCF provided by NBFCs showcases the positive impact on businesses, illustrating how NBFCs contribute to refining supply chain processes.

    Collaboration and Innovation:

    • Collaborations Between NBFCs and Corporates: NBFCs may engage in collaborations with corporates to customize SCF solutions addressing specific financial needs within their supply chains, fostering innovation and efficiency.
    • Technology-Driven Innovations: Integration of advanced technologies, such as artificial intelligence and machine learning, by NBFCs propels continuous innovation in SCF, providing more sophisticated and personalized solutions.

    Conclusion:

    SCF provided by NBFCs in India stands as an integral element of the financial ecosystem, supporting businesses in their supply chain operations. As the landscape evolves, businesses must meticulously evaluate the offerings, risks, and benefits of SCF by NBFCs to make well-informed financial decisions, ensuring the optimization of their supply chain processes.

    The future of Supply Chain Finance (SCF) in India is on the brink of transformative changes, propelled by technological advancements, shifting business dynamics, and an increasing recognition of the advantages linked with efficient supply chain financing. This narrative outlines the pivotal trends and factors that are poised to define the trajectory of SCF in India:

    1. Technological Integration:
    • Blockchain Technology: The integration of blockchain technology is anticipated to witness a surge, providing a foundation for secure and transparent transactions. This move aims to diminish fraud risks and amplify the overall efficiency of SCF processes.
    • Artificial Intelligence and Machine Learning: Advanced technologies, specifically Artificial Intelligence (AI) and Machine Learning (ML), are set to play a pivotal role. They will automate intricate processes, enhance risk assessment methodologies, and introduce more sophisticated and tailored SCF solutions.
    1. Digital Platforms:

    The widespread adoption of digital platforms for SCF is expected to become the norm. This shift will streamline transactions, elevate transparency levels, and furnish real-time access to financial information within the supply chain.

    1. Collaboration and Industry Standards:

    A surge in collaboration between traditional banks, non-banking financial companies (NBFCs), and corporate entities is foreseen. This collaborative spirit is likely to pave the way for the establishment of comprehensive industry-wide standards for SCF. Common frameworks, documentation practices, and operational standards may be developed, contributing to a more streamlined and efficient SCF ecosystem.

    1. Cross-Border SCF:

    The globalization of supply chains will drive an escalating demand for cross-border SCF solutions. Banks are expected to introduce specialized services tailored to facilitate international transactions. Key considerations will include factors such as currency exchange rates and geopolitical risks.

    1. Regulatory Evolution:

    Regulatory bodies, with a primary focus on the Reserve Bank of India (RBI), are anticipated to evolve their guidelines. This evolution is crucial to keeping pace with the dynamic nature of SCF. Clearer regulations are likely to in still increased confidence among stakeholders, fostering greater participation in SCF activities.

    1. Increased Awareness and Adoption:

    As businesses gain a deeper understanding of the myriad benefits associated with SCF, there is a projected surge in adoption across diverse industries. Small and medium-sized enterprises (SMEs), in particular, stand to benefit from the accessibility and flexibility that SCF affords.

    1. Sustainability and ESG Considerations:

    Environmental, Social, and Governance (ESG) considerations are gaining prominence in contemporary business practices. SCF solutions are expected to evolve to incorporate sustainability criteria, aligning with the broader trend of responsible and ethical business conduct.

    1. Fintech Disruption:

    The anticipated entry of fintech companies into the SCF arena is likely to catalyze increased competition and foster innovation. Fintech platforms are poised to introduce agile and user-friendly SCF solutions, challenging traditional banking models.

    1. Continuous Innovation:

    Banks and financial institutions are foreseen to remain at the forefront of innovation in the SCF landscape. This continuous innovation is expected to manifest in the development of novel products and services catering to the evolving needs of businesses. The focus will be on providing more efficient, cost-effective, and tailored solutions.

    1. Integration with Supply Chain Management Systems:

    An increased level of integration between SCF platforms and supply chain management systems is likely. This integration is envisaged to enhance visibility, coordination, and overall efficiency across the entire supply chain, creating a seamlessly interconnected financial and operational ecosystem.

    The future of SCF in India presents a dynamic landscape characterized by a strong emphasis on technology, collaboration, regulatory evolution, and sustainability. Businesses that adeptly adapt to these trends and leverage the evolving SCF landscape are poised to derive benefits such as improved financial processes, enhanced collaboration, and optimized supply chain operations.

    In conclusion, SCF plays a pivotal role in optimizing financial processes within the supply chain, contributing to the growth and stability of businesses. As the landscape continues to evolve, businesses must stay informed about the options, risks, and benefits of SCF to make sound financial decisions, leveraging opportunities presented by banks for financial growth and efficiency.

    How to Pick the Right Credit Card

    How to Pick the Right Credit Card

    How to Pick the Right Credit Card

    Credit cards are super useful in India, giving you an easy way to pay for things, flexibility, and some cool perks. But with so many credit cards out there, it’s hard to pick the right one for you. This guide will help you choose the best credit card in India, considering what you need and what’s smart for your wallet.

    Subas Tiwari

    Why Credit Cards are Big in India

    In India, people love credit cards. They used to be fancy, but now they’re smart financial tools. Credit cards let you buy stuff, pay bills, and get money when you need it. Plus, they give you rewards, cashback, and discounts – what’s not to love?

    Why Picking the Right Card is Key

    Choosing the right credit card is a big deal because it affects your money big time. A good credit card can save you cash, protect you when things go wrong, and build your credit score. But a bad choice means you pay extra fees and get stressed out.

    India’s credit card world is a big place, and there’s no one-size-fits-all answer. The best credit card for you depends on your needs, money goals, and how you spend. Let’s break it down and make the right choice.

    Understand Your Money Goals and Spending Habits

    First, know your financial story. What do you want from a credit card? Here are some common goals:

    • Building Credit: If you’re new to credit or need a better credit score, go for a card that helps with that.
    • Earning Rewards: If you want freebies like cashback, rewards points, or air miles, go for a card with a sweet rewards program.
    • Managing Expenses: If you’re using a credit card for everyday stuff, get one with low interest or a grace period.
    • Travel and Lifestyle: If you’re a globetrotter or want cool stuff like airport lounge access, look into travel or lifestyle credit cards.
    • Building or Fixing Credit: If your credit history isn’t great, try secured or credit-builder cards. They’re designed for folks like you.

    Think about your spending habits, too

    • Categories: What do you spend most on? Groceries, eating out, travel, shopping, fuel, or fun stuff?
    • How much and how often: Do you use your credit card a lot or just now and then? Do you pay the full bill every month?
    • Your budget: What’s your monthly budget, and can you stick to it with a credit card?

    Know Your Card Needs

    Now that you’re clear on your goals and spending style, it’s time to nail down your credit card needs. Here are some scenarios:

    Rewards Lover: If you want rewards, go for cards that give the most in the categories you spend most on. For instance, if you love eating out, find a card with dining rewards.

    Interest Saver: If you want to avoid high interest, find cards with low Annual Percentage Rates (APR) and easy interest rules.

    Frequent Flyer: If you travel a lot or like VIP stuff, prioritize travel cards that offer air miles, hotel deals, and travel insurance. They often come with neat perks like airport lounge access.

    Credit Builder: If you’re building or fixing your credit, look into secured or credit-builder cards. They’re perfect for people with a slim or damaged credit history.

    Knowing your goals and spending habits is the first step in finding the right credit card. Armed with this info, you can compare your options and pick smartly.

    Get the Lowdown on Your Credit Score

    Your credit score is like your financial report card. It shows lenders how responsible you are with money. In India, credit scores come from folks like CIBIL, Experian, Equifax, and CRIF High Mark. These scores depend on your credit history, like your accounts, how you repay debts, and what you owe.

    Before you apply for a credit card, you got to know your credit score. Here’s how:

    • Online Credit Bureaus: Check out websites like CIBIL, Experian, Equifax, or CRIF High Mark. They let you request your score by filling out some personal info.
    • Credit Monitoring Services: Some banks and credit card companies offer credit monitoring services. These give you easy access to your score.
    • Credit Score Apps: Loads of apps let you check your score. They even toss in regular updates and credit monitoring.

    Why Your Credit Score Matters

    A good credit score is key for a bunch of money stuff. Here’s why:

    • Credit Approval: Lenders and credit card companies peek at your credit score to see if you’re good with money. Higher scores mean a better chance of getting credit cards and loans.
    • Lower Interest Rates: A top-notch score lands you credit cards and loans with low interest. This saves you lots of money in interest over time.
    • Higher Credit Limits: A sweet score can get you higher credit limits on your cards, giving you more financial elbow room.
    • Haggling Power: A solid credit score lets you bargain with lenders. You can ask for better rates and terms based on your financial track record.
    • Renting Homes: Landlords check your credit score to decide if they should rent you a place. A good score makes this easier.

    Before you dive into the world of credit cards, take a sec to check your credit score. Knowing where you stand helps you figure out what cards you’ll qualify for and what terms to expect.

    Compare Types of Credit Cards

    Credit cards in India come in all shapes and sizes, each designed for specific needs and lifestyles. Understanding the types helps you narrow down your choices. Here’s a quick look at the common types:

    • Travel Credit Cards: These are for jet-setters. They give you air miles, hotel discounts, airport lounge access, and travel insurance. Perfect if you want to max out your rewards on trips.
    • Rewards Credit Cards: These cards hand out rewards like points, cashback, or discounts on different spending categories. You earn points for every rupee you spend. They’re great for everyday spending.
    • Lifestyle Credit Cards: If you want to spice up your life, go for these. They offer discounts and goodies for things like dining, shopping, entertainment, and fitness.
    • Fuel Credit Cards: Tailored for frequent fuel consumers, these options provide benefits such as fuel surcharge waivers or cashback on refuelling expenses—an ideal way to cut down on your fuel costs.
    • Secured Credit Cards: Geared towards individuals with limited or no credit history, these options require a deposit matching your credit limit. Using them wisely aids in establishing or rebuilding your credit score.
    • Business Credit Cards: Entrepreneurs and business owners, these are for you. They offer biz perks like expense tracking, employee cards, and business rewards. You can also get higher credit limits to meet your business needs.

    Consider your lifestyle, spending habits, and personal preferences when evaluating credit card options. The ideal choice aligns with your goals and maximizes value. Certain cards even combine features from various types, offering a versatile mix of benefits to suit your needs.

    Master the Art of Fees and Charges

    Before you lock in your credit card choice, you got know about the different fees and charges. They can jack up the cost of using your card. Here’s what to watch out for:

    • Annual Fees: Every year, you’ll pay a fee for having and using the card. It can be zero (no annual fee) or a few grand. You might get a break in the first year, but it kicks in from year two. Think about whether the fee’s worth the card’s rewards.
    • Interest Rates: This is the cost of borrowing money with your card, and it’s called the Annual Percentage Rate (APR). It’s slapped on any balances you don’t pay off in full by the due date. Different card actions, like purchases, cash advances, or balance transfers, can have different rates.
    • Late Payment Fees: If you don’t at least pay the minimum amount by the due date, you’re in for a charge. It can be pretty hefty and mess up your credit score.
    • Cash Advance Fees: Grabbing cash from your credit card at an ATM or somewhere else means you pay a fee. It’s a chunk of the cash advance amount and comes with a higher interest rate.
    • Foreign Transaction Fees: Buying stuff in foreign currencies or outside India racks up foreign transaction fees. These can add up if you travel a lot or shop from overseas websites.

    Know the details of these fees and charges when you’re thinking about your credit card. The right card for you has a fee setup that matches your spending and helps you keep costs down.

    Find Extra Benefits

    Beyond the basics of rewards and fees, credit cards throw in extra benefits and perks. They can make your card awesome. Depending on what you like and how you live, some extras might catch your eye more than others:

    • Travel Perks: Lots of cards, especially the travel ones, come with cool travel stuff. This could be air miles that you can turn into free flights or hotel discounts, airport lounge access for a comfy pre-flight experience, and travel insurance. Also, some cards give good exchange rates for international travel and spending.
    • Concierge Services: Fancy credit cards often offer concierge services. These pros help with things like travel plans, restaurant bookings, event tickets, and more. They save you time and up your lifestyle.
    • Purchase Protection: A few cards have your back when you’re unhappy with things you bought using the card. You can get stuff like extended warranties, price protection, and cover for damaged or stolen things.
    • EMI Conversion Options: Some cards let you turn big buys into Equated Monthly Instalments (EMIs) with lower interest rates. It’s a great way to spread out big expenses.
    • Balance Transfer Offers: If you’ve got high-interest credit card debt, some cards offer balance transfer options. This lets you move your debt to a new card with a lower interest rate for a set time.

    When you’re looking at extra benefits, think about what fits with your lifestyle and spending habits. If you’re a frequent traveller, things like air miles and lounge access might be a hit. But if you make big buys, purchase protection and EMI options might be more your thing.

    Check for Signup Bonuses and Introductory Offers

    In India, credit cards often tempt newbies with juicy signup bonuses and introductory deals. These goodies give you a sweet reward or save you cash right off the bat. Here’s the deal:

    Signup Bonuses: These are gifts for new cardholders who spend a certain amount in a set time. It can be cashback, rewards points, or vouchers for shopping or services. When you’re checking out signup bonuses:

    • Look at the requirements to score the bonus.
    • Check how much the bonus is worth and if it lines up with your spending.
    • Mind the time frame to hit the spending target.

    Introductory APR Offers: Certain cards offer an attractive initial deal with low or 0% interest rates on purchases or balance transfers, typically spanning a few months to over a year. Consider how you can leverage these offers based on your financial goals. Be mindful of when the introductory period concludes and the subsequent regular APR. While signup bonuses and initial offers may be enticing, ensure the card’s long-term benefits and terms align with your needs. Opt for a card that provides ongoing value beyond the initial promotional period.

    Dive into the Terms and Conditions

    Before you say yes to a credit card, take a good look at the terms and conditions that come with it. This is the fine print that lays out the rules for using the card. You got know stuff like:

    • Interest Rates: Check out the interest rate terms, including the APR for different card actions. Understand how interest is calculated, and keep an eye out for variable interest rates that can change.
    • Minimum Payments: Know the rules for the minimum payment. This is the least amount you got pay each month to keep your card in good standing. But keep in mind that paying just the minimum will cost you more in interest and take longer to pay off your balance.
    • Grace Periods: Credit cards usually give you a grace period to pay your balance in full without racking up interest. Know how long the grace period is and when it starts and ends. Pay your balance in full within this period to dodge interest.
    • Rewards Redemption Rules: If you’re going for a rewards card, understand the rules for cashback or rewards points. Know how and where you can use your rewards, and check for any limits or expiration dates.
    • Restrictions and Limits: Search for any restrictions or limits imposed by the card issuer, such as blocking balance transfers, restricting cash advances, or adding fees for foreign transactions. Familiarizing yourself with these rules helps you avoid fees and potential complications.

    Reading the terms and conditions is a big deal. It tells you what you can and can’t do with your card and what you’re on the hook for as a cardholder. It’s your ticket to a smooth credit card ride

    Seek Advice and Read Reviews

    When you’re almost ready to pick a credit card, it’s smart to ask for advice and check out reviews. Hearing from other folks who’ve used the card can give you the lowdown that you can’t get from the card’s official info.

    • Ask for Recommendations: Talk to friends, family, or co-workers who’ve got credit cards. They can share real-life experiences on the pros and cons of their cards. You might get the scoop on how they’ve used the card and if it’s been a win for them.
    • Read Credit Card Reviews: Plenty of financial websites and publications lay out credit card reviews and comparisons. These reviews give the lowdown on the card’s features, rewards, fees, and what users have to say. Look for reviews from sources you trust to grab unbiased info.

    Nonetheless, remember, what works for one person might not be good for another. Use recommendations and reviews to get more information in your search for the perfect credit card.

    Apply for the Card

    So, you’ve done your research, weighed the options, and found the credit card that’s your perfect match. Now it’s time to actually apply for it. Here’s what to know about the application process:

    How to Apply: In India, most credit card issuers let you apply online. Check out the issuer’s website to find the application form. The general steps look like this:

    • Pick Your Card: Choose the exact credit card you want based on your research.
    • Personal Info: Fill in the application form with your deets, like your name, address, birthdate, and contact info.
    • Docs: Gather up the paperwork they want, which might be ID proof, address proof, income proof, and recent passport-sized photos. The exact documents can vary from issuer to issuer.
    • Eligibility: Make sure you hit the eligibility targets the issuer sets, like age, income levels, and credit score.
    • Submit Your App: Go over your application to check it’s all right, and then click to send it in.
    • Docs You Might Need: Common documents include your passport, Aadhaar card, PAN card, voter ID, driver’s license (for ID), recent utility bills, a rental agreement, or your Aadhaar card (for address proof), salary slips, bank statements, or income tax returns (for income proof), and new passport-sized pics for ID checks. And even though it’s not a paper, your credit score might be looked at when you’re applying.
    • Credit Card Approval and Activation: After you throw in your application, the issuer will give it an once-over. It can take anywhere from a few days to a few weeks to get your answer. Once they give you the green light, you usually get an email, SMS, or snail mail notice.

    You’ll also get your credit card in the post, along with a Personal Identification Number (PIN). You need to activate your card the way they tell you to. It could be a toll-free number to call, a website to visit, or a mobile app to use. Once that’s done, you’re all set to start swiping your card for buys and transactions as the card’s terms say.

    Use Your Credit Wisely

    Choosing the best credit card is the first step in your financial journey. But it’s just the start. You also use your credit responsibly to get the most out of your card and keep your finances on track. Here’s how:

    Smart Credit Card Moves

    • Pay on Time: Always make at least the minimum payment on your credit card bill by the due date. That way, you dodge late payment fees and bad marks on your credit score.
    • Pay in Full: Whenever you can, pay your card balance in full every month. That way, you don’t pay interest on what you carry over.
    • Stay in Budget: Stick to your budget and don’t use your credit card for stuff you can’t pay off in the billing cycle.
    • Check Your Statements: Look over your credit card statements often. Make sure they’re right, there aren’t any mystery charges, and you’re not overspending.
    • Set up Alerts: Lots of credit card issuers let you get emails or texts with updates on due dates, low balances, and big transactions. Sign up for these to stay in the loop.

    Budgeting and Tracking

    • Make a Budget: Set up a budget every month to cover your income and costs, like credit card payments. This helps you keep your finances in line.
    • Watch your Spending: Use tools like mobile apps or budgeting software to track your spending. They show where you can save.
    • Emergency Cash: Make an emergency cash stash to cover surprise costs. This way, you don’t need your credit card when stuff happens.

    Paying On Time

    • Automatic Payments: Set up automatic payments for your credit card bill. It’s like insurance that you’ll never miss a due date.
    • Paying Options: Most credit cards let you pay through different ways, like online banking, mobile apps, or with a check. Pick the one that suits you best.

    Credit Score Check

    • Credit Report Look: Check out your credit report often to make sure it’s right and there aren’t any signs of identity theft or fraud.
    • Credit Score Watch: Think about using credit score monitoring services or apps that give you regular score updates.

    Avoid Credit Card Traps

    • High-Interest Debt: Be careful about piling up high-interest credit card debt. Avoid using your card for cash advances, and be aware of the interest rates.
    • Responsible Balance Transfers: If you use balance transfer offers, have a clear plan to pay off the moved balance within the deal time.
    • Skip Minimum Payments: Pay more than the minimum amount due when you can. It cuts interest charges and gets your balance down quicker.

    By using your credit wisely, you get all the goodies from your credit card, keep a solid credit score, and dodge money problems. Finally, remember that choosing the right credit card is all about fitting your financial goals and lifestyle. It’s like a magic wand that makes your money life more awesome. So take your time, do your research, and choose a card that works best for you. When you use it right, your credit card is a big boost for your finances.

    For personalized recommendations or to compare specific credit cards, you can visit the websites of major banks and credit card companies in India or consult a financial advisor.

    Related

    ELSS Mutual Funds

    ELSS Mutual Funds

    ELSS Mutual Funds

    An Equity Linked Savings Scheme (ELSS) is a mutual fund scheme primarily focused on investments in equity and equity-related securities. ELSS funds are strategically structured to enable investors to reduce their tax liabilities under Section 80C of the Income Tax Act in India. In this article, we will provide an extensive examination of ELSS mutual funds.

                                                                                                                                                            Subas Tiwari                                                                                                                                                                               In comparison to Fixed Deposits or the National Pension Scheme (NPS), Equity Linked Saving Scheme (ELSS) provides numerous tax-saving benefits while also delivering higher returns. Mutual funds, including ELSS, typically yield greater returns than FDs or NPS. Consequently, individuals who invest in ELSS funds or equities tend to regard ELSS as a more effective option.

    Imagine the advantages of accumulating funds while also enjoying a substantial tax exemption. Tax exemptions essentially translate to savings, which can then be strategically allocated to other financial objectives. A similar program, known as Equity Linked Saving Scheme (ELSS), allows individuals to save up to Rs. 46,800 in taxes.

    ELSS is an investment fund that offers optimal returns within a minimal lock-in period. It is predominantly composed of stocks from large and medium-sized companies. ELSS has been thoughtfully structured to simplify tax-saving for investors. Over an extended holding period, it presents significant potential for growth and enhanced returns. This fund boasts various appealing features; for instance, you can initiate investments with as little as Rs. 500, and it accommodates systematic investment plans (SIPs). The fund comes with a minimum lock-in period of 3 years, meaning you can easily exit the fund and access your funds after this period. The most noteworthy feature is that this fund empowers taxpayers to potentially save up to Rs. 46,800 in taxes.

    Fund’s salient features

    There is a specified range for the minimum deposit amount in this tax-saving fund. In this particular fund, you can commence your investment with as little as Rs 500, and the upper limit for your deposit is capped at Rs 1, 50,000. Your earnings from this fund are contingent on both your deposit amount and the prevailing market conditions. Considering the performance over the past year, it has been promising, with mutual funds, as well as equities, delivering favourable returns.

    Multiple benefits with single investment

    Indeed, an Equity Linked Saving Scheme (ELSS) is a tax-saving fund that predominantly allocates its funds to equity schemes. Equity funds are investment schemes that channel funds into the shares of various companies. The selection of companies for investment is typically based on their market capitalization, and the fund’s assets are distributed among these companies. If an individual consistently invests Rs 1.5 lakh in an ELSS every year, they can avail a tax saving benefit of up to Rs 46,800 under section 80C of the Income Tax Act. It’s important to note that while the tax benefit is capped at Rs 1.5 lakh, you are indeed allowed to invest more than this amount in ELSS if you choose to do so.

    Why invest in ELSS?

    ELSS is considered to be much better than those who follow the traditional methods of tax saving. Compared to Fixed Deposit or NPS, ELSS offers many tax saving facilities along with giving higher returns. Mutual funds earn more than FDs or NPS. Therefore, people who invest in ELSS funds or equities consider ELSS to be more effective. The biggest thing is that the lock-in period of ELSS is very less as compared to FD or NPS. That is, the possibility of high returns in a short time can be found in ELSS.

    Who can invest?

    ELSS can be invested by any person who wants to reduce his income tax under section 80C by investing money in tax saving scheme. It is an equity investment, so those who invest money for a long term and expect returns, who are less concerned about market risk, can make the most of this fund. Since ELSS has a lock-in period of 3 years, the fund is taxed on the basis of long-term gains. If earning more than Rs 1 lakh then interest of 10% will have to be paid.

    More work with less investment

    You don’t have to contribute a substantial amount of money all at once to participate in this fund. You needn’t worry about having to make a large initial deposit to benefit from this tax-saving program. You can join this scheme with a minimal investment. By averaging your contributions to this fund every year, you can start your investment journey with the same amount of money. You’re not required to make substantial payments per unit of the fund. If you prefer, you can begin your investment with as little as 500 rupees, and this approach also fosters a disciplined investment strategy.

    What are ELSS funds?

    ELSS is a mutual fund scheme & is quite similar to diversified equity fund of Mutual Fund. As the name suggests, the scheme primarily invests in equity market by buying equity stocks of companies listed on the stock exchanges. The units of the scheme are offered at the NAV (Net Asset Value). The NAV is announced for all business days and keeps changing primarily depending upon the movement in the prices of stocks held in the portfolio of the scheme in relation to market fluctuations. Mutual Fund ELSS is a good tax-saving instrument but still is not invested in large numbers by tax-savers. So, this article is just to wake them up & take notice of this tax-saving investing option so that there is maximum participation of the public from all walks of life.

    What is the urgency to invest in ELSS?

    It is most likely that the Direct Tax Code (DTC) proposed by the Government will come into effect (sooner than later), and your most dependable tax saving section – Section 80C of the Income Tax Act would undergo amendments. While the DTC includes a proposal to increase the eligible deduction under Section 80 C, Equity Linked Savings Schemes (ELSS) -also known as ‘tax saving mutual funds’, would no longer continue to be a part of eligible tax saving instruments, thus leaving you with fewer market-linked investment options to accelerate the process of wealth creation.

    Who are advised to invest in ELSS?

    YES. This is an important aspect of tax-planning especially when you look at ELSS as a tax-saving option. The following are the factors that could be considered.

    Those who have clear & focused financial goals

    If you have financial goals set in your life, the same too should influence the way you do your tax planning and invest in tax saving instruments. So, say for example your goal is retiring from work 5 years from now, then your tax saving investment portfolio should be less tilted towards market-linked tax saving instruments, as you are quite near to your goal and your regular income will cease. Likewise, if you are many years away from the financial goal, you should ideally allocate maximum to market-linked tax saving instruments and less towards those instruments (tax saving) which provide you assured returns.

    Those who have risk appetite

    It refers to your ability to take risk while investing, and it is totally dependent on your age, income, expenses, and nearness to your goal. So, if your willingness to take risk is high (aggressive), you can tilt your tax saving investment portfolio more towards the market-linked instruments such as ELSS. But if you have a moderate-risk profile, then you can take a mix of 60:40 into market-linked tax saving instruments and assured return tax saving instruments respectively.

    Thus, now if you are young, income is higher, and therefore willingness to take risk is highest along with your financial goals being far away; you may look at ELSS mutual funds to avail a tax benefit under Section 80C. Please note that ELSS mutual funds are 100% diversified equity funds and a distinguishing feature about them is the compulsory lock-in period of 3 years brings in financial discipline towards holding one’s investments for the long-term. For investment in ELSS, there is a minimum investment amount of Rs. 500 which is unlike the other equity-oriented funds (which generally demand Rs. 5,000 as the minimum investment amount).

    What should be the income bracket to enter investing?

    It is said that if your income is high, your willingness to take risk is generally high. This can work in your favour, as you can allot your portfolio more towards equity-related instruments such as ELSS, and make your portfolio appear more aggressive. Similarly, if your income is not high enough, you can invest in other tax-saving instruments which provide you assured returns.

    At what age should one begin investing?

    Your age should determine your asset allocation. If you are young, you can take more risk and vice-versa. Hence, for prudent tax planning too, if you are young, you should allocate more towards market-linked tax saving instruments such as ELSS. Moreover, you would also enjoy the advantage of greater investment tenure which would enable you make more aggressive investments and create wealth over long-term to meet your financial goals. 

    How to select ELSS funds?

    Ideally while evaluating ELSS mutual funds, one should assess their performance over a 3-year time frame, as this would enable you to judge whether they have created wealth for your post- lock-in period.

    Moreover, the fund has to ensure to its investors to fairly low-risk, but should provide risk-adjusted returns thereby making it a low risk-high return investment proposition in the category. Also, the returns should have been achieved by the Fund without indulging in much portfolio churning.

    What are the benefits of ELSS MF?

    Tax benefit on the Investment

    You can get full tax benefit of investment under section 80 C of Income Tax Act. Maximum taxable limit is Rs. 150000 for the current Assessment Year.

    Shortest lock-in period (period during which payment will not be made if you go in for tax benefit)

    Lock-in period of ELSS is 3 years which is shortest in comparison to any other tax saving investment. This lock-in period is the only difference between diversified equity mutual funds & ELSS. When compared to Bank tax-saving FDs, ELSS scores over them as Bank FDs have a lock-in period of 5 years.

    Tax-free returns

    Any profit/ capital gain you have from ELSS is completely tax free. If you compare the returns from NSC & Tax-Shield Bank FDs, these are completely taxable & paid interest is added to your income for tax computation. So, you end up paying tax on interest received. Only PPF offers tax- free returns but it has a maturity period of 15 years.

    Tax free dividends

    ELSS schemes give dividends on regular intervals and the dividend you receive is tax free.

    No entry loads

    Say if you invest Rs. 15000 in ELSS Scheme, your Rs. 15000 is invested in ELSS Mutual Fund. You have to decide how much want to pay your financial advisor. Take a word of caution: some insurance agents sell ULIPS as Mutual Fund + Insurance with lots of ‘load’ expenses.

    High growth

    Equity funds can be volatile in the short run, but have been known to beat inflation and create wealth over the long run. If you are looking at investing some money that you won’t need in future, and are willing to stand atop the ups and downs of the market, you may find ELSS an ideal tax saving option.

    Systematic Investment Plan (SIP) in ELSS

    In SIP, you invest a certain amount each month in a fund. It’s an effective way of investing in ELSS as the concept of rupee cost-averaging and the power of compounding works well. Even if you have done your tax planning for this year, start from 1st AUGUST, 2015.

    Comparison with Unit-Linked Insurance Plan

    The investors & tax-saving public sometimes think of ELSS funds and ULIPs as alternatives. This is a mistake as functionally, there is nothing common between ELSS funds and ULIPs. It’s a basic rule of saving to not mix up insurance and investments. ELSS and ULIPs are two different products that serve different purposes.

    COMPARISON OF ELSS WITH ULIP
    ELSS ULIP
    ELSS is an equity fund in the market ULIP is a mix of life insurance and investment offered by life insurance companies
    ELSS have a predictable cost, and easily understandable returns and are transparent about how the fund operates and what it invests in  From the premium paid, the insurer deducts charges towards life insurance (mortality charges), administration expenses and fund management fees. So only the balance amount is invested
    Only payment of fund management charge (as expenses) per year is applicable ULIPs have high first year charges towards acquisition (including agents’ commissions)
    The total investment under ELSS is in Equity Funds only In a ULIP, the mix of investment and insurance prevents savers from having a clear cost-vs-benefit understanding of either of the two components
    In ELSS, there is no fixed period of maturity except for the lock-in period as the fund is open-ended With an ULIP, you have to block your money for long periods of time. So, you sacrifice on transparency and liquidity
    ELSS has a 3 years lock-in period ULIPs have a 5 years lock-in
    ELSS has no switching facility of funds as it is controlled by the fund manager

     

    ULIPs provide for ‘switch’ from one fund to another

     

    Where do ELSS stand as a preferred fund for investment?

    ELSS stands out as a favored tax-saving choice for savvy investors. It not only offers diversification through its equity investments but also comes with a relatively short lock-in period of just 3 years from the date of investment. The returns generated from ELSS investments are closely tied to the performance of equity markets. Furthermore, the returns from ELSS schemes are tax-free.

    In recent years, some of these funds have demonstrated exceptional growth, multiplying in value by three times within a 5-year period. It’s worth noting that there is no specific limit on the amount you can invest in ELSS funds. However, you can claim a tax deduction of up to Rs. 1,50,000 under Section 80C of the Income Tax Act.

    It is always better to invest-

    • via SIP mode rather than lump-sum (for cost-averaging)
    • in GROWTH options (for wealth accumulation)
    • in DIRECT Plan (to save costs & higher returns)

    ELSS vs. NPS vs. PPF

    ELSS (Equity Linked Savings Scheme), NPS (National Pension System), and PPF (Public Provident Fund) are all popular tax-saving investment options in India. Each of these options has its own set of features, benefits, and limitations. Here’s a comparison of ELSS, NPS, and PPF to help you make an informed decision:

    1. Nature of Investment:

    ELSS: ELSS is a mutual fund scheme primarily investing in equities. It aims for capital appreciation and carries market-related risks.

    NPS: NPS is a retirement savings scheme that allows you to invest in various asset classes, including equities (up to 75% of the contribution in Tier I account). It is designed for building a retirement corpus.

    PPF: PPF is a long-term fixed income investment scheme offered by the government. It offers a fixed interest rate and is considered a safe investment option.

    1. Lock-in Period:

    ELSS: ELSS has a lock-in period of three years, which is the shortest among the three options.

    NPS: NPS has a lock-in period until retirement (with some exceptions). Partial withdrawals are allowed under specific circumstances.

    PPF: PPF has a lock-in period of 15 years, but it can be extended in blocks of five years indefinitely.

    1. Tax Benefits:

    ELSS: Investments in ELSS are eligible for a tax deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh per financial year. However, returns from ELSS are subject to long-term capital gains tax.

    NPS: Contributions to NPS enjoy tax benefits under Section 80CCD (1) and Section 80CCD (2) of the Income Tax Act. However, there are restrictions on withdrawals, and the maturity amount may be partially taxable.

    PPF: PPF investments and interest earned are both eligible for tax deductions under Section 80C. Additionally, PPF returns are tax-free.

    1. Risks and Returns:

    ELSS: ELSS investments carry market-related risks. Returns can be higher but are subject to market fluctuations.

    NPS: NPS offers a mix of asset classes, including equities, which can provide potentially higher returns than PPF but with some risk.

    PPF: PPF offers fixed, guaranteed returns. It is a low-risk investment but typically provides lower returns compared to ELSS and NPS.

    1. Flexibility:

    ELSS: Offers flexibility in terms of investment amount and frequency (through SIPs). Post-lock-in, you can redeem or switch your investments.

    NPS: Provides flexibility in asset allocation and contribution amount. It is designed for long-term retirement planning, so withdrawals are restricted.

    PPF: Offers flexibility in terms of contribution amounts and frequency but has a long lock-in period.

    1. Purpose:

    ELSS: Primarily used for wealth creation and tax-saving goals.

    NPS: Designed for long-term retirement planning and building a retirement corpus.

    PPF: Suited for long-term savings, particularly for conservative investors.

    1. Liquidity:

    ELSS: Becomes liquid after the three-year lock-in period.

    NPS: Generally, not liquid until retirement, with some exceptions.

    PPF: Offers partial withdrawal options from the seventh year onwards.

    The choice between ELSS, NPS, and PPF depends on your financial goals, risk tolerance, and investment horizon. Many individuals opt for a combination of these investment options to balance risk and returns while achieving their financial objectives. Consulting a financial advisor can help you create a tax-efficient and diversified investment portfolio based on your specific needs and circumstances.

    Portability of Health Insurance

    Portability of Health Insurance

    Portability of Health Insurance

    If you find yourself dissatisfied with the services provided by your current mobile phone service provider and wish to switch to a different company, you can easily port your mobile number. Similarly, you also have the option to port your health insurance policy, allowing you to transfer your policy from one insurance provider to another.

                                                                                                                                                                      Subas Tiwari

    Portability of Health Insurance

    When you change your health insurance policy from one insurance company to another, you don’t have to lose the benefits you have accumulated.

    In the past in health insurance policies, such a move resulted in your losing benefits like the waiting period for covering “Pre-existing Diseases”.

    Now IRDA protects you by giving you the right to port your policy to any other insurer of your choice. It has laid down that your new insurer “shall allow for credit gained by the insured for pre-existing condition(s) in terms of waiting period”.

    This applies not only when you move from one insurer to another but also from one plan to another with the same insurer.

    Rights

    • You can port your policy from and to any general insurance company or specialised health insurance company
    • You can port any individual/ family policies
    • Your new insurer has to give you the credit relating to waiting period for pre-existing conditions that you have gained with the old insurer
    • Your new insurer has to insure you at least up to the sum insured under the old policy
    • The two insurers should complete the porting as per the timelines prescribed in the IRDA (Protection of Policyholders’ Interests) Regulations and guidelines

    Conditions

    • You can port the policy only at the juncture of renewal. That is, the new insurance period will be with the new insurance company
    • Apart from the waiting period credit, all other terms of the new policy including the premium are at the discretion of the new insurance company
    • At least 45 days before your renewal is due you have to
    • Write to your old insurance company requesting a shift
    • Specify company to which you want to shift the policy
    • Renew your policy without a break (there is a 30 day grace period if porting is under process)

    IRDA Facilitation

    IRDA has created a web-based facility to get and maintain data about all health insurance policies issued by insurance companies to individuals so that it can be accessed by the new company to which a policyholder wishes to port his policy.

    This enables the new insurer to obtain data on history of health insurance of the policyholder wishing to port his policy.

    Process for Health Insurance Portability Policy

    If you think that health insurance portability is an excellent choice for yourself and now you are wondering how to port your health insurance policy, here are the details of how to complete the process:

    Stage 1

    First of all, you may have to fill the IRDA portability form to initiate the process. Note that a policyholder can initiate a portability request when the policy is due for renewal. You will have to approach the insurance company where you wish to port your existing health insurance policy. The new insurer will send you a couple of documents that include a portability form and a proposal form. They may also send details about various health insurance products that the company offers.

    Stage 2

    Once you fill all the necessary forms and submit it to your new insurance company, they will get in touch with your previous insurer for obtaining your medical records and other related information. They might also ask for your claim history. Your old insurance company is bound to share this information via IRDA i.e. the insurance regulator when they receive such requests.

    Stage 3

    When the new insurance company receives all the required details, they will decide whether or not they wish to provide you a health insurance policy. This is called underwriting of a policy. An underwriter will analyse the data related to you and consider your risk profile to decide about providing health insurance to you. Your new insurance company is supposed to underwrite your policy within 15 days if they decide to insure you. In case of a delay in this time period, it is considered that you are insured under the new insurance company.

    Documents Required For Porting a Health Insurance Policy

    The process of porting a health insurance policy can differ slightly based on the terms and conditions of the insurance company. You need to get in touch with your current and previous insurer to understand the exact set of documents required for the purpose of porting the policy. You may be asked to submit the following documents to initiate the process:

    • Identity Proof
    • Address Proof
    • IRDA portability form
    • Proposal Form
    • Insurance Policy
    • Claim History if applicable
    • Declaration of no claims, if applicable
    • Documents related to medical history

    Advantages & Disadvantages of Health Insurance Portability

    Switching to a new health insurance company has its own set of advantages and disadvantages. We will discuss both in this section. You can read through them and then decide whether you want to make a switch to a new insurer or renew the existing health insurance policy at your current insurance company.

    Benefits of Porting Health Insurance Policy

    Benefits of porting to a new health insurance company are as follows:

    • Customize the Policy- You have an option to customise the policy to an extent. This way you can make changes in the policy to suit your existing needs from a medical insurance policy.
    • No Claim Bonus- In case you have an accumulated No Claim Bonus on your existing policy, your new insurer will calculate this discount and incorporate it with the amount of premium you are supposed to pay. Thus, you can continue to avail the benefit of No Claim Bonus by leading a healthy lifestyle.
    • Health Insurance Benefits- Apart from the accumulated No Claim Bonus, all the other benefits of your policy remain intact even after you make a switch. Porting allows you to keep the existing benefits and avail new ones with a new insurer.
    • Premium- The current health insurance market in India is brimming with competition. Insurers want policyholders to join them and buy a health insurance policy. Thus, porting the existing policy may lower your premium while the benefits may increase

    Disadvantages of Porting Health Insurance Policy

    Disadvantages of porting to a new health insurance company are as follows:

    • Porting on Renewal- As mentioned earlier, porting a health insurance policy is only possible near the date of renewal. A policyholder may not be allowed to port the policy when the renewal date is far away.
    • Changes in Plans- Changing the existing health insurance policy drastically is not allowed. You can make certain changes in the extent of coverage, however, changing the whole plan is not possible.
    • Extra Coverage- The policyholder needs to pay a higher amount of premium for buying any kind of additional coverage at the new insurance company.

    What to Do If They Reject Portability Requests?

    There could be a few reasons why one’s health insurance portability gets rejected. Let’s take a look at these reasons and understand what a policyholder can do in such cases.

    • Providing incomplete information-This can lead to rejection because the new insurance company is not provided with true and complete information about the policyholder. Getting in touch with the insurance company to provide all the required details might be done to get an approval.
    • Not submitting the documents in time- As mentioned earlier, there is a timeframe in which the policyholder needs to get in touch with the new insurance company and apply for a switch. If there is a delay, the request for porting the policy may get rejected. The policyholder must now wait for the next renewal date and make sure that necessary timelines are followed.
    • Claim history- There are high chances that your request for porting the policy may get rejected if the claim history is not proper. The company has a right to reject the request in case of frauds or misrepresentation of information.

    Things to Remember While Porting For Health Insurance

    A medical emergency can affect a person in both financial and emotional ways. It can easily deplete your savings if you do not have proper health insurance coverage. Buying a policy without considering your needs, lifestyle, and coverage can have a huge impact on the claim amount. Thus, it is important to consider the following things while porting your health insurance policy from one insurer to another.

    • Limits and Sub-limits- Each type of coverage of a health insurance policy has a certain cap on the claimable amount. For example, the daily room rent could be capped to Rs. 2500. You need to check such limits when you port health insurance policy and make sure that you are okay with the limits and sub-limits of the new policy.
    • Benefits- Each health insurance policy is designed to provide certain features that are helpful for the policyholder. You need to understand that these features or benefits are limited to the policy and cannot be ported. For example, if your old policy offers pre-hospitalization coverage for 30 days and the new insurance company offers this coverage for 15 days, you cannot change this feature. You have to make do with the new coverage.
    • Premium- The new insurance company may offer a lower premium for a similar insurance policy. However, you need to make sure that the coverage offered for a lower premium is sufficient for your needs. Lower premiums for a lower coverage will increase your out of pocket expenses at the time of a medical emergency. ‘Out of pocket expenditure’ refers to the money you pay directly to the hospital or a medical facility without the involvement of the insurance company.

    Frequently Asked Questions (FAQs)

    Here are some answers to the most asked questions related to Health Insurance Portability.

    From the article, I understood that making a switch between two insurance companies is possible. However, is it possible to switch between plans in the same insurance company?

    Yes, it is possible to switch to a new health insurance policy offered by the existing insurance company. This process will not take as much time as switching to a new insurance company, because your current insurer already has all the details required to make a switch.

    I have already served half of the waiting period. Will it reset upon porting the policy to a new health insurance company?

    Probably not. If the applicable waiting period for a specific condition is similar to that of the old policy, then you may only have to serve the remaining waiting period under the new plan. However, this solely depends upon the terms and conditions of the new health insurance company.

    Why should I port my health insurance policy?

    You should port your health insurance policy if you are not happy with the services provided, coverage, or premium with respect to the current insurance company and your health insurance policy.

    Does the age of a policyholder matter while porting health insurance?

    Yes, the age of a policyholder is a vital factor while porting the policy. The older the person the more will be the health insurance premium. An insurance company may also reject a proposal based on the risk factor associated with the age of a policyholder.

    Is it a good idea to buy health insurance coverage from two different insurance companies?

    Buying health insurance from two different insurers depends upon the coverage being purchased. There is no point in buying similar coverage from multiple insurers. Instead, consider buying different coverages to create a comprehensive health insurance portfolio. This can provide all-round coverage in the time of a medical emergency.

    Info sourced from: https://policyholder.gov.in & https://www.acko.com

    Related

    Insurance cover against Tsunami & Earthquake

    Insurance cover against Tsunami & Earthquake

    Insurance cover against Tsunami & Earthquake

    Tsunamis are massive sea waves triggered primarily by earthquakes that occur under the sea. A considerable amount of water may be displaced when an earthquake or volcanic activity occurs. Waves are formed when water is disturbed. When these waves approach shallow water in coastal locations, they become high and crash into the shoreline. Tsunamis wreak extensive devastation to people and property.                                                                                                                                             

    SubasTiwari     

    Following the tsunamis that struck Japan and India in 2004, a debate arose as to whether insurance coverage for tsunami is available in India. Tsunamis have been reported in India as long back as 1762 AD. The Indian peninsular is covered by the water bodies on three sides; therefore, those staying in the coastal area in earthquake-vulnerable areas require a tsunami insurance coverage. Coverage for tsunami insurance is not required if you are living in the inlands, comfortably far away from the sea.

    Sadly, insurance companies are yet to provide a tsunami policy and the world over, the only option for tsunami insurance is through coverage provided for natural calamities like flood, landslide, earthquake, volcanic movement, etc.

    The term ‘tsunami’ and ‘tidal wave’ is the same thing. The world ‘tsunami’, a Japanese word was created by the scientific community to distinguish tsunami damage from other forms of flood and earthquake damage. Earthquakes, submarine landslides and volcanic eruptions are some of the sources of these killer waves.

    Why no Tsunami insurance Cover?

    A characteristic that distinguishes tsunami from most other major hazards is that it does not occur from one cause. As some experts say, to define tsunami as a result of earthquake only is a narrow definition. While ‘earthquake’ is a narrow term to define the cause of tsunami, ‘earth movement’ is a broad term that includes earthquakes, landslides, rockslides, mudslides, subsidence, etc. Therefore, it is better to take insurance for both flood and earthquakes.

     Tsunami Prone Areas in India

    The government has identified a list of areas prone to tsunami in India on eastern coast. These include –

    1) Puri
    2) Kakinada
    3) Machilipatnam
    4) Nizampatnam-Vetapalem
    5) Chennai
    6) Cuddalore-Pondicherry
    7) Rameshwaram
    8) Thoothukudi
    9) Alappuzha-Chavara
    10) Kochi

    You should know that tsunamis aren’t common in India due to their geography. However, India isn’t immune to tsunamis. Past records show the tsunami-affected areas in India that suffered a major blow. These tsunamis originated in the Indian Ocean.    

                                                                                                                                                                           

    How to Prepare for a Tsunami

    1) Before a Tsunami

    • One should get ready before a tsunami strikes. It will help reduce damage to your home and business, it will also help you to survive.
    • Ask your council about your tsunami risk. If you live in a coastal area, always keep a check on the local warning arrangements.
    • If you have a disability or special requirements, arrange with your support network to alert you of any warnings and emergency broadcasts.
    • Always advance a Household Emergency Plan and have a Getaway Kit ready with you.
    • Know where the nearest high ground is and how you will reach it. Plan to get as high up or as far inland as you can. Plan your escape route for when you are at home, as well as for when you may be working or holidaying near the coast.

    2) During a tsunami

    • If possible, keep your getaway kit with you if possible. Do not travel into the areas at risk to get your kit or belongings.
    • Try to take pets with you if you can do so safely.
    • One should move instantly to the nearest higher ground, or as far inland as you can. If you have evacuation maps handy, follow the routes shown.
    • Walk or bike if possible and drive only if essential. If driving, keep going once you are well outside the evacuation zone to allow room for others behind you.
    • If in any case, one cannot escape the tsunami, then he/she should go to an upper storey of a sturdy building or climb onto a roof or up a tree. Or grab a floating object and hang on until help arrives.
    • One should remember that boats are usually safer in water deeper than 100 metres than if they are on the shore. Always move boats out to sea only if there is time. It should be safe to do so.
    • Never go to the shore to watch for a tsunami. Always try to stay away from at-risk areas until the official all-clear is given.
    • Listen to your local radio stations as emergency management officials will be broadcasting the most appropriate advice for your community and situation.

    3) After a tsunami

    • Always try to be connected to the radio for civil defence advice and do not return to the evacuation zones until authorities have given the all-clear.
    • Be aware that there may be more than one wave and it may not be safe for up to 24 hours, or longer. The waves that follow the first one may also be bigger.
    • Check yourself for injuries and get first aid if needed. Help others if you can.
    • Do not visit for any sightseeing.
    • One should extreme caution while re-entering homes or buildings, floodwaters may have damaged buildings. 
    • Be sure to take notes and photographs for insurance purposes if the building gets into damage state. If you rent your property, contact your landlord and your contents insurance company as soon as possible.

    A tsunami is actually a series of waves. One must not go to an affected coastal area until it is declared to be safe by authorities.

    Sourced: https://www.vedantu.com

    Types of possible insurance coverage

    In India insurance for perils due to tsunami can be ensured through some coverage provided in Home, Auto, and Fire and special peril insurance policies.                                                                                           Earthquake Insurance in India Insurance as a whole has a very low penetration in India. Total insurance premium In India hovers around 0.5 % of the global premium and around 1.5 % of GDP of India. Majority of the population remains uninsured. Penetration of insurance can also be adjudged by the fact that insured losses are a small fraction of total economic losses in the event of catastrophe. The Bhuj Earthquake of Gujarat is one of the greatest earthquake disasters that India has faced in the last 200 years. An official figure published by the government states a death of 17,122 persons, a figure that has since been reduced to 14,000. However, the number of fatalities is likely to have been much higher. The economic loss is US$ 4.5bn, with insured losses in the range of US$ 100m (Annual Review: Natural Catastrophes 2001, Munich Re). Earthquake risk is inbuilt in many of the Life and Non-Life policies. Life policies cover death due to various causes and the risk of earthquake is not excluded. Non-life policies provide for cover against accidental death or injury under various kinds of personal accident policies and hospitalization benefit for treatment of accidental injury under Mediclaim. As far as property insurance is concerned, Householders Insurance provides insurance coverage to the Building and its Contents. The granted covers include Fire and allied perils including earthquake. The own damage section for two wheelers and four wheelers under motor package policy provides cover against earthquake risk. Other classes of insurance such as Marine, Engineering, Rural and other miscellaneous insurance also cover earthquake risk in some form or the other.

    What does the policy against calamities cover?

    The policy (Cost: Rs 0.6 per Rs 1,000) insures your house against fire, natural calamities like floods, storms, cyclones and earthquakes, riots, terrorist attacks, gas cylinder explosions, etc. What are covered are loss of the building and its contents. What are not covered are loss or damage to documents, bonds, securities, precious stones, jewellery, cash, and valuables.

    Who among earthquake victims can claim insurance benefits? For what?

    All those individuals who are policyholders (or their nominees) can claim insurance cover. The earthquake falls within the purview of personal accident insurance policy and fire insurance cover taken by organizations, companies, business establishments and institutions. Individuals may submit that earthquake is a personal accident and claim benefits. It is legal. Only a token premium needs to be paid. Claims can be made for damages to households and business establishments, loss of belongings, death, and injuries.

    What should be done to fine-tune insurance sector for India-specific situations?

    Experts suggest that insurance against fires, earthquakes and other such calamities must be made mandatory for housing establishments, just as in the case of motor insurance, where insurance against risk due to a third party is compulsory. It is being pointed out that developed countries have exclusive property insurance policies tailor-made for specific localities. So an earthquake-prone state like Gujarat ought to have a law that makes property insurance mandatory. This, experts feel, has multiple benefits: survivors of calamities would not have to depend on charity; liability-averse insurance companies would offer housing cover only for good structures; this, in turn, would pressure builders to construct top-quality houses/complexes; priceless data on disaster-prone areas/zones would be created.

    TAC* Rates for earthquake

      *Tariff Advisory Committee on insurance
    BIS ZoneRisk ZoneRates Remarks
    Zone I 1.00% High Damage Risk Zone
    Zone II0.50% Moderate Damage Risk Zone
    Zone III0.20% LowDamage Risk Zone
    Zone IV0.10% Very LowDamage Risk Zone
    Zone-I comprises of entire north-eastern India, parts of Jammu and Kashmir, Himachal Pradesh, Uttaranchal, Rann of Kutch in Gujarat, parts of North Bihar and Andaman & Nicobar Islands. Zone-II covers remaining parts of Jammu & Kashmir and Himachal Pradesh, Union Territory of Delhi, Sikkim, northern parts of Uttar Pradesh, Bihar and West Bengal, parts of Gujarat and small portions of Maharashtra near the west coast and Rajasthan. Zone-III comprises of Kerala, Goa, Lakshadweep islands, and remaining parts of Uttar Pradesh, Gujarat and West Bengal, parts of Punjab, Rajasthan, Madhya Pradesh, Bihar, Jharkhand, Chhattisgarh, Maharashtra, Orissa, Andhra Pradesh, Tamil Nadu and Karnataka. Zone-IV covers remaining parts of the country.
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