Secure yourself first

Quote ARN -99994 for all Equity/Debt and ELLS mutual funds

EUIN - E120123

Know About Insurance

  Everyone must be seeing TV channels like ET Now, Zee Business,  CNBC Awaz, CNBC 18, NDTV Profit to get some knowledge about insurance. CNBC awaaz has some programs like your money, Sabka Sapna money money etc...

However, first we should understand what is insurance and know the different types of insurance and what is our need of the hour. Any type of insurance cover you take all depends upon your present income & the day 2 day life risks. Insurance covers your risk and provide you a mental peace in tough times.

Now I am going to cover a brief about this. However these all are my own views gathered from my experience over the years.

Types of Insurance

• Medical Insurance


• Personal Accidental insurance


• Critical illness cover/Rider


• Travel Insurance                                     


• Motor/auto/Car insurance


• Home Loan insurance - as the name suggest (it is costly so better cover through term plan)


• Life Insurance money back/endowments


• Life Insurance term plan


• ULIP -  Unit linked insurance Policy (Life insurance)

I am explaining more about the highlighted ones as others are not so important

Medical Insurance

It covers you and your family from the untimely medical expenses. It is must for everyone these days as the hospitalization expenses are sky rocketing if you/your family member unfortunately get hospitalized. People working with corporate world are covered by their employers but other individuals are not. I still recommend all to have their own personal plan as well. Reason is simple, if you leave the job and you have an existing illness then it becomes difficult to get the insurance and sometimes some employers do not provide this facility and charges a lot, in that case you can have your own plan working. Also once you cover your existing plan for 3 years claim free then you are always covered for existing diseases as well.  In such case you can take your own plan for some minimal cover to avoid hefty insurance premiums.

Now the question is how to choose your insurance:

Always compare different plans from different companies. However I recommend go for individual family covers for all the family members instead of family floater. If you calculate floater is very costly as compared to Individual plans. Example, when I took plan for myself Family floater for 5 lakhs was costing me 13K PA. When I enquired about individuals then 4 lakhs for myself, 3 lakh for my spouse and child each cost me 10K. How much you want to insure depends upon your family’s health conditions and your earnings. Almost all plans have 3 months cool of period.

Some good plans in the market are

1. Apollo Munich optima restore


2. Max Bupa – Starts insurance from 1^st day no cool of period.


3. ICICI Lombard - Family floater is better.(Has improved a lot)

 Go to http://www.policybazaar.com to compare the different premiums and features.

Personal Accidental Insurance:

This is one area which I have not explored much, however in today’s life it has become mandatory. Driving has become rash, no space to drive on roads so everyone drives daily with a lot of risk. A good insurance covers the

Accidental Death, Permanent Disability (one part, both the parts), cover for some period due to accident and loss of salary( it provides you the stipulated amount as depicted in your insurance policy for 8-12 weeks as per company).  Oriental Insurance had a very good policy this regard last year, not sure if it is still there. SBI was providing Rs 4Lakh ins. cover for Rs 100 to their account holder last week (July 10, 2012), you can check with your branch. It is normally cheap and you should insure yourself (for your family) for a good amount.

Life Insurance

When we talk about life insurance LIC strikes our mind at the first go. These days there are lot of flavours of life insurance with different companies not only LIC. However LIC is still the most reliable when it comes to traditional/endowment plans.

Always keep in mind you do your life insurance for your family not for you. It provides your family the means to live in case something happens to you and you are the sole bread earner of the family.

People always combine their life insurance and investments; I would never suggest you to do that as most of the financial advisors do. If you want good returns then invest in debt/Mutual or gold funds.  Next question come to our mind is how much I should cover for:

People say you should cover yourself for 10X of your salary; If you have a salary of 20 Lakhs then 2 CRORES. If it increases then get your cover increased accordingly, what will happen if you lose your job next year, but they never cover your assets as your insurance in your bad time, why not. You are the best guide to see what amount you should be covered for. You should take following consideration while insuring yourself

1. It should cover all your liabilities (Home/education/auto loans if any). ( Say you have liabilities of 10 L)


2. Value your current assets. Say these are (20 L) in which 5 L are liquid (equities/MF’s/FD’s) and 15L are non liquid (1 BHK flat) and take some time.


3. What is current monthly salary say 10L PA.?


4. What is your monthly expense say 50K?


5. What do you need in future say 25Lakhs for your son, 25L for your daughter?

You should then calculate it accordingly the with time intervals you need the money and taking inflation into account. It may be 10X of your salary, may be less or more also. Next question arise here which policy I should take... Never hide your existing problems if they have known medical history while taking an insurance.

Now I am going to cover different types of Life insurance then

1.  Endowment Policies: One of the most popular policies. Though people do not prefer that as the rate of return does not meet inflation. Problem lies here as people forget they offer life cover also. I would prefer put some amount here also say if you want a cover of 50 Lakhs for you then cover 5Lakhs here. Your money is safe here. You get b/w 5-7% of return here and all your money back at the end of the plan. However if you are more than 35 years then it will be very costly and go only for term plan. Choose LIC as your partner in case of Endowment/ money back plans. They have good history.


2. Money Back: It is similar to endowment but you can get your money back at different chosen intervals.


3.  Term Plans: This is the best plan to insure your life, that give you the cover you want and with very less amount. Almost all the insurance companies have offered I-Term plan now which proves to be very cheap as it excludes the agents in between and is offered online on company’s website. A person with 25 years of age can get 1 crore cover for less than 10K PA. If a person is young and earns more than 5L PA, he should get it done rather than waiting to marry etc... Some good companies offering cheap insurance
   
   
   1. HDFC protect to click
   
   
   2. ICICI i-Protect
   
   
4.  ULIP: - I am not at all in favour of them. They incur a lot of expenses and then very less insurance cover. They provide you different options of investing your money like- 100% debt, 100% equity and mix of debt with Equity. In such case I would prefer a term plan with good cover + SIP in MF’s according to my pocket. ULIP offers 2-3 switches free in 1 year, but then you need to be an expert of the markets and timely switch. Then people debate ULIPS are better as they offer switch b/w funds and we lose money in term plan, but they never think,


5. What is the liability on you for insuring the same amount as with term plan in ULIP? Also you can also withdraw SIP in case you cannot continue.


6.  How many people are experts in financial markets to know and make a timely switch? If they are so then why to go for SIP instead of stocks directly.


7.  If you are good in timing the market then you can also switch b/w the funds. It is 1% charge and after 2 switches ULIPs have more than that.

Most of the child plans are ULIP plans or traditional endowment type plans.

COVID 19 is one of the worst situation we have come across ever whether it is financial, medical or life scare. Many people have lost life, many suffered huge medical exigencies. Even many have lost /will loose jobs where they were counting earlier on GMCs. So get self secured first before making any investments. Have your personal Insurance first and as foremost priority. Remember

" When you are safe & healthy you don't take any insurance and unhealthy then noone give you insurance"

Complaints:-

As per IRDA rules, insurance company has to settle your claim in 21 working days. If they don't listen or harass then you can file a complaint to IRDA  as below

Contact 155255 (Toll Free) to register the complaint. email: complaints@irda.gov.in

If you like this article then please like my facebook and Instagram at the links below

https://www.facebook.com/sunrisefin.serv.31

Systematic Withdrawal Plan (SWP)

What is Systematic Withdrawal Plan (SWP)?​

Systematic Withdrawal Plan (SWP) is the facility by which an investor can withdraw a pre-determined amount from his existing investments in mutual funds at a pre-decided interval (weekly, monthly, quarterly, semi-annually or annually). Functionally, Systematic Withdrawal Plan (SWP) is similar to Systematic Investment Plan (SIP) but it gives an option to withdraw systematically. This helps in generating a regular cash flow for the investors. SWP in mutual fund is one of the most effective and tax efficient way to earn potential returns.​

Key benefits of ​SWP

• Tax advantage- In case of investments in equity mutual funds for a period of more than a year, the long term capital gain is exempted. Only short term capital gains are taxable at the rate of 15% (if the total income does not exceed INR 1 Crore) on withdrawals from equity mutual funds investment within 1 year. Whereas in case of investments in debt schemes, the short term capital gain (invested period is less than 3 years) is added to the investors’ income and taxed as per their tax slab. Long term capital gains in debt schemes are taxed at the rate of 20% with indexation. In Systematic Withdrawal Plan (SWP), the tax is paid only on the gains made due to the NAV movement and not on the principal part in the withdrawals making the overall tax incidence lesser. Unlike SWP, in traditional investment options the entire gain is taxed according to the investors’ tax bracket (the highest currently being 30 %) considering if the investor falls under the highest tax bracket.​
• Regular supplemental income- The option of SWP in mutual fund can help you by providing a steady source of income from your investments. This is especially useful for those who need money when their cash flow comes to a halt like retirement, or at a time when supplemental income becomes a necessity due to the altered circumstances in life.
• Meet financial goals- If planned well ahead of time, SWPs can provide a steady flow of money when most needed. They can therefore be linked to long term financial goals, such as providing a steady income in one’s retirement years or managing your child’s educational expenses.

​

Who can use SWP?

Systematic Withdrawal Plan (SWP) can be utilized by those who are planning for their retirement in the coming years. Usually the large amount of money that one receives at the time of retirement is invested in traditional savings instruments which attract income tax at the normal rates. Instead, they can make a lump sum investment in mutual funds with SWP facility. In this case, along with earning capital appreciation on the invested amount, he/she can receive a fixed amount monthly. It will help you in getting a regular income like salary even after retirement.​​

​However, the use of SWPs may not be restricted to retirees alone. It is also useful for middle-aged professionals who have the responsibility of their family. They can use SWP option to get a constant source of fund for their dependents. They can plan it for their child’s educational expenses. They can even plan for a constant source of money for their retired parents.​​

SWP calculators are also available. One can easily make all the necessary calculations before investing. The SWP calculator helps in determining the amount to be invested, withdrawal amount and the tenure. It also helps in understanding SWP meaning in mutual fund in a better way.​​

A m​​utual fund SWP is designed keeping in mind the needs, interests and financial goa​​ls of the investors. By judiciously using tools like Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP), you can meet your financial goals without having to go through the hassle of timing the markets and making wrong financial decisions that may cost you dearly and throw you off track. ​​​

​ 

Tax efficiency through SWP​​

WITHDRAW HAPPINESS THAT’S TAX EFFICIENT

Click on Image to see Large picture

Above is the tabular Presentation of HDFC Prudence fund with Initial investment of 1Cr.. and monthly withdrawal of 50000, means you are withdrawing 6% PM and still having left with huge corpus after 3 years

As you can see, withdrawals through SWP are tax-efficient as you only pay 3,233 as tax on your gains, i.e. 0.90% on withdrawals of 3.6 lakhs, as compared to a traditional savings instrument where you pay 1,11,240 on your gains.

Now, there is a further twist in this.. In case you decide to start withdrawing funds after 1 year..
then you need not to pay any tax as all EQUITY LONG term gains are tax free...

Happy Investing..
Sunrise financial services

Disclaimer:- This is a representation of facts, actual returns may vary according to market conditions.

Sources: SBI Mutual Fund Knowledge center