Question: I am 45, I am overweight, I smoke and drink, work in a high-stress job and keep irregular hours, and do not have either a life or a health cover. Is it too late to buy them?

Answer: Life insurance companies categorize individuals under low and high risk category. Being overweight or a chain-smoker and a heavy drinker certainly puts you on a high-risk category as far as your life insurance in concerned. However, that does not mean, that you cannot acquire a life or a health cover.

Apart from the financial underwriting that largely decided how much of life cover can be given to an individual, all insurance companies have their own medical underwriting guidelines that help them to decide on the health profile of the individual. Some of the factors considered for placing a life on high or low risk health profile are height, weight, state of health, history of disease, amount of cover and the occupation. The insurer also carries out a series of medical tests to determine the health risks.

For all lives falling under the normal health category, the insurers cover the risk and the life protection is provided to the individual. However, the moment the risk appears to be high as per the insurer’s standards, the insurer resorts to asking higher premium from the individuals. This is called the ‘loading’, ‘rating’ or ‘extra-premium’, which the individual has to pay over and above the premium, which is paid by healthy-class of individuals.

In certain cases, the life protection is totally declined to the individual and the entire premium, is paid back to the individual. According to the defined benchmarks, the life of the individual is considered too risky and the insurer is reluctant to offer any level of protection to the individual.

However, that might not be the case always. The perceived medical factors like overweight should not be the reason for one to stay away from applying for life cover. Even a normal looking and healthy individual may be declined a protection if negative factors surface after the medical tests. Buying insurance when one is in the best of health is the right approach.

Disclose all material information about your health and let the insurer decide. Even if there is a ‘loading’ within manageable amount, go ahead and be insured. In case, the ‘loading’ is too high, lowering of the amount of life cover or even the term of the plan can be sought. In case of of health insurance, the insurer might as well ask you to undergo medical tests and submit reports. Also, the pre-existing diseases are never covered for the initial 2-4 years. Hence, company’s risk is reduced to that extent. It is certainly not too late for cutting down on weight and stop the use of tobacco for a better health, for you and your family.

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Wealth management services in India are generally thought to be the preserve of the rich. It is assumed that the middle-class hardly has any wealth to be managed, what with the monthly expenses of household and lifestyle leaving a gaping hole in your pocket. And that is where you are wrong. Everybody can benefit from wealth management services. It helps define financial objectives in line with your incomes and expenditures.

How it works

• Your Financial Risk profile is gauged with reference to your personality, earnings, assets, liabilities and life goals. If you are able to take bigger risks, there is a likelihood of bigger returns.

• Your investment portfolio is analyzed. It is an assessment of all your assets over the quality of returns they generate against the cost of acquisition.

• Then, your investment portfolio is re-jigged or fine-tuned, as necessary. Thus, your portfolio matches your needs and expectations at different points of time in your life.

• You pay for wealth management services because they employ their experts to do a customized research to find the best investment options only for you. And that’s how you get to manage your finances better.

Now you don’t need to worry about your short-term, medium-term or long-term financial objectives. The right time and the right product to invest in, is no longer your care. You hired wealth management services to do all the worrying for you. Now you just count how profitable are your returns.

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Question: I am 27 and working in Government sector. My annual income is 4.5 lakh. I want to invest in MFs and want a return of 6 lakh in 4-5 years. What fund is suitable for me and how much money to invest? Also, is that safe to invest in ULIP?

Answer: With a time horizon of 5 years or more, you should invest in diversified equity Mutual Funds through Systematic Investment Planning (SIP). To accumulate Rs. 6 lakh over next 5 years, you should invest about Rs. 6,000 per month for which you may start three SIPs of Rs. 2,000 each, in funds which have been performing well consistently.

Firstly, ensure you have a life cover of at least 10 times of your annual income. This is best met through a term plan. Both Mutual Funds and ULIPs are market-linked investments, hence returns would be subject to volatility. Therefore, invest through ULIPs for your long-term needs and short-medium term goals.

Regarding tax savings, do not invest merely to save tax. Choosing the right tax saving investments depends on which goal you are looking to meet through tax saver. Investments in ELSS Mutual Funds and ULIPs and, even, term plan give you tax benefits.

Ideally, spread your investments across medium term and long term plans. Choose to invest in equity-oriented investments like equity-oriented investments like equity MF and ULIPs for long-term investments.

For more queries, write to us at grow@bajajcapital.com

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Ever considered what could be your life worth, in terms of money? Your productivity, your income levels, your assets, they all have a monetary value. Then why cannot their sum total, that is your life, also have a value attached to it? To calculate the Human Life Value for a person to be insured, an HLV calculator is required.

For a secure life for your family, you need to calculate this figure. When you get the life insurance based upon the calculations regarding your income, expenses, assets as well as liabilities, you are assigning the correct value for your life.

What needs to be entered in an HLV Calculator

•    Annual household expenses

•    Annual income

•    The number of years your family should have this annual income

•    Expected rate of inflation

•    Expected return from the investment

•    Outstanding loans and liabilities

•    Current investments and assets

•    Current value of insurance

After you enter these values, you get the figures telling your Human Life Value.

What the HLV Calculator tells you

•    How much income do your dependents require

•    Your net worth by deducting outstanding liabilities from extant investments

•    How much insurance you must have

By knowing your HLV, you can buy the correct amount of life insurance. In the unfortunate circumstance of your passing away, your family will be financially secure. They would live the lifestyle that you have worked hard for, even after you are gone.

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From 1st January 2004, the Government of India launched the National Pension Scheme. Barring the Armed Forces, all new employees of the Central Government had to contribute to it. The objective was to inculcate the habit of saving for retirement.From 1st May 2009, NPS is available to all Indian citizens, including the unorganized sector, on a voluntary basis.

To develop and regulate the pension market, the government set up the Pension Fund Regulatory and Development Authority. The PFRDA has authorised some banks, private financial institutions and the Department of Posts for opening NPS accounts for citizens.

How it works
 
•    Each subscriber is allotted a unique PRAN (Permanent Retirement Account Number), which won’t change, and can be used throughout the country.

•    PRAN gives access to two Accounts:

    Tier-I: You can check the accumulated sum but cannot withdraw from it.

    Tier-II: It is a voluntary savings account. The subscriber can withdraw at will. However, there are no tax benefits in this account.


Tier-I Account benefits

Investments in a Tier-I Account are exempt under Section 80 C, although the withdrawal of pension would be taxable. All charges of a Tier-I Account are paid by the employer.

Service Tax and other levies would be charged as applicable.

NPS benefits

•    Know the value of investment on a daily basis.

•    PRAN stays the same even if you are transferred.

•    PFRDA regularly monitors the performance of the fund managers.

Start your pension savings today.

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