Does Your Existing Health Insurance Cover You for COVID-19?

Novel Coronavirus, or COVID-19 as it is called in short, is an unprecedented global biological threat that has gripped the whole world. Soon after originating in China, the infection spread worldwide and today, all the leading nations are grappling with the spread of the infection. Given the increasing incidence of the disease, the World Health Organisation (WHO) declared it a pandemic. Even in India, Coronavirus is slowly wreaking havoc as the numbers, though restricted, are rising with each passing day. More and more cases are coming to light every day and amidst this health panic, many of you must be wondering whether your health insurance policy would cover the infection or not. What do you think? Would your existing health plan cover the medical bills if you or your family member is struck with the infection?

One of the many medical insurance benefits includes coverage for hospitalization costs if you are admitted to a hospital for an illness or injury. So, by their nature, health plans would extend coverage if you are hospitalized for a suspected or confirmed case of Coronavirus infection. Even the Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines for insurance companies to cover claims arising out of COVID-19 infection. Thus, insurance companies are providing coverage against COVID-19 to their policyholders who are covered under an existing health insurance plan. However, there are some terms and conditions associated with such coverage. You need to know these terms and conditions to know whether your COVID-19 claims would be honored by your insurance company or not. So, here are some pitfalls to look out for –

• OPD expenses might not get covered

Coverage for OPD expenses is available only is selected health insurance plans. Most plans cover hospitalization costs which incur if you are hospitalized for 24 hours or more. Thus, if you incur medical expenses on an outpatient basis, wherein 24-hour hospitalization has not occurred, your claim might not be paid by the insurance company even though your health plan covers COVID-19. Thus, you should check whether your policy has OPD coverage benefit or not avail coverage against the expenses incurred on an outpatient basis.

• The pandemic situation might be an exclusion

Some health insurance plans specifically exclude illnesses which occur due to a pandemic or epidemic like situation. Since WHO has already declared COVID-19 as a pandemic, you might not get coverage for your hospitalization if your plan has a pandemic exclusion. 

• Suffering the infection within the waiting period of the policy

When you buy a new health insurance plan, there is a waiting period of 30 days to 60 days within which illnesses are not covered. So, if you have recently bought a new health insurance plan and you suffer from the infection during the initial waiting period of 30-60 days, you might not get coverage for hospitalization.

• If it is a pre-existing condition

This condition is also applicable if you are buying a new health insurance plan. Pre-existing diseases are not covered within the first 2-4 years which is called the pre-existing waiting period. So, if you are suffering from COVID-19 symptoms and you invest in a health plan for coverage, the infection would be treated as a pre-existing condition and you might not get covered for the medical costs that you incur.

If you have an existing health insurance policy, chances are that your policy would cover the medical costs you face due to COVID-19. However, if you buy health insurance online and then suffer from the infection within the first few days, the coverage might not be available. So, it is always better to find out from your insurance company whether you can avail coverage against COVID-19 and the associated terms and conditions of the coverage.  

Choose dynamic bond funds that have good track record and performance

We all know that markets are highly dynamic in nature. So, why shouldn’t our investment options also be the same? Luckily we have dynamic bond funds to cater to this need.

What are dynamic bond funds? 

Dynamic Bond Funds belong to the category of debt funds. As per SEBI guidelines, these open-ended debt funds have the flexibility to invest across varying durations. They can invest in short-term bond funds in one month and long-term in another, basis the direction being followed by market interest rates.

Dynamic bond fund investments are taxed as per other debt funds. If the holding period is three years or more, the returns are taxed as Long-Term Capital Gains (20% tax rate with indexation benefit). Short-term capital gains (if the investment is redeemed before three years) are added to overall income and taxed basis the applicable income tax slabs.

How do these debt funds work?

Dynamic Bond funds seek to generate higher returns by switching between varied durations basis the market conditions. Bond prices and interest rates are inversely related to each other. When the interest rates go down, bond funds with longer durations get rewarded handsomely. However, in case the interest rates climb up, these funds stand to lose out a lot. Fund managers in charge of dynamic bond funds can reduce the duration (when interest rates are going up) to soften out the blow from dwindling bond prices. Similarly, they can increase the duration of the underlying investment so as to capitalize on the rising bond prices.

Hence, if you invest in dynamic bond funds, your debt funds risk is managed and the potential for earning higher returns is also enhanced.

Factors impacting the success of dynamic bond funds

1. Performance

What do you do before making any online purchase? Read the reviews to see how the product has fared for others. Similarly, before you invest in dynamic bond funds, you should analyze the performance (in absolute terms as well as in relation to benchmark and peers) for a period of at least 3 to 5 years. Going by just the last year’s performance scorecard is likely to result in wrong choices.

2. Fund House

If you wish to invest in dynamic bond funds, then you need to choose a fund house with a healthy track record. Factors such as technical research, market knowledge and understanding and agility to respond to changing market conditions play a crucial role in maximizing the returns as well as managing the debt funds risk.

3. Fund Manager

Dynamic Bond Funds are reactionary in nature. The success of these funds relies heavily on the fund manager’s ability to catch the troughs and peaks of the interest rate cycle and change the duration accordingly.

Risk in dynamic bond funds?

Debt funds generally have lower debt funds risk quotient and are considered suitable for conservative investors. However, those who are looking at investing in dynamic bond funds need to have a healthy risk appetite. This is because sometimes the trend (for interest rates) is not clearly visible. There are times when the fluctuations (up as well as down) happen very swiftly (too fast for even the best fund managers) and these debt funds get hit severely.

Best of the lot

If you want to invest in dynamic bond funds, you should consider these top-performing schemes:

1. ICICI Prudential All Seasons Bond Fund
2. Edelweiss Dynamic Bond Fund
3. Mirae Asset Dynamic Bond Fund
4. Kotak Dynamic Bond Fund
5. Aditya Birla Sun Life Active Debt Multi Manager FoF Scheme
6. Quantum Dynamic Bond Fund
7. Tata Dynamic Bond Fund
8. Quant Dynamic Bond Fund
9. IDFC Dynamic Bond Fund
10. L&T Flexi Bond Fund

Final Words

Dynamic Bond funds need to be given a minimum of three years (five years for optimum results) to get the most out of your investment. A value research study revealed that at the 3-year time juncture, the outperformance of dynamic bond funds (over short-term funds) was around 60%-70%. The figure jumped to 80%-90% at the five-year time frame.

Invest in dynamic bond funds if you have the appetite for higher debt funds risk and hunger for higher returns! 

All you need to know about EPF

A wise person had once said, “it is never too early to start planning for retirement”. While there are multiple retirement plans available in India, one scheme that has the maximum recall value for salaried individuals is the Employee Provident Fund (EPF) scheme. 

What is the Employee Provident Fund (EPF) scheme?

Launched in the year 1952, the EPF scheme seeks to provide employees with a way to plan for their retirement.  This social security scheme enables employees to save a certain portion of their monthly income in a fund dedicated to financial planning for important life events such as retirement, child’s marriage or education, etc. The USP of this scheme is that there are two sets of contributors – the employee as well as the employer. All companies or establishments which employ 20 or more people need to contribute to this scheme. Currently, there are more than 6 crores active PF subscribers in the country.

Here are some of the benefits associated with the Employee Provident Fund (EPF) scheme in India:

• It Helps to build a sizeable corpus by the time you reach your retirement stage
• It is an affordable financial planning tool as you do not need to invest a large lump-sum.
• The scheme offers a host of tax concessions and benefits
• It acts as a financial back-up during emergencies

Contribution

Employees need to contribute 12% of their salary towards PF contribution every month. The employer makes a matching contribution. The employer’s contribution is split in the following manner:

• 3.67% towards the Employee Provident Fund (EPF) Scheme
• 8.33% towards Employee Pension Scheme (EPS)

(Salary for the purpose of EPF includes basic salary and dearness allowance. Employer’s contribution is 10% for jute, brick, beedi and guar gum industries or companies which have been declared as sick.)

Employees are allowed to contribute an additional amount (in excess of 12% but limited to 100% of their salary) towards the EPF scheme and earn interest on the same. However, employers are not required to make an additional contribution at par with the employee’s voluntary contribution.

Rate of Interest

The EPF interest rates are notified by the Government on a yearly basis. The rates are decided after taking into consideration a host of factors such as economic growth. For FY20, the EPFO has lowered the interest rates to 8.5% per annum (from 8.65% in the previous year). Here is a look at the EPF interest rates in the past.

Impact of tax on EPF deposits

EPF deposits are exempt from tax at all three stages – deposit, interest accrual and maturity. Additionally, investments made in Employee Provident Fund (EPF) scheme qualify for deduction as per Section 80C. However, the tax exemption benefits are not available if the withdrawals are done before the completion of five years.

Transfer of EPF

EPF offers funds transfer facility when you change your employer. In this process, the UAN (Universal Account Number) plays a critical role. This 12-digit number is like a social security number and remains constant throughout an individual’s life, irrespective of the organization he or she is working with. UAN allows employees a single unified platform through which they can transfer their funds between companies, download PF statement as well as make withdrawals.

Knowing your EPF Balance

EPFO has leveraged technology to make employees’ lives easier. They can check their EPF balance through multiple ways:

• Through the EPFO website
• On the Umang App launched by Government
• By sending an SMS 
• Giving one missed call

Withdrawal of EPF

While EPF is broadly seen as retirement plans, it can also be used to finance other important life events such as marriage, education, house purchase or medical expenses. Partial withdrawals (referred to as non-refundable loans) are permitted after the completion of five years.

Summing it up

Employee Provident Fund (EPF) scheme is one type of retirement plan in India that is in-built in the system. Being a risk-free investment avenue that can help you amass a considerable corpus to meet your financial needs post-retirement, it is a win-win deal for all salaried individuals.

ELSS – Why they are a must in your portfolio?

Mutual Funds have taken over the financial world. While most people invest in mutual funds with the hope to grow their money and meet their financial goals, there is one more important aspect that some mutual funds take care of – reducing your tax burden. ELSS are tax-saving mutual funds that are eligible for tax exemptions as per the Income Tax Act. 

How ELSS Funds work?

Equity Linked Saving Scheme or ELSS are diversified open-ended mutual funds that predominantly invest in equity and equity-related instruments. As per the SEBI Regulations, these schemes need to mandatorily have 80% equity exposure. ELSS Funds invest across market segments (large-cap, mid-cap, and small-cap) and industries. The core objective of these schemes is to maximize wealth appreciation in the long run.

ELSS Mutual Fund Benefits

So, are you wondering why you should include this tax-saving mutual fund in your portfolio? Read on. 

There are a lot of ELSS Mutual Fund Benefits wherein only the top five reasons are listed here. Read to know why you should consider investing in these mutual fund schemes.

1. Tax Exemption

The biggest advantage of these schemes is that they qualify for tax-deduction as per Section 80C of the Income Tax Act. You can claim a deduction against investment in ELSS up to Rs. 1.5 Lakhs in a financial year.

2. Higher Returns

ELSS Funds have the potential to generate the highest returns amongst all tax-saving instruments. ELSS returns are market-linked and their high equity exposure enhances their return generating capability, especially in the long run. In the last three years, these funds have generated about 13.18% returns, making them the most lucrative (financially) tax-saving option.

Additionally, these schemes offer better post-tax returns. Long-term capital gains till Rs. 1 lakh (per fiscal year) are exempted from tax. The gains over that limit are taxed at 10%. Short-term capital gains carry a tax rate of 15%. Higher returns coupled with better tax rates give double benefits to investors.

3. Shorter Lock-in

Investments in ELSS have a mandatory lock-in period of three years as compared to the other products eligible for tax deduction under section 80C. Thus, compared to other tax-saving alternatives, this is the shortest lock-in period. This is one of the most important of the ELSS Mutual Fund Benefits.

A look at this below table will help you do the comparison:

Tax-saving instruments	Lock-in Period
Bank FDs (qualifying for tax exemption)	5 Years
National Saving Certificates	5 Years
ULIPs	3 years
Life insurance policies	Minimum  of 5 years
PPF	15 Years (partial withdrawals are allowed from the 7th year)
NPS	Till retirement

4. Professional fund management

One of the reasons mutual funds have become a preferred investment choice for investors is that they are professionally managed by financial experts. Fund managers are well-equipped with technical and market knowledge to make the best decisions for the investor’s portfolio. This becomes easy after you understand how ELSS Funds work.

5. Flexibility

ELSS Funds offer a great deal of flexibility to investors. For example, investment in Public Provident Fund cannot exceed Rs. 1.5 lakhs in a year. There are no such restrictions on ELSS investments. Additionally, unlike ELSS, other-tax saving instruments come with an end date. Hence, you can continue to invest money in ELSS and link them to a specific financial goal.

So, once you understand how ELSS Funds work, the next question becomes extremely important.

So, how do you choose the right ELSS fund?

These factors can help you select the best ELSS Fund for your portfolio.

1. Fund House’s track record
   A good fund house can make all the difference to your investments. Look at the track record of the fund house, quality of fund managers, research capabilities, etc.
   
2. Returns
   A good fund should be able to perform consistently well in absolute terms as well as in comparison to peers and benchmarks.
   
3. Costs
   Every fund houses levy a charge for managing the investor’s money. It is expressed in the form of a percentage and is known as the expense ratio. Higher is the expense ratio, lower is the net income for the investors.
   
4. Financial parameters
   Some financial ratios also help you in choosing the right fund. Factors such as standard deviation, alpha, beta,  Sharpe ratio enables you to understand the risk profile of funds.

Final Words

The wide range of ELSS Mutual Fund benefits makes them an all-rounder. They help to prevent tax outflows as well as grow your corpus. If you stick with them for a long time period, they have the potential to make you a very happy investor.

Invest in a PPF scheme to get tax benefits and risk-free returns

When it comes to investment avenues, there are market-linked investment avenues as well as fixed-income investment avenues. Market-linked avenues provide non-guaranteed returns while fixed income avenues do not depend on the market. They offer a fixed rate of interest irrespective of the volatility in the market. A PPF scheme is a fixed income investment avenue which is quite popular among investors. 

Let’s understand what this scheme is and how it gives you tax benefits and secured returns – 

What is a Public Provident Fund (PPF) Account?

A Public Provident Fund (PPF) account is an account which you can open with your bank. It is a long term savings account which helps you accumulate a guaranteed corpus through fixed interest incomes. The money that you deposit in the PPF Account continues to earn interest at a specified rate and when the account matures you get a lump sum corpus.

Public Provident Fund (PPF) Account eligibility

A PPF Account can be opened by resident Indian individuals. Hindu Undivided Families, companies or NRIs are not allowed to open a PPF Account in their names. Moreover, the PPF Account cannot be opened or operated on a joint basis. One account is allowed in the name of one individual only. 

How does the Public Provident Fund (PPF) Account work?

The PPF account can be opened with any bank. You need to make a minimum deposit of INR 500 to open the account. The maximum deposit which is allowed is INR 1.5 lakhs. Once opened, the account should be kept active by making at least one deposit in the account. You can make a deposit either in a lump sum or in instalments as per suitability. The deposits accumulated in the account earn interest which is determined and fixed by the Government of India. This interest rate is reviewed every quarter and can increase or decrease. Currently, till the quarter ending on 31st March 2020, the PPF interest rate fixed by the Government is 7.90% per annum.

Maturity and withdrawals 

The PPF Account has a fixed tenure of 15 years. This tenure can be increased by 5 more years if you want to stay invested. Once the tenure of the account comes to an end, the account matures and you can redeem it to avail a lump sum corpus. 

Partial withdrawals are permitted from the PPF Account before the account matures. Such withdrawals are allowed from the 7th year of deposit. The amount of withdrawal is limited to 50% of the balance of the PPF Account as at the end of the 4th year. One partial withdrawal can be done from the account in one financial year starting from the 7th year of opening the account.

Public Provident Fund (PPF) tax benefits 

As mentioned earlier, the PPF account is a tax-saving investment avenue. The Public Provident Fund(PPF) tax benefits which you can avail from your investments into the PPF scheme are as follows –

Public Provident Fund (PPF) tax benefits

• The amount of money invested into the PPF account is allowed as a deduction under Section 80C of the Income Tax Act, 1961. The maximum deduction allowed is limited to INR 1.5 lakhs
• If you make partial withdrawals from the PPF Account, the amount of withdrawal would also be allowed as a tax-free benefit in your hands.
• The fixed interest income that you earn on your PPF contributions is completely tax-free.
• When the account matures and you redeem the account, the accumulated balance which you receive from the investment is tax-free. You don’t have to pay any tax on the redemption proceeds from the PPF Account and you can get a tax-free corpus.

A Public Provident Fund (PPF) account is, therefore, a tax saving as well as a risk-free investment avenue. You should invest in the scheme for the benefit of availing fixed returns and also to lower your tax liability. 

Why ELSS mutual funds are beneficial for your financial planning

Mutual funds are looked upon as a favourable investment avenue by many. They give you attractive returns, diversify your risks over a vast portfolio, suit the risk preference of all types of investors and also let you invest affordably through SIPs (Systematic Investment Plans). Though there are different types of mutual fund schemes, ELSS mutual funds are very popular among investors. Let’s understand why – 

What is an ELSS mutual fund?

An ELSS mutual fund is an equity-oriented mutual fund scheme which has at least 65% equity exposure in its portfolio. The scheme allows you tax benefits while creating an attractive corpus for your financial needs. The fund has a lock-in period of 3 years after which it can be redeemed fully or partially.

ELSS benefits

There are many ELSS benefits which make ELSS investments very popular and favoured among investors. These benefits are as follows –

• Easy to invest

You can invest in an ELSS fund easily either online or offline. You can also invest in a lump sum or in monthly instalments through Systematic Investment Plans (SIPs). The investments are affordable and you can start investing in the ELSS mutual fund with as little as INR 500. Such affordable investments allow even small investors to save and create a substantial corpus over time. If you choose SIPs, you can save regularly and get the advantage of rupee cost averaging. You, therefore, don’t have to time the market movements. Moreover, SIPs also give you the benefit of compounding and help you earn good returns over a long period of time.

• Attractive returns

Since ELSS mutual funds are equity-oriented schemes, they offer good returns. If numbers are to be believed, one of the best ELSS fund, Axis Long Term Equity Fund has given an annual return of 28.7% and a CAGR of 17.01% over a 3-year period as on 19th February 2020. Such high returns help you to maximize your investments and build up a substantial corpus over time. Since returns dominate your preference of an investment avenue, ELSS funds sure top the chart.

• Disciplined investment

ELSS mutual funds have a lock-in period of 3 years and you cannot redeem your investments before the lock-in period is over. This creates a disciplined approach to savings and you can remain invested in the scheme for a good enough tenure to generate returns. Thus, ELSS funds help you avoid the temptation of early withdrawals or redeeming your investments for any short term financial need making you disciplined towards investing. This disciplined investment grows your corpus, gives good returns and creates a corpus for your financial needs.

• Tax benefits

Last but not the least, ELSS investments give you tax benefits and this is one of the primary reason why the investment is favoured by investors. The money that you invest into the ELSS scheme is allowed as a deduction under Section 80C up to INR 1.5 lakhs. Through this deduction, you can lower your taxable income and reduce your tax liability. In fact, through ELSS investments you can save up to INR 45,000 in taxes if you are in the 30% tax bracket. Even in case of returns generated from the scheme you get tax benefits. Returns up to INR 1 lakh are completely tax-free in your hands. Excess returns are, however, taxed but the tax rate is 10% which is not very high. Thus, ELSS investments are tax-efficient and beneficial.

With these benefits ELSS mutual funds become a favourable investment avenue. So, choose from a list of the best ELSS funds for investments and tax planning and create a corpus to meet your financial goals.