Life insurance can prevent the burden of your loan EMI on your family

Loans have become a common part of everyone’s lives. Just as a house, a car, a trendy mobile phone, and other things have become a necessity, a loan is often used to pay for these necessities. When you avail of a loan you are required to pay it off within a specified duration. You, therefore, plan your budget in such a way that you are able to pay off the loan within the specified duration. But what if you face premature death? Who would pay off the loan then?

In case of the death of the borrower, the loan burden shifts to his family. Thus, in case of your premature demise, your family would have to pay the loan EMI to pay off your debt. Besides suffering a loss of income on your death, your family would face an additional credit burden which might land them in a financial crisis. Can this crisis be handled?

Yes, it can be. You can buy a life insurance policy to take care of your loan burden in case of your sudden demise. Life insurance plans primarily cover the risk of premature death. In case of death of the insured, a death benefit is paid to the family which helps them manage their financial problems. Thus, if you buy a life insurance policy, the financial crisis faced by your family in your absence can be avoided through the death benefit paid by the policy.

When it comes to life insurance, a term plan policy is the best way to cover your liabilities in your absence. A term plan policy is the most basic form of life insurance that covers the risk of premature death. This is a pure protection plan which costs very less and allows you to opt for a high sum assured. When you choose a high term insurance cover, your family gets sufficient financial assistance to meet their financial needs and also pay off any outstanding loan that you have left behind. High term insurance cover, therefore, provides financial security to your family and takes care of your loan EMIs. 

Other benefits of a term insurance plan include the following –

1. Since the premium of the policy is low, you can easily afford to opt for a high term insurance cover. This high cover ensures complete financial protection for your family in your absence. Moreover, the low premiums are also affordable on your pockets making you able to continue the coverage without any strain.
2. Nowadays, a term plan policy offers a wide range of coverage benefits including inbuilt rider benefits. Thus, the plan not only allows coverage against premature death, it also covers other contingencies which you might suffer and provides financial assistance in such contingencies. For instance, if the plan has an inbuilt critical illness rider, a range of illnesses are covered and if you are diagnosed with a covered illness, a lump sum benefit is paid by the policy
3. Term plans also allow coverage for a longer tenure which can go up to 99 or 100 years of age. Thus, you are assured of longer coverage 
4. There are specific mortgage redemption term insurance plans which exclusively cover your liabilities. In case of premature death, the outstanding balance of  the loan is paid off by the plan avoiding the loan burden to fall on your family
5. Term plans also help you in saving tax. The premiums paid for the policy are allowed as a deduction from your taxable income. You can claim a deduction of up to INR 1.5 lakhs under the provisions of Section 80C of the Income Tax Act, 1961. The benefit paid by the plan is also allowed as a tax-free income for your family thereby giving them a higher corpus for their financial needs.

Life insurance policies, especially term plans, are, therefore, an ideal way to cover your outstanding liabilities so that your family gets to live a debt-free life in your absence. So, invest in a suitable life insurance plan, with an optimal coverage level, so that your loan EMIs can be met with the plan’s benefits if you are not around.

How Life Insurance protects your child's education and career goals?

Life is unpredictable and when it throws a challenge your way you might suffer financial troubles. When you have children, you want the best for them. You work hard day in and day out so that your child’s future is financially secured. But what if life puts a stop to your child’s dreams?

While you earn and save for your child, premature death can put a stop to securing your child’s future. Thus, you need a financial plan to secure your child’s education and career goals. This is where a life insurance policy comes in handy. A term insurance plan helps you secure your family’s financial needs when you are not around. When you buy a term life insurance policy online, you can secure your child’s education and career goals too. Let’s understand how –

1. Term plans allow you a high coverage level

Term insurance plans have low premiums. These low premiums allow you to afford a high sum assured level. A high sum assured level helps you meet your family’s financial needs. In your absence the sum assured not only helps your family to meet its financial needs, it also creates a corpus for your child’s future needs. Education costs are expensive and with time they are expected to increase. That is why you need a high sum assured to take care of your child’s education needs. A term plan lets you afford a high sum assured which would help meet your child’s future goals.

2. They are affordable 

As mentioned earlier, term plans have low premiums. Thus, they are easily affordable and help you plan for your child’s future easily. You can pay the premiums of the policy easily and secure your child’s future against unforeseen contingencies.

3. They can be easily bought

Buying a term insurance policy has been made simple with the advent of the internet. Today you can buy a term life insurance policy online from the comfort of your home or office. Moreover, when you buy the term life insurance policy online you can also get attractive premium rates and choose the best plan through comparison.

4. Term plans help in tax saving

If securing your child’s future was not enough, you get the added advantage of tax saving through the policy. Term insurance plans help you reduce your tax liability. The premiums paid for the policy are allowed as a tax free deduction from your taxable income. You can get a maximum deduction of INR lakhs under Section 80C by investing in term plans. Moreover, the benefits which are paid by the policy are also exempted from tax giving your family a tax-free corpus for their needs.

With these benefits, term life insurance policies can prove to be a game-changer in your financial portfolio. However, when you buy a term insurance plan, here are some aspects which you should keep in mind –

• Don’t skimp on the coverage amount. Remember that you are investing in a life insurance policy only to create a secured financial future for your child. Given the rising cost of education, considerable funds would be needed to fund your child’s future which can be ensured if the sum assured is optimal.
• Do not delay buying a term insurance plan. The earlier you buy the earlier can you get the coverage of the policy
• Choose suitable riders with your policy so that you can enjoy a comprehensive scope of coverage under the policy
• Go for the maximum policy tenure. The longer the policy covers you, the longer you can enjoy financial security

While you are investing for your child’s bright future, don’t forget to secure your finances with a term life insurance policy. The coverage offered by the policy along with its tax saving benefits make it an ideal tool of financial security for your child’s dreams. So, buy a term insurance plan and protect your kid’s dreams from being shattered.

Explain death cover in term insurance

Life is uncertain. But the same need not be the case for the financial needs of your loved ones, in your absence. A term insurance policy is one of the easiest, hassle-free and quick ways to ensure that you can provide for your dependents, even when you are not around anymore. 

Meaning of Term Insurance

Term Insurance is the simplest form of the life insurance policy. These schemes upon the death of the insured person (policyholder) pay a stated amount (also known as sum assured) to the nominee or beneficiary. There are no maturity benefits under these plans. 

A Term Insurance policy remains active for a particular period of time. The premium for these policies depends on a host of factors such as age, general health or life expectancy, occupation, etc.

Unlike other life insurance policy variants, there are no savings, profit or other such components built-in term insurance cover plans. Due to their sole offering of a death cover, they are also known as pure life insurance or protection policies. Term insurance policy is a great way to financially secure your dependents’ lives in your absence, especially in an unfortunate case of untimely death.

Why term insurance is a must for everyone?

1. Affordable and higher coverage

When it comes to life insurance, it is often said that you should have a cover which is at least 10 times your income. Such high coverage, without burning a deep hole in your wallet is feasible only with a term insurance policy. The premiums for Term Insurance cover are much lesser than other life insurance plans. 

Term insurance policy, due to its simple construct, is able to provide a higher coverage (sum assured amount) at an affordable premium. This is the most economical way to offer optimum financial security to your dependents.

2. Riders

Term insurance policies also give the option to further enhance the insurance coverage with the help of additional riders. For instance, disability cover, higher coverage in case of accidental death, lump-sum payment on diagnosis of any critical illness such as cancer, renal failure, etc.

3. Tax Benefit

Premium paid towards these policies qualify for a tax deduction as per the Income Tax Act (Section 80C). Moreover, death benefit payouts made to beneficiaries are also exempt from any tax in the hands of the recipients.

Inclusions of a death cover

Death cover is the key highlight of a term insurance policy. A death cover entitles the beneficiary to receive a lump-sum payment on the insured’s demise. However, it is important to understand the type of deaths which are covered or excluded under term insurance cover. While each insurance provider may have their own terms and conditions, these are the generally accepted guidelines:

1. Natural death

Death caused by natural conditions such as health-related or medical issues, old age, etc. are eligible for payment under term insurance cover.

2. Accidental death

If the policyholder dies in an accident, the term insurance cover will be applicable.

3. Suicide

Usually, insurance providers do not accept these claims for the first 12 months of the policy. However, from the second year onwards, death due to suicide are also included in the term insurance cover.

Some of the commonly excluded deaths under term insurance policies are:

• If the insured is involved in any criminal or illegal activity which leads to his or her death.
• If the death is due to a road accident wherein the policyholder was drunk or under the influence of other narcotic substances.
• If the policyholder’s death takes place during an adventure, sports or any such hazardous activity (unless covered by an additional rider)
• Death due to self-inflicted injuries, diseases which are sexually transmitted or substance abuse
• Death due to pre-existing diseases or health conditions
• Policyholder’s death due to pregnancy-related complications or during childbirth

To sum it up in the words of a wise man, “term insurance is part of a good defensive plan”. It brings financial security for your loved ones in your absence. But more importantly, it takes care of not just tomorrow but your today too. It gives you peace of mind knowing that you have done the best you could have for your dear ones!

How to open the NPS Account through ETMONEY App?

The National Pension System (NPS) is a market-linked retirement savings avenue which helps you plan for a tax-effective retirement corpus. The scheme helps you build up a substantial retirement corpus over your working life and then gives you a tax-free benefit when you reach 60 years of age. Moreover, the NPS scheme also promises pension payments throughout your lifetime after it matures. These pension payments help you get a regular stream of income even post-retirement.

Since NPS investment is an attractive choice, many individuals opt for the scheme. There are various modes of investing into the NPS scheme. The ETMONEY mobile application also allows you to open an online NPS account. In fact, investing in the NPS scheme becomes quite convenient through the ETMONEY app. Do you know how to open your NPS account through the app?

Here’s the detailed process of opening an online NPS account through the ETMONEY app –

• Download the ETMONEY application on your Smartphone from Google Play Store or Apple Store depending on your mobile phone’s operating system
• Once downloaded, register on the application using your email ID
• The application would ask your permission to access your phone inbox to send and receive SMS. You can hit ‘Continue’ to grant access to choose ‘Ask me Later’ to proceed to the next page
• The application would, then, create your profile. You would see different options for investments, insurance, and loans. You can also track your monthly expenses using the application
• On the app’s home page, there would be an option ‘Retire Rich’ under which you would be given the option to invest in the NPS scheme
• Choose the NPS investment option and a new screen would appear. It would show you the tax benefits of NPS, its returns, how it works, NPS calculator, how the investment is allocated and also FAQs on NPS
• On the bottom of the page, there is an ‘Invest Now’ button. Click on it to begin your investments 
• You would then be asked if you have invested in NPS earlier and your date of birth in DD/MM/YYYY format
• Then you would have to choose your risk profile from Aggressive, Moderate, or Conservative profile options. The aggressive profile has a high equity exposure while Moderate has a moderate exposure. Conservative profile, on the other hand, has low equity exposure thereby preventing your investments from market volatility. Moreover, based on your age, the application would also recommend the suitable risk profile which you should choose.
• After you choose your risk profile, the fund managers would be listed. Their respective fund sizes and 5-year returns would also be shown so that you can choose a suitable fund manager to manage your investments and give you the best returns
• After the fund manager is selected, you would be asked the lump sum investment amount which you would like to invest
• Specify the amount and click to agree on the terms and conditions of the application
• Click on ‘Continue’ and you would be shown the total amount payable including GST
• Confirm the amount to proceed to invest
• You would  have to enter in your PAN Card number as it is compulsory for NPS investments
• Once your PAN number is verified, choose whether you are an Indian resident or an NRI
• Provide your bank account details and scan and upload a copy of your account’s canceled cheque for verification purposes
• Thereafter, you have to make the payment from your bank account to complete the investment
• Once the investment is done, you would get a confirmation message and also your PRAN account number through which you can track and monitor your NPS investments

The ETMONEY app, therefore, eases the whole process of opening an online NPS account. It takes a few minutes to invest in NPS through the application. The application also helps you track your investment and monitor the returns easily with a few clicks of the button. So, if you want to invest in the NPS scheme, download and use the ETMONEY app for a convenient way to invest.

Equity fund investment strategy to get max returns and stability

The global economy is already experiencing a slowdown due to the coronavirus pandemic. With businesses of various sectors coming to stand still, there would be a rise in unemployment level and fall in consumer demand. As the modern world is facing the challenge of a global pandemic for which it was unprepared, one may not be able to talk about the severity of its impact on the economy for the days to come. The investor community has also been experiencing volatility and uncertainties due to this economic situation. However, during this volatile period, investing in equity mutual funds with certain strategies can help you achieve financial goals with stability and optimum return.

So, how can you strategize your equity fund investments to get maximum returns and stability?

Equity mutual fund investment strategies for optimum returns and stability

In the current market scenario, having a long-term investment strategy can optimize your returns in an equity-based investment. Here are certain tips to define your long-term equity mutual fund investment strategy for generating maximum returns and stability –

• Be disciplined and invest systematically: In this volatile market, it is important to follow a disciplined approach towards investment. Save regularly and systematically which will not be heavy on your wallets. With the professional management of your money, equity mutual fund investments offer you a choice to invest a certain fixed amount systematically every month. A systematic investment plan helps you tide over market volatility as it works on the principle of rupee cost averaging. As the markets are down if you have already invested in best performing equity funds through SIP, consider increasing your monthly investment amount.

SIP is the best way to invest in equity mutual funds during the volatile market to achieve your long-term financial goals along with helping your investments to stay stable during market turbulence.

• Diversify within the equity fund choices: There are multiple equity fund types are available to choose to depend on your investing style, risk-taking ability, and goal. Classification of equity funds is done on the basis of the market capitalization of underlying stocks in the portfolio, diversification, taxation and by sector-orientation and investing themes. In the volatile market scenario, you can diversify your equity fund investments among the various classification of equity funds such as large-cap funds, value funds, focused equity funds, sectoral funds, and thematic funds. For example, as the pharma sector has become attractive again and expected to perform well in the coming days, you can choose to invest part of your money in sectoral-pharma funds. For long-term stability, you can consider investing a major part of your money in large-cap equity funds that invest in blue-chip stocks.

• Evaluate the fund performance: Once you decide on the classification of equity funds for your consideration, it is important to evaluate the performance of funds in each category so that you can invest in best performing equity funds. When it comes to evaluating performance, you need to also have a long-term outlook in consideration of past performance. For example, if you are planning to invest in large-cap funds, sectoral-pharma funds, and focused funds you need to list out the best performing equity funds in each category. There is Axis bluechip fund, HDFC index Sensex fund, and Mirae asset large-cap fund at the top in large-cap category. You can refer to ETmoney to know best-performing equity funds in each category.

• Make the right choice: Once you list out the best performing equity funds, you need to choose the right funds among the list that fits into your goals and risk appetite. 

Diversification and systematic investments are the keys to long-term equity investment strategies that can optimize your return with stability. However, your investment decision should primarily be on your liquidity preferences, time horizon, investment goals, and risk appetite.

How you will get indexation benefit through Medium duration fund investments?

Debt fund schemes in India offer a wide range of investment options to investors, especially ones with a low-risk appetite or who want to avoid market volatility. With SEBI’s categorization and rationalization exercise in 2017, there are currently 16 debt fund schemes in India. Investors have ample choice available and can opt for a scheme which is in line with their investment objectives. 

This article will give you an overview of medium duration funds. 

Meaning of Medium Duration Funds

Medium duration funds are open-ended debt schemes that invest in instruments (debt and money market) such that the Macaulay duration ranges between three years and four years.

Medium duration fund investments have a longer maturity period than six debt variants (overnight, liquid, ultra-short, low duration, money market, and short duration funds). However, their maturity tenure is lower when compared to medium to long duration and long duration funds. This debt scheme is more likely to have higher interest rates, especially when compared to the shorter duration debt funds. Medium duration fund investments are ideal for investors who have a medium investment tenure (at least three years), low-risk preference, and are content with moderate returns. 

Indexation benefit for medium duration funds

For the purpose of taxation, medium duration fund investments (being debt schemes) qualify for indexation benefits. This benefit is applicable for long-term capital gains or when the investments are redeemed after a minimum period of three years. Indexation allows adjustments in the initial purchase price of your investment to account for inflation. The purchase price is inflated basis the inflation index of the year of purchase. As a result, your net gains go down and so does the tax payable.

Here is an example of how indexation helps to bring down your tax liability.

In August 2015, you put in Rs. 10,000 towards medium duration fund investments. You were allotted 1000 units at the NAV of Rs. 10. In the year 2019 (July) when the NAV had reached Rs. 20 you decided to redeem the investment. The value of your investment at that time was Rs. 20,000 (1000 units * 20 NAV per unit). 

Hence, your capital gains from this transaction were Rs. 10,000 (i.e. Rs. 20,000 – Rs. 10,000). However, as your investment holding period was more than three years you will and get the benefit of indexation. As a result, you will not need to pay tax on the amount of the entire gain of Rs. 10,000

In order to determine the taxable income, the Indexed Cost of Acquisition will be computed as:

Original investment or acquisition cost multiplied by (CII** of the redemption year divided by CII** of the acquisition year)

= 10,000 *(289/254) =Rs. 11,378

(**CII stands for the Cost Inflation Index. This value is determined by the Central Government. CII for the FY 2015-2016: 254. CII for the FY 2019-20: 289) 

Your net gains (for the purpose of taxation) from the sale transaction would now be Rs. 8622. The tax payable would be Rs. 1724 (20% Tax rate) as compared to Rs. 2000 without indexation.

Final Words

Indexation is the USP of debt fund schemes in India. It gives them an edge over conventional investment options such as FDs, etc. Medium duration fund investments, due to their longer maturity period amps up the potential for generating higher returns for investors. This coupled with indexation benefits makes medium duration fund investments a total win-win deal! But remember that indexation benefit kicks in only once you complete three years. Longer you remain invested, lower is likely to be your long-term capital gains tax. 

How to get the best health insurance without a medical test?

Buying a health insurance plan has become the need of the hour as medical costs are increasing every day. If a medical contingency strikes, it threatens to wipe out your financial savings and leave you penniless. In such a situation, having a health insurance plan comes as a blessing as the plan covers the medical costs and spares you the financial horror. Health insurance policies provide coverage against medical expenses and safeguard your finances. You should, therefore, invest in a comprehensive health plan to cover the financial implication of a medical illness.

When you buy a health insurance plan, you might be required to undergo a pre-entrance health check-up based on which the policy would be issued. The requirement of this pre-entrance check-up depends on your age and the coverage that you choose. Many health plans require you to take such medical tests while many don’t. Among the different plans where medical tests are not necessary, one of the best available policies is the HDFC Ergo Health Suraksha Silver Smart health insurance policy. The policy does not require you to undergo any medical test before buying the policy.

Besides the no medical test benefit, the reasons why HDFC Ergo Health Suraksha Silver Smart health insurance policy ranks among the best health insurance plans are as follows –

• An inclusive scope of coverage 

HDFC Ergo Health Suraksha Silver Smart health insurance policy offers you three sum insured levels which are INR 3 lakhs, INR 4 lakhs, and INR 5 lakhs. This is, therefore, an affordable health insurance policy which also provides an inclusive scope of coverage through its coverage benefits, the most notable of which include the following –

• Coverage against mental illnesses
• Cashless home hospitalization benefit for specific illnesses
• No room rent sub-limits
• Recovery benefit of INR 5000 if you are hospitalized continuously for 10 days or more

Moreover, there are a host of optional coverage benefits that you can choose from to customize your coverage at a small additional premium.

• Coverage for all family members

Under HDFC Ergo Health Suraksha Silver Smart health insurance policy you can cover your entire family under a family floater policy. There is no maximum entry age allowing even older dependents to enjoy coverage under your policy without restrictions.

• Emphasis on healthy living 

This health insurance plan gives you the benefit of free annual health check-ups so that you can track and monitor your health every year. Moreover, there is my: Health Active benefit under the policy which rewards you for healthy living. If you maintain a healthy lifestyle by walking and exercising, you can accumulate healthy weeks. The accumulated healthy weeks in a policy year can then be exchanged for premium discounts when you renew the policy. Moreover, the policy provides wellness services and a health coach so that you can live a healthy lifestyle, keep illnesses at bay, and also avail premium discounts on renewals.

• Sum insured rebound

Also called sum insured restoration, the plan allows a free refill of your sum insured if your existing coverage gets used up on previous claims. This rebound facility ensures that your coverage does not run out due to frequent claims.

Besides these salient features, the plan has low premiums which are further made affordable through different types of discounts. Besides availing the healthy living discount, you can claim a family discount of 10% if two or more individuals are covered under the policy as well as a loyalty discount of 2.5% if you have invested in other policies issued by HDFC Ergo.

So, if you are looking to buy a health insurance policy without undergoing any medical tests, you can opt for HDFC Ergo Health Suraksha Silver Smart health insurance policy. The policy allows a good scope of coverage which can be customized through optional add-ons and riders. Lastly, the premiums are also affordable ensuring that the coverage does not prove heavy on your pockets.