Do you know about this ‘must-have’ insurance?

The ongoing pandemic has highlighted the importance of having a good and adequate health insurance cover. Changing lifestyles, poor dietary habits, working pressures etc, have taken a toll on everyone’s health. Fortunately, most of the armed forces families have unlimited life-time health insurance which has stood them in good stead every time they faced a medical issue.

However, onset of critical illnesses or diseases put a lot of pressures even on armed forces families’ finances. Most of us would have heard of relatives, friends or family of how they ended up paying a fortune in the treatment of a family member suffering from a critical illness. Diseases like Paralysis, Cancer, Heart attack, Coronary artery bypass graft (CABG), Transplant of organs like pancreas, liver, heart, and lungs, Kidney failures etc could require a huge amount of special supplements, human caretaking, in-home medical equipments etc which could cost a lot as one-time and/or continuous expenses.

A critical illness policy keeps a family financially protected against ever-increasing medical expenses and lifestyle-related illness as they offer large sum payment that can also be used to manage health care expenses other than the hospital bills and even act as an income replacement in case a serving person has to leave the forces.

Premium paid for critical illness insurance is also available for deduction under 80D.

Here are a few tips that will help you buy the perfect critical illness insurance cover plan that matches the budget, pays adequately for extra medical requirements and safeguard a family individual against a medico-financial crisis:

1) Type of Policy: There are two types of critical illness insurance plans –a  standalone policy, or a rider which can be clubbed with other policies.

2) Diseases covered: Before buying the critical illness policy, you must know what all diseases are covered under the policy. Most of the insurers cover as many as 20-28 critical illnesses under the same policy.

3) Ample sum insured: Take adequate cover – not too much, not too less, as per your financial situation.

4) Waiting Period: Every critical illness policy has a waiting period of three months to four years, after which a pre-specified illness is covered. So, try to select a critical illness cover as early as possible and not wait for the illness to strike since then it may not get covered.

Remember – ‘Health is a priceless Wealth. Invest while you can.’ – Bryant McGill

(Contributed by Radhika Chandak, Associate Financial Planner, Team Vikrant, Hum Fauji Initiatives)

This small step can magnify your wealth multiple times

‘Little drops of water make the mighty ocean’ stands true testimony to the power of SIPs (Systematic Investment Plans) in creating, sustaining and preserving wealth for each one of us. The only thing that could disturb this comfortable scenario is, surprisingly that small creep called inflation, which works unannounced behind the scenes and keeps eroding the true value of our money like a wood-borer eats surreptitiously into a piece of wood from the inside. Inflation constantly reduces our purchasing power.

The only counter-strategy to tackle this is to increase the size of our droplets periodically so that our financial goals and requirements are timely achieved. This might sound a very nominal thing to say but it has a magical impact.

Say you are investing Rs 50,000 per month in SIPs in a good investment giving you a good 12% average returns over a long term of 15 years. You have assumed an inflation of 5% per year and hence calculated that you need Rs 2.5 Crores to meet your child’s educational requirement. But unknown to you, the inflation rate is clocking 7% and not 5%.

What happens then?

In the second case above, instead of just investing Rs 50,000 per month for 15 years, you have decided to increase the SIP amount by just 5% per annum as your pay increases. This means your monthly SIP will increase by Rs 2500 in the second year, by Rs 2625 in the third year, by Rs 2756 in the fourth year and so on. And the net result – you accumulate Rs 80 Lakhs more and achieve your goals. That’s the power of a Step-up SIP.

(Contributed by Rishabh Shukla, Associate Financial Planner, Team Vikrant, Hum Fauji Initiatives)

The best form of Gold you can invest in.

In India, Gold has always been linked to auspicious occasions and festivals like Deepawali, Dhanteras etc. At the time of marriages, exchange of Gold jewelry is considered more auspicious than other expensive items like diamonds and platinum. From the investment perspective, it is considered to be a safe haven that diversifies an investor’s portfolio and is beneficial in times of market volatility.

We want you to continue your religious/traditional beliefs but in a new and better Avatar. You should buy the physical gold that is meant to be worn as jewelry or for gifting purpose. But from investment perspective, there is a much better form of gold available now – ‘Sovereign Gold Bond’.

SGBs (digital form), government securities denominated in grams of gold, are substitutes for holding physical gold. Investors have to pay the issue price and the bonds will be redeemed in cash on maturity. The bonds are issued by the RBI on behalf of the government.

Some features of SGB are as follows:

1) Fixed 2.5 % p.a. Interest Rate: While capital appreciation is associated with each form of gold the way physical gold price moves, none of them promise a fixed interest rate as in the case of SGB.

2) Elimination of cost of storage, risk of theft/lost: Physical gold is always exposed to the risk of loss/theft and includes storage charges for bank’s locker facility. SGB eliminates them completely.

3) Tax Free Capital Gains: If SGB is held till its maturity of 8 years, all capital gains, ie profits made if gold prices rise compared to purchase price, are tax exempted.

Gold Mutual Funds, Gold ETFs, Digital gold are some other forms of gold but SGB stands tall amongst them all, if maturity period is not a concern.

(Contributed by Jatin Uppal, Deputy Manager, Hum Fauji Initiatives)

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