Author: Everypennycounts (aka Saurabh S)

Welcome to my personal finance blog! With over 18 years of experience in financial services, I’m here to help you become more money-conscious and take charge of your financial future. I’ve witnessed firsthand how transformative it can be to truly understand and manage your finances. Everyone deserves to feel confident in their financial decisions—whether you’re planning for the future, making smart investments, or managing everyday expenses. My goal is to simplify complex financial concepts, share practical tips, and offer guidance that you can easily apply to your life.

Understanding Mutual Funds – A Shopping Mall Analogy

Amit: Hey Riya, I keep hearing about mutual funds, but there are so many types! Can you simplify them for me?

Riya: Sure! Think of mutual funds like different types of shopping malls—each designed for different needs. Let me break it down with examples you’ll relate to.

Amit: That sounds helpful!

Riya: Let’s start with the three main categories:

1. Equity Funds – Like a Shopping Mall

Just like how different stores in a mall cater to different shoppers, equity funds invests similarly in different types of companies:

Large-Cap Funds: Like big anchor stores—stable and reliable. You shop at these big brands because you trust their quality.
Mid-Cap Funds: Like growing retail chains that are becoming popular (think about any successful regional brands that come to your mind). Just as these stores might become the next big thing, mid-cap companies have the same sort of growth potential.
Small-Cap Funds: Like promising local boutiques or startups. These carry a higher risk since they might either succeed big or fail, but they could offer great returns—like discovering the next Big Coffee brand when it was just a single coffee shop!

Amit: Oh, so it’s like choosing between shopping at a big mall versus exploring local markets?

Riya: Exactly! Now, let’s move on to the next category.

2. Debt Funds – Like Different Bank Accounts

These are similar to different ways to save your money:

Liquid Funds: Like keeping money in a digital wallet for quick shopping—it’s easily accessible and safer than cash.
Short-Term Funds: It is similar to a recurring deposit account where you park money for your upcoming vacation in six months.
Corporate Bond Funds: Like lending money to your reliable cousin’s successful business—they’ll pay you back with interest.
Gilt Funds: Like keeping money in a government bank—super safe, but returns might be lower.
Overnight Fund: One of the best options if you are thinking about keeping money for a week to a fortnight

Amit: That makes sense! And what about the third category?

3. Hybrid Funds – Like a Balanced Diet

Just as we balance healthy and tasty food:

Aggressive Hybrid Funds: Like a diet with 70% protein (eggs, meat) and 30% carbs (rice, bread)—more growth-focused but they are still balanced.
Conservative Hybrid Funds: Like a diet with 25% protein and 75% carbs—safer but with some growth potential.
Balanced Advantage Funds: Like adjusting your diet based on your activity level—more carbs on workout days, more protein on rest days.

Special Categories:

Index Funds: Like buying everything on a shopping list without making changes—you get exactly what’s on the list (market index).
Fund of Funds: Like a food subscription box that contains different meal kits—you get variety managed by experts.

Amit: These examples really help! So, if I’m saving for my daughter’s education in 15 years, I should probably look at equity funds?

Riya: Exactly! Just like you’d plan a big purchase well in advance. For long-term goals like education:

Consider Large-Cap Funds as your main course (70%).
Add some Mid-Cap Funds for extra growth (20%).
Maybe a small portion in Small-Cap Funds for potentially higher returns (10%).

But if you’re saving for next year’s car down payment, you’d want Debt Funds—just like you wouldn’t risk your car money in a new startup!

Amit: This makes so much more sense now. One last question—what about tax-saving funds?

Riya: Ah, ELSS (Equity Linked Savings Scheme) funds! Think of them like a combo deal—you get tax benefits under Section 80C, plus the potential for good returns. It’s like getting a discount while shopping, but you need to hold onto your shopping bags for three years from the date of investment before using them!

Amit: Perfect! Now, I can actually relate mutual funds to things I understand. Thanks, Riya!

Riya: Happy to help! Just remember, just like you don’t buy all your clothes from one store, it’s good to diversify your investments based on your needs and goals.

EPF vs NPS: Making the Right Choice for Your Retirement

Madhuri (Investor): looking concerned Prayag, I’ve been reading a lot about retirement planning lately. I’ve had my EPF for years, but everyone keeps talking about NPS. Am I missing out on something better?

Prayag (Financial Planner): pulls out a calculator Let me show you something interesting, Madhuri. Let’s look at real numbers. Imagine you started investing ₹5,000 monthly in 2009. With EPF, you’d have about ₹17.5 lakh today.

Madhuri: Okay, that sounds decent…

Prayag: But here’s where it gets interesting. The same amount in NPS could have grown to ₹20.2 lakh with a conservative 25% equity allocation, or even ₹25.6 lakh if you’d opted for 75% equity exposure.

Madhuri: eyes widening Wait—you’re telling me I could have had nearly ₹8 lakh more? That’s almost 50% extra! Why such a big difference?

Prayag: nodding It’s all about investment flexibility. Think of EPF as a bus that takes the safest route—it moves steadily, but it won’t go faster even if the roads are clear. Now, NPS is like a car—you can choose the lane you want. If you’re comfortable with a little speed, you can take the express lane (higher equity exposure) and reach your destination faster.

Madhuri: But I’ve always heard EPF is more tax-efficient. Isn’t that true?

Prayag: smiling That’s a common misconception. Here’s something most people don’t realize—NPS actually gives you an extra tax break. Beyond the standard ₹1.5 lakh deduction under 80C that both EPF and NPS offer, you get an additional ₹50,000 deduction under 80CCD(1B). That’s like getting a “Buy 1 Get 1 Free” offer on tax savings!

Madhuri: leaning forward Tell me more about this flexibility you mentioned earlier.

Prayag: With EPF, you’re locked into contributing 12% of your basic salary, like it or not. NPS, on the other hand, is like a buffet—you can start with as little as ₹1,000 per year, pick your fund manager, and even decide how much risk you want to take with different asset allocations. You have full control!

Madhuri: thoughtfully This sounds great for new investors, but what about someone like me who already has significant EPF savings?

Prayag: You have two paths forward. The practical approach is to keep your EPF running and start an NPS account alongside. Think of it like having both a savings account and an investment portfolio—you get the best of both worlds.

Madhuri: You mentioned two paths—what’s the other one?

Prayag: adjusting glasses Technically, you can transfer your EPF balance to NPS—PFRDA approved this in 2017. But grimaces the process is still stuck in bureaucratic red tape. So for now, running both accounts is like keeping both a pension plan and a mutual fund—it’s a smart move until the transfer process becomes smooth.

Madhuri: What would you advise someone just starting their career?

Prayag: enthusiastically If their monthly basic salary exceeds ₹15,000, they actually have a choice. They can opt out of EPF and go all-in with NPS. But here’s the catch—many companies make EPF mandatory. In such cases, I recommend a hybrid approach: contribute the minimum ₹1,800 monthly to EPF and direct additional savings to NPS. It’s like ordering a thali—you get a little bit of everything, but you can choose to have extra servings of what benefits you more (NPS).

Madhuri: So basically, NPS offers triple benefits—potentially higher returns, extra tax savings, and more control over my investments?

Prayag: nodding approvingly Exactly! Think of EPF as a fixed-deposit account—safe but slow-growing. And NPS as a mutual fund SIP—it gives you the opportunity to build wealth faster while still being structured for retirement security.

Madhuri: standing up with determination Thanks, Prayag! You’ve convinced me. I’m going to start my NPS account this week itself.

Prayag: smiling That’s great! Remember, when it comes to retirement planning, it’s not just about saving money—it’s about making your money work smarter. And NPS helps you do just that!

Smart & Simple: Timeless Rules for Mutual Fund Success

Seetal (Investor): Aakash, I’ve been getting bombarded with investment advice lately – new mutual fund launches, market predictions, hot sectors. It’s overwhelming! How do I cut through all this noise?

Aakash (Financial Advisor): chuckles I completely understand, Seetal. Instead of chasing every new trend, let’s focus on fundamental resolutions that can transform your investment journey. Think of them as your financial compass.

Seetal: Hmmmm!! I am listening.

Aakash: First and foremost – try to know your portfolio like the back of your hand. You’d be surprised how many investors can’t tell me what they own beyond ” the names of some mutual funds companies.”

Seetal: looking slightly embarrassed Guilty as charged. I mean, I get my statements, but I usually just check if the total value has gone up.

Aakash: That’s more common than you think! Start simple – Start categorizing your funds into buckets: equity, debt, and hybrid. Then understand their roles. Are your equity funds focusing on large companies or small ones? Are your debt funds short-term or long-term in nature? It’s like organizing your wardrobe – you need to know what you have before deciding what to buy next.

Seetal: That makes sense. And the other resolution?

Aakash: Regular portfolio check-ups – but here’s the key – with a disciplined schedule. Think of it like your annual health check-up. You wouldn’t skip it, right?

Seetal: True, but I’ve heard people say you should track your investments daily. Isn’t that better?

Aakash: shaking head That’s like weighing yourself five times a day while on a diet – it’ll drive you crazy! I recommend half yearly reviews to stay informed, but make major changes only after 18 months or so. Unless there’s a significant event, like a fund manager change or a major strategy shift.

Seetal: Oh! That’s actually a relief. And what’s the last one?

Aakash: This is crucial – SIP discipline. Think of SIPs as your financial fitness routine. Just like you wouldn’t expect six-pack abs from random gym visits, wealth building needs consistency.

Seetal: But what about when markets crash? Last time that happened, I got scared and stopped my SIPs.

Aakash: That’s exactly when SIPs are most powerful! It’s like getting a discount on your favorite brands. When markets are down, your same SIP amount buys more units. Remember, you’re not just investing in funds – you’re investing in India’s growth story.

Seetal: nodding thoughtfully And I suppose I should increase my SIP amounts when my income grows?

Aakash: Absolutely! Most people remember to upgrade their lifestyle when they get a raise but forget to upgrade their investments. I suggest the 50-50 rule – allocate at least 50% of any raise to increasing your SIPs.

Seetal: These actually sound doable. But how do I stay motivated to stick to them?

Aakash: Here’s how I explain it to my clients – think of your investment journey like driving a car. Your SIPs are the accelerator, pushing you toward your goals. Your half yearly reviews are the brakes and steering, keeping you safely on track. And just like driving, once you develop good habits, they become second nature.

Seetal: smiling That’s brilliant! No more getting distracted by every new fund launch or market prediction.

Aakash: Exactly! Focus on these three resolutions – know your portfolio, review with discipline, and maintain SIP consistency. Master these basics, and you’ll be surprised how much clarity and confidence they bring to your investment journey.

Seetal: Thanks, Aakash! These are definitely going to be my financial resolutions this year. Simple but powerful!

How do you navigate market volatility with mutual funds?

Characters:

Rita (Investor)
Krishna (Financial Planner)

Scene: A cozy coffee shop where Rita and Krishna meet to discuss the recent market downturn.

Disclaimer: All characters in this article are fictitious and do not bear any resemblance to any person, living or dead.

Rita: Krishna, the stock market has been on a rollercoaster ride lately. From an all-time high of 85,478 in September 2024, it’s now down to 76,190—that’s over an 10.8% drop! I’m worried. Should I exit my mutual fund investments?

Krishna: Rita, I understand your concern. Market fluctuations can be unsettling, but it’s important to remember that equities are inherently volatile in the short term. Selling now might not be the best move.

Rita: But what if the market falls further? I don’t want to see my investments shrink any more.

Krishna: That fear is natural, but exiting during a downturn could lock in losses. History shows that markets recover over time, and staying invested allows you to benefit from that recovery.

Rita: So you’re saying I should hold on? But what about my SIPs? Should I pause them until things stabilize?

Krishna: No, Rita! Your SIPs are actually working in your favor right now. When the market is down, you buy more units at lower prices. This helps reduce your average cost and positions you for better long-term returns.

Rita: Hmm, that makes sense. But I’m still unsure about where to invest in this volatile market. Any suggestions?

Krishna: It all depends on your goals and risk tolerance. Let me break it down for you:

Short-term goals (1-3 years): Stick to fixed-income investments like short-duration debt funds / ultra-short bond funds to ensure stability and capital preservation.
Medium-term goals (3-5 years): A small equity exposure can help boost returns. Consider equity savings funds for a balanced approach or a conservative hybrid fund.
Long-term goals (5+ years): Focus on an equity-heavy portfolio. If you’re conservative or worried about volatility, aggressive hybrid funds are a great option. For experienced investors, flexi-cap funds offer good diversification, while small-cap and mid-cap funds can add higher returns, albeit with greater risk.

Rita: Okay, that gives me some clarity. I think I should review my portfolio and align it with my goals.

Krishna: Absolutely! And diversification is key. A well-balanced portfolio across market caps can help manage risks effectively.

Rita: Got it. But what about timing the market? Should I wait for a better entry point?

Krishna: Trying to time the market is a risky game. It’s nearly impossible to predict the bottom. Instead, stay focused on your long-term goals and maintain a disciplined approach.

Rita: I see what you mean. So, the moral of the story is to stay invested and stay disciplined?

Krishna: Exactly! Market downturns are temporary. By sticking to a consistent investment framework based on your time horizon, risk appetite, and asset allocation, you can build lasting wealth.

Rita: Thanks, Krishna. I feel much more confident now. I’ll stay the course and continue with my investments.

Krishna: That’s the spirit, Rita! Remember, patience is the key to financial success.

Health Insurance Riders & Add-ons : Making the ”Right Choices”

Seema: Hi Rahul, I was about to buy a health insurance policy, and just before making the payment, I saw a lot of options for ‘riders’ and ‘add-ons.’ I’m a bit confused—do I need them?

Rahul: Hi Seema! I understand—it can be overwhelming. Riders and add-ons can enhance your policy coverage, but it’s important to choose them wisely based on your needs.

Seema: What’s the difference between a rider and an add-on? They seem quite similar.

Rahul: Good question! Riders are extra benefits added to your base policy and are usually more affordable, offering limited customisation. On the other hand, add-ons are separate covers attached to your base policy, often covering niche needs and are slightly more expensive.

Seema: Oh, I see. Why aren’t these just included in the base plan? Wouldn’t that be simpler?

Rahul: That’s because insurance companies want to keep the base premium affordable. Not everyone needs all features, so they provide essential coverage in the base plan and allow policyholders to customize their coverage with riders or add-ons as per their unique needs and budget.

Seema: Makes sense. How do I decide which riders or add-ons to go for?

Rahul: Start by reviewing your base policy to understand what it covers. Then, consider factors like your age, your current lifestyle, your family medical history, and future health plans. For example, if you’re planning to start a family, a maternity benefit rider would be useful. If your current plan has a room rent cap, a room rent waiver rider can remove that restriction.

Seema: Speaking of room rent, I saw a ‘Room Rent Waiver’ option. What is it exactly?

Rahul: The Room Rent Waiver rider allows you to bypass any limits your policy might have on room rent. Some older policies cap room rent at 1-2% of the sum insured, which can impact your entire hospital bill. If you exceed the allowed limit, you’d have to pay a proportionate amount for all related expenses like doctor’s fees and nursing charges.

Seema: When should I consider this rider?

Rahul: If your existing policy caps room rent, this add-on is definitely worth considering. However, if you’re buying a new policy that already offers no room rent limit, you can skip this add-on.

Seema: Got it. I also noticed an option for ‘Hospital Daily Cash.’ What does that cover?

Rahul: Hospital Daily Cash provides a fixed daily amount for each day of hospitalization. This money can be used for non-medical expenses like medicines, diagnostic tests, and consumables such as gloves, PPE kits, and even travel or food expenses for your attendant.

Seema: That sounds useful. Should I go for it?

Rahul: It’s a good choice if you want to cover out-of-pocket expenses that aren’t typically covered by your insurance. It’s especially beneficial if you anticipate frequent hospital visits or want extra financial support during hospitalization.

Seema: That makes sense. What about OPD coverage? I visit doctors frequently for minor health issues.

Rahul: OPD (Out-Patient Department) cover helps you with expenses related to doctor consultations, diagnostic tests, minor procedures, and even medicines that don’t require hospitalization. It’s particularly useful if you have frequent medical consultations or conditions that need ongoing treatment.

Seema: When should I consider OPD coverage?

Rahul: OPD coverage is ideal if:

You are over 40 and prone to lifestyle diseases like diabetes or hypertension.
You or your family members require frequent dental or eye check-ups.
You have a family history of mental health conditions, which may require regular consultations.

Seema: That’s helpful. But I’ve heard OPD cover raises the premium. Is it worth it?

Rahul: Yes, OPD coverage can increase the premium, but if you frequently incur outpatient expenses, it could be cost-effective in the long run. Otherwise, you might be better off paying for OPD visits out of pocket if they’re occasional.

Seema: Hmm, I think I’ll need to prioritize based on my budget and health needs.

Rahul: Absolutely! Consider your current health status, potential future needs, and financial capacity. It’s all about balancing coverage and affordability.

Seema: Thanks, Rahul! This has been really insightful. I feel more confident in making the right choices now.

Rahul: You’re welcome, Seema! Take your time, review your options carefully, and choose what best suits your needs.

Too many cooks spoil the broth!!

Seema: Hi Kapil, I’ve been investing in mutual funds for a while now, and with all these new campaigns, I feel like I should add more funds to my portfolio. What do you think?

Kapil: Hi Seema! It’s great that you’re interested in mutual funds, but adding more funds isn’t always the best approach. Let me ask you: How many funds do you have in your portfolio right now?

Seema: Hmm, I think I have about 14. Is that too many?

Kapil: Well, it depends on your experience and portfolio size, but 14 sounds like it might be too many. Think of your portfolio like a cricket team. Imagine having 11 Best players on the field—brilliant right? Naaaah……… You will lack the balance and coordination. Similarly, having too many mutual funds can dilute your returns and make tracking your portfolio more difficult.

Seema: Oh, that’s an interesting analogy. So how many funds should I ideally have?

Kapil: For someone new to investing—lets say less than five years of experience—four to five funds are usually enough. For seasoned investors with more than five years of experience, around 8 funds is reasonable. And for those with portfolios in crores, they might need more than 10, but only if each fund offers meaningful diversification.

Seema: I see. So, how do I decide which funds to keep and which to let go?

Kapil: Start by evaluating each fund’s role in your portfolio. Here’s a simple checklist:

Give equity funds time: Hold them for at least three years before judging their performance.
Avoid sectoral and thematic funds: These are risky and often cyclical. Most investors jump in after the best phase has passed.They can be used as a satellite fund to your portfolio provided you understand that sector well
Focus on high-quality funds: Look for funds with not much expenses and consistent performance over more than 5 plus years
Eliminate insignificant funds: If a fund contributes less than 5% to your portfolio, it’s probably not making a meaningful impact.

Seema: That makes sense. So, it’s better to have fewer but high-quality funds that align with my goals?

Kapil: Exactly! A lean, purposeful portfolio is like a well-balanced cricket team—each player or fund has a role to play, ensuring maximum efficiency and peace of mind.

Seema: Thanks, Kapil! I’ll review my portfolio with this approach and start decluttering.

Kapil: Great! Let me know if you need help with the process. Investing is never about the quantity of financial products you own but the quality and alignment it serves with your own goals. Remember keeping it simple always works.

“Weathering Market Storms: A Dialogue on Staying Calm and Invested”

Ravi: Sudhir, I’m really anxious about my investments. There’s so much going on – tensions in the Middle East, Japan’s stock market single day fall or the FIIs moving out of the Indian market. Should I pull out some money before things get worse?

Stock market journey is always filled with ups and downs

Sudhir: Ravi, I understand your concern. It’s natural to feel uneasy with all this news. But let me ask you: Is this anxiety keeping you up at night?

Ravi: Honestly, yes. I keep thinking, what if I lose everything?

Sudhir: That’s a sign your portfolio might be taking more risk than you’re comfortable with. It’s time we review your asset allocation and see if it aligns with your temperament.

Ravi: But with all this uncertainty, isn’t it better to act now and avoid further losses?

Sudhir: Ravi, successful investing isn’t about reacting to every market event. Whether it’s Middle East tensions or Japan’s market fall, these are just short-term fluctuations. The key is to stay disciplined, stay invested, and keep adding to your portfolio, regardless of what’s happening in the headlines.

Ravi: That’s easier said than done. What if the experts predicting doom are right this time?

Sudhir: Experts often speak with absolute certainty, but remember, no one can consistently predict markets. Treat their analysis like entertainment – it’s interesting to hear, but not something you should base your financial decisions on.

Ravi: So you’re saying I should just ignore the news and stay invested?

Sudhir: Exactly. Markets have always been noisy. The art of investing lies in ignoring that noise and focusing on your long-term goals. Wealth is built by staying invested through cycles, not by reacting to every market hiccup.

Ravi: But what if the market falls further? Won’t I lose more money?

Sudhir: Markets do go through declines, but they also recover. The biggest mistake would be letting fear keep you out of the market altogether. If someone was perpetually scared of bad news, they’d never invest – and that would be the real folly.

Ravi: You’ve got a point. So I just need to stay calm and keep investing?

Sudhir: That’s right. Let’s review your portfolio to ensure it matches your risk tolerance and goals. Once that’s done, the key is to remain disciplined and focus on the long term.

Ravi: Thanks, Sudhir. This conversation has really helped me see things differently. I’ll work on staying calm and not overreacting to market news.

Sudhir: That’s the mindset of a wise investor, Ravi. Let’s get started on fine-tuning your portfolio and ensuring you’re on the right track.

Building Wealth: A Steady Path Beyond the Yearly Trends

Ravi: Hey Shaila, with the new year coming up, I’ve been thinking about my investment strategy. Do you think the new year is going to be a different one investment-wise?

Shaila: Honestly, Ravi, while each year can bring new trends, the core principles of building wealth don’t change. It’s all about having a disciplined plan and sticking to it, whether it’s a sunny or a rainy day.

Ravi: I’ve heard of Earl Crawley, the Chicago Mechanic :- His story is inspiring—managing to accumulate over $500,000 even with modest earnings. How do I adopt a strategy like his?

Shaila: Earl’s story is about simplicity and education. He lived simply, invested in dividend-paying stocks, and always sought to learn more. Let’s break down some guiding principles for you.

Ravi: Great, where do we start?

Shaila: Begin with SIPs—Systematic Investment Plans. They’re your best friend for wealth creation. They keep you disciplined despite market fluctuations. For example, a Rs 5,000 monthly SIP can grow significantly over 5 years, typically at an annualized return around 11%.

Ravi: How should I align my investments with my goals?

Shaila: It’s all about your time horizon as I keep saying:

– Long-term (5+, 7+ years): More equity exposure. Depending on your risk tolerance, anywhere from 85-100% equity could work.

– Medium-term (3-5 years): Mix of equity and fixed income for balance. Adjust according to your comfort with volatility.

– Short-term (<3 years): Stick to fixed income to minimize risks. Avoid equities as market volatility can impact returns.

– Very short-term (<1year): Stick to liquid, ultra short term funds, FDs and RDs to avoid any capital erosion

Matching investments to your goals helps avoid unnecessary risk while growing wealth.

Ravi: What about protecting my wealth?

Shaila: Insurance is key—think of it as your financial foundation.

– Life Insurance: Opt for a term insurance plan, with no riders, ideally 10-15 times of your annual post tax income. As per the current structure for 1 crore cover for a 30 year old – healthy non-smoking person might cost around Rs 10,000 to 14,000 annually.

– Health Insurance: It is quite essential for you to also protect yourself against any medical emergencies which can derail your financial plans.

Ravi: And chasing investment trends?

Shaila: Avoid that trap. While trends like crypto or any other short term investment options may sound tempting, tried-and-tested investments like equity mutual funds or the traditional plans in the debt category like your PPFs / Sukanya Samriddhi often yield better long-term results. Remember, consistency is the key—better to be steady and sure than chasing volatile trends.

Ravi: So, should I automate my investments?

Shaila: Absolutely. Once you get into the habit of automating your investments per month you eliminate the emotional decisions. Set up your monthly SIPs to make it hands-free, but remember to review your portfolio every 15 to 18 months. As you get closer to your financial goals, balance out your equity and debt to manage risks. You can also exercise the SWP option to withdraw systematically in the mutual funds.

Ravi: So wealth creation isn’t just about making more money next year?

Shaila: Exactly. It’s about creating habits that work year after year. Being disciplined and keeping it simple will go a long way. Make sure to review your portfolio regularly as they are the true drivers of long-term wealth creation.

All the Best 😀

Navigating Health Insurance: Simplifying Your Path to make Informed Choices

Satish: How important is the insurer’s claim settlement history?

Rupesh: It’s crucial. A good claim settlement ratio with low rejection rates and quick processing times indicates reliability. You can find these details in the insurer’s public records.Also look for companies where they have an in-house claims department vis-a-vis an outsourced TPA (Third Party Administrator), the chances are highly likely that Insurance organization with an in-house claims management team will be a bit quicker in servicing.

Satish: What about disclosing my medical history?

Rupesh: Always be honest. Misrepresenting your history could lead to claim rejections. Disclose all past conditions and medications. It’s better to pay a slightly higher premium than risk claim denial.Satish, I came across a customer who paid 2 years advanced premium to the insurance company without understanding the policy fine prints. He even did not disclose his medical history, which is not the right approach.

Satish: And what about medical tests?

Rupesh: Insurers may require medical tests before issuing a policy, typically free of charge. These are convenient, with technicians often visiting your home. Just have your medical records and ID documents ready.It’s better to be safe now than sorry at a later stage.

Satish: This all makes a lot more sense now. Thanks, Rupesh, for clarifying things!

Rupesh: You’re welcome, Satish. Remember, a little research can save you from stress at a later stage. Remember, Health insurance is not just about medical bills—it’s more an integral part of personal finance risk management.

‘Term Plan’ – Essential Role it plays in Personal Finance & Risk Management

Shyam: Hey Mohan, I’ve been hearing a lot about term plans in personal finance. Are they really that important for risk management?

Mohan: Absolutely, Shyam. Term plans are essential for several reasons. They offer a high life cover for a relatively low premium compared to other insurance plans, making them a cost-effective choice.

Shyam: That sounds promising. Are there benefits to starting a term plan early?

Mohan: Yes, starting early is key. The younger you are, the lower your premium will be. Locking in a low rate when you’re young can save you a lot over the years.

Shyam: What about the flexibility of term durations? How does that work?

Mohan: Term plans are quite flexible. But it is always advisable to have the term plan till you work or till all your liabilities like home loans and other liabilities are over. The ideal scenario would be to have it till the age of 60.This ensures your family can handle financial obligations if anything happens to you during that period. Remember one thing if you delay buying your term plan by a year you end up paying more with every passing year.

Shyam: Are the premiums fixed throughout the policy?

Mohan: Yes, once your premium is set, it won’t change for the term of the policy. You can count on paying the same amount annually, making budgeting easier.

Shyam: Are there any tax benefits?

Mohan: Absolutely. You can claim a deduction of up to ₹ 150,000 per annum for the premium paid under Section 80C, and the death benefit is tax-free under Section 10(10D).

Shyam: Sounds like term plans are a crucial part of financial planning.