Friday, July 10, 2009

Health Protection Plus plan from LIC simplified with example

Lic has come out with another Health cover with Unit linked plan called with Health Protection Plus Plan. The earlier one is called Health Plus plan. (Whenever any policy of LIC uses the word 'Plus' at the end it means its an ULIP product and its NAV based)

When you first take a look at the policy its a huge document seemingly very complicated with so many new terminology. Lets us simplify it one part at a time with example.
1) Hospital Cash Benefit (HCB). A daily benefit is payable in case the insured is hospitalized due to either accidental body injury or sickness. (It can be from min of Rs 250 per day to max of Rs 2500)
To understand this with an example lets take an HCB as follows for family of four
Person Insured : Rs 2000 (called PI )
spouse : Rs 1500
1st Child : Rs 1000
2nd Child : Rs 1000
you can also select varying HCB; for spouse and children maximum allowed is Rs 1500.

2) Major Surgical Benefit (MSB): In the event of the insured undergoing one of the major surgeries defined in the Annexure I, a lump sum benefit (regardless of the actual costs incurred) equivalent to the percentage of the sum assured mentioned against that surgery will be payable on providing proper proof of surgery to the satisfaction of the corporation.
(MSB is 200 times of HCB meaning for our example it works out as follows
PI = 200 * 2000 = 4 lakh
Spouse = 200 * 1500 = 3 lakh
1st child = 200 * 1000 = 2 lakh
2nd child = 200*1000 = 2 lakh)

3) Domiciliary Treatment Benefit (DTB). The Principal Insured can claim an amount equivalent to the actual expense he or she has incurred in respect of any domiciliary treatment or to meet the medical expenses incurred over and above the hospital cash/major surgical benefits in respect of either oneself or the others insured under the policy.
DTB is available only after at least 3 years premiums are paid

4) Premium : Let us see how to calculate premium with example as follows
a) If one life is covered then it is : 6 Times of HCB (for single life)
= 6 * 2000 = Rs 12000 (If only single person is covered)

b)If four lives are covered then it is: 6 Times of HCB for PI + 3 times HCB for others
for our example it is as follows
Premium = 6 * 2000 (PI) + 3*1500(spouse) + 3*1000(1st child) + 3*1000(2nd child)
= 12000 + 4500 + 3000 + 3000
= Rs 22500( If four lives are covered)

NOTE: This means that ideally it is better to take policy for entire family as we get 50% discount on other members premium.
for other terms and conditions you can visit LIC website

Tuesday, July 7, 2009

UTI Mahila Unit Scheme ;Hybrid conservative balanced fund for women

Following are the marketing claims from UTI Mutual Fund and they come out to be true
  1. UTI Mahila Unit Scheme is the only Scheme which is exclusively designed for Indian women above 18 Years of age in the whole Indian Mutual Fund Industry.
  2. UTI Mahila Unit Scheme is the top performing fund in the Hybrid Debt category in the entire Mutual Fund Industry.
  3. UTI Mahila Unit Scheme has been continuously rated as a Five Star Rated Fund by Value Research online
  4. UTI Mahila Unit Scheme has won LIPPER Awards for its consistence high rated performance in the Year 2007, 2008 & 2009.
  5. Prudent Asset Allocation (Minimum 70% Debt, Maximum 30% Equity) in the Fund with a view of Safety and Consistent Returns is the hall mark of the Scheme.
  6. Lower volatility of returns and well diversified & actively managed portfolio are some of the additional feathers of UTI Mahila Unit Scheme.
  7. Superlative Performance across all Time Periods: UTI Mahila Unit Scheme is the Super performer in the Hybrid Debt Fund Category.
It has ranked First in Last One Year Performance, First in Last Five Year Performance and also is ranked First in performance since inception.

Monday, July 6, 2009

changes in Personal Tax for individual in the budget

Income tax exempetion limit for
1) senior citizen Income tax limit increased by Rs 15,000 to 2,40,000
2) Women Income tax limit increased by Rs 10,000 to Rs 1,90,000
3) Individaul income tax limit increased by Rs 10,000 to Rs 1,60,000

10% surcharge on income tax of above Rs 10 laksh has also been abolished
The much hated FBT or fringe benefit tax has also been abolished.

Friday, July 3, 2009

Origin of the word Budget; It actually means a bag

The origin of our word 'budget' is the Latin bulga,meaning a little pouch or knapsack. The word turned up in English in the fifteenth century, having travelled via the French bougette, a diminutive form of bouge, “leather bag”. Its first meaning in English indeed was “pouch, wallet, bag”, and followed its French original in usually implying something made of leather.

By the end of the sixteenth century, the word could refer to the contents of one’s budget as well as to the container itself. People frequently used this in the figurative sense of a bundle of news, or of a long letter full of news, and the word formed part of the name of several defunct British newspapers, such as the Pall Mall Budget.

The connection with finance appeared first only in 1733, as the result of a scurrilous pamphlet entitled The Budget Opened, an attack directed at Sir Robert Walpole, The allusion was that the government minister responsible for financial affairs opened his budget, or wallet, to reveal his proposals. It probably also echoed the idiom to open one’s budget, “to speak one’s mind”, which was current then and continued to be so down into Victorian times. By the 1760s, it was clearly well established, and has been the standard term ever since. But it was only in the 1880s that it began to be used as a verb in the sense of planning one’s expenditure, and the attributive meaning of “inexpensive; suitable for someone of limited means” is first recorded only in 1958.

Wednesday, July 1, 2009

No Entry load for MF from 1st August 2009

As was expected after the SEBI's announcement about abolishing entry load on investments in Equity diversified Mutual Funds. The final effective date is 1st August 2009.

1) No more entry load of 2.25% which was being charged earlier. Hence the investor's invested amount will be more.
2) No incentives for churning of Mutual Funds investments which is good for the investor.
3) Investor can now decide how much he wants to pay to the advisor for his service and hence can expect better and improve service from the advisors.

1) The major drawback for this is that now MF advisors will not be motivated to sell MF products and hence they will stop selling MF and rather now will sell ULIP which are sold as investment cum insurance products and where commission for Advisors is very high.
Hence Most small investors would have to be vary of getting into ULIP products.
Ultimately this is good deciscion for the educated and financialy savy people but a very decscion for the most of the common man who dont understand much about financial products. Now Mis-selling of ULIP will be very high.
2) Exit load might be increased by MF Houses

for readers of this blog simple piece of advise.
STAY AWAY FROM ULIPs. Keep investments and insurance seperate.

Top performing Mutual Fund for the month of June 2009

Top performing ELSS Mutual fund for the month of June 2009
1) SBI Tax Advantage Sr-1
2) Escorts Tax Plan
3) HDFC Long Term Advantage
4) Fortis Tax Advantage
5) HDFC Tax Saver

Top Performing Diversified Equity Mutual Fund June 2009
1) IDFC Small and Midcap Fund
2) Tata Capital Builder Fund
3) HSBC Emerging Markets Fund
4) JM Core 11 Fund
5) Tata Indo - Global Infra