L.I.C’s Cancer Care – Financial Fight against cancer!

Cancer burden in India has more than doubled in the last 26 years! The dreadful disease stare at the face of the country with the  Indian Council Medical Research (ICMR) estimating more than 17.3 lakh new cancer cases and more than 8.8 lakh deaths due to the disease by 2020. The disturbing fact is that these numbers may be far lesser than the actual as there is an expected under-reporting of at least 50-100% due to non-availability of formal cancer registries.

Keeping in mind the impact on finances for the family whose member are affected by cancer, L.I.C of INDIA has brought out an exclusive plan – CANCER CARE that provides “financial fight” against cancer.

lic-cancer-cover-plan

The following are the broad features of L.I.C’s Cancer Care Plan:

  1. The plan provides cover for both Early Stage / Major Stage Cancer detection
  2. The plan is available for a maximum of 30 years term (or) 75 years of the insured, which ever is lesser.
  3.  The plan is available in two variants – A Fixed Sum Assured option & An increasing Sum Assured option where the cover gets increased by 10% every year for first 5 years
  4. Any person from 20 years till 65 years can avail the policy
  5. The minimum sum assured is fixed at 10 lakhs & the maximum is at 50 lakhs
  6. Only yearly & half-yearly mode of premium payment is allowed & the premiums are guaranteed for the 1st 5 years of the policy.
  7. Premiums paid are eligible for tax exemption u/s 80D of IT Act
  8. There is no maturity benefit / death benefit in this plan & hence the premiums are very cheap!

Now let us look at the benefits of the plan:

EARLY STAGE CANCER – BENEFITS

  • Lump-Sum Benefit at 25% of the applicable Sum Assured is immediately payable
  • Premium Waiver Benefit: Premiums need not be paid for the next 3 years
  • The policy benefits will continue as such

MAJOR STAGE CANCER – BENEFITS

  • Lump-Sum Benefit at 100% of the applicable Sum Assured is immediately payable (Less any claims previously paid)
  • Premium Waiver Benefit: Premiums need not be paid at all
  • Income Benefit: 1% of applicable sum assured shall be paid every month for next 10 years to the insured or to the nominee

The below are the sample premium rates for a 35-year old Male / Female for various sum assured (Fixed Option) & for a 30 year policy term:

Premium-Rate

Waiting Periods

  • Waiting period of 180 days is applicable from date of issuance of the policy (or) date of revival for any benefits to be payable
  • Survival Period of 7 days including the date of diagnosis is applicable for any benefit to be payable.

For exclusions on Early Stage Cancer & Major Stage Cancer – it is advisable to refer to the policy conditions and/or speak to the financial advisor as the it will be too technical to discuss here.

Over all, L.I.C’s Cancer Care is a wonderful product with low premiums in the financial fight against cancer.

Interesting Thumb Rules (Part-2)

* The 10% Savings Rule – Minimum Savings to be done for the future

Most experts believe that the savings rate should be a minimum of 10% of your gross household income. A better goal is to aim higher. Another popular rule is to start saving 10% for meeting basic needs, 15% for comfort and 20% for freedom when you are young.

* 3 Month Emergency Fund Rule – To meet out any unforeseen emergency expenses

The idea is to have at least 3 months and going up to 6 months, of living expenses as emergency fund in addition to your savings for other goals. This of course depends on the nature of our work, risks and possibilities of finding new source of income soon.

* The 6 Times Life Cover Rule – Adequacy of Life Insurance Cover

This rule simply says that your life insurance policy should be at least 6 times of your total household income so that the family’s continuance of income is maintained even in the absence of the bread-winner of the family.

* The 20% Down-payment, Two Times Home Loan Rule:

This rule says that while buying a home, we should put down 20% as down-payment and avoid taking a loan over 2 times of our total household income. If we cannot afford the 20% down-payment rule, it probably means that we cannot afford that home itself.

* 20 times Income Rule For Retirement Kitty – How much Corpus is enough for Peaceful Retirement?

How much retirement kitty you will need is a big question. There are many calculations available but this simple rule says that it is 20 times of your gross total income at the time of retirement.

* Pay Highest Interest Rate Debt first:

This rule points out which loan has to be repaid on priority first – it is the one that carries the highest rate of interest. Usually, the order would be credit card first, then bank overdraft, personal loan, vehicle loan and lastly home loans – preferably home loans can be left to continue till the end of the tenure.

* Don’t Take An Education Loan More Than The Expected First Year Salary: 

With rising education costs, this one rule can help decide whether to pursue an education course on loan or not. Following this rule will help avoid the struggle to repay loan after the education is completed.

Source: NJ Publications

Interesting Thumb Rules (Part-1)

Ever wondered how much should you invest in equities? In what time will your money double? Most of our money related questions often have complex answers which are boring and beyond comprehension for most of us. Well, now you can take a break from the calculators and take a look at a few quick thumb rules for the same. These thumb rules are interesting, easy calculation tips which we can use in our daily lives. But we also have to be careful as the results are often approximate and may not be ‘exact’ answers we are looking for.

* Rule of 72 – When will my money double?

Rule of 72 simply tells us the number of years in which our money would double. Divide 72 by the rate of interest & you will get the number of years in which the money would double. Ex. if the interest rate is 8%, then it would take 72/8 = 9 years to double.

* Rule of 114 – When will my money Triple?

Rule of 114 is same as above & it gives us the number of years in which the money will triple. Divide 114 by the rate of interest & you will get the number of years in which the money would double. Ex. if the interest rate is 8%, then it would take 114/8 = 14.25 years to triple the money.

  • Using the above two rules, one can find out the effect of Inflation (or) the Rate of Interest by simply dividing 72 or 114 by the number of years.

* 100 Minus Your Age Rule – To figure how much should I invest in Equities

One of the basic ideas while investing in equities is to reduce the exposure as you grow older. But, apart from age, there are also many other factors affecting your asset allocation which makes risk profiling an important exercise. For the rest of us, this rule easily gives an idea on the extent of equity exposure, considering the age. For ex., if your age is 40, your equity exposure should be at (100-40 = 60) 60%. The balance would be invested in debt and other safer asset classes. Note that this old rule is contested by many experts today who argue that 100 be replaced by 110 or 120 or even higher considering the need for wealth creation, longer life expectancy and low debt returns.

* 20/4/10 Rule – For buying a Vehicle

The rule says that while getting a loan for a vehicle, you should first put down at least 20% as the down-payment, the loan term should not be for more than 4 years and that your total monthly transportation costs (including EMIs) should not be over 10% of your income. This rule can thus also help you know whether you can truly afford to buy the vehicle of your choice.

* 80% Income Replacement Rule – To determine how much should one earn after retirement

Many experts believe that we should aim for replacement of 80% of our income after retirement to live comfortably. This presumably takes care of the reduced expenses on one hand while maintaining the living standards on the other hand.

* 4% Withdrawal Rule – Safe withdrawal amount from Retirement kitty every year 

This rule is used very often in retirement planning where the idea is to arrive at a withdrawal figure every year that will keep the retirement kitty intact while you are not generating any other income. The rule says that we can withdraw 4% annually from the outstanding balance amount to keep the capital safe. While there are many faults and misses in this assumption, like the rate of return, inflation, life expectancy, etc., the underlying idea is not entirely lost. Some experts say that the actual figure should be less than 4%, preferably 3%. The lesser the figure the better it is as it can ensure you do not run out of your retirement kitty any time soon.

* Pay Yourself First Rule – For Financial Freedom & Independence

This is a simple yet very important rule used in financial planning, especially retirement planning. The rule requires us to save for our own future (read retirement) first before anything else. The idea is to make an automatic arrangement from your bank account every month so that, the money is auto-deducted first every month after your receive your cash inflow, like salary. The process of automatic routing is said to be like ‘paying yourself first’ since money is deducted before other expenses are incurred.

To Be Continued…

Source: NJ Publications

Sovereign Gold Bonds vs Physical Gold

When you want to purchase Gold, there are various options:

  1. Purchase as Physical Gold (As ornaments or as coins / bar)
  2. Purchase through Gold Funds or Gold ETFs through Mutual Funds
  3. Purchase as Sovereign Gold Bonds as issued by Govt. Of India through RBI

The best option out of the three would be to go through the Sovereign Gold Bonds route owing to the below reasons: One should hold a DEMAT account to facilitate this purchase.

Physical-vs-Sovereign

Purchase of Physical Gold also makes our country to import more gold (which in turns causes fiscal deficit) & keeping it idle at one’s home is not of any use either. Hence, if one decides to purchase gold – it is better he considers Sovereign Gold Bonds as issued by RBI rather than physical gold…

Gold Prices on Diwali

Festive season brings with it more joy & happiness – people get together for celebrations, exchange sweets, burst crackers and more importantly they also tend to buy among many other things – GOLD. Gold is always considered to be an auspicious investment during these times as it is believed to bring prosperity & wealth.

But how well Gold has fared in terms of returns over the last few years? Gold is a good instrument as an hedge against inflation as it tend to give return at par with inflation rate. For instance in the last 13 years (since 2005), if you had purchased Gold on the Diwali day, you would have got an average annualized return of 7%. Inflation during the same period was around 6.7%. When you compare GOLD as an investment option with Equities, during the same period of 13 years, NIFTY has delivered around 12% CAGR.  

Gold-Prices
Gold Prices on Diwali Day since 2005 – Source ET