What is Equity Linked Savings Scheme (ELSS)

Majority of us rush up to our auditors and financial planners during the month of March for tax planning in order to invest up to INR 1.5 Lacs that qualifies for tax exemption under section 80C of the Income Tax Act. We end up buying a new insurance policy, dumping and blocking the money in PPF or NSC, getting into highly tax inefficient 5 year bank FDs, and other traditional tax savings instrument. There is another exciting option available to all of us to save taxes and get good returns, which often remains unexplored - Equity Linked Savings Scheme (ELSS)...Read on...

Source or Sink

There is a hero in each one of us !!

The fact is that most of us are looking for some heroes in life, someone whom we can follow, someone whom we admire, someone whom we know is making a difference out there in the world "in spite" of all the challenges and is not sitting down and out "because of" all the reasons, someone who can show us the direction. 


People follow leaders who are sure where they are headed. This, perhaps, justifies our long standing attachment to movies, other than the entertainment aspect. Even today, if we associate with the subject of the movie, we root for the hero of the movie. We want him to win. We want him to fight against all odds and come out victorious.

Over a lazy weekend, i was sitting with my family watching Spider man - 2 (perhaps for the 3rd time). Kids love it, and so do we. The movie again re-kindled this topic. Peter Parker was unable to take a decision whether to go for his love OR to dedicate his life for the people of his country. He had to chose between the two. The situations always aligned in a way that he is unable to do justice to both these aspects of his life. 

He stayed confused till his grand mom gave him the answer that he was looking for. He had to be "the Hero", a hero which people can only aspire for, a hero for whom people are ready to stand in a queue for hours just to get one glimpse, a hero who has the power and also the responsibility to utilise the power in the right way. With great power, came great responsibility. After hearing all this, it was much more easier for him to take the "right" decision.

It is one thing to look for your own comfort and strive for doing things for yourself. It is completely another thing to come out of your comfort zone and do something for others. Heroes are less - they are one in a million because only one in a million have the guts to do something for others so that others can get to see their hero, get inspired from them and perhaps, follow them as well.

Have some mission of your life. Have some dreams. Make some goals. Make them for yourself and then make them so that you can do something for others. At the end of your life, it is what you do for others that would give you the bliss that is ultimate and satisfying to the core.

Be a source, not a sink. 

Are you a source of love for your entire family or you are yourself looking for love? Are you a source of inspiration for your friends and colleagues or are you looking for inspiration?  Are you a source for doing something for your society or your country or are you waiting for your country and society to do something for you? Are you setting a moral example for your children or are you compromising on your values to earn more money? Are you spending time with your children or buying gifts to compensate for the lack of time? Are you ready with 100 things to do before you die or the life is just passing by?

Are you are being driven by your life or are you the one who has taken charge of your life? Are you the source of energy or a sink waiting for energy from others.

Be a source, not a sink. Someone will get inspired from you and take the torch forward.If you are a source, you will inspire others. If you are a sink, you might only get sympathy.

Steven Gorden once said : “I’m not afraid of dying, I’m afraid of not trying.” 

For all the beautiful ideas that you keep getting during the best part of your day, and before your mind rejects them after 10 min of negative thinking, bring your inspiration to work before the mind can get enough time to reject it,.. you can make it happen..you can be a hero for someone in life.

You can be a source of power, energy and passion for so many around you.

Cheers

Manoj Arora

Are we really prepared to live our life?

Life is a beautiful journey. Yes, it indeed is.

What is a paid up life insurance policy?

I have seen many people who buy life insurance policies and start paying premiums only to realize after a few years that they need to continue to pay the premium for another 20 years or in some cases, even throughout their lifetimes. After 3-4 years, they seem to be running out of finances to continue to pay regular premiums for the policy to stay in effect. Do not lose heart. Insurance industry provides a provision in such cases.

Tax benefits for NGO donations under Sec 35AC and Sec 80GGA

As i am working on my goal of setting up my first NGO this year, there came the realization that i would also need some funds to run this NGO :). Well, do not worry, i will not bore you with my NGO details on this post. The purpose of this post is to help me collect funds :) just kidding..it is actually for you to know the tax benefits you can avail when you donate money to any NGO. There are different IT Act sections that apply if you are salaried class or if you are running a business.

Can multiple insurance policies cover the same risk?

Background

Insurance policies are designed to ensure that the recipient of the policy benefits do not collect more than the claim is worth (risk coverage), regardless of how many insurance policies may be in force. 

Insurance is designed to protect against financial losses from damage. It is not meant to be used as a way to gamble and make money off damage to your business or personal assets. If you own multiple policies that cover the exact same risk, the payout result depends on the type of insurance coverage.


Kind of Insurance Contracts
Policies will typically build in wording to address how they will respond in the event of a claim and other insurance is available. There are a few ways that policies can interact with each other and there is no one standard provision that can be applied to all policies. When you buy insurance, you are given a policy that explains the terms of your agreement. Your policy states what your insurance company will do if you own another policy for the same risk. 

Some policies pay on a pro-rata sharing basis, meaning they divide the payments with the other companies. 

Other policies designate themselves as primary or excess policies. Primary policies always pay claims first, whereas excess policies wait until the other contract has paid before making payments. 

Some contracts offer no coverage at all in the event you own a duplicate policy, making your extra coverage worthless.

Let us look at it on a case to case basis for various types of insurance that we do.

Auto Insurance
If you own duplicate auto policies, it is crucial that you review the terms of your contracts. Auto insurance does not pay more than the limits of your insurance. If your vehicles are insured for the same amount by each company, it is possible that the two companies will argue over who should pay. This could delay the payment of your claim, forcing you to pay for your bills out of pocket. You should never use two auto policies to cover the same risk.

Health Insurance
 Owning two types of health insurance is more common and can have some benefit. This often happens when a person enters Medicare while he is still working. Health insurance policies follow the "coordination of benefits provision" created by the National Association of Insurance Commissioners. If you or your employees own two policies, the provision designates one policy as primary and the other as excess. The primary policy covers the health claim up to its benefit limits. If you or your employee still owes money for a medical claim, the excess policy picks up the difference. The insured needs to pay the deductible and co-pays for the primary policy first. If the excess policy needs to be used afterward, its deductible and co-pays also need to be paid.

Life Insurance
Life insurance policies follow different rules for duplicate coverage. While someone may destroy property to earn a profit, few would end their lives to make a profit on life insurance. As a result, owning duplicate life insurance policies will not reduce your future payment. Both policies will pay their face value in full after your death. While an insurance company may refuse to sell you excess life insurance coverage due to existing coverage, it will not refuse a death benefit for an outstanding contract.

 
In the worst case scenario, some policies state they will not pay any claims in the event any other insurance is available for the same loss and achieve this denial of coverage in a few ways. Some policies simply include policy language to exclude any coverage in the event another policy covers the same loss. Other policies will reduce the amount of insurance by any other insurance available. If the other available insurance is in an amount equal to or greater than the policy's limits, essentially no coverage will be available from this policy.

Knowledge of such overlapping policies and the provisions in your insurance contracts can go a long way in saving your money and giving you surprises at the end of the day.

Cheers

Manoj Arora

No Claim Bonus (NCB) for your Car Insurance

Vehicle insurance is mandatory. But make sure that you are not losing out on the No Claim Bonus especially when you are buying a vehicle (new or 2nd hand).

What is a No Claim Bonus (NCB)

No claim bonus is a discount given by the insurer to the policyholder on his / her vehicle insurance policy premium for making no claims. NCB can be accumulated over years and the discount ranges from 20% to 50% on own damage premium. No claims bonus (NCB) is crucial to reducing car insurance premiums.

What is Own Damage (OD) premium?

Before you understand NCB premium calculation, you must understand what is an Own Damage (OD) premium. Own Damage (OD) premium is the amount of premium that you pay to the insurance company over and above the mandatory third-party cover. If you have paid OD premium you are entitled to claim compensation in the case of damage to your vehicle due to flood, fire, earthquake, etc. In case you have only got 3rd party insurance (mandatory) done, then NCB will not be applicable on your premium since that is applicable only on the OD part of the premium of your total premium.

How does NCB work?

No claim bonus increases every year as per the following table. NCB rewards you for being a good driver and helps you save on your motor insurance.

The chart here illustrates the discount on Own Damage Premium on account of no claims for the consecutive years.

All Types of Vehicles	% of Discount on OD* premium
No claim made or pending during the preceding full year of insurance	20%
No claim made or pending during the preceding 2 consecutive years of insurance	25%
No claim made or pending during the preceding 3 consecutive years of insurance	35%
No claim made or pending during the preceding 4 consecutive years of insurance	45%
No claim made or pending during the preceding 5 consecutive years of insurance	50%

*OD= Own Damage

Illustration 

On first renewal, a car with IDV (Sum Assured) of Rs 4 lacs has own damage premium of Rs 12000. If no claim has been made, the policyholder is entitled to 20% discount so his premium would be Rs 9,600. He clearly saves Rs 2,400 by not making a claim.

The money saved on OD premium keeps on increasing every year with the discount increasing every year.

When is NCB terminated?

NCB can be terminated in the following 2 scenarios:

a) If a claim is made during the policy year, no NCB will be given in the corresponding next year. Reasons are obvious based on the NCB definition itself.
b) If the policy is not renewed within 90 days from date of expiry on your existing policy, then NCB is forfeited or terminated.

Important Notes :

a) NCB becomes Nil in case of a claim

b) NCB follows the fortune of the customer and not the vehicle. It stays with the initial owner of the car even when the ownership changes. In fact not many dealers update the buyers of this, and when someone with few years worth of NCB buys a new car, most of the people end up paying the full insurance amount, without claiming the NCB they have accumulated over the years.
c) NCB can be transferred to the new vehicle (actually the new owner) in case of substitution of vehicle of the same class
d) Validity of NCB is 90 days from the date of expiry of the policy
e) NCB can be utilized within 3 years (where the existing vehicle is sold and a new vehicle is purchased)
f) NCB recovery can be done in case of a name transfer.

g) NCB is also transferable from one insurer to another.

Save money wherever you can and you should. Money saved is money earned.

Cheers

Manoj Arora

Healthy Breakfast for your mind.

However fond you may be of junk food, morning is a time when everyone prefers to have something relatively healthy. This is what our body craves for. Surely, a good start to the day is half the battle won. But wait...What do you feed your mind for the morning breakfast?...Who cares...Read on...

Life Insurance Policy Tax Exemptions - Section 80C and Section 10(D)

[Last Update : 14-Oct-2017]
There is a general perception among the taxpayers that all premiums paid for Life Insurance is eligible for deduction under Section 80C subject to overall limit of Rs.1.50 Lacs. Further, it is also a misconception that all sums received from the insurance company against your life insurance policy is exempted under section 10(10D). You may be in for a shock if you are not careful with the sum assured and the premium you have been paying for these policies...Read on...

Income from House Property Part-3 (Sec 22 and 24 IT Act)

In this series of posts, we have been covering the tax awareness on Income from House property (Sec-22 and Sec-24 of IT Act). We have covered 2 parts till now and we are covering the 3rd and final part today. So, lets read on the Computation of Income from a self-occupied Property.