MONEYMAKEOVER Build a strong base to protect your wealth Have contingency fund, adequate life & health covers to mitigate risks

Born and brought up in Mumbai, Mehul Bheda (29) lives with his wife Kinjal (26) and his parents. Mehul's father used to run a groceries store and is now retired. His mother is a housewife. The couple works in the private sector.  What are they saving for?  •Their top most priority is to purchase a larger home in the next five years for about Rs 50 lakh.  • For their retirement, they estimate a need of Rs 5 lakh per annum.  • Once they have children, they will also need funds for their education and marriage.  • Their aspirations include foreign travel and a car.      These figures will be revised in the future on the basis of inflation.  Where are they today?  Cash flow: The couple's annual inflow from all sources is Rs 8.35 lakh. Against this, their annual outflow is Rs 6.06 lakh. Their monthly outflow includes regular investments via SIPs, EMIs on loan taken for house, insurance premiums, supporting their parents and other routine household expenses. Annual debt payments come to around 6% of their annual takehome income.  Net worth: The couple's total assets are worth Rs 32.92 lakh, comprising personal assets worth Rs 25 lakh including house and jewellery. There is an outstanding loan of Rs 7.07 lakh taken for purchasing their home.  Contingency fund: Against the mandatory monthly expenses of Rs 35,000, the couple's balance in savings bank and liquid funds together comes to Rs 65,000, which is approximately twomonths' reserve.  Health & life insurance:  Mehul has a life insurance cover of Rs 78.30 lakh, which includes endowment policies and a term plan. The couple has a health insurance of Rs 1 lakh each.  Savings & investments: The couple's balance in savings bank account is Rs 15,000 and in liquid fund Rs 50,000. Their invested assets include equity shares worth Rs 2.81 lakh, equity mutual funds worth Rs 4.31 lakh, along with debt mutual fund and PPF together worth Rs 14,000.  Fiscal analysis  Mehul and Kinjal are saving about 45% of their total income, but their health and life covers seem to be inadequate. While borrowing is within permissible limits, the couple should pay off the loan aggressively by increasing the EMI.  The way ahead  Contingency fund: The couple must keep aside funds equivalent to about threemonths' mandatory expenses. They should maintain a contingency reserve of Rs 1.10 lakh, out of which Rs 20,000 should be held as cash in hand and the balance in an FD linked to a savings bank account. This reserve must be reduced once their loan is paid back.  Health & life cover: The couple's health cover seems to be insufficient — this must be increased to Rs 3 lakh each for Mehul and Kinjal. Since both are generating income, they both need life cover. The recommended incremental sum assured for Mehul, by way of a term plan, is Rs 50 lakh, and for Kinjal Rs 35 lakh. This may need to be enhanced if the couple opts for any loans in the future.  Planning for couple's  financial goals  Home buying: The couple wishes to buy a larger house worth Rs 50 lakh in five years. Once the loan for their existing home is paid off, they must start investing in debtbased products in order to accumulate a corpus for the down payment of a bigger home. When purchasing that bigger home, they can use the proceeds from the sale of their existing house along with the corpus accumulated in debt instruments for making the down payment. Any short-fall can be funded by a home loan.  Retirement planning: In order to save for their retirement, the couple should start investing Rs 7,500 by way of SIPs in equity-based mutual funds. They must increase this amount by 5% every year. Also, they can continue contributing to their EPF/PPF accounts.  Children's needs: Once their home acquisition is complete, the couple can start an SIP in an equity fund to create a corpus for funding their children's future needs.     T o b e f e a t u r e d i n t h i s      f o r t n i g h t l y c o l u m n , w r i t e      t o m o n e y m a k e o v e r @      t i m e s g r o u p. c o m  PLANNER'S EYE      You can always make a strong and large building, but unless its base is strong, it is susceptible to risk. Similarly, a contingency fund, health insurance and life insurance form the base of your financial building. No matter how much wealth you create, unless you have a contingency fund, health and life insurance in place, it is susceptible to risk. In the absence of these, even one untoward incident can lead to an erosion of the hardearned wealth you have generated over the years. Mehul and Kinjal Bheda

Now, demat insurance covers under one folio IRDA Clears 5 Entities To Set Up Repositories

Mumbai: In a few weeks, insurance buyers will be able to convert all their policies into electronic records under one common folio, irrespective of the company or even the nature of policy. Be it life, health or motor — all policies can be dematerialized and maintained under one account. 

    The electronic insurance account will do away with the need for providing address and identity proof for every purchase and will bring in all the benefits of demat to the insurance business, including automatic reminders for premium. 
    Insurance regulator IRDA has issued licences to five promoters to set up insurance repositories — National Securities Depository (NSDL), Central Securities Depository (CDSL), Stock Holding Corporation's SHCIL, Karvy Group and Cams. These five firms have their systems in place, which are being betatested with a small number of policies. The official launch is expected to take place in September. 
    According to IRDA chief T S Vijayan, insurance companies will have a huge cost incentive in encouraging customers to hold their policies in electronic form as costs will come down substantially from around Rs 600 per policy. 
    This is similar to the development that has taken place in the mutual fund business where asset management companies do not even have to maintain a physical presence for servicing. Most of the mutual funds today are serviced by Cams and Karvy who have centralized the functions of sending consolidated statements to customers. The fund houses now restrict their activities largely to sales and fund management. 
    "This is a path-breaking initiative akin to demat of shares. By bringing down cost of delivery, it will enable the industry to come up with lowcost policies which are not viable today because of the cost of delivery," said M Ravichandran, president, Tata AIG General Insurance. He added that besides lowering costs it will improve 'contactability' of the policyholder and address the issue of policy documents being misplaced. According to him, Tata AIG welcomes this initiative and the industry would do well to embrace this and make the necessary changes to IT systems and processes to make this work. 
    In terms of the IRDA's proposal, a policyholder can choose any of the repositories where he has to maintain the account. While opening an account for the first time, the customer will be required to provide 'know your customer' (KYC) documents, which include address and identity proof. 
    Non-life companies say that one of the benefits will be better contact with customers. At present, most motor policies are sold through dealers and insurers do not have complete contact details of the customer. Since the repository will have up-to-date data, the company can ensure that renewal notices are delivered. 
    Similarly, in the case of life insurance companies, policyholders often move house without informing the company of the change in address. But because motor and health insurance are annual contracts, the addresses are updated regularly. 
    IRDA had earlier indicated that dematerialization of insurance policies will facilitate portability. Customers who are not satisfied with the services of one insurer will be able to shift to another with minimum effort since all information will be maintained centrally. But this is a futuristic plan and not a mandate for the repository participants. 
A POLICY OF PLUSES 

• Insurance co will not matter when policyholders dematerialize any life, health or motor policy under a common folio 

• Once this is done, KYC documents like address and ID proofs will not have to be furnished every time a policy is bought 

• For insurers, electronic records will slash costs substantially from current Rs 600 per policy & renewal notices will become easier

9 yrs after robbery, insurance firm to pay jeweller 43L

Mumbai: An insurance company will have to pay around Rs 20 lakh in interest for wrongly repudiating the claim of a jeweller whose gold worth Rs 23 lakh was stolen during transit in 2004.      United India Insurance Co Ltd will also have to reimburse the claim amount of Rs 23 lakh to Bhuleshwar Roadbased Pravin Kumar Ramani, as the Maharashtra State Consumer Disputes Redressal Commission found no substance in the firm's argument that the jewellery was lost due to an employee's negligence.      According to the complaint filed by Ramani in the state commission, his employee was given a bag containing gold bangles weighing a total of 4.1kg to be taken to Bangalore. The bus in which he was travelling halted for lunch at Khed and the employee was forced to alight as the bus was to be locked. The employee was the last to get off the bus and he ensured that the bag was chained to the seat. But when he returned to his seat after lunch, he found the jewllery was stolen.      Ramani registered an FIR and filed the claim with the insurance company. But the firm rejected the claim on the basis of an exclusion clause. Aggrieved, Ramani filed a complaint in the commission.      The commission said that a simple reading of the exclusion clause would show that an involvement of the employee as an accomplice, or the act of commission or omission on part of the employee should have a direct nexus with the felony. "In this case, such possibilities were ruled out and insurance company did not place any material on record to infer otherwise. If the employee gets involved in such capacity and in such form with the felony, then the case may be covered by this exclusion clause and not otherwise," the commission said.      It further stated that under such circumstances, interpretation of this clause which favours the consumer is to be accepted. "As the insurance company failed to discharge the onus which lies upon it to justify its repudiation, it is deficient in service," the commission said.  THE ORDER      The Maharashtra State Consumer Disputes Redressal Commission directed India Insurance Co Ltd to reimburse the claim amount of 23 lakh to Bhuleshwar jeweller Pravin Kumar Ramani as gold bangles weighing 4.1kg were stolen in transit in 2004      The firm will also have to pay 20 lakh in interest for wrongly repudiating the robbery claim

‘Can’t deny mediclaim for magnetic treatment of osteoarthritis’

Mumbai: A consumer forum has said Rotational Field Quantum Magnetic Resonance (RFQMR), a non-invasive osteoarthritis treatment, could not be called an alternative or experimental therapy and ordered an insurance firm to pay up for rejecting two claims. 

    Dismissing New India Assurance Co's argument that the treatment was not recognized by the Indian Medical Council, the forum asked it to pay first complainant Sanyuktaben Shah the insured amount of Rs 1.05 lakh with a compensation of about Rs 46,000, and second complainant Bhisham Lambh Rs 1.30 lakh with a compensation of Rs 40,000. 
    The forum held that the insurance company had not produced any evidence to show that RFQMR was not recognized by the Indian Medical Council. "Only mentioning the same in the mediclaim policy clause would not be held just and proper for repudiating the claim," it said. 
    Vile Parle resident Sanyuktaben Shah, in her complaint on 2010, said she came to know about RFQMR about five years ago when osteoarthritis attacked her knee joints. She took the treatment at a Bangalore-based company's Andheri centre in 2008 and was in regular consultation with doctors and physiotherapists as there was still some pain. She also visited a health care centre and was recommended some oral medicines which worked. That year in December, she submitted a claim for Rs 1.05 lakh, which was repudiated. 
    Juhu's Bhisham Lambh also underwent the treatment after crippling pain in his knees from December 2009. After the 21-day therapy in May 2010, he sent theinsurance company a claim of Rs 1.30 lakh. A month later, it was rejected. He moved the South Mumbai District Consumer Disputes Redressal Forum in October 2010. 
    In both cases, the insurance company said the treatment was experimental and unproven and, therefore, according to the terms and conditions of the mediclaim policy, they were rejected. It stuck to its stand in the forum. 
    The forum ruled otherwise after taking into consideration the literature produced by the complainants. It showed that RFQMR significantly decreases pain, increases mobility, stability and power of the knee joint, and increases cartilage thickness in osteoarthritis patients. "Furthermore, as per the documents of objectives of Indian Medical Council which is placed on record by the complainant, it appears that the council does not have any object to approve any specific treatment or disapprove any treatment," the forum said. 
WHAT IS OSTEOARTHRITIS? 
Commonest form of arthritis that occurs as the protective cartilage on bone ends wears down over time 
USUAL TREATMENT 
Worsens with time, no cure exists 
Patients given oral medication to relieve pain, improve joint function 
NOT AN ALTERNATIVE THERAPY 
Rotational Field Quantum Magnetic Resonance developed in Institute of Aerospace Medicine, B'lore 
RFQMR regenerates/repairs cartilage and relieves chronic pain by using rotating quantum electromagnetic resonating beams 
There is no hospitalization

‘Death due to fall after slipping is an accident’

A fall at home due to slipping of foot is an accident and claim is payable under an accident policy. 

    Background: When an old person slips at home, resulting in subsequent death, can the insurance company reject a claim on the presumption that the fall was age-related and hence the death was due to a natural cause? In a recent judgment delivered by S M Ratnakar, along with member S S Patil, the South Mumbai district consumer forum ruled that a claim cannot be rejected on such a pretext. 
    Case Study: Dr Shirish Vakil had taken Janata Personal AccidentInsurance Policy from National Insurance Co when he was 69 years old for a period of 12 years (November 12, 1997-November 11. 2009) with a sum insured of Rs 5 lakh. 
    Shirish, though retired, was in good health. On November 3, 2009, he slipped and fell at home. The fall impacted the rear portion of his head, making him feel giddy. There was no serious injury visible externally. But at night, his condition deteriorated and he was taken to Bhatia Hospital, where a CT scan was done. Due to want of beds, he was shifted to Harkisandas Hospital, which registered a medico-legal case and informed the police. He was diagnosed to be having an introcerebral or intracranial bleed. On November 6, Shirish succumbed to injuries. 
    His son, Sunil, then claimed the sum insured. But the firm rejected it, contending that the fall was due to giddiness, an age-related problem, and hence the death could not be termed as accidental. Sunil moved the Insurance Ombudsman, which upheld the firm's contention. He then filed a complaint through 
the Consumer Welfare Association. The firm said a claim under the policy would be payable if the insured sustains bodily injury, resulting solely and directly from the accident caused by outward violent and visible means. 
    The forum observed it would require to consider whether Shirish's case amount to an "accident" as interpreted by the National Commission in the case of Reeta Devi v/s National Insurance Co. Ltd. [IV (2007) CPJ 355 (NC)]. The forum noted that the CT scan mentions subdural hematoma of 0.8cm, also seen in left frontoparietal lobe region. The hospital records clearly show "intracerebral bleed". Statement of the domestic servant present at the time of incident, as recorded by the police, also showed that Shirish's foot had slipped in the bedroom. The forum said the records establish that the fall was accidental. Hence, the forum ruled that the claim was payable, and that its wrongful rejection constituted a deficiency in service and also an unfair trade practice. 
    The forum held that the Insurance Ombudsman order would not act as an impediment to the proceedings before it, as this question had already been settled by the National Commission. Accordingly, it directed the firm to pay the sum insured along with interest at 6% pa from December 7, 2009, till payment. In addition, Rs 20,000 compensation was awarded for harassment and Rs 3,000 as costs. 
    Conclusion: A consumer can approach a forum even if his claim has been rejected by the Insurance Ombudsman. Under an accident policy, a claim for any injury or untoward incident caused by outward violent and visible means is payable.
    (The author is a consumer activist and has won the government of India's National Youth Award for Consumer Protection. His e-mail address is jehangir.gai.articles@hotmail.com)

9 yrs after robbery, insurance firm to pay jeweller 43L

Mumbai: An insurance company will have to pay around Rs 20 lakh in interest for wrongly repudiating the claim of a jeweller whose gold worth Rs 23 lakh was stolen during transit in 2004. 

    United India Insurance Co Ltd will also have to reimburse the claim amount of Rs 23 lakh to Bhuleshwar Roadbased Pravin Kumar Ramani, as the Maharashtra State Consumer Disputes Redressal Commission found no substance in the firm's argument that the jewellery was lost due to an employee's negligence. 
    According to the complaint filed by Ramani in the state commission, his employee was given a bag containing gold bangles weighing a total of 4.1kg to be taken to Bangalore. The bus in which he was travelling halted for lunch at Khed and the employee was forced to alight as the bus was to be locked. The employee was the last to get off the bus and he ensured that the bag was chained to the seat. But when he returned to his seat after lunch, he found the jewllery was stolen. 
    Ramani registered an FIR and filed the claim with the insurance company. But the firm rejected the claim on the basis of an exclusion clause. Aggrieved, Ramani filed a complaint in the commission. 
    The commission said that a simple reading of the exclusion clause would show that an involvement of the employee as an accomplice, or the act of commission or omission on part of the employee should have a direct nexus with the felony. "In this case, such possibilities were ruled out and insurance company did not place any material on record to infer otherwise. If the employee gets involved in such capacity and in such form with the felony, then the case may be covered by this exclusion clause and not otherwise," the commission said. 
    It further stated that under such circumstances, interpretation of this clause which favours the consumer is to be accepted. "As the insurance company failed to discharge the onus which lies upon it to justify its repudiation, it is deficient in service," the commission said. 
THE ORDER 
    The Maharashtra State Consumer Disputes Redressal Commission directed India Insurance Co Ltd to reimburse the claim amount of 23 lakh to Bhuleshwar jeweller Pravin Kumar Ramani as gold bangles weighing 4.1kg were stolen in transit in 2004 
    The firm will also have to pay 20 lakh in interest for wrongly repudiating the robbery claim

Insurance co to pay up for stolen auto

Mumbai: A consumer forum has held that an insurance company cannot reject a claim merely on the ground that the premium was received late. The forum directed IFFCO Tokio General Insurance Company to pay Andheri (E) resident Arvind Pithva the insured amount of Rs1.25 lakh for his stolen autorickshaw along with Rs55,000 compensation.      Pithva had purchased the rickshaw on a loan for Rs1.25 lakh and it was insured with the company. The insurance was valid from June 21, 2008 to June 21, 2009. According to a complaint filed with the Mumbai District Consumer Disputes Redressal Forum, he had parked the rickshaw in front of his house on June 26, 2008, but the next morning, he could not find it.      Pithva filed a complaint with the Andheri police, intimated the company about the theft and filed his claim. But the insurance claim was rejected. The company told Pithva that since the premium was paid on June 25, 2008, it was not liable to pay the insurance amount. The police informed the court that they could not find the thief. Pithva filed the complaint on January 7, 2011 and submitted a copy of the FIR as evidence.      The insurance company filed its reply and iterated its stand. It told the forum that since the cheque for the premium was deposited only on June 25, 2009, theinsurance policy was invalid and it was not responsible for reimbursement of the claim. The company stated that the policy was active only from June 27, 2008.      Taking the FIR copy into consideration, the forum observed that it was established that the vehicle was stolen on the intervening night of June 22-23, 2008. It also found substance in Pithva's statement that he had issued the cheque before the incident and it was not his fault that the company encashed it only on June 25, 2008.      The forum pointed out that the insurance papers showed the policy was valid from June 21, 2008. "This proves that the cheque was issued by the complainant before the theft," the forum said.

This I-Day, Plan For Financial Freedom Take small but definitive steps towards building long-term wealth to ensure better and secured future

 For parents, there was a time when grown-ups and working sons were synonymous with both financial freedom and security. But with changing times and new social structures, that concept of financial security has become almost non-existent, at least in most of urban India. 

    Other than raising their children, parents themselves have to think about their post-retirement financial security. And with the demand and popularity for such approaches increasing, there are financial planners and advisors who are there to help, for a fee of course. 
    In the run up to the Independence Day, we spoke to three investment planning experts about how they would guide their clients towards financial freedom. Here is what they had to say: 
For retired individuals 
1) Don't run out of cash: You should keep cash and cash equivalent that can take care of your household expenses for at least six months. 
2) Match expenses with income: Suppose of the total Rs 1-lakh expenses per month, Rs 75,000 is on food and essentials, while another Rs 25,000 is discretionary spending. Always make sure you have a regular source of monthly post-tax income of Rs 75,000. This can also include a systematic withdrawal plan (SWP) which can save more taxes for you. 
3) Ensure growth: This is for that part of investment that will take care of incremental incomes and help you beat inflation in the years to come, and will insure you against running out of cash. For this, systematic investment plans (SIPs) in good mutual fund schemes are unbeatable options. This can also help you take care of your discretionary spends. 
4) Get into another profession: You have retired from a job, but not from your life. Also learn and/or do something that you always wanted to do but never got the time during your working years, like taking up a hobby, etc. Also, learning how investments are done is a good option. But never spend more than 40% of your time in the new profession and keep 60% of your time reserved for all other things like hobbies, new learning, etc. 5) Get a good financial advisor: You have a life partner. Now do a proper due diligence and choose an advisor who will remain a friend for life. 
    — Rajiv Bajaj, 
    VC & MD, Bajaj Capital 
For women 
1) Get on top of numbers: Don't let numbers make you cross-eyed! Investing is about understanding yourself and what you want your money to do for you, understanding concepts and then numbers…and someone else can always crunch the numbers for you. 2) Health cover:Don't count on the health policy of your company alone to take care of any future medical expenses. You should also have one of your own. Here, the younger you start, the cheaper it is. 
3) Don't sign anything blindly: Most women do not take their own investment decisions but depend on the men in their lives like fathers, brothers and partners. Love with your heart, but sign with your brain. 
4) Make your CA fall in love with you: Get him to teach you how to save tax. Sometimes you can save more in tax than the stock markets can give you in returns. 
5) Don't be afraid to take risks: 
Studies show that women are generally risk-averse and so tend to save rather than invest. However, the only way to build wealth is to invest. Riskaverseness could be due to not understanding how financial investments work, so take small steps and dip your foot in the water! 
    — Sujata Kabraji, financial planner and wealth advisor 
For young and first-time savers 
1) Upgrade your skills: As lifecycles of products and services get shorter, and technology innovations cause disruptive changes, growing income consistently will only be possible by investing in oneself by constantly upgrading skills through training, learning and development workshops. Set a training budget for yourself, just like budgeting for regular and lifestyle expenses. 
2) Manage expenses: You should learn to differentiate between your needs and wants. Once you learn that, you would be in control of your money in a much better way than otherwise. 
3) Get risk cover: You should have adequate risk coverage to protect your whole family from any potential loss of assets and income. So, have a life insurance policy, health covers and also house insurance. 
4) Set clear financial goals: Not only that, you should also measure the goals and how far have you reached at a pre-determined frequency. Any divergence from the set course should also call for a course correction. 
5) Have a plan B: Learn to have a contingency plan, for everything. Have an investment strategy in place that should take care of your financial needs in case of loss of job, if the rate of interest goes up and your EMIs start shooting up, which in turn may be a stress on your expenses and savings, and various other such situations. 
— Vishal Dhawan, founder, Plan Ahead Wealth Advisors 
NEXT WEEK 
    With the rate of interest in the economy showing extreme volatility, fixed maturity plans (FMPs) are the flavour of the season. Next week, we will revisit FMPs, the pros and cons of investing in these schemes, how these products stack up against other competing ones and other related issues.

Firm to pay widow for wrongly rejecting hubby’s insurance claim

Mumbai: The Life Insurance Corporation of India (LIC) will have to pay a compensation of Rs 1 lakh with 9% interest from March 2000 to a widow for wrongly repudiating her claim. The LIC had rejected Asha Dave's claim on the grounds that her insured husband had suppressed that he was suffering from hypertension. The Maharashtra Consumer Disputes Redressal Commission recently rejected LIC's appeal against a district forum order that had held it guilty and ordered it to pay the compensation. 

    There is no reason to believe that the deceased, Pradeep Dave, had suppressed any material fact of suffering from hypertension, observed the commission. "It cannot be said that the LIC had a valid reason to repudiate the claim. Repudiation being arbitrary, deficiency in service on the part of LIC is well established," the commission said. 
    Vile Parle resident Asha said Pradeep suffered a heart attack and died on July 2, 1997. After the insurance company rejected her claim, Asha moved the district forum in 2001. The forum ruled in Asha's favour and the LIC filed an appeal in the state commission in 2003. 
    The LIC claimed that Pradeep's certificate of treatment/consultation signed by his doctor revealed that he suffered from hypertension. 
    Asha said Pradeep was not suffering from hypertension when the LIC recorded details for his personal health statement in 1997. A mediclaim attendant's certificate issued after Pradeep's death to Asha by the same doctor who had signed his certificate of treatment/consultation stated that he did not suffer from hypertension. "This declaration assumes more weightage," the commission said. "The certificate of treatment/consultation cannot be believed." 
    THE CASE 
Sept 2, 1997 | Pradeep Dave's insurance policy is revived 
July 2, 1999 | Dave dies of a heart attack 
March 31, 2000 | LIC rejects the claim, saying he had suppressed the fact that he suffered from hypertension 
2001 | Pradeep's wife Asha files a complaint in the district forum 
April 21, 2003 | The forum orders LIC to pay Asha a compensation of Rs 1 lakh with 9% interest from March 2000 
2003 | LIC files an appeal 
July 31, 2013 | The state consumer commission dismisses the appeal