Money Today experts answer your personal finance queries -INVESTINGQ. I have been recruited to a public sector company. The firm is offering a pension scheme, which I don't think will be sufficient. How can I supplement my retirement savings? I'm 24 and earn about Rs 3.6 lakh per annum. I don't have any debt or assets. - Mohit Kapoor, e-mail
A. While a pension scheme is one vehicle for building a retirement corpus, it is always advisable to source your retirement corpus through various avenues with different risk to return possibilities. Since you are 24 and have no debt, you can take relatively higher risk and should consider investing in equity mutual funds schemes. Within mutual funds you can diversify your investment across different categories-large-cap funds, mid- and small-cap funds, balanced funds and gold fund schemes.Q. I have invested in an equity-linked savings scheme, PPF and a 5-year fixed deposit. But when I calculated my tax for the past financial year, I realised I had already exhausted the exemption limit allowed under Section 80C. Now I want to dump one of these and invest in a more aggressive instrument. But I don't know if current market conditions warrant such a move. What would be my best bet? -Hanif Khan, Lucknow
A. Considering the current market scenario, invest in equity mutual fund schemes through an SIP (Systematic Investment Plan). But, if you have a lump sum to invest (say if you have the option to withdraw the fixed deposit), choose a debt mutual fund and transfer some amount to equity schemes through an STP (Systematic Transfer Plan)- wherein a certain amount is transferred from debt to equity every week or month. While investing in equity mutual funds, diversify your corpus across categories of funds such as large-, mid- and smallcap funds, balanced funds and gold schemes. You can drop one of your current investments based on your risk profile and the kind of returns you're hoping to get in the long term.Q. I wish to go back to school for a year or two to get an expert qualification in my field. My wife and I earn about Rs 20 lakh (per annum) together. I hope to quit and join classes in 2015, when the household income will go down to about Rs 8 lakh per annum. I will need about Rs 6 lakh for the programme as the rest of the fee will be covered by a scholarship from my current company. We have no debts, already own a house and have a few tax-saving investments. Which mutual funds or stocks can I invest in to get a lump sum in 2015? Or will real estate be a better bet? -Rajat Mukherjee, Durgapur
A. That you have no debt obligations is an added advantage when you go back to college. Since you want to plan for a corpus of Rs 6 lakh, ensure that you're prepared for contingencies- medical and financial-as you may lose out on the health cover provided by your company on joining the course. It is advisable to start regular investments immediately. The contingency plan will also give your financial corpus additional liquidity.
In order to accumulate the required corpus, an investment Rs 27,000 will be required per month, considering a growth rate of 10 per cent on investment and inflation assumed to 7.5 per cent on cost of education.
Consider equity, balanced, gold and debt mutual fund schemes.Q. I want to buy a property. I recently read that the National Capital Region has a very high appreciation rate followed by Pune. However, I would never want to live in these places even though I'm working in Delhi right now. Should I invest in NCR (or Pune) for a few years and sell to buy a house when I settle down? Are there better markets for investment right now? -Raju Bonapalli, e-mail
A. Every real estate market provides an opportunity for growth and appreciation differs within a market dependent on the region. If you are planning to buy a house by investing in real estate, then you have the advantage of saving on rent (or earning rental income) apart from capital appreciation. There are also tax benefits for investing capital gained from real estate to buy more property. Also, if you have taken a home loan, the EMI paid also has tax benefits. Interest paid on a home loan can be claimed for deduction under Section 24b and principal under Section 80C of the Income Tax Act.
INSURANCEQ. I want to buy a health insurance policy for my parents as they are not covered by my employer. There are many plans available but which one is the best? How do I choose one? My father is 65 years old and relatively healthy except for diabetes while my mother is 60. -Pratim Chaterjee, Mumbai
A. Review all the features, benefits, exclusions and waiting periods of the plans available. As your father has diabetes, ensure that the plan covers all diabetes-related ailments. You could also look at critical illness riders additional to the basic health policy. Last but not the least, the policy you choose must have lifelong coverage and no 'exit-age' barriers. To be sure, consult an advisor before taking the final decision.Q. I have read about health Insurance policies that restores the sum insured if it is used up. What does this mean and should I consider moving my policy to one that has this feature? -Sumeer Saurab, Patna
A. Over the past 10 months, health plans have been introduced for those who exhaust their sum insured within the policy period and are without cover for the rest of the policy year. Restore benefit, as it is known, is a useful feature in a family floater plan as these sum insured can be exhausted by one member of the family, leaving the others without cover. You can consider porting for this feature but make sure to compare the benefits of your existing policy with those of the new plan before porting.Q. For one year now, I have had health insurance cover provided by my employer for my wife and me. As we will be having our first child next year, what additional features should we look for in a health policy? Should we opt for an additional plan other than the one provided by my company? Are there special maternity plans that we should consider? -Arushi Jain, Jaipur
A. Maternity benefits are usually covered by the group health insurance policy. However, check the benefits list of your group cover to know exactly what is covered. If you find that the group plan does not have maternity benefits (or related cover), you can consider an additional policy.
Make sure to double-check the policy's waiting periods and sub-limits meet your needs. There are health insurance policies available that offer this feature but with a waiting period. It is advisable to buy a policy that covers pre-natal and post-natal expenses for both mother and child.Q. I'm travelling abroad with my family for a month-long vacation. In case of an emergency, does overseas mediclaim offer cashless or only reimbursement? What is the claim procedure in both cases? -Vijay Makhan, Delhi
A. Overseas mediclaim does have both cashless and reimbursement facilities. To avail the cashless facility, inform the third party administrator (TPA) helpline and register the claim. You will be guided to a hospital and the TPA will verify the details of the plan with the insurer. The TPA will then directly settle the bill with the hospital. For reimbursement, inform the TPA helpline and register the claim abroad. The claimant should then send the claim form along with supporting documents and bills (in original) to the TPA on returning to India. The TPA will verify the documents and reimburse the amount within 15 days of receiving all necessary documents.Q. I bought a sedan three months back, for which I have comprehensive car insurance. But after a couple of recent long journeys, there is running damage that has to be repaired immediately. Should I get it repaired under a claim so early in the policy period? -Kuldip Alluwalia, Chennai
A. The claims history of your vehicle is an important factor while determining the renewal premium. Those customers who do not make any claim are eligible for additional incentives as, commonly known as NCB or No Claim Bonus, at the time of renewal, while customers who make claims stand to lose this benefit. Further, frequent claims also attract claims loading, meaning an increase in the renewal premium. We would advise that you avoid making small-value claims as far as possible and protect the NCB component of your insurance policy.
REAL ESTATEQ. I recently took a home loan to buy a property in Pune. I have been told that a change in base rate is not always passed on to the customer. How can I ensure that my home loan lender will lower the interest I pay when interest rates go down? -Rajiv Dua, Patiala
A. Review your loan account periodically to know if a fall in Base Rate (BR) or Prime Lending Rate (PLR) has been reflected in your home loan rate. However, lenders are often hesitant to reduce BR when interest rates fall. So keep track to see if interest charged is higher as compared with the prevailing rate or rates being offered to new customers. If so, you can transfer your loan to another lender (no prepayment charges on transfer of floating-rate loans). You can also check with your lender if they will lower the rate on payment of a fee.Q. I want to purchase a flat in Bangalore, which will cost about Rs 25 lakh. My monthly income is Rs 40,000. What is the maximum loan amount that I might get? Also, will I be able to get a joint loan with my brother-in-law as the co-borrower? -Jatin Anand, Mumbai
A. The bank will finance up to 80 per cent of the agreement value and you will have to fund stamp duty and registration charges apart from the remaining 20 per cent. Based on your income, you should be eligible for a home loan of about Rs 18 lakh at 10.5 per cent per annum for a tenure of 20 years, provided you have no other loans to service. A spouse or a parent who has an income as co-borrower will increase your eligibility. Lenders allow immediate kin to be co-borrowers. It is unlikely that a lender will allow your brother-in-law to be part of the loan.
Anil Rego, Chief Executive Officer, Right Horizons has tackled financial planning issues; Harsh Roongta, CEO,Apnapaisa.com has responded to real estate financing queries; Antony Jacob, CEO, Apollo Munich Health Insurance, has advised on health insurance; and Neelesh Garg, Executive Director, ICICI Lombard, has answered general insurance queries.