Tag: Intermediate Level

LIC Online Term Plan Launched – 37% cheaper than Offline version

Posted on by Jagoinvestor

Good News! . Finally LIC Online Term plan is launched. The name of its online term policy is LIC e-Term and can be bought via LIC Direct initiative. Investors community was waiting for this online term insurance from LIC from very long time and finally many will buy the term plan to cover their family. In this article I want to give you a crisp review of LIC Online Term plan.

LIC online term plan launched

Let me share some of the features of LIC Online

1. Completely online buying – without agent help

Like any other online term plan, LIC e-Term is completely online term plan. You just need to calculate your premium, give your details online and then buy the policy by paying the premium. Incase you need to appear for medical examination, that will be done offline.

2. Different premium for smokers and non-smokers

There are two categories of premiums which will apply. The first one is called Aggregate category which will apply for all those who will choose the sum assured between 25 lacs and 49 lacs (it does not matter if you are smoker or non-smoker) . This category has to be chosen if you are smoker anyways (incase you take more than 50 lacs of sum assured)

The next category is non-smoker is called Non-smoker if are choosing sum assured more than 50 lacs and if you are a non-smoker.

choose category in lic eterm online term plan

3. Eligibility Conditions and Other Restriction

  • Minimum Sum Assured : Rs. 25 lacs for Aggregate category and Rs 50 lacs for Non-smoker category
  • Maximum Sum Assured : No limit
  • Minimum age at entry : 18 years (completed)
  • Maximum age at entry : 60 years (nearest birthday)
  • Maximum cover ceasing age : 75 years (nearest birthday)
  • Minimum policy term : 10 years
  • Maximum policy term : 35 years

4. Cooling-off period

If the Policyholder is not satisfied with the “Terms and Conditions” of the policy, the policy may be returned to us within 30 days from the date of receipt of the policy bond stating the reason of objections. On receipt of the same the Corporation shall cancel the policy and return the amount of premium deposited after deducting the proportionate risk premium for the period on cover, stamp duty charges, expenses for medical examination and special reports, if any.

Cheaper Premiums of LIC Online Term Plan

The great news is that LIC Online term plan premium is much cheaper than the offline version of its term plan. If you see the premium rate charts, you will see the premiums for LIC e-term is around 20-30% cheaper then the offline version.

For example – The Yearly premium for LIC online term plan for 50 lacs sum assured was Rs 7,300 (for 30 yrs old male and for 30 yrs term), compared to Rs 11,600 for the offline version (LIC Jeevan Amulya II) . For the same profile HDFC Click2Protect charges Rs 6,000 , so LIC online term plan is around 20% costlier to HDFC Click2Protect plan.

Here is the graphical comparison for the premium difference between 3 policies

LIC online term plan premium difference

Details you have to provide for taking LIC online term insurance ?

When you buy the online term policy from LIC, here will be few things required. Those are as follows

  • Details about your occupation/ Educational qualification
  • PAN number
  • Your Income Details ( Form 16 / ITR for last three Years or P&L Account)
  • Details of all your previous life insurance policies (like policy number, sum assured, plan etc) taken in last 3 years.
  • Details of family members like age, state of health, age and cause of death (if applicable)
  • Details of your medical history including illnesses, injuries and any medication.
  • Bank details like Account number, MICR code etc.

Can NRI take the online term plan from LIC ?

Yes, NRI’s can also buy the term plan from LIC, but it clearly mentions that they will have to be present in India for medical examinations.

Step by Step process of buying LIC Term plan online – VIDEO

You can just go to this LIC eTerm Page and start the process of buying the plan. Below you can watch a 10 min video on how to buy LIC online term insurance policy in step by step manner. I have explained more of the things in the video itself.

Comments on LIC Platorm and overall experience

I have gone through the overall form filling experience and I find it well researched and thorough. LIC has taken a lot of time to come up with platform. Given the popularity of LIC and the trust of its customers, LIC will surely be going miles and will gain millions of new customers. Investors now are well aware of the importance of term plan and its popularity will only grow overtime.

Are you buying the LIC Term plan ? How did you find the review ?

Are you Overestimating your future income and getting into debt trap ?

Posted on by Jagoinvestor

Today I want to discuss a problem which is part of almost everyone’s life and creates some really big issues. I am talking about the problem of “Over Estimating your Future Income” . Yes – A lot of people take their current life decisions, based on what they feel about their future career and future income.

over estimation of future income

My Salary Hike

When I was working in Yahoo, Bangalore around 2008, I saw all the newcomers around me “expecting” their salary hike to be around 20% and 25%, and guess what – It actually happened.

Then in 2nd year, the same people “estimated” that they deserve a minimum 15-20% salary hike at any cost, because they have given their best. It happened again ! .

Then in the 3rd year, they got into the same – “I think my salary hike this year will be .. ” game and by then these people were using maxing out their credit card limits, had bought all the financial products for tax saving and committed to pay huge premium, at times as high as 80,000 per annum. They were all living a life which they deserved after 7-8 yrs of their career.

Then there was a layoff in Yahoo and some people got FIRED (some were my friends)

One guy had almost finalized a home loan, obviously based on his “future income”. Another guy could not pay his credit card bills for next 3 months, because there was no money (he eventually got another job in few months) . And most of them wished if they had saved a bit more, it would have been a better situation.

We focus on positive side, but not on negative’s

The incident I explained above looks fine at the start of career, there is less to loose. But just imagine the depth of this problem. This shapes our financial life.

If you have been working for many years now, you probably have lots of things to achieve in life and due to peer pressure, you can go overboard on your expenses, just by assuming that your future is too bright. The issue is not that we look at the brighter side, the issue is that we look “only” on the brighter side – the salary hike, the promotion, the better salary if we switch companies, the extra bonus which we will get, and then the side income which we can generate along with job .. etc

We do not look at the negative side seriously or just under rate them. We feel job loss is something which happens to others, not us! . The accidents can never happen to us. We cant loose our wealth due to some reason. What about a sudden medical emergency which can wipe out your wealth, what about “No Salary hike” this year , what about “bonus below the expectation” , what about a Fraud which creates a big hole in your pocket?

When we see our future from current situation, it looks like a straight line without any issue or problems, we extrapolate our smooth past into future and every thing looks promising. However the reality is full of surprises, and problems. Things can go terribly wrong and it can really damage your plans in life. How serious it will be depends on how much over estimation you have done for your future income. The image below clearly explains what I want to say here.

your plan in life vs reality

I posted this same point about “overestimation of future income” on my facebook wall, and I got a very good reply from Vishnu Prasath, which I feel everyone should read, below is that reply

Vishnu Prasath reply for overestimation of future income

In our 6 weeks online Investors Bootcamp, one of the weeks is about getting clarity of your current situation and where you stand in your financial life. With the help of an amazing excel sheet, participants are able to find out 12 insights which are related to their financial life, it tells them key hidden points about their financial life.

Yeah .. I am starting my business !

Let me also touch upon the point – “starting my own business”. When you do calculations and plan for your business potential, MS Excel makes you millionaire on paper and shows you all the rosy picture. However things are so different in real life. Assume a person, who is going to leave his job and going to start a business/startup . He forcasts the cashflows and profits and declares that in next 1 yr itself he will break even and start making money. Life will be on track again, but in reality – it can take 4-5 yrs. There can be losses, things can go totally wrong ..

In that case, imagine the situation, the stress the family will go through , the “I told you so … ” the person has to be hear every month. This is one real life example almost all the not-yet-successful entrepreneurs can relate to .

How we spend more and more Today

So because we over-estimate our future income, we buy bigger car, bigger Home, we go on more longer and premium vacations, and commit to higher EMI’s which looks possible considering our future income and cash flows. I do not want to sound like a pessimist here, I am not saying don’t be confident in life or career, one always have to do a calculative move and take decisions based on some assumptions, but some people go over board and damage their future at the cost of today. On that point I want to focus on two main points – which are

We are Consuming more today and not leaving much for future

The biggest problem I see today in most of the people financial life is that they are consuming a lot on the name of “Life is here to Enjoy” .. Yes – its a crime if you dont enjoy your life despite earning so much, but there is a limit to it. There is a always a cieling to your spending. If your yearly salary package is Rs 8 lacs, then you should NOT be spending all 8 lacs , because you “feel” , next year your package will rise to 10 lacs and “at that time” you will save more. If your salary is 8 lacs per year, you should start with Rs 5 lac car, and not Rs 16 lacs car, because your future looks bright. It just does not work that way in most of the cases.

Getting into Debt Trap

Another issue is that, When things dont turn out as per your expectations, you also feel very disappointed and frustrated and start comparing your imagination with reality. Just because you assume future is too bright, you spend on those things, which you dont really need today, but have potential to pay. You also over spend and this is also a cause at times for Debt Trap, you get into a small debt first, you assume its normal and next month you will take care of it, and then it never happens and after 3 yrs, you feel you should have controlled yourself in the start itself.

One of the guys commented his real life experience on one of the facebook groups I am part of. Here is what he said

The biggest problem with our generation is that we overestimate our future cash flows,, think ourselves entitled to expensive lifestyle due to easy credit and fall prey to EMI trap rationalizing it with our increasing incomes every year. I represent this generation and have badly suffered the consequences of overestimating my future earnings.

I took personal loan for construction of my home, then took top up loan next year when my salary increase  and put it in interior and then again took maximum personal loan that I was entitled to for my sister’s marriage next year rationalizing every time that my income will only increase every year in my job.
But then I left job to start a business with one of my friends and all hell broke loose. All my cash flows dried up, debts increased and

I was reduced to begging for money. I had to live on borrowed money for more than a year. All my aggression,confidence,self image and big talks took a bad beating. It was hell of a time. Now I hate debt and credit of any kind. It is slavery, bondage and evil.

You never know when things can go wrong for no reason or for no mistake of yours. Think a hundred times before committing yourself for high EMI, high tenure loans.

(Source : Asan Ideas for Wealth Facebook Group)

How long can you survive financially if you loose your job ?

So you must be wondering about your own case right now. Let me ask a very simple question – “If you loose your job, how many months or year can you survive without working?” . This is a powerful and disturbing question at the same time. If you have been working for many years, and your answer to this question is in months, then there is some issue.

Whats the right way ?

There is no right or wrong way here, there is only logical way. You always have to keep a balance in your spending and saving. You can surely expect the future to be good and bright, but make sure you do not over leverage to a limit which turns out to be a disaster if things go wrong. Also think about situations which are negative and then take a balanced decision.

Let me know what are your comments on this topic ? Have you ever faced any issue because you over estimated things ?

How I arranged my financial life in 4 steps – The Inside Story of my real life

Posted on by Jagoinvestor

Today I am sharing my real life story of how I arranged my financial life. Our financial lives over time gets messed up because we are lost in our jobs and family and everyday some new information or financial document enter our life and gets piled up. We keep stuffing documents here and there in our almira thinking – “I will keep it properly next Sunday” .

Which never comes ! 

getting organised in financial life

In my personal case, I consciously try to keep things arranged as far as possible, but just like everyone, my financial documents and various information become unorganised like every other person. So finally one day, I decided to have my own “Personal Finance Management Week” , where I decided to finally come out of my “comfort zone” and cross all my mental limits, defeat my laziness and arrange all my documents and fix various other “issues” and finally make things neat and clean in my financial life. And thats exactly what 150+ participants of our last bootcamps did in their financial life too.

But why Did I decide to arrange my financial life ?

  • For Myself – Everytime I have to find out some document or information, I really had to struggle remembering where exactly I had kept it, The piles of xerox papers, insurance papers, bank documents, property papers etc etc had got mixed with each other and it takes more than 10-15 mins, lots of frustration and that little guilt inside for creating this mess and not keeping it clean . I wanted to have a clean space of things, where if you ask me about document X or information Y – I can give it you in less than 60 second.
  • For my Family – Because I know, my family will really get confused and frustrated when they will have to deal with my financial mess. They are not as much financially aware as I am, they dont understand this “personal finance” area so much and it will scare them like anything in future when they need to deal with it. So I need to create an environment, where my family members can find out various things related to my financial life, as easily as possible. If you want a proof that family members can suffer if you dont take care of this area, then I want to share a real life case which was shared on our blog itself where, a wife was never able to claim life insurance after her husband’s death, because she had no idea where are documents and which company was it .. here is the sharing by Nishareal life experience on arranging documents
  • and Finally, because its once a year task – Truly speaking, this whole thing does not take a lot of time, all it takes is huge commitment and a small START. There is a great chance that even you have not completed this, just out of lethargy and nothing else, It takes few hours of dedicated work and huge commitment and nothing else. Once you arrange all the things, then from next year, it will be just 1 hour of additional work to update things.

4 things  I did for arranging my financial life like a SuperMan

So, here is how I started. The first thing I did was to buy 3 BIG folders and 2 small plastic pockets which can contain few documents and then I did following 4 tasks

Action #1 – Created 5 folders to hold documents and categorise them

The first big thing I did was to buy 5 folders where I arranged 5 kind of documents in each, so that if I need a particular kind of document or information, I have a separate folder for that. Those 5 folders were

arranged documents in various folders

a) Protection Related Folder – This folder contains all my documents which protect my financial life like – Life Insurance, Health Insurance, Car Insurance related papers, which includes Policy documents, Health Cards, Premium Receipts, A paper containing all the customer care numbers. I still need to add a document which explains them what to do to claim each of them. Imagine you meet an accident and are not accessible, this folder will help them like GOD , Won’t it ?

b) Property related Folder – This folder contains all my property related documents, like Loan Agreement Paper, Home Loan related document, Property Tax receipts and any other small or big document which is property related

c) Banking Related Folder – Banking is a big aspect of everyone’s financial life and I thought why not have a dedicated folder for this. So in this folder I have all my cheque books, Bank related document, Locker papers, FD receipts (if any) , any bank statements which I want to keep etc etc. If you have more than 2-3 bank accounts, it really becomes very cumbersome to manage them, so this dedicated folder comes very handy.

d) All the Bills/Receipts/Warranty Cards Folder – This is not exactly related to personal finance, but over the years, you collect so many important bills, warranty cards, receipts which you want to keep because they are needed later in future and if you cant find them, you really regret mismanaging them and not keep them properly. So in this folder I am now keeping all the bills and important warranty cards. You can also store all your old ITR acknowledgement copies in this folder.

e) Education Related and Important Documents – And finally I have dedicated a folder for all my and spouse education related document like 10th , 12th , graduation and post graduation certificates , marksheets , passing certificates etc etc. Plus , I have also chosen this same document to keep our important documents like Passport, Aadhar card, Driving License xerox, Voter Id Card etc etc, Cable related, Electricity bills etc etc.

After making these 5 folders , now if you ask me you want X , I open my almira, know which folder has it, open it and can find out the required document  80% faster compared to old situation. Now my family, knows that things are not randomly lying here and there, but somewhere neatly arranged .

How 150+ investors organised their financial documents in Bootcamp

We have just completed our Facebook Bootcamp with 150+ investors and we dedicate one full week for arrangement and cleaning up of your overall financial life. Almost all the 150+ participants had taken huge actions and with lots of commitment, they all cleaned up their financial lives. They all arranged their documents and you should see what kind of conversations happens on our facebook bootcamp. See the snapshot below

bootcamp documents arranging week

Action #2 – Created Scanned Version of all important Documents

The next important thing I did was to scan each of my very important document and keep the scanned version online accessible to me and my family. Some people might think its going extra mile and not required, but then its your choice and mindset. God Forbid, if you loose your physical documents somewhere, due to fire, robbery or any damn reason, it gets really tough sometime, especially in case of education related certificates.

There is no harm in scanning documents and keeping it with you online, especially if it takes 2-3 hours of work. All you need to do is take out time and pick which documents you want to scan and then finally scan then. Make a folder, compress it in ZIP format and mail it to yourself on your email id and someone else in your family. Keep it saved in a CD format also and keep at home or locker. It does not hurt at all, other than it takes fews hours of yours, but so what, its for your own good, Its a once and for all kind of activity.

I would still make sure I will take care of my physical documents , but god forbid if something happens to them (for any damn reason), atleast I have a scanned version of it, Its a better situation then to have nothing in your hand. In my case, I have scanner at my home so it was handy for me.

Storing Scanned Files

Here are those documents which I scanned

  • Health Insurance Policy First Page (which mentions Sum Assured and Premium)
  • Life Insurance Policy first Page
  • Health Insurance Cards
  • 10th , 12th and other educational certificates marksheets

Action #3 – Created Emergency Black box Kit for my Family

The next thing I did was to create a emergency black box kit, which any one from my family can open and they will get every possible information about everything at one place. It will have all the basic + critical directions for them to follow, whom to contact in which case, where to go in which situation, how to claim for various things etc etc. Here is a snapshot of what all it can contain

  • All Important Contact Numbers like CA, Tax Consultant etc etc
  • Toll Free Phone numbers of Health Insurance, Car Insurance, Life Insurance
  • Customer Care numbers of all the banks where we have account
  • Email id of all the Insurance and Investment companies
  • All Documents numbers like – PAN number, Driving Licence Number, Passport Number
  • Process to claim life insurance, health insurance etc
  • Process to close bank accounts and claim back the money
  • Process to claim back all the mutual funds and other investments

Here is a rough idea on how it can look like

the emergency file for family

It can be roughly 6-8 pages long. You can keep the online version on your computer, email and dropbox and also take a printout and keep it at home and label it respectively like – “Open in case of emergency” . So incase something bad happens and you are not accessible or can’t help your family, your family members can look at it and their life will be more easier !

Store some important Contacts on Phone also

I extended this task and also stored some very important things on phone , which can be very handy and save you a lot of time in the times of crisis. I have my health insurance card scanned version on my phone, so that I can use it whenever required. Also I stored all the customer care numbers properly one by one with this format – “COMPANY-NAME CUST CARE” , so that in future if me or my family members have to call some customer care, we just can look at the phone search for “CUST CARE” and then choose the number.

I have seen people who try to find out the important phone numbers on the last minute, and that eats out some important time of theirs. Also in case of crisis or emergency – you really need it handy on your finger tips, This particular action might look very trivial , but in times of need, you will really feel very relaxed and happy to have it with you. More than yourself, its for your loved one’s who don’t have to struggle for this.

Action #4 – Created a Run-Away File

I dont know if this is my invention – but this came into my mind some weeks back . Every time I had to go for some important work which requires my Identity card xerox or address proof, I had to everytime arrange for it because I didnt had the xerox ready with me, so I had to carry original and then on the way, I have to xerox it. This takes up time …

Then at times, I had to return back home because I was not having my cheque book, because it was not asked to me . Then at one time, my trip to a property tax department was a waste because I didn’t bring my Index2 (house ownership proof) .. So then I thought why not create a RUN-AWAY file , which has all the things you can imagine which might be required ! for some work . So if you have to take a new phone connection, just pick the run-away file and go

run away file for emergency purpose
If you have to go to book a new property – Phew .. Just pick the run-away file and thats all .. It will have all the things ..

So it will have

  • Atleast 2 Xerox copies of PAN CARD
  • Atleast 2 xerox copies of your address proof (electricity/phone bill)
  • Passport xerox, aadhar xerox, driving licence
  • 4-5 passport size photos of yours, spouse ete (if needed somewhere)
  • 1 cheque leaf of your bank accounts (unsigned)
  • 1 pen

You place all these things in a plastic packet and that’s all, you take it where ever you go , You don’t have to arrange for things every time. From the day I have created it, my life has become very easy, all I need to do is just open my almira and pick up that folder and I move on ..

Define your own style of arrangement

What you just saw above was my personal way of arranging things. This is just a idea of what all you can do, next – you need to define what all you want to arrange, in what manner, to which level and which are more important things for you and what is not. It might happen that you might feel, that what I did was little over-doing of things, but thats fine – its your choice. You can choose to go for a lower version, but I would just say that a lot of things are just one time task and then a small pinch of yearly review, Give the benefit you will get out of it, compared to the time you put, its worth going a little deeper.

Arranging Things is 1st Step , Communicating with Family is 2nd

We feel we should communicate all the things about our financial life to our spouse, children , parents etc and they should be aware about what all is there, but imagine if you do that without arranging things . If things are messed up in your financial life, the communication from do will not be effective.

However, if you arrange things neatly like this, and then when you show these things to your family members – they will be able to consume it in a better way, they will understand things more clearly, because they are able to “see” things before their eyes. They know what to find, where to find, and how to find. If things are clean and neatly arranged like this, they will also become more serious about overall finances and they will really feel that you are responsible and think about their care in future.

You will feel amazing

Once you arrange your financial life and fix lot of other things which were pending from long time, you will really feel amazing. I want to share one of our bootcamp member experience of working on his financial life and how our bootcamp has changed his financial life overall.

This looks so small thing, but the difference it makes in your day to day life is really great ! – So are you still waiting for “next Sunday” ?

4 kind of exclusions in your health insurance policy which are NOT covered

Posted on by Jagoinvestor

When health insurance claims are rejected, it disappoints the customer more than anything else. Its a disappointing moment for the policy holder, when his trust is lost in company and he starts feeling that he was a fool to buy the health insurance policy at the first place and waste his premium, because companies are just fraud, who wants to loot the customers, by giving silly reasons for not settling the claim.

They feel companies are coming up with unreasonable reasons to reject their claims. This situation is a big blow to customer financially, because now they have to bear all the expenses from their own pocket. This is exactly what happens with many customers who have no idea of what their health insurance policy covers and does not cover.

What does a Health Insurance Policy does not Cover ?

In almost all the cases where claims are rejected and customers are disappointed, its seen that it happens because companies reject claims based on the policy document rules and what is covered or not covered into the policy, however the customer disappointment is always there, because there was a lack of understanding of what is covered and what is not covered. There various clauses like waiting period concept or exlusion of pre-existing illness, which customers do not try to understand fully and see health insurance policy as something which will just pay their bills in any medical case. However thats not true.

In this article I want to make you aware about the 4 major clauses in almost all the health insurance policies which will help you understand how exclusions work in case of health insurance policies and when you will not be paid. This will help you and companies both to make sure you are on the same page.

What is not covered in health insurance policies

Exclusion #1 – Permanent Exclusions

Permanent exclusions are listed category of treatments, which are never covered in health insurance policy for whole life. They are excluded permanently from the ambit of the health insurance scope. These permanent exclusions are clearly mentioned in the policy document of the health insurance product under section “Permanent Exclusions”.

Even before buying the policy, you can look at the PDF document of the policy which must be there on the health insurance company website. Almost all the companies have the same list of illnesses listed under this section, however you should anyways look at it.

Here is a sample list of some of the permanent exclusion taken from Religare Care Health Insurance policy(not the full list)

  • Any condition directly or indirectly caused or associated with any sexually transmitted disease
  • AIDS
  • Any Treatment arising from or traceable to pregnancy, miscarriage, maternity, abortion or complications of any of these.
  • Any Dental treatment or surgery unless necessitated due to an injury
  • Charges incurred in connection with cost of spectacles or contact lenses, routine eye and ear examinations
  • Any treatment related to sleep disorder etc
  • Treatment of mental illness, stress , psychiatric or psychological disorders
  • Any Treatment/surgery for change of sex or gender reassignments including any complication arising out of these treatments
  • All preventive care, vaccination, including inoculation and immunizations
  • Non Allopathic treatments
  • Any Out Patient Treatment
  • Treatment received outside India (unless its part of the policy)
  • Act of self destruction or self inflicted injury , attempted suicide
  • Any Hospitalization primarily for investigation or diagnosis purpose
  • Cosmetic and aesthetic treatments
  • plus, there are many others – which you should read in policy document

Here is an exact snapshot from Bharti Axa Health Insurance page

what is not covered in health insurance policies bharti axa

Exclusion #2 – Waiting Period Concept for selected illness

Each Health insurance policy has the concept of “Waiting Period” for a selected list of illnesses, which means that for first few years(which can be anywhere between 2-3 years) will not be covered under health insurance and only after that period they will be covered. So if waiting period is 2 years in some policy, and you take the policy in year 2014, the illness covered under waiting list will be covered only after 2 yrs are over.

This is one thing which customers do not pay attention to while taking the policy and if they get hospitalized due to some illness which is not covered under waiting period, their claim is rejected and then they feel cheated and complain about the company. Here is a real life case on our forum

Here is the list of some of the illness and diseases which are part of waiting period in most of the policies

  • Arthritis , Osteoarthritis , Osteoporosis , Spinal Disorders, Joint replacement surgery
  • ENT Disorders & surgeries, Deviation, Sinusitis and related disorders
  • Cataract
  • Dilation and Curettage
  • Piles, Gastric Ulcers
  • All types of Hernia , Hydrocele
  • Internal tumors, Skin Tumors , cysts
  • Kidney Stone , Gall Blader Stone

Some policies might have the specific waiting period for senior citizens, like in case of Family First policy by Max Bupa, there are few illness which are under 2 years waiting period for senior citizens, but not for young customers.

Specific Waiting period for senior citizens

Exclusion #3 – Pre-Exisitng Illness

Another exclusion is “Pre-existing illness” in all the policy documents of all the health insurance policies. Pre-existing illness are those illnesses which are already detected for the patient. Most of the companies do not cover these pre-existing illness for starting 2-4 yrs (exact time varies from one company to another). So if someone is suffering from some respiratory illness already, then any treatments or hospitalizations which occurs due to respiratory problems will not be covered for first few yrs (the exact tenure depends on company). This is to prevent situations where a person is detected for some disease and he takes the health insurance so that he is covered for the hospitalization, this is simply not allowed and does not make any business logic. So thats the reason its said that one should take health insurance as soon as possible so that those initial few years are passed and then you are covered for wide range of illness.

Pre-existing illness in case of Senior Citizens

In case of senior citizens, pre-existing illness are excluded for rest of the life in most of the policies, because anyways there is higher probability of senior citizens getting hospitalized due to their existing illness. So if someone has undergone bypass surgery and they are senior citizen, any heart related treatments will not be covered for all life. It will be permanently excluded from the policy. Thats one big reason why I keep on saying that you should take your parents health insurance before they turn 60 yrs. There are some companies like Oriental Insurance, which does not even require medical tests for persons upto age of 60 yrs, just the declarations given in the health insurance form is enough.

Exclusion #4 – First 30-90 days waiting period

Almost all the health insurance companies do not give cover for any medical treatment for the first 30-90 days of taking the policy, except the medical expenses which result from injury (like accident). For example Religare Care have a initial 30 days waiting period, however Max Bupa Family First policy has a 90 day waiting period

Conclusion

Health Insurance is a preventive financial product, not a reactive financial product. You take health insurance to make sure that you are covered from future problems, not to deal with current medical issues. So when you are healthy, you should go for medical policy, so that you are covered for any long term medical issues. Most of the people start the procedure of buying health insurance when some illness is detected, and that’s when health insurance policy will not help you much. Instead of having wrong expectations by assuming things, better analyse and research the health insurance policy properly and deeply by reading the policy document.

Let me know if you have any experiences on this or want to share something ?

How Wrong CIBIL report’s have harassed & destroyed many investors life?

Posted on by Jagoinvestor

A few years back, India was introduced to the world of “Credit Bureaus” and “Credit Scores”. Credit Bureaus track an individual’s credit history and create a report from that data. So all your financial history including credit cards, loans, the timeliness and regularity of your repayments and the number of times you have sought credit, is captured in this single report, and based on all this information a score is generated. This data is shared with lenders on request and subsequently used by them to make a lending decision.

CIBIL report Errors

On paper, this idea looks great because the system ensures that there is extensive record keeping for all individuals and the data can help lenders and banks make effective lending decisions. So far, the intention was good and admittedly with our huge population and fragile systems, there were bound to be a few hiccups along the way.

But it would seem that the amount of confusion created by the Credit Bureaus has reached unreasonable proportions.

Wrong Credit reports and how they are messing up financial lives of many

From the last 3-4 years, I have been hearing horror stories about how various financial lives have been destroyed as a result of wrong credit reports and mismatches in data. Banks are now mostly reliant on CIBIL reports for processing loan requests – they look at the CIBIL report and take the decision. But how does one guarantee that each and every bit of data recorded in the credit report is a 100% CORRECT?

There have been tons of instances where the report was wrong or had incorrect information and ultimately the consumer had to suffer a lot because of it.

  • Imagine a student who is looking for education loan and his father has applied for education loan, but bank is not ready to give loan because there is no Credit history ?
  • Imagine a family has made the down payment for their dream home and have applied for home loan , but it gets rejected because their CIBIL report has an entry for a credit card due which they have closed 8 yrs back and now neither they are getting loan , nor the builder is co-operating with them
  • Imagine a guy who is in need of personal loan, and if fully eligible for it, but could not get it just because his report has data of some one else whose name is close enough and the system has made the error ?
  • Imagine a guy following up with banks to update his data with CIBIL, then going back to CIBIL to know the status, asking 100 times about it, still not getting any clue on what is the status and finally he feels helpless and sorry for the whole system

Wrong Data in Reports

One of the biggest issues with present credit reports is the inaccuracy of data. Mostly this happens because the report is pulling data from multiple sources that might have incorrect data themselves or because of name mismatches. Even though this is a system fault but the end result is that the investor suffers.

I want to share Prabhat’s story on how his life was impacted due to wrong data in his CIBIL report.

Hi Manish,

Am a real victim of this “CIBIL”. Two years back i requested for a report. The report was full or errors- be it my name, identity, address, accounts etc. I raised a dispute form then. Since then, in that report, my name has changed thrice, my addresses have changed, my contact nos have changed. They apologised and said that corrections have been made. Recently i applied for a loan and again got rejected. When inquired and got the CIR, my data was merging with some other “Prabhat”. To confirm my doubts, i even called that person and highlighted all this in my next mail to cibil. But to no avail. You would always get a prototype reply- “We cant change data on your own and pls contact credit institution for modification”.

Ridiculous, is’nt it? First of all you sweat to get your issues registered (if only you get a great guy who happens to read your mail/ talk to you over phone by luck). Then follow the same to make them understand what is apparent to even a layman. in my case the other “Prabhat’s” pan no is different, dob is different, address and other things are also different but even then the data got merged and when i raised this, they are passing the buck onto credit institutions.

This is clearly not any fault of credit ins but of this cibil only. To be more precise- in their system of extracting data which they are not accepting. Sometimes, after negotiating so many mails and conversation with their executives, i really feel that this is being run by a bunch of nerds who would not listen or not understand your concerns. I have not taken a single penny as a loan in my whole life and now not getting loan just because of this cibil.

I want to knock the doors of law, to claim a heavy compensation- can you suggest me how and where can i lodge my complaint. I have all the evidences in black n white.

Prabhat

Here is another case of spelling mismatch

I got my CIBIL report recently. My Name is CHANDRA SEKHAR SHARMA but the name that I have found on the report is CHANDRA SEKHAR S V. It is not a spelling mistake as CHANDRA SEKHAR S V is a different person at all. But all my credit cards are listed against this name and one loan which is taken by MR CHANDRA SEKHAR S V is also showing here. So it is overall one report mixed up with two person’s information. In other word CIBIL is selling one report to 2 person.

I am going to report this dispute to CIBIL. But it is raising lot of question on CIBIL.
This CREDIT score concept hold good and easy to maintain in country like USA. They are having SSN concept where they are uniquely identifying each individual. But in our country we still to have such concept until UIN /adhar effective completely. Till then we have to face such situation .

Gap in Communication from Banks

The other problem is gap in communication with banks . The whole system is not efficient enough for speedy updates. Given huge banking system and widespread network, its bound to have communication gap. Here is one instance where Subhajit was marked as Defaulter by CIBIL , just because SBI didnt update some data from their side on a loan closed years back

I took a loan from SBI in 2004 and closed it in dec 2012. Now at present when i applied for another loan to some other bank, CIBIL marked me as a defaulter as they did not get any updates from SBI on the closure details. I contacted Chief Manager of the SBI branch from where I took the loan and asked her to send out an email to CIBIL ([email protected]), mentioning all my details and report that the loan account is closed now. Even after this was done, CIBIL is still saying that they might take 30 days untill the credit institution reverts back with their response. I dont understand whether CIBIL has a huge miscommunication between their call center folks and the email department. what do i do now?? i wanted to escalate this to the highest authority in CIBIL but i dont have any contact information for the same.

Regards,
Subhajit

Here is another case of Vijay

Hi Manish

In my report, the SBI card which I used to have was mentioned as “WRITTEN-OFF” and the Days Past Due section also had a number 120 put for the last several months ending in Sep-2006. This was definitely wrong info since I had checked with SBI in 2006 and they had informed me that there was no due from me at the time of closing the card. So I contacted SBI and they informed me that it was a mistake from their end and that they have corrected it in the latest update to CIBIL.

Then I informed CIBIL about the mail from SBI and asked them to confirm if the erroneous entries have been removed. CIBIL gives me a very vague answer stating the SBI card account is closed as per instruction. But I want to know if the word “WRITTEN OFF” has been removed from my report and if the Days Past Due section have been set to 0. I have sent them at least 3 mails asking for precise info on the above two queries. But they continue to give me very generic and vague answer.
Please let me know if there is any escalation mechanism when CIBIL gives vague responses.

Also in the score section, there is a line which states “*One or More Trades with Suit Filed Status in the Past 24 Months*”. I asked them for an explanation on what the above line meant. But they have not given any explanation. It sounds like some company has filed a suit against me in the last 2 years. I am not aware of any such suit. I am not able to get CIBIL to explain the line or tell me which company has filed the suit. I am at my wits end to get a proper response from CIBIL. Any help is appreciated.

Regards

Vijay

Using CIBIL report as a weapon

Some banks have also started using CIBIL report and its impact as a weapon against investors. They have started talking in the language of – “Do this, else your credit history will … ” (here is the proof).

Here is a what happened with Ravi

I was using a credit card from ICICI bank and I used it for about 6 months, in between I forgot to pay the due amount for one month and in the next month statement I found additional 6000+ Rs to be paid as late fees + interest + taxes that I refused to pay and deposited the amount that I was expected to pay. And after this I traveled abroad for 1.3 years and on my return from there I was called up by bank and asked to deposit 31 000 Rs against that, here again I refused to pay initially and asked them since I have not used this amount why should I pay this much. But later one gentle man from the same bank called me and said that if I will not deposit the same amount it will affect my credit history and I will not be able to get any loan in future. Hence I deposited all the stated outstanding amount at once.

But now when I applied for car loan , my loan request got rejected by the AXIS bank due to that credit card credit-history. I also approached ICICI bank for same and they immediately issued me the NOC with 0 Rs outstanding for me.and also requested them to get my name cleared from CIBIL, for this they told me that your name is already updated in CIBIL for 0 balance. I forwarded the same email to AXIS bank but still they are not ready to issue me the loan saying that I have paid the money lately after 1 year. Hence I am very anxious about it now that without doing any fault from my side I am becoming a victim here.

Your rights incase you are suffering because of Credit Beureu mistakes ?

A lot of investors who are affected by this CIBIL menace and mistakes from the banks side just feel angry, but they let things go and do not force a resolution. But you need to know that no one has any right to play with your financial life and if someone has, then they need to pay for it. If you have been facing an issue because of CIBIL or the bank and it has impacted you financially or mentally, you should always reach out to the consumer court or banking ombudsman. There have been many cases where customers have got some compensation. The only catch is that you need to be committed to pursue the case and have patience.

Here is one instance where a person was awarded compensation because was mistekenly marked as “defaulter” by the bank and suffered due to this

City residents continue to be hassled by the ‘CIBIL defaulter’ tag over minor disputes with banks. Now, a Sector-39 resident received justice from the UT Consumer Disputes Redressal Forum after a private sector bank had labelled him a defaulter and sent his name to Credit Information Bureau India Limited (CIBIL), an all-India data bank which carries credit history of all commercial and consumer borrowers.

The Chandigarh Consumer Disputes Redressal Forum has directed the bank to pay Rs 10,000 to the harried complainant, and Rs 5,000 as cost of litigation.

The order was issued by the Forum following a complaint filed by Bhajan Palm who told the forum that in 2003, he took a personal loan of Rs 66,000 from the bank, and repaid it in equal monthly installments.

Here is another instance where HSBC was fined for adding the name of a person to defaulter list without strong reason

Hongkong and Shanghai Banking Corporation (HSBC) has been ordered by a consumer forum here to pay Rs 20,000 as compensation to one of its credit card holders for adding his name in CIBIL’s defaulters list even though he had paid all his dues.

While awarding the amount to the HSBC credit card holder, the New Delhi District Consumer Disputes Redressal Forum said the Bank should have “gracefully” accepted its fault instead of adopting an “obstructionist attitude” by seeking rejection of his complaint.

You can read some more cases here or here .

Below is a 2 part video series from MoneyLife Foundation on “How to file effective complaints and win your battles in Consumer Courts”

Can you share any experience of yours on CIBIL mistakes or any struggle you faced ?

Also let me remind you of the ‘Oh my God’ offer coming on 7th Jan 2014, which you will not like to miss at any cost. Its one of its kind of offer coming soon !

Review of iWish Recurring Deposit from ICICI Bank

Posted on by Jagoinvestor

Around December last year, ICICI Bank launched a flexible Recurring Deposit scheme called “iWish”. Customers with an ICICI savings account and who have access to Internet banking can use the iWish facility. Here’s how

  • Login to the iWish section in your ICICI saving bank account
  • Define a goal (like buying a laptop, vacation, down-payment on a house, etc.)
  • Define the amount and tenure
  • Make the starting contribution and the iWish goal starts

After this point, you are free to deposit additional money in your iWish account anytime you have surplus funds. Also, you can clearly see how much of goal is completed in % terms at any stage of the process. Interest rates on the iWish scheme range between 7.75% and 8.5%. Rates depend on the tenure of your goal – which can be between 6 months and 10 yrs.

ICICI iWish scheme Interest rates and Penalty rates
Source Page
Where iWish really innovates, is by bringing a social networking aspect into the picture. Users have the ability to share their goals (and the money required to achieve them) on their Facebook account and friends and family can then contribute money to the goal if they wish. By getting users to make a public declaration of their goal, the scheme hopes to prompt greater accountability in individual financial decisions.

To learn more about ICICI iWish Scheme, please watch the video below.

How its different from normal Recurring Deposit ?

Compared to a standard Recurring Deposit, the iWish scheme does not make it compulsory for users to make payments on a fixed date and also gives them the power to categorize savings into goals – which is a more human way to visualize and save your money.

Personally, I see iWish as a mechanism to define goals and save for them through Recurring Deposits. While standard Recurring Deposits just help save money for an unlabeled goal, iWish helps you define and prioritize your goals – helping you decide which goal to save for first. It also helps build a focused saving approach as once someone defines a goal, they are more likely to be serious about achieving it.

The scheme is clearly going to benefit the young generation, who are new to investing. For a generation who rely a lot on visual stimuli, the ability to see defined goals and a visual image of progress towards that goal (e.g. 34% of your ‘new car’ goal has been achieved) is a huge plus.

Fine Prints and things to know

While, on the whole, the iWish Scheme is good, there are few things one should be aware of to avoid a mismatch with expectations.

  • One can create maximum of 10 goals (wishes) and the maximum goal amount can be Rs 10 lacs
  • The minimum installment amount per month has to be Rs 500
  • If you want to withdraw the money on maturity or even before maturity, you need to open a request online for that.
  • There is no compulsion of making payments each month, so you can skip the installments if you want

Disadvantage of iWish from ICICI

By now, you must be wondering what the downsides of the iWish scheme are? Simply put, it is the problem of “manual intervention”.

I am convinced that it takes a great degree of resolve and discipline to properly manage one’s personal finance and investments. Unless the saving process is automated, people are tempted to be a little relaxed about saving in every period. While iWish touts its ‘flexibility’ as an innovative feature, in real life it might not help, as people are more likely to stop ‘voluntarily’ paying into their goals after 2-3 contributions.

With a traditional recurring deposit, the process of investing is compulsory and forced on you and in essence, you are compelled to make payments on a fixed date. Furthermore, the knowledge that there is an auto-debit leads you to ensure the monies are there in the account on the designated date. All this means that over 1-2 years, the Recurring Deposit really works and creates the money pool you need. While iWish is a fancy product, I do not see it as an improvement over the traditional Recurring Deposit.

Only in selected conditions and situations, iWish seems to work better than normal Recurring Deposit. An example would be when the investor’s income is not stable (one does not know if the bank account will really have the required balance on a certain date). For all other cases, I would prefer using traditional Recurring Deposits. Choose a goal, fix the amount, divide it by number of months and just start the RD for that amount. That should get the job done without needing my involvement every month.

What’s your verdict about iWish Feature and its utility? Do you think it’s any better than traditional Recurring Deposits?

UPDATE : Just realised later and came to know that you can have funds debited from your account automatically just like traditional RD, but it was kind of hidden and I never realised it . So mainly iWish has both, traditional RD features and innovative flexible way to accumulate your money and hence is better than what I have projected above.

 

Recurring Deposits – How to get maximum benefit from them in your financial life !

Posted on by Jagoinvestor

Today I will talk about the simplest financial product known to me – the Recurring Deposit or RD as it is called. Most investors know about Recurring Deposits and have used them at some point of time. However, many investors are still confused regarding this straightforward product.

Also, I will share tips on extracting the maximum benefit out of Recurring Deposits and on using this product to lead a better financial life.

Recurring Deposits

Simple and Beautiful financial Product

Recurring Deposits are often rightfully called one of the simplest financial products in the world. You open a Recurring Deposit for a fixed amount and for a fixed tenure. Each month that fixed amount is invested and you earn interest (at a predefined rate) on the Recurring Deposit.

For example – You can open a Rs. 1,000 Recurring Deposit for 2 years @ 9% interest. Now for the next 24 months, Rs. 1,000 will be invested from your bank account and it will get accumulated in the Recurring Deposit and will accrue interest at the rate that was offered. This is exactly the same as putting Rs. 1,000 in a piggy bank on a certain date for the next 2 years, except that in Recurring Deposit you also get interest income (which is not an option with the piggy bank).

I have been unequivocal in stating that almost all new investors who enter the world of personal finance should start with Recurring Deposits. Typically, new investors do not fully understand the principles behind personal finance and so to protect their money from the they leave funds dormant in their savings account or use them up for some other purpose. Instead, by creating a Recurring Deposit, they will ensure their income is getting channeled into investments and more importantly that they earn interest on their money – eventually leading to good investing habits being formed. Gradually over the next 1-2 years, they can start investing in other instruments such as mutual funds, real estate or bonds.

Planning your Short Term Goals using Recurring Deposits

A Recurring Deposit is a safe investment, or in other words, it is a financial product with guaranteed returns. Stocks or mutual funds are not ideal investments for short tenures. There is no guaranteed return in equity-based productsand consistent returns can only be expected over a long horizon of 8-10 years.

Recurring deposits are therefore the ideal products to consider when planning short-term goals over a horizon of 1-3 yrs. These may include

  • A corpus for a downpayment of our new home
  • Education fees for your children (yearly fees paid in one shot)
  • Home Renovation expenses
  • Higher Education Expenses if you are in Job
  • Upcoming Marriage expenses due in 2-3 years (e.g. sister’s/brother’s marriage)
  • Setting aside funds for a vacation

Now if you look at most of these goals above, Recurring Deposits give returns similar to those of Fixed Deposits. Returns are at the moment in the range of 8-10% depending on the tenure chosen. As Recurring Deposits do not carry risk, they are the ideal investment solution for short-term goals (such as the ones above) where the investor is looking for guaranteed and liquid returns on savings.

Using Recurring Deposits for Ultra Short term goals in life

But the real reason why I love Recurring Deposits the most is this – Recurring Deposits are without doubt, the most powerful way to reach your ultra short-term goals in life. The parts below are excerpted from my 2nd book – “How to be your own financial planner in 10 steps“.

How many long-term financial goals do you have in life – A maximum of 3 or 4, right? Investors tend to overemphasize their focus on this handful of goals in life and spend most of their time working towards them. However most of these goals are so distant in the future, that planning for them is virtually impossible. On the other hand, we have dozens of small goals in life, which are due in next 6 or 8 months or a year at the most. We really aspire to achieve these goals, but ironically, never plan for them – because we think they can be achieved without planning.

Let me explain –

Imagine you want to buy Nokia ‘Lumia 720’ in the coming 6 months. This is very small goal. But most people think about it and leave it hoping to have sufficient money for the phone when the time comes. Now imagine 8 months go by. If at that time, the person has enough money in his account, the idea to buy the phone will again occur to him and he will make the purchase. And if the money is not there, the purchase idea yet again gets pushed out in to the future.

The same habit recurs in a case where you might wish to gift a small vacation to your parents on their birthday next year. Lets say you want to send your parents on a small vacation after a year, and it would cost Rs. 25,000. Now again no one “plans” for it. The matter of having sufficient funds when the time comes is left to chance.

Now here comes the power of Recurring Deposits where you convert each ‘small expenditure’ that is due in the next 6 months to 2 years (not more than this please) into a goal – and open a Recurring Deposit for it. You then let the money flow out of your bank account each month without manually getting involved, set reminders for each goal on the target date and keep achieving those goals!

Example of using Recurring Deposits in a Scenario

Imagine you have 3 small goals within next 1.5 years and those are

  • Buy Nokia Lumia 720 in next 10 months – Rs 20,000
  • Gift a Vacation to Parents in next 1 yr – Rs 25,000
  • Pay Installment of you Kid Pre-school in next 1 yr – Rs 25,000

Most people have goals similar to the ones listed above. To achieve these goals, you can open 3 Recurring Deposits (one for each of these), for the exact tenure (10 months, 1 year and 1.5 years). Consequently, just by having small investments each month, your planning for short-term goals will become quite robust. As the deposits mature, you will find that you have the financial means to achieve your goals without scrabbling to arrange money at the last moment or worse, having to drop your goals altogether.

Taking the above example, The RD’s would be like this

  • Buy Phone – Start 10 months RD for Rs 2,000
  • Gifting Vacation – Start 1 yr RD for Rs 2,000
  • Pre-school Fees – Start 1 yr RD for Rs 2,000
  • Total Money going in RD each month – Rs 6,000

What you have done above is to give concrete shape to your short- term goals by using Recurring Deposits and prevent your goals from turning into perennially postponed wishes or wishes that remain unfulfilled throughout your life.

Simplicity means Fast Action

Setting up a Recurring Deposit is so easy it’s almost effortless. You can log onto your Internet-banking page and open an online Recurring Deposit within seconds. You just have to pick the amount per month, the tenure and the date you want the money to be debited from your bank account – and your Recurring Deposit is all set. This simplicity in setting up also helps you take actions faster

Recurring Deposits Tenure’s and minimum Requirement

The minimum and maximum tenure and amount for recurring deposits varies from one bank to the other. In general, PSU banks such as SBI Bank, PNB or Andhra Bank have a minimum limit of Rs. 100 to open a recurring deposit. However, private banks such as ICICI, HDFC or Axis have minimum limits of Rs. 500 or Rs. 1000. The maximum tenure for Recurring Deposits is up to 10 yrs. Here is a snapshot just to give you an idea

Recurring deposits tenure and limits

Some other Features of Recurring Deposits

  • There is no TDS applicable on recurring deposits, but the interest income is fully taxable in your hands.
  • You can break your recurring deposits anytime before maturity with some penal interest. The interest applicable will be the rates applicable for the tenure RD was running and not the original tenure chosen.
  • Some Banks offer flexi recurring deposits also, where you can increase the amount of deposit each month (but cant decrease it)
  • The minimum tenure for RD is 6 months and maximum is 10 yrs
  • You can start recurring deposits for minimum of Rs 500 or Rs 1,000 . In post office its minimum Rs 10
  • Recurring deposits comes with Nomination Facility, so your nominee will be contacted and handed over the money if you die.
  • You can take loans against your recurring deposits for 80-90% of RD worth
  • Interest is compounded on quarterly basis in recurring deposits

Please share what you think about Recurring Deposits. Have you used them? Can you share one insight or hidden information about Recurring Deposits, which you feel may help others!

How EPF Fraud of 100 crore was done from Inactive accounts?

Posted on by Jagoinvestor

In the last few days, there is news that some EPFO employees have done fraud and siphoned off Rs 21 crores from some EPF account.

How was this EPF fraud done?

So the fraud was done on those EPF accounts which belonged to small companies which are inactive from 2006 and there were some checks and balances which were not done for those old accounts. Another thing they did is that they only withdraw 2-3 lacs because it does not for any kind of audit (it happens above 5 lacs withdrawal).

This was done by few employees of the Mumbai office and one of the clerks was the mastermind for this. Around  8 people have been suspended already and it points out that a bigger fraud may be in place. More investigations are going on right now!

Apart from the above recent incident, I also want to share with you some more incidents which have happened in past.

I am going to share some startling facts today about EPF Frauds that have recently come to light and have been written about and highlighted in the press. And it is highly likely that some of you who are reading this article might be victims of this fraud – just that you are unaware of the fact at the moment.

Fraud Withdrawal’s from EPF accounts

Sanjay Kumar is the Chief Vigilance Officer at EPFO and on 7th Oct 2013, a circular was issued to all the EPFO establishments of all regions in the country with the subject- “Fraudulent withdrawal from the account of EPFO by furnished forged statutory returns”.

The letter talked about scammers making fraudulent withdrawals from various EPF accounts by submitting forged bank accounts and KYC details/documents. It also mentioned that EPF officials had colluded with these scammers and helped them withdraw money from Provident Fund accounts – especially ones that were inoperative (no activity on those accounts) and/or where the employer no longer existed (closed or shutdown).

I have paraphrased below important excerpts from the circular

Point 2. The investigation has revealed that the fraud was committed mainly in respect of those establishments where remittances had not been received for many years, records not updated and the establishment had not submitted statutory returns. Further no pre-coverage or post-coverage inspections were carried out of the firms and no claims were received or settled since long,” it said.

Point 3. The investigation has revealed that the fraudsters had submitted forged/fabricated returns viz . Form 3A/6A, 9(R), Specimen Signature Cards and therefore, Submitted fictitious claims in the name of original members of non-members. The claims were settled by putting pressure on dealing hands/office by all possible means.

You might be aware of multiple cases where investors face a slew of obstacles while withdrawing their Employee Provident Fund money. At times, it takes years before they get any status of their EPF money and even when a payout is made, cheques go missing or are sent to the wrong address. So, it doesn’t require much imagination to see how in the wrong hands the cheques can be cashed simply by opening a fake bank account.

Here is an incident where an EPF investor faced the issue

Preliminary investigations revealed that there had been huge withdrawals and transfers of money from the individual fund accounts of a number of school employees without their consent and knowledge,” they added. “An FIR was registered and investigations were initiated by a special investigation team. During the investigation, it came to light that funds were withdrawn by the treasurer of the school by forging signatures of the principal and staff members,” police said.  (Source)

Some Numbers

To put things in context, we are not talking about a few isolated fraud cases or few crore rupees here. The actual scale of the fraud is mind-boggling and will cause you sleepless nights.

Consider this – as on April 2011, there were close to 8.15 crore EPF accounts, out of which 3.14 crores EPF accounts were dormant with a balance of close to 16,000 crore rupees. Of these 3.14 crore dormant accounts, 2.5 crore accounts had a negative balance, which meant that they did not have any money in them (money had been totally withdrawn!).

EPF withdrawal fraud on fake names

How does EPF Fraud work?

Let’s talk about the modus operandi of the fraudsters in detail, so that you can understand the loopholes in the EPFO system. Note that this whole fraud is highlighted mainly for dormant accounts, especially those where the employer does not exist now. However, it would not surprise me if frauds started to happen even on active accounts anytime soon.

So here are the steps that are taken by fraudsters

Step 1 – Identify a dormant EPF account

The first step is to find out all the details of the dormant EPF account. If you have some money to spend on bribes or lots of time and patience to search the Internet, you can get all the information you want. The Internet abounds with people who have given their EPF numbers, names and addresses without realizing the risk they are exposing themselves to.

Also if you have the money, you can quite easily bribe officials and get information. A dormant EPF account is one that does not get any fresh contributions for 36 months. At times the employer depositing the money in the EPF account closes operations and now the EPF account is totally orphaned and the money is sitting idle.

The EPF holder is either in another job waiting for that perfect moment when he will start the withdrawal or transfer process or he is working outside India and has totally forgotten to take action on his EPF account. It may also be that the money in the EPF account is such a trivial amount that he/she does not bother to do much about it.

Step 2 – Open a bank account with Forged details

The fraudster’s next step is to open a bank account with forged details and prepare a PAN card, address proof etc. In an environment, where obtaining fake passports or completely forged educational degrees is child’s play, it’s no stretch to assume that it would be easy to get fake KYC documents made.

Step 3 – Apply for Withdrawal of Claims with forged identity

After all the documents and identity are set, one just has to fill up a withdrawal claim while posing as the target of the intended fraud. If the company depositing the money in the EPF account is now non-existent, then EPFO relies on the bank branch to confirm the authenticity of the bank account (as per the Livemint article)

In any event, the structure of EPFO is not centralized i.e. each state has its own EPFO department and things are controlled locally. Therefore there are different EPF account numbers for the same person and different EPF accounts opened at different intervals. Even the process followed at each step is not extraordinary but rather the same old rotten way of doing things.

If there are issues at some stage, it has been found that insiders have been influenced and helped to pass the claims (as per the EPFO circular itself). There is no wonder that bribes are given and taken and things are bent. Here is proof below

The RTI reply also revealed that at least 1,350 EPFO employees have had corruption charges against them in the past five years. Of this, 450 are from the officer grade. Most of these officers have been accused of misusing power and colluding with companies to turn a blind eye to their wrongdoings. And every year, more and more such officers are coming under the scanner.

Confirming the trend, DL Sachdeva, a member of the EPFO board, said it would be next to impossible for any company to siphon off money without the help of EPFO officials. (Source)

EPF fraud modus operandi

What you should do now?

If you have an old EPF account that needs attention, you should ensure you withdraw the money or transfer it to your current EPF account. Make certain that you only have one single active EPF account running.

Do not leave it unattended for extended periods or else be ready to face unpleasant surprises in the future. If you need any information or need to move things forward, use the RTI application to the EPFO department and things will move quickly. Also, make sure you take general precautions like not revealing your EPF number and other details in public without a strong reason.

Please share your views on this topic and EPFO in general in the comments section below?

What is “Undivided Share in Land” and why it should be in mentioned your agreement ?

Posted on by Jagoinvestor

You bought your “Dream Home” and you are on top of the world. The joy and pride you have after buying your home is amazing. The property is at great location and the prices are appreciating, and you feel you are the Hero ! . Now you want to sell your flat for some reason and you are more than confident that you will get a buyer and the deal will take just few weeks and you will be bathing in cash from top to down.

undivided share in land india

Prospective buyers have started meeting you and they want to buy the property, but they are all rejecting it. They are “informed investors” who take care of every single detail and they ask you that killer question –

“Everything is fine, but where is your undivided share of land (UDS) in agreement?”

You are wondering whats going on, quite amazed only to realize later that you were only sold the building which is depreciating each moment, but “LAND” , which is the real thing is not owned by you.

You are SCAMED or FOOLED ! or both ! . Let me introduce to the term “Undivided Share of Land” or UDS as its called generally in real estate world and why you cant ignore this at any cost while purchasing properties.

What is Undivided Share of Land (UDS) ?

I will keep it short and simple. Undivided Share of Land is the share of land owned by you when you purchase the property. Basically when you buy a flat or apartment, you are buying two things

1. The constructed building – where you actually reside
2. The proportionate share on the land, where the whole property is built

The Price Appreciation in real estate actually is the appreciation in land prices, because technically the building will depreciate overtime. Its not that cement and concrete structure which is the prime thing, but the land. Have you ever thought what will happen if there is an Earthquake and the building collapses ? What is in future, the govt wants to acquire the land for some national project and wants to give compensation to you ?

Leave all that, imagine in future your building after many years needs to be redeveloped and a new construction has to happen. At that time, the amount of land you own will matter. Note that incase of co-operative societies, the Undivided Share of Land might be on the name of society and not on the home owner name, because they are share holder in the society, which is fine.

The sum of all the flat owners UDS has to be equal to the property land size. You should also know that the undivided share of land will be proportionate to your property area.

Example 1 – If there is land measuring 1,000 sq and there are 10 flats or equal size is constructed on that land, then each owner will have 10% of the land as his/her share.

Example 2 – Lets say there is a big township where 100 units of 2 BHK flats of 1,000 sqft and 50 units of 3 BHK measuring 1,500 sqft . Then the total constructed area is (100 units * 1000 sqft) + (50 * 2000 sqft) = 2,00,000 sqft . Anyone who owns a 1,000 sqft flat will have 0.5% share in the total land (Because 1000 is 0.5% of 2,00,000) and anyone who owns a 2,000 sqft flat (3 bhk) will have 1% UDS .

There has been cases where the builder has allocated less undivided share to flat owners and kept some part of himself and the original land owner (a lot of times, builder buy the land from someone else). Here is one such example

Current apartment which I am staying is 10 years old apartment. Building having total 24 flats. Whereas builder made total 26 undivided share. Other than 24 flat owners one share for builder and one share for Land owner. In the share of builder and Land owner they constructed few shops in building cellar. SOURCE

Important Point – The above example is for apartment system . If its a co-operative society, then the land share is equal for each member, irrespective of their property size.

What to check in Agreement ?

When you buy the property, your builder will give you a date when you have to come to registration office and all the agreement work will be done. Most of the times, builders are reluctant to show you the agreement copy. But they will be ready to share someone else agreement copy at their office or at the main site.

Just have a look at that agreement which is like a specimen or the format, on some of the page, you will see “Details of Undivided Share of Land” and it will be mentioned in percentage terms like “0.45%” or exact area in sqft terms. Just read the whole thing carefully.

Then when the actual agreement has to take place, you can then read the agreement in detail and make sure you look after this point in your agreement copy. A small tip here is that when builder calls you for registration, tell him you would like to come before 1 hour from the scheduled time and have a detailed look at the agreement, if possible also get a lawyer with you and have him look at the agreement.

So did you check your agreement copy and see how much Undivided share of land you own ?

Dont get fooled by High CTC offered by your employer

Posted on by Jagoinvestor

It was campus placement month, and although everyone declared that they wanted to do quality work once they were placed, they also harbored a secret desire to get placed at the highest salary. When we used to look at our pocket money and compare it with the salary “package” offered by companies, we used to feel we would sleep on bundles of notes.

The top students of my batch were placed at extremely high pay packages, and they were proud to have “cracked” it. However the average students and other not so lucky ones had to settle for lower pay packages.

The “Very Happy” and “Only Happy” students left for the next phase of their life. The bitter truth however, only emerged after a year or two – that the take home salary of most of the students was not that different from the rest. While the students who got high packages were obviously earning more than the others, the difference was only marginal.

The CTC (Cost To Company) numbers had fooled us!

CTC vs Take Home salary

What is CTC (Cost to Company)

What was happening was that the companies were exploiting our human craving for “Instant Gratification”. Job Seekers want big salary numbers – its’ a benchmark which they use to compare themselves with others. It feels nice to say, ”my package is 12 lakhs per annum”, even if you only get 58,000 per month in hand.

CTC or cost to company is what a company spends on you. If something is an “Expense” for a company because of you, its part of your CTC, as simple as that. So starting from the air conditioning you use at office, to the food you eat at office, everything can be part of CTC. Here is one how one of our readers Nandan feels

I fell for a similar trap while joining an IT MNC recently (from another which was equally good at inflating its VP compoment). It’s been only 3 months now since I joined this company and the worst part is that the take home I get now is almost same as that I was getting in my earlier company (though on paper the CTC is having 35% hike over the previous company CTC) – Link

5 tricks to increase CTC numbers and give wrong impression to employees

There are several ways companies can inflate the CTC Numbers and give you an impression that you are getting the best deal, only for you to realize later that the other job was better. Let me now show you some ways companies increase the CTC numbers.

Trick 1 – Including their EPF share inside the CTC itself

The first time I saw my salary slip, I was somewhat shocked to see that my employer was deducting the ‘employer’s share’ of EPF from my salary. I was wondering – “If it’s the employer’s share – why are they deducting it from my salary?” It was only later that I realized that this was merely a simple trick to inflate the CTC. They could have just reduced my CTC by an amount equal to employer share of EPF and could have paid it separately, but then my CTC would be lower– even though I would have been getting the same salary at the end of the day.

Trick 2 – Adding One time Bonus in CTC at the time of joining

When I joined my first job (and the last one), I was very pleased to hear my CTC; it was amongst the highest packages on campus. But then my salary in hand correlated poorly with the CTC figure. In my mind, I had divided my CTC by 12 on the day of placement and was on the top of world. Though what happened in reality was that I was supposed to get a one time joining bonus (that too after many months), and that figure was added to the final CTC – inflating the number substantially. It was only for first year, not a regular thing !

Trick 3 – Adding Stock Options in CTC

Another simple trick employers play is to add your Stock Options to your CTC. Stock Options again are not a regular payment source, however they do increase the CTC considerably. You can learn about stock options, RSU’s and ESPP here in this article.

Trick 4 – Adding Insurance Facilities, Food coupons, Transport Facilities to CTC

At the end of every month, we used to get food coupons from our company. We also had payments made by the company towards yearly life insurance and medical insurance. The thing is, you do not get these things as CASH, but instead as benefits. However, the company adds all these to your CTC figure, as it is paying for it.

Trick 5 – Putting Large chunk of variable component in CTC

Another famous trick played by companies (especially those in sectors that are performance based) is to add a considerable amount of variable component to the salary and keep the fixed part small. The CTC number is then provided based on an average performance assumption. For example if your CTC was Rupees 10 lakhs, it could happen that 4 lakhs of the CTC would be FIXED and the remaining 6 lakhs would be variable. The part of the variable component ultimately paid to you could go down or up depending on your performance or some parameter that supposedly would be under your control. It could be sales, the number of clients you bring in etc. etc.

Start-ups vs Giant MNC companies – Difference in Salary Structure

In my limited experience, pay packages offered by startups or smaller companies are more or less transparent, and artificial increases in CTC are limited. Dividing the CTC figure offered by them into a monthly number will get you very near to your take home salary – though it will obviously be lower. However, in the case of larger companies, the CTC number is inordinately inflated and your eventual take home salary might give you the feeling – “Seems like there is some mistake in the calculation”.

Joining other company for higher Salary ?

Just because you are getting a higher package in some other company, does not automatically mean that your take home salary will increase by the same margin. It may happen that your take home salary increases by very little, or in the worst case scenario, stays exactly where it was. What you should focus on, while moving to another job, is the additional increment in your take home component and not just the change in CTC.

In the image below you can see how a job with low CTC can lead to a higher take home salary – all because the package with the higher CTC was inflated by injecting various components.

High CTC vs take home salary

I hope from now on, you will focus more on the final take home and not be fooled by CTC numbers.

Any personal experiences?