Q. I am 23. I want to have a good long-term investment plan. Is it good to invest in LIC or any other insurance plan? I do not want to invest in mutual funds and stocks. What should be my strategy if I need a good sum of money once I retire?


A. Starting your retirement planning early is a great idea. An even-paced accumulation over a long period can lend your retirement income both volume and stability.

A variety of annuity plans and policies of LIC and private life insurance firms are available. An alternate, or supplement, to this can be joining the National Pension Scheme (NPS).

The structure of a typical annuity plan is as follows. There will be an accumulation stage when you make payments. Then comes your chosen vesting date, the date on which you stop paying premium and your accumulated corpus is applied towards an annuity policy. Then comes the period when you receive annuity payments, that is, the pension.

You can choose how long and how much you are going to invest, in your case from age 23 to, say, age 60. How much you invest depends on the premium required for your target annuity, moderated by your ability to invest. You can check the annuity amounts you will get for this investment in the premium calculator available on most life insurance company websites.

If it is NPS, the corpus in your NPS account on the vesting date will be used to buy an annuity policy on your behalf from a life insurance company of your choice.

The contributions you make are invested by the life insurer or the NPS, so the corpus on your vesting date will be principal plus returns. For NPS, you can choose the profile of investment and the asset manager also through the decades up to retirement. You have the flexibility to change them as often as you wish. In the case of unit-linked annuity plans of an insurance company, you can choose between fund options on offer.

If you are likely to retire with a pension, take that into account and plan any independently-funded annuity as the next level building block. Similarly, include employee and voluntary provident fund contribution options. On the other hand, you may opt for a public provident fund account which has a basket of advantages in the form of tax breaks and compound interest.

Q. I am 31-year-old Central government officer. I started saving late and am about to get married this November. As of date, I have a RD of ₹10,000 for one year, PPF investment of ₹1.5 lakh, SIP (ELSS) of ₹3,000 a month and about ₹3 lakh debt. I come under CGHS health scheme. Should I opt for other health insurance and term insurance? I have no dependants except for my future wife.


A. You have the foundations of a good financial plan in place already. Please study the eligibility under your CGHS scheme for you and your future family members and keep supplementing it as you go along. A few years before retirement, you can opt for individual hospitalisation policy. This will establish a track record and work off your waiting period for some kinds of treatments and also serve to enhance your coverage to make up for any drop in coverage or scope of coverage after retirement.

Right away, you can start a term-life policy which is the most cost efficient of life policies. This is targeted at the risk of your family losing the bread-winner and the sum assured for this policy should be tuned to this requirement. Ideally, the interest from the sum assured should support your family. For example, today, the best interest available in super-safe investments is roughly 7% for Government of India bonds. So, for a sum assured of ₹50 lakh, this translates into ₹30,000 per month before taxes.

Q. I am a senior citizen of 68 years and I have taken a health insurance plan of ₹3 lakh and top-up of ₹6 lakh. I was hospitalized for COVID in a reputed hospital and discharged after six days. As this hospital is not approved, I paid ₹1.24 lakh and got reimbursement. But the insurer deducted ₹33,000 towards cost of medicines, x-ray, room and boarding charges stating that this was above my eligibility. In exclusions, nothing mentioned about the medicine [cost] limit, consultation, laboratory charges etc. Being a COVID patient, tests have to be done regularly. Please advise whether there is any limit or cap on these charges?


A. In most hospitalisation policies there are sub-limits. This means under your overall sum assured there is a limit on various heads of expenses starting with your room rent. The choice of your room type cascades on many other hospital charges and this is what you have faced as a short payment of your claimed amounts.

Having been treated for COVID, you may also face many non-medical expenses like sanitisation costs and cost of personal protection equipment kits excluded from your claim.

As for sub-limits on the other expenses you mention, please read your policy and talk to your insurance company representative to understand the status. Pre- and post hospitalisation expenses will be covered as per your policy for specified periods.

(The writer is a business journalist specialising in insurance & corporate history)

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