Lifestyle changes with age and so does aspirations. In this case, you have to take a special review of your insurance portfolio, especially after 50 years of age. There are many people who buy different types of insurance policies during their young age. That’s good and it helps in developing a sizeable corpus along with protection against risks.

Nonetheless, after the age of 50, life brings forth many more complications besides the physical feebleness. Retirement issues haunt the mind and responsibilities that have not been fulfilled yet rob most of the space in the life. Since you have spent all your lifetime in procuring the assets and securing your future, you should take care that your belongings are not left astray to various uncertainties. At the same time, it is imperative that you protect yourself and take care of your health to spend the remaining life happily.

Here are a few tips on what should be considered after the age of 50 to optimise the insurance portfolio without losing on any financial aspects.

Health insurance: During old age, you require due care and attention to your health. After 50 years of age, you can focus more on a comprehensive health insurance plan. You might wonder whether or not insurance companies in India offer health insurance to people above 50 years. The answer is: yes.

Until a few years ago, insurance companies were reluctant to provide health insurance coverage to people above 50 years. But now it is different scenario. In 2009, the Insurance Regulatory and Development Authority (IRDA) categorically asked insurance companies to extend health insurance coverage to people up to 65 years.

The regulator also prevents refusal of health insurance services or undue charging of premium amount due to old age.

There are companies which have specific health insurance plans for people above 50 years age. In fact, many offer coverage against pre-existing conditions and provisions without medical tests. Amount of premium is indeed higher in such cases but that ensures a complete peace of mind.

Some plans also offer additional riders such as provision of medical reimbursement for tests as well. As per the IRDA ruling, the amount of reimbursement in such cases should not be less than 50 per cent.

Life insurance: If you think very logically, you will realise that life insurance is meant to replace policy holder’s income in case of death. It may sound brutal but going by this rationale, you may think of reducing your investment in life insurance premium to an extent which is bare minimum. This amount should be able to provide necessary support to your dependents. Over that, you can invest more in regular income producing instruments.

Naturally, these instruments could be insurance plans that provide a combination of health insurance, life insurance and pension scheme.

You may consider liquidating traditional endowment insurance policy as it may not serve your purpose after a certain age.     

Car insurance: There seems to be no evidence of increase in premium due to the old age of the driver. However, if you have been a responsible driver for quite a long time, insurer may renew your car insurance policy at a comparatively lower rate of premium. If nothing else pays in the old age, experience holds you for what you have achieved in so many years. For the same reason, there are lesser probabilities of you getting into a collision.

Then again, if you have recently got the possession of car and you are new to driving, you should not acquire the car insurance policy in your name in order to avoid the higher premium rate.  But if there is no other choice, insurer may charge higher price against providing you the protection.

You can consider pooling wherever possible, if you need to use car frequently. In that case, you can also prefer other modes of transport. This will not increase the number of miles run by your car and you can ask your insurer to reduce the premium due to the same.

Pension plans: Pension plan is widely used as retirement tool to enhance the savings and increase the financial security during the old age. You must be on the verge of receiving the annuities by now. Even if you do not have any pension plan yet, it is never too late to plan for the future.

You can utilize your savings to acquire a retirement plan. Since you have already reached your age now, you do not need to defer your annuities. Instead, you can pay the lump sum premium for the first and the last time and you are ready to receive annuities as regular monthly income immediately.

A lot of preference is given to senior citizens in India. Moreover, insurance companies have dedicated cells to address the issues of senior policyholders. You just need to keep your insurance documents and birth certificates or related documents handy to smooth out the renewal procedure of existing policies or to make the purchase of new ones an easy task.

This article has been contributed by www.policyx.com.  The views expressed in this article are that of policyx.com and are not necessarily the opinion of Old is Gold Store.

By Yashish Dahiya Policybazaar.com

Health insurance is more important for the elderly than the others, for the simple reason that, as age advances, one’s vulnerability to diseases and physical conditions increases. Thus, a medical emergency could result in severe financial crisis, unless covered under a comprehensive medical insurance policy. Adding to their apathy is the fact that there are many a number of Health insurers in the country who are not happy to provide senior citizens health insurance because of the higher loss ratios.

The scenario now is changing. The Insurance Regulatory and Development Authority in one of its recent directives had asked general insurance companies to keep at least 65 years as the maximum entry age for a health insurance policy. This has helped increase the number of health insurance products for senior citizens in the Indian market. Many companies have no come up with health insurance policy specifically designed for senior citizens. For example, Star Health Senior Citizen Red Carpet Plan, Bajaj Allianz Silver Health and many more.

Elaborating a little on these plans, Star Health Senior Citizen Red Carpet policy covers people in the age group of 60-69 years. Although there is copayment of 50%, there are no medical tests required at the time of the payment of the policy. Similarly, Similarly, Bajaj Allianz Silver Plan covers people till the age group of 75 years and the policy can be renewed till 80 years. The Sum Insured options start from Rs 50,000 to Rs 5,00,000. Similarly, Oriental insurance’s plan called Hope states no upper age limit for health insurance and covers 11 specified critical illness diseases like Accidental Injury, Knee Replacement, Cardio Vascular Diseases, Chronic Renal Failure, Cancer, Hepato-Biliary Disorders, Chronic Obstructive Lung Diseases, etc.

There are a couple of things that senior citizens should keep in mind while purchasing health insurance. Firstly, if you are confident about your health then take a health examination and show proof of your good health to a health insurance agent & company. This proves that you might be getting up there in age but there aren’t any high risks that they would have to take yet. Secondly, it’s imperative that good hospitals near the policy holder’s place of residence are under the network hospitals. At the time of emergency, travelling long distance to reach the network hospital is not suitable at all.

Waiting period for pre-existing conditions is also an important aspect to keep in mind when it comes to purchasing health insurance. Lesser the pre-existing cover, the better. Normally, it ranges between 3-4 years for senior citizens. Copayment options should also be considered as it reduces the premium to be paid by the policy holder. Finally, in case of senior citizen plans, it is very important that all the clauses are read and clearly understood. A seemingly normal looking clause can have certain hidden implications; hence, it is advised to consult the company representative to get a perfect clarity.

As the market is abound with options it gets important to go through all the options and then zero down on one to buy the best health insurance policy for the elderly. Ideally, try to compare senior citizen health insurance quotes online from a number of different providers. It allows you to pick and choose from policies and rates and get in touch with a representative of the insurance company to discuss risk and ways you can lower it.  Before you decide on purchasing a certain policy, we would recommend you scan all the possible options and decide on the one that is best healthcare policy suitable for senior citizens. The author is a CEO and co-founder, www.policybazaar.com

Read more at: http://www.moneycontrol.com/news/health-insurance/insurance-insight-all-you-need-to-know-for-senior-citizens_1032194.html?utm_source=ref_article

You may have spent a good part of your life earning hard so that you can lead a peaceful retired life. Yet, the investment challenges for a retired individual remains aplenty. Diminished income flow and steady rise in price of essentials, higher medical needs and lower risk taking ability all add to the challenges. To top it senior citizens, the world over, are victims of mis-selling incidents. Here are a few simple tips to enable you to lead your retired life peacefully:

1.    Emergency kitty

Ensure that you hold a good proportion of your money in liquid instruments to meet medical emergencies. Agreed, that will mean idling way the money in savings bank. But use options such as flexi deposits in your savings bank account, which will sweep excess money from your account into FD and move then back to you savings account when you overdraw. Options such as liquid funds are also good if you wish to build a contingency reserve. They are reasonably safe and can be withdrawn a day after you initiate a redemption transaction.

2.    Diversify

Ensure that you don’t place all your eggs in one basket. You may think that a bank is very safe or a 60-year old finance company cannot go wrong or an investment is guaranteed. We have had instances of banks going bust and finance companies being strapped for cash because their borrowers defaulted. A guarantee is only as good as the strength of the guarantor. Hence, diversify your investments across banks, post offices, companies, government bonds and mutual funds. Even within banks, do not go overboard on a single bank, especially co-operative banks.

3.    Different strokes for different folks

When you invest for your grand child’s future or are investing money on behalf of your children, remember that their need would be ‘wealth creation’ and not ‘income generation’. That means your own risk metric will not apply to them. Take risks that you understand and risks that will reward well in the long term. Consider more regulated and nuanced products such as mutual funds, gold ETFs and debentures in such a case.

4.    Go for top-rated instruments

When you invest in company fixed deposits or corporate bonds, stick to top rated (AAA) bonds and deposits. Most companies other than NBFCs (non-banking finance companies) may not disclose their rating as they are not mandated to. But unless you are in the know of how the company/business works, you are better off sticking to rated instruments. Also do not go for very long tenures of over 3-5 years as companies’ fundamentals can change.

5.    Insure with care

You should have been done with your insurance in your working life. Closer to retirement of later, if your agent comes up with fancies policies linked to markets, be wary. Besides having high premium, a multiple riders would prevent you from enjoying a worthy plan.

6. Assured return claims

Aside of fixed return products such as deposits, no insurance or mutual fund plan can give you assured fixed returns. There are now advertisements (in public places) of commodity/currency trading that promise assured returns. Pay no attention to these.

These are merely speculative bets.

7.    Beware of high returns

If you have not already burnt your fingers in the series of ‘chit fund’ and ‘benefit fund’ scams in the 80s and 90s good for you. Don’t attempt to get hurt now. Remember that high returns are not possible unless your money is deployed in risky ventures. That means there is a good chance that the businesses of the borrowers (from the chit fund) can be risky.

8.  Land is a slippery slope

Land is one investment that entails lot of money, lot more risks and very poor/painful redressal mechanism if you are conned. Even if you have large sums, do not get into speculative bets in land, unless you have been doing that for a living. Poor title, lack of computerized records and land grabbing all make this asset class fraught with risks. Don’t forget the farm/land schemes in the 90s that went bust with most people not getting back a penny. The settlements are still pending well after a decade.

9.    Retain property

If you bought your own property, retain it for yourself and your spouse during your life span. Let you children enjoy it after your life. Make a will that will specify who will benefit from your assets after your life span.

Even if you are in financial difficulties for running your household, consider a reverse mortgage option of your property with banks. This will provide you with some regular income stream as it’s a scheme that specifically caters to senior citizens.

10. Form a trust for a special child

If you have children with special needs or in general wish to leave a source of regular income for your family, consider forming a trust. Take the help of a lawyer or financial planner to have a trustee and ensure that your child’s need is taken care of, over the beneficiary’s (the child) life span.

In all this do not forget to live life well post retirement. If you have sufficient savings, spend on yourselves well instead of hoarding for the next generation. They would have formed their own kitty sooner or later.

(The author is Ms. Vidya Bala, Head, Mutual Fund Research, at FundsIndia.com)

The Reserve Bank of India (RBI) today notified 0.1 per cent reduction each in the interest rates on Public Provident Fund (PPF) and Senior Citizen Savings Scheme (SCSS) to be effective from fiscal beginning April 1, 2013.

The rate of interest on PPF has been lowered from 8.8 per cent to 8.7 per cent with effect from April 1, 2013, the RBI said in a notification.

The rate of interest on 5 year SCSS has been reduced to 9.2 per cent from 9.3 per cent for entire 2013-14 fiscal, it said.

To read more about it click here.

It’s the tax-saving season and one of the popular tax-saving instruments – the five-year tax-saving bank deposit – is being promoted by banks. A major public sector bank has been prominently advertising its five-year tax-saving deposit, stating yields of 16.64 per cent pre-tax, for regular investors and 17.39 per cent for senior citizens. The rates of interest on these are 8.5 per cent and 9 per cent respectively.

The pre-tax magic

How can an 8.5-percent-a-year interest-generating deposit deliver almost twice the return? Are their claims valid?
Well, they are; only it does not give the full picture. The said advertisement bumps up your returns by considering the tax you save but totally ignores the tax that your interest income will suffer. In other words, it considers the benefit and stops there at a pre-tax stage to make the returns attractive.

Let us take an example to see how this is done: If you invest Rs 10,000 in a five-year deposit that returns 8.5 per cent a year (compounded quarterly) then you will have Rs 15,228 at the end of five years. But remember, in the first year you save taxes to the extent of Rs 3,090 (30% of Rs 10,000 plus 3% cess), if you are in the 30% tax bracket. Therefore your net cash outflow in the year of investment is taken to be Rs 6,910 (10,000-3090).

Lower returns post tax

The effective pre-tax yield is therefore about 17.1 per cent {(15,228/6910)^1/5}. But did you know that the interest of Rs 5228 suffers income tax? Interest income from deposits are treated as ‘income from other sources’ and taxed. So if you are in the 30% tax bracket, you will have a tax burden of Rs 1615, including 3% cess. Net of this, your maturity value is only Rs 13,613 (Rs 15,228-1,615). So the yield comes down to 14.5 per cent.

The return comes down if you are in the lower tax bracket of 10 per cent. Why? Because you enjoy only Rs 1,030 (10% of Rs 10,000 plus cess) as tax saved, instead of Rs 3,090. See table below to know, the actual post tax yields for those in the 10%, 20% and 30% tax bracket.

And remember, if you are a senior citizen, you may well be in the lower tax bracket, which means that your benefits post tax are definitely much lower than what the advertisement claims; although you may receive a slightly higher rate of interest.

Hence, you would do well to take the claims of ‘high yield’ advertisements with a pinch of salt.

The humble NSC

That said, are there any other debt options with similar maturity at this juncture that would provide tax-saving under Section 80C and also deliver good yields post tax? As seen in the table below, both regular investors and senior citizens can earn superior post tax yield if they invest in NSC. This is because, the interest on NSC, although taxable, is treated as reinvested every year under Section 80C and is therefore allowed as deduction. As a result, only the last year’s interest is actually taxed.

In contrast, interest on a bank tax-saving deposit is taxed entirely.

Hence, if you are a tax payer and can take a five-year lock-in, NSC’s current rate (applicable only up to March 2013) is attractive from a post tax perspective.

This article was written by Ms. Vidya Bala, a member of the financial advisory committee at Old is Gold Store.

Safety of capital will be on top of the financial priority list of a retired individual/senior citizen; and rightly so. With limited means of cash flows, safeguarding the capital, which would provide some income by way of interest, is important.

And yet, have the typical safe modes such as deposits offered you enough by way of return? Not so in recent years suggests this data from JP Morgan Asset Management. Across the Asian countries mentioned below, deposit rates managed to beat inflation and leave you with some surplus (returns mentioned below are deposit rates post yearly inflation) until 2007.

Source: Asia Outlook Q1 2013 report of JP Morgan Asset Management

However, since the start of the economic slowdown in 2008, most Asian countries have seen either lower interest rates and low growth or high inflation. As a result, investors in deposits have ‘negative real returns’. For India, rising prices were higher than deposit rates by 1.9%. Simply put, the interest income from deposits has not helped you keep pace with rising cost of goods. Net result, you would have had to dig in to your capital/savings to meet it. Now in a way, that too amounts to erosion of capital does it not? That means, while you may not lose your capital through risky investments, you lose it to a lethal force called inflation.

Way out?

But what choice do you have to combat this? Not much but here are a few suggestions: Ensure that you diversify your investments across a few products. Of course, you do not have to compromise on the quantum of risk you can take. If you want only debt products, look beyond bank deposits. There would be times when top-rated bonds and debentures come up with good rates. Be on the look-out and lock into them. Keep a demat account ready for this purpose as most bonds require you to have a demat account. Explore corporate deposits in credit worthy companies that are rated. Avoid going for unrated companies unless you have knowledge on the financials of such companies.

Ensure that instruments have high credit rating such as AAA before you invest either in bonds or deposits. Look for short-term debt mutual funds that have delivered not less than 7 per cent annually in the past and have at least a three-year record. Use systematic transfer plan in these options if you wish to get a steady payout.

Even with all this, there is no guarantee that you will successfully combat inflation. The fact is that if you had a sufficiently large corpus, you can simply park your money in instruments that earn 6-7 per cent and still not worry too much about erosion in capital.

But such a corpus could have been built only if you had invested in asset classes such as equities and real estate early on in life. If you have missed the bus, advice your children to invest early, invest systematically and in inflation-beating asset classes. They can always move their money later to deposits, when their risk-taking ability diminishes.

This article has been written by Vidya Bala of our financial advisory team.  Write to advice@oldisgoldstore.com if you would like us to answer any of your questions or address a specific topic..