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When it comes to Health Insurance, most people focus on the sum insured – believing a ₹5 lakh or ₹10 lakh policy is enough to cover major medical expenses. However, a lesser-known clause called the room rent limit can significantly reduce how much your insurer will pay leaving you with a hefty out-of-pocket bill.

In this blog, we’ll break down:

• Why hospitals charge different rates for the same service?
• How room rent limits work and their impact on your claim?
• How to avoid unpleasant surprises when filing a claim?

Why Do Hospitals Charge Different Rates for the Same Service?
Did you know that the same doctor’s visit or surgery can cost drastically different amounts depending on the hospital room you choose?

For example, in many hospitals:
A doctor’s visit in a shared room may cost ₹1,000–₹2,000
The same doctor’s visit in a suite can cost ₹2,500 or more
Similarly, operation theatre charges, diagnostic tests, and daily care costs vary depending on your room category—even if the medical procedure itself is identical.

For insurers, this poses a significant challenge. Without limits, a policyholder opting for a luxury room could drive up the overall treatment cost. This is why insurers introduce room rent limits as a way to manage claim payouts

Understanding Room Rent Limits in Health Insurance:
A room rent limit is the maximum daily amount your insurer will pay for a hospital room.
This limit is typically defined as a percentage of your sum insured—commonly:

• 1% of the sum insured for regular hospitalization (e.g., ₹5,000/day for a ₹5 lakh policy
• 2% of the sum insured for ICU stays (e.g., ₹10,000/day for a ₹5 lakh policy)
• If you choose a hospital room that exceeds this limit, your insurance won’t just exclude the extra room cost – it applies proportionate deductions to your entire bill.

How Proportionate Deduction Works (With an Example)

Let’s say Mr. X has a health insurance policy with:

• Sum insured: ₹10 lakhs
• Room rent limit: ₹2,000 per day

Mr. X is hospitalized and chooses a private room that costs ₹8,000/day. Over a 5-day stay, his total bill comes to ₹2 lakhs.

Since the allowed room rent is ₹2,000/day but the actual room cost is ₹8,000/day, the insurer applies a proportionate deduction:

Sum Approved = (Room Rent Approved / Room Rent Claimed) × Total Bill

• Sum Approved = (₹2,000 / ₹8,000) × ₹2,00,000
• Mr. X’s Approved Claim = ₹50,000

Even though his sum insured is ₹10 lakhs, Mr. X must pay ₹1.5 lakhs from his own pocket— just because of the room rent limit.

Why Room Rent Limits Can Be Costly

Room rent limits don’t just restrict the room you can select – they also reduce all related expenses such as:

     ➢ Surgeon’s fees
     ➢ Doctor’s visits
     ➢ Operation theatre charges
     ➢ Diagnostic tests

If your room exceeds the specified limit, every component of your bill is reduced proportionately leaving you exposed to significant out-of-pocket expenses.

How to Protect Yourself from Room Rent Limits

• Choose a Policy with No Room Rent Limit:
  Many comprehensive health insurance plans now offer “No Room Rent Capping” – ensuring you can select any room without worrying    about proportionate deductions.
• Review Your Existing Policy:
  Check your policy document for terms like “room rent limit” or “room category capping.” If  your policy includes this restriction, consider  upgrading to a no-cap plan. 
• Port to a Better Plan:
  If your current insurer doesn’t offer a no-limit option, port your policy to a more flexible plan at the time of renewal without losing          continuity benefits.
• Understand Sub-Limits:
  Room rent isn’t the only restriction—watch for disease-specific limits (e.g., caps on maternity or cataract costs) which can also impact    your claims.
• Speak to a Financial Advisor:
  Consult an expert who can guide you to the best health insurance plan, ensuring you’re covered for large hospital bills without unexpected  deductions.

Final Thoughts:
Room rent limits are one of the most overlooked pitfalls in health insurance. While they may seem like a small technicality, they can slash your eligible claim—leaving you with a significant financial burden during a medical emergency.

Invest in a policy with no room rent limit to ensure you and your loved ones get the best medical care without compromising on quality due to hidden clauses.

If you want help evaluating or upgrading your health insurance plan, reach out to us today – because when it comes to your health, there should be no compromises.

A Systematic Withdrawal Plan (SWP) allows you to withdraw a fixed amount monthly from your investment, while the remaining corpus continues to grow. Here’s why SWPs are ideal:

For Retirees:

• Provides a steady cash flow for living expenses.
• Avoids the need to dip into your savings unpredictably.
• Ensures your remaining investment keeps working for you, helping to combat inflation.

For Younger Investors:

SWPs can create a consistent income stream to meet regular expenses, like EMIs or household costs, while keeping the principal invested.

Example for Better Understanding:

Let’s say Mr. Sharma, a retiree, invests ₹30 lakhs in a debt-oriented mutual fund offering an average annual return of 7%.

He sets up an SWP of ₹20,000 per month to cover his living expenses. Here’s what happens:

1. He withdraws ₹2.4 lakhs annually for his expenses.
2. Despite the withdrawals, his corpus continues to grow at 7%, ensuring he doesn’t outlive his savings.

Outcome: Even after 10 years of withdrawals, Mr. Sharma still retains a significant portion of his investment, thanks to the growth of his corpus.

Why Choose SWPs?

• Offers a predictable income stream.
• More tax-efficient compared to traditional fixed deposits (tax is only on gains, not the principal).
• Keeps your wealth growing while meeting expenses.

💡 Takeaway: Whether you’re a retiree seeking financial independence or a younger investor wanting regular cash inflows, SWPs can be tailored to meet your needs.

Explore SWPs and other retirement-friendly investment options today for a stress-free financial future!

The 2024 Summer Olympics in Paris has been a remarkable event for India, showcasing the incredible talent, determination, and perseverance of our athletes. India’s impressive performance, highlighted by several medal-winning moments, offers valuable insights into investing. By drawing parallels between the journey of our athletes and the path to successful investing, we can glean lessons that are both inspiring and practical.

Medals and Achievements

India’s athletes have delivered outstanding performances in various disciplines, bringing home medals and making the nation proud. Here are some of the highlights:

*Neeraj Chopra – Gold in Javelin Throw*: Neeraj Chopra once again demonstrated his prowess by clinching the gold medal in the javelin throw, defending his title from the Tokyo 2020 Olympics. His consistent performance and ability to peak at the right moment reflect the importance of patience and timing in investing.

*Mirabai Chanu – Gold in Weightlifting*: Mirabai Chanu achieved a historic gold in weightlifting, breaking records and showcasing her extraordinary strength and dedication. Her journey underscores the significance of discipline and hard work, key attributes for successful investors.

*PV Sindhu – Silver in Badminton*: PV Sindhu added another Olympic medal to her collection with a silver in badminton. Her resilience and ability to stay focused under pressure highlight the importance of perseverance and strategic planning in investment.

*Bajrang Punia – Bronze in Wrestling*: Bajrang Punia’s bronze medal in wrestling is a testament to his grit and determination. His ability to bounce back from setbacks is a valuable lesson for investors, emphasizing the need to stay the course despite market fluctuations.

*Bajrang Punia – Bronze in Wrestling*: Bajrang Punia’s bronze medal in wrestling is a testament to his grit and determination. His ability to bounce back from setbacks is a valuable lesson for investors, emphasizing the need to stay the course despite market fluctuations.

Investing Lessons from Olympians:

*Discipline and Consistency*: Athletes like Mirabai Chanu and Bajrang Punia have shown that discipline and consistency are crucial for achieving long-term goals. Similarly, investors need to maintain a disciplined approach, regularly investing and sticking to their financial plans to achieve their objectives.

*Patience and Timing*: Neeraj Chopra’s ability to deliver when it matters most is a lesson in the importance of patience and timing. In investing, waiting for the right opportunities and not rushing into decisions can significantly impact the returns on investments.

*Resilience and Adaptability*: The journey of PV Sindhu and Lovlina Borgohain demonstrates the importance of resilience and adaptability. Markets can be volatile, and investors must be prepared to adapt to changing conditions and stay resilient in the face of downturns.

*Long-Term Vision*: The training and preparation that go into an Olympic journey are extensive and long-term. Similarly, successful investing requires a long-term vision and the ability to look beyond short-term market movements.

*Learning and Improvement*: Continuous learning and improvement are integral to an athlete’s success, as shown by all our medalists. Investors should also strive to learn from their experiences, stay informed about market trends, and continually refine their strategies.

Conclusion:

India’s latest performance in the Paris Olympics serves as a powerful reminder of what can be achieved with dedication, strategy, and perseverance. Just as our athletes have reached new heights through their hard work and determination, investors can also achieve financial success by applying these same principles to their investment journey. Let us draw inspiration from our Olympians and strive to achieve our financial goals with the same spirit of excellence and resilience.

“I have corporate health insurance of ₹5 lakhs from my office. What’s the need for personal health insurance?”

This is a common question many people have, especially when their employers provide a substantial health cover. However, relying solely on corporate health insurance might not be the best strategy for long-term financial security.

🏢 What is Corporate Health Insurance?
A Corporate Health Insurance Policy, often called a Group Health Insurance Plan, covers a group of professionals working under an organization. It protects against illnesses, accidents, and other health issues, typically extending coverage to the employee’s spouse and children. Some companies also offer coverage for parents at an additional premium.

✨ Key Features of Corporate Health Insurance

• 👵 Inclusion of Senior Citizens: Even with pre-existing conditions, senior citizens can be enrolled in group policies more easily than in individual plans.
• ⏳ No Waiting Periods: Corporate policies usually have no waiting periods, making it easier to claim for pre-existing conditions right from the start.
• ✅ Waiver of Medical Checks: Most corporate plans waive the need for medical examinations, which is especially beneficial for older employees.
• 💸 Employer-Paid Premiums: Your employer pays the premium, unless you opt to increase the coverage or add a supplementary plan.

⚠ Limitations of Corporate Health Insurance:

• 🏥 Caps and Co-Pays: These policies often have caps on room rent, co-pays, and sub-limits on specific treatments, which can limit your coverage.
• 🔄 Changing Terms: Employers can change the terms of the policy based on their premium budgets, leading to potential reductions in coverage.
• 💰 Insufficient Coverage Amount: A ₹5 lakh cover might be sufficient today, but it may not be adequate in the future due to rising medical costs.

• 🕒 Limited Policy Tenure: Coverage lasts only as long as you are employed with the organization. Once your employment ends, so does your insurance coverage.

📈 Should You Top Up Your Corporate Cover?
Topping up your corporate health insurance with a super top-up policy can be beneficial. However, if your employment is terminated, you will have to pay the deductible amount out of pocket, which can be substantial.

🔄 Can Corporate Policies Be Ported After Employment?
Some insurers allow corporate policies to be converted to individual plans for a premium. However, not all insurers offer this option, and the conditions can be restrictive.

🔍 Why You Need a Personal Health Insurance Policy:
While corporate health insurance provides valuable coverage, it should not be your sole safety net. Having a personal health insurance policy ensures that you are protected regardless of your employment status. This is especially important if you develop a serious illness, as it can be difficult to obtain new coverage later in life.

In conclusion, securing a personal health insurance policy alongside your corporate cover is a prudent strategy to ensure comprehensive protection for you and your family, now and in the future.

Investments Solely for Tax Savings: A Double-Edged Sword?
When it comes to tax-saving investments, it’s essential to differentiate between creating assets and liabilities. The choices you make under Section 80C of the Income Tax Act can either enhance your financial health or burden you with low-yield, high-cost commitments.

Equity-Linked Savings Scheme (ELSS) vs. PPF vs. Low-Interest Fixed Deposits vs. High-Cost Insurance Policies:

Equity-Linked Savings Scheme (ELSS):

• Pros: ELSS funds offer the dual benefit of tax savings and potential for high returns due to equity exposure. They have a relatively short lock-in period of three years.
• Cons: The risk associated with equity markets might not be suitable for all investors.

Public Provident Fund (PPF):

• Pros: PPF is a government-backed, long-term investment with tax benefits on the invested amount, interest earned, and maturity proceeds. It’s safe and reliable, with decent returns.
• Cons: The 15-year lock-in period might be too long for some investors.

Low-Interest Fixed Deposits:

• Pros: These offer safety and assured returns, suitable for risk-averse investors.
• Cons: The returns are often low and may not keep up with inflation, making them less effective in wealth creation.

High-Cost Insurance Policies:

• Pros: Some insurance policies provide a combination of insurance and investment benefits.
• Cons: The high cost and low returns on the investment component often make them less attractive compared to other options.

Insurance: Asset or Liability?

Insurance can be both an asset and a liability, depending on the policy type and terms. Policies with cash value or those protecting significant assets can be valuable. However, if premiums are high without adequate coverage, it becomes a liability.

Good Insurance:

• Provides adequate, cost-effective coverage.
• Protects against significant financial risks.
• Policies with a cash value component can act as an asset.

Bad Insurance:

• Offers inadequate coverage.
• Comes at an unreasonable cost.

Understanding Good and Bad Assets:

Bad Assets:

• Definition: Investments that do not generate income or appreciate and often require more money to maintain.
• Examples: Depreciating assets like cars and electronics, non-performing loans, unproductive real estate.
• Key Characteristics: Negative cash flow, high opportunity cost, financial risk.

Good Liabilities:

• Definition: Debts used to finance investments or assets that generate income or appreciate.
• Examples: Mortgages on rental properties, business loans, controlled leveraged investing.
• Benefits:Facilitate financial growth, enhance wealth, potentially tax-deductible

Strategic Financial Decisions:

Making informed decisions about assets and liabilities is crucial for financial health and long-term success. While bad assets can drain resources, good liabilities can be leveraged to create wealth.

Government Perspective:

• Good Assets:Infrastructure, education, healthcare, research and development.
• Bad Assets: White elephant projects.

Conclusion:

Investing wisely under Section 80C involves evaluating potential returns, risks, and alignment with financial goals. By making strategic decisions, you can transform potential liabilities into powerful tools for wealth creation, laying the foundation for a prosperous future.

Takeaways for Investors:

• Evaluate investments carefully: Consider their potential to generate income or appreciate.|

• Leverage wisely:Use debt for investments with solid returns.

• Monitor cash flow: Ensure investments contribute positively.

• Seek professional advice: Work with a financial planner to tailor strategies to your goals.

Informed choices today lay the foundation for a prosperous tomorrow. Make strategic decisions to harness the power of assets and liabilities for wealth creation.

We all want to make the most of our hard-earned money, but sometimes it’s easier said than done. There’s a common money mistake that many people make without realizing it, and it could be holding you back from achieving your financial goals.

The mistake is not having a budget. It’s simple, yet so many people overlook the importance of creating and sticking to a budget. Without a budget, it’s easy to overspend, rack up credit card debt, and live paycheck to paycheck.

But with a budget, you can take control of your finances and start making progress towards your financial goals.

𝐇𝐞𝐫𝐞 𝐚𝐫𝐞 𝐚 𝐟𝐞𝐰 𝐭𝐢𝐩𝐬 𝐭𝐨 𝐠𝐞𝐭 𝐲𝐨𝐮 𝐬𝐭𝐚𝐫𝐭𝐞𝐝:

📌 𝐓𝐫𝐚𝐜𝐤 𝐲𝐨𝐮𝐫 𝐞𝐱𝐩𝐞𝐧𝐬𝐞𝐬: Start by writing down everything you spend money on for a month. This will give you a clear picture of where your money is going and where you can cut back.
📌 𝐒𝐞𝐭 𝐠𝐨𝐚𝐥𝐬: Whether it’s paying off debt, saving for a down payment on a house, or building an emergency fund, set specific financial goals that you can work towards.
📌 𝐌𝐚𝐤𝐞 𝐚 𝐩𝐥𝐚𝐧: Once you know your income and expenses, create a budget that works for you. Allocate your money towards your goals first, and then prioritize your other expenses.

By creating a budget and sticking to it, you can avoid the common money mistake that so many people make. It takes discipline and commitment, but the rewards are worth it.

If you need help getting started, there are plenty of budgeting tools and apps available to make the process easier. Personally, I have found the moneylover app to be immensely helpful in creating and sticking to a budget. This app allows me to easily log my income and expenses, set budgets and financial goals, and track my progress over time. By using this app, I have been able to stay on top of my finances and make informed decisions about my spending.

And remember, it’s never too late to start taking control of your finances.

Are you wondering whether to break your old Fixed Deposit (FD) to invest in a new one with higher interest rates? It’s a common dilemma that many people face.

Before you make any decision, it’s essential to calculate the penalty and the interest rates for both the old and new FDs to determine if it’s financially beneficial. Let’s break down the concept with an example:

Suppose you have an old FD of INR 1,00,000 for 1 year at an interest rate of 6% per annum. At maturity, you will receive INR 1,06,000 (which includes INR 6,000 as interest earned).

Now, you have the option to break your old FD after 6 months and invest the money in a new FD with a higher interest rate of 7% per annum for the remaining 6 months.

However, breaking your old FD will incur a penalty of 1% (INR 1,000). So, should you break your old FD and invest in a new one?

To make an informed decision, you need to compare the total returns from both scenarios.

Here’s a table to help you calculate:

From the table, we can see that if you keep your old FD, you’ll earn INR 6,000 as interest, but if you break it and invest in a new FD, you’ll earn INR 1,750 as interest and incur a penalty of INR 1,000.

Therefore, in this case, it’s not financially beneficial to break your old FD and invest in a new one. However, if the penalty for premature withdrawal is lower, or the difference in interest rates is higher, it may be worthwhile to break your old FD and invest in a new one.

Let’s take another scenario for a person who has an FD of INR 1,00,000 for a tenor of 3 years with an interest rate of 6% p.a. and is considering breaking the FD after 1 year with a penal rate of 1%:

From the table, we can see that if the person breaks the FD after 1 year, they will receive INR 1,05,000, which includes INR 6,000 as interest earned till 1 year and a penalty of INR 1,000.

On the other hand, if the person reinvests the amount in a new FD with a higher interest rate of 7% p.a. for 2 years, the maturity value after 2 years will be INR 1,14,000, which includes INR 14,000 as interest earned for 2 years.

Therefore, in this case, it may be financially beneficial to break the old FD and reinvest the amount in a new one with a higher interest rate, provided the person is willing to pay the penalty of 1% on the amount.

However, it’s important to note that the decision to break an FD should not be taken lightly, and the person should carefully evaluate the penalty charges, the difference in interest rates, and the duration of the new FD before making a decision.

Planning for RETIREMENT is an essential aspect of financial planning, and it involves putting in place a financial plan that will help you achieve your financial goals during retirement. It is important to determine your retirement goals, calculate your retirement savings needs, start saving early, and develop a retirement savings plan. By following these steps and working with a financial advisor, you can develop a retirement savings plan that aligns with your goals and helps you achieve financial security during your retirement years.

• Determine your Retirement Goals: The first step in planning for retirement is to determine your retirement goals. Consider what you want to achieve during your retirement years. Do you want to travel the world, buy a second home, or simply live a comfortable life without financial stress? Once you have established your retirement goals, you can determine how much money you need to save to achieve those goals.
• Start saving early: One of the most critical aspects of retirement planning is starting to save early. The earlier you start saving, the more time your money has to grow, and the less you will need to save each year to reach your retirement savings goals. Consider opening SIPs/STPs and contribute to it regularly.
• Develop a retirement savings plan: Developing a retirement savings plan involves outlining the steps you will take to achieve your retirement savings goals. It should include a budget, investment strategy, and a timeline for achieving your goals.
• Monitor and adjust your retirement plan: Monitoring and adjusting your retirement plan is essential to ensure that you stay on track to achieve your retirement goals. Review your plan regularly and make adjustments as necessary to ensure that you remain on track. One popular method to use during the distribution phase is the bucket strategy, where you allocate your retirement savings into different buckets based on your short-term and long-term needs. This strategy can help you manage your retirement income and expenses and ensure that you have enough money to cover your needs throughout your retirement years.

In conclusion, retirement planning is crucial to achieving financial security during your retirement years. By following these steps and working with a Professional Finance Professional (PFP), you can develop a retirement savings plan that aligns with your goals and helps you achieve financial security during your retirement years. Remember to start early, develop a plan, and adjust it regularly to ensure that you remain on track.

Indian life insurance companies are set to hike premiums for their term insurance plans after several reinsurers increased rates for underwriting portfolios of these pure-protection covers. The move comes even as the domestic life companies face higher-than-expected mortality claims due to Covid.

The Insurance Regulatory and Development Authority of India (Irdai) has issued a notice warning the public against buying motor insurance policies from the fake website Digital National Motor Insurance with email id: digitalpolicyservices@gmail.com.

The insurance regulator clarified that Digital National Motor Insurance has been selling motor insurance policies, although it has not been licensed or granted registration by the regulator to sell insurance policies of any kind.

The insurance regulator has been constantly making public cautioned against spurious calls and fictitious offers.

Considering the fact that several complaints were received from members of the public relating to spurious calls and fictitious offers involving insurance products, IRDAI launched a multipronged campaign to caution members of the public through print, electronic and social media platforms and by way of specific directions to insurers to incorporate the caution in their publicity material in policy-related advertisements as well as advertisements in print, electronic media, and Television,” said the Irdai annual report.

The regulator has also launched several insurance awareness campaigns. Some of them are:

‘BimaBemisaal’ is the brand name for Irdai’s insurance awareness campaign. It is a consumer education initiative and has the tagline “Promoting Insurance. Protecting Insured”. BimaBemisaal educates policyholders about their rights and obligations and informs them about the complaint resolution methods available to them. It also creates awareness about insurance among the general public.

Television Campaign: Irdai has undertaken a pan Indian campaign where Television Commercials (TVCs) cautioning the public on Spurious Callers were telecast on Doordarshan and Private Television channels.

Radio Campaign: Radio Jingles on Life Insurance, Property Insurance, Health Insurance, Motor Insurance, Misselling in Insurance, etc. were broadcast across All India Radio and other private FM Channels throughout the country for the purpose of creating insurance awareness, as per the Irdai annual report.

Source:livemint.com

Previous Blog: Understanding REIT: https://shahfin.com/understanding-real-estate-investment-trust-reit/