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Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 17, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Prasanna Question by Prasanna on Dec 17, 2023Hindi
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sir, i have made fore closure of home loan(out-standing upto 6 laks). For that to happen i was asked to close even one lakh amount towards home loan insurance(SBI insurance). As i had money, i closed home loan as well as requisite loan insurance amount of one lakh. My question is if i foreclose my loan , why should give complete loan insurance part also. will i get pro rata money for preclosing insurance amount( one lakh)

Ans: When you foreclose a loan, the associated insurance often needs to be closed as well, as it's linked to the loan. Unfortunately, insurance premiums are generally non-refundable upon premature closure. However, you can check the policy terms or contact SBI insurance to see if any pro-rata refund is possible for the insurance amount paid.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 06, 2024

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I took houseing loan at axis bank with25 years repayment term and covered life insurance for the loan amount. But i closed said loan with in 28 months.shall i get back proposanate insurance premium paid by me.
Ans: Understanding the Insurance Premium Refund Process

When you close a housing loan early, you might wonder about getting back the insurance premium. The insurance you bought covered the loan term. Now, let's explore if you can get a refund for the insurance premium paid.

Nature of Loan Insurance

Loan insurance safeguards the lender and your family. If something happens to you, the insurance pays off the loan. It’s a crucial element in securing financial stability. But when you repay the loan early, the scenario changes.

Terms and Conditions of Insurance Policies

Insurance policies come with specific terms and conditions. These conditions dictate the refund policy. Usually, insurers have clauses about refunding premiums if the loan is closed early. Reading these terms is essential to know your entitlement.

Pro-rata Refunds

Some insurance companies offer a pro-rata refund. This means you get a refund based on the remaining term of the policy. For instance, if your loan was for 25 years and you closed it in 28 months, you might get a refund for the unused period. This could be a significant amount, given the long-term nature of your original policy.

Administrative Fees and Charges

Be aware of administrative fees and charges. Insurance companies might deduct these fees from your refund. This can affect the total amount you receive back. Ensure you understand these potential deductions by reviewing your policy documents or speaking with your insurance provider.

Communication with Your Insurance Provider

To initiate the refund process, contact your insurance provider. They will guide you through the steps needed to process your refund. Having all your loan and insurance documents handy will streamline this communication.

Importance of Documenting Communication

Keep records of all communications with your insurance provider. Emails, letters, and call logs are crucial. This documentation can be useful if there are disputes or delays in processing your refund.

Insurance Policy Alternatives Post Loan Closure

After closing your loan, you might still need insurance coverage. Reassessing your insurance needs is wise. A Certified Financial Planner can help you determine the best coverage to protect your financial interests moving forward.

Reinvestment of Refund

If you receive a refund, consider how to use it wisely. Consulting with a Certified Financial Planner can provide insights. They can guide you on reinvesting the money in mutual funds or other beneficial financial products.

Common Misconceptions about Insurance Refunds

Many people believe that closing a loan guarantees a refund of the insurance premium. This is not always the case. The refund depends on the specific terms of your insurance policy. Understanding these nuances can save you from unrealistic expectations.

Assessing the Financial Impact

Evaluate the financial impact of closing your loan and getting an insurance refund. This analysis helps in understanding the overall benefit. You might find that the refund can be a valuable addition to your financial planning strategy.

Potential Delays in Refund Processing

Be prepared for possible delays in the refund process. Insurance companies have their procedures and timelines. Staying patient and following up regularly can ensure a smoother process.

Appreciating the Value of Insurance

Even though you might get a refund, it’s crucial to appreciate the value insurance provided while your loan was active. It offered peace of mind and financial security, which is invaluable.

Conclusion

Closing your loan early and seeking a refund on your insurance premium is a prudent financial move. Understanding the terms, communicating effectively with your provider, and planning the use of your refund are essential steps. Consulting with a Certified Financial Planner can further enhance your financial strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 13, 2025

Asked by Anonymous - Feb 13, 2025Hindi
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Why do Debt Funds offer lower returns as compared to Equity Mutual Funds?
Ans: Debt funds and equity mutual funds serve different purposes in an investor's portfolio. Debt funds offer stability and lower risk, while equity mutual funds focus on high growth with higher risk.

Below are the key reasons why debt funds provide lower returns than equity funds.

1. Nature of Underlying Investments
Debt funds invest in bonds, government securities, corporate debt, and fixed-income instruments.

These instruments provide fixed interest, leading to predictable but lower returns.

Equity mutual funds invest in company stocks, which have the potential for higher capital appreciation over time.

2. Risk-Return Tradeoff
Lower risk means lower return potential in debt funds.

Debt investments focus on preserving capital rather than aggressive growth.

Equities are volatile, but over the long term, they tend to generate higher returns.

3. Interest Rate Sensitivity
Debt fund returns depend on interest rate movements in the economy.

Rising interest rates reduce bond prices, lowering returns in debt funds.

Equity funds are less impacted by interest rate changes and benefit from economic growth.

4. Inflation-Adjusted Returns
Debt funds often fail to beat inflation in the long run.

Equity investments provide inflation-adjusted growth due to rising corporate earnings.

Holding equities for longer durations results in compounding benefits.

5. Growth Potential
Equities represent ownership in businesses that expand over time.

Business growth translates to higher share prices and higher returns.

Debt instruments provide fixed interest, which limits potential upside.

6. Tax Efficiency
Equity mutual funds enjoy lower long-term capital gains (LTCG) tax rates compared to debt funds.

Debt fund gains are taxed as per the investor’s income tax slab, reducing post-tax returns.

This tax treatment makes equities more attractive for long-term wealth creation.

7. Market Performance
During economic growth, companies generate higher profits, leading to higher equity returns.

Debt fund returns depend on interest rate cycles, making them less rewarding in growth periods.

Equities have historically outperformed debt over longer durations.

Finally
Debt funds provide safety and stability but offer lower returns.

Equity mutual funds outperform over time due to business expansion and compounding.

A well-balanced portfolio should include both debt and equity, based on financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Harsh

Harsh Bharwani  |75 Answers  |Ask -

Entrepreneurship Expert - Answered on Feb 13, 2025

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Sir I am a Engineer by profession snd working in Qatar. Same time i had Cost accountant Degree and passed out way back at 2009. After that no touch with Cost Accounts. Now i am 48 yrs and after few yrs i want to move back to India. But that time if want open a cost accounting firm, what would be the best move i can do to open the consulting firm?
Ans: Hello Mr. Heman,
Reestablishing your career in cost accounting and setting up a consulting firm in India requires careful planning. Start by updating your knowledge through ICAI’s continuing education programs, industry seminars, and professional courses to stay current with evolving regulations and industry practices. Reactivating your ICAI membership and obtaining a Certificate of Practice (CoP) is essential to offer consulting services legally. While still in Qatar, gaining practical exposure by offering freelance or part-time cost auditing or GST advisory services to Indian firms will help establish credibility.

Next, choose a suitable business structure - Sole Proprietorship, LLP, or Private Limited Company - based on your growth plans and compliance preferences. Register your firm with the Ministry of Corporate Affairs and obtain the necessary licenses. Conduct thorough market research to identify your target clients, understand industry needs, and define your service offerings, such as cost audits, financial consulting, and management advisory. A well-structured business plan with clear financial projections will help ensure long-term sustainability.

Investing in technology and infrastructure is crucial. Setting up a professional office, adopting modern accounting software, and leveraging cloud-based financial solutions will enhance efficiency. Building a strong professional network is equally important - reconnect with former colleagues, join industry associations, attend networking events, and establish a digital presence through a website and social media to attract clients.

Lastly, focus on compliance and quality assurance. Adhering to ICAI regulations, tax laws, and ethical standards is critical for maintaining credibility and trust. By systematically following these steps, you can successfully transition back into cost accounting and establish a reputable consulting firm in India, ensuring a stable and rewarding career.

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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