Dear Mr. Sanjib I am having a family Medicare policy with UIIC since long. My age is 62 yrs now. The renewal premium is very high considering the age factor and I want to discontinue the same after one year. Instead I am planning to take SBI Arogya Plus family floater policy with top up. My questions are 1) is SBI Arogya Plus premium fixed and is it good choice 2) in SBI policy there is 90 days and 120 days waiting period for specific diseases. After the waiting period is over, are we be eligible to lodge claim or cashless treatment for those specific diseases. 3 Regards

Ans: I understand you're looking for a good health insurance plan for you and your wife. That's a smart decision, especially considering your health conditions. Let's break it down to help you choose the best option:

Understanding Pre-existing Conditions:

Your existing health conditions (BP, spondylitis, etc.) are called pre-existing conditions. These might affect your policy options and premiums.
Individual vs. Family Plan:

Family plan: Covers you and your wife together under one plan. It can be cheaper, but coverage limits get shared.
Individual plans: Separate plans for each of you. More flexibility, but might cost slightly more overall.
Considering Your Needs:

Pre-existing condition coverage: Look for plans that cover pre-existing conditions after a waiting period (if any).
Hospitalization coverage: Choose a plan with sufficient coverage for hospitalization expenses.
Medicines: Check if the plan covers medicines you take regularly.
Finding the Right Plan:

Talk to a CFP professional: A Certified Financial Planner can assess your needs and recommend suitable plans from different insurers.
Compare plans online: Many insurance companies offer online plan comparisons. Look for plans that cover pre-existing conditions and have good network hospitals in your area.
Here's a quick tip: Since your wife is younger and has a different health profile, individual plans might be better. This allows you to get customized coverage based on your specific needs.

Remember: Don't hesitate to ask questions! Choosing the right health insurance is important, and a CFP professional can guide you through the process.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: I suggest you go ahead with the separate health policy for the new child as of now. Going further if you still find their service quality level poor you can decide about porting suitably.

Ans: Hello;

It is recommended to have separate health care insurance apart from that offered by the Govt health schemes.

If you are using old regime for income tax filing then you are eligible to claim deduction upto 25 K under Section 80 D.

Here's wishing your daughter a speedy recovery.

Best wishes!!

Ans: Investing Rs. 12,00,000 annually for yourself and Rs. 6,00,000 for your wife in SBI Life Smart Privilege plans requires a thorough evaluation. Your queries about premium payment frequency and policy continuation beyond five years are critical for maximising returns and aligning with your financial goals.

Let’s analyse these aspects comprehensively.

1. Premium Payment Frequency: Annual vs Half-Yearly or Quarterly
Cost Efficiency of Annual Premiums

Annual premiums often cost less than half-yearly or quarterly options. Insurers offer discounts for lump-sum annual payments.

Paying in smaller instalments results in additional administrative charges. This increases the total cost of the policy.

Annual payments ensure immediate allocation of your funds. Half-yearly or quarterly payments delay this allocation, reducing the compounding benefit.

Opting for annual payments is financially efficient, provided cash flow permits it.

Impact on Cash Flow

Annual payments require larger cash reserves. Evaluate whether this impacts your liquidity needs.

If cash flow is constrained, half-yearly or quarterly options provide flexibility. However, they incur higher costs.

2. Continuation After 5 Years vs Investing in Equity Mutual Funds
Performance of ULIPs vs Equity Mutual Funds

SBI Life Smart Privilege is a ULIP (Unit-Linked Insurance Plan). ULIPs combine insurance with investments.

ULIPs have higher charges such as policy administration, premium allocation, and fund management fees. These charges reduce net returns.

Equity Mutual Funds often outperform ULIPs due to lower expense ratios. They focus solely on wealth creation, unlike ULIPs.

Lock-In Period Considerations

ULIPs have a mandatory 5-year lock-in. Beyond this period, the decision to continue depends on fund performance and your financial goals.

Evaluate your ULIP’s fund performance against comparable equity mutual funds. If it underperforms, consider discontinuing premium payments.

Flexibility and Liquidity

Mutual funds offer better liquidity and flexibility. You can withdraw or switch funds based on market conditions.

ULIPs restrict fund switches to options within the policy. Mutual funds provide a wider range of choices.

Advantages of Shifting to Equity Mutual Funds
Higher Returns: Actively managed equity funds generally deliver higher long-term returns than ULIPs.

Lower Charges: Mutual funds have lower expense ratios, maximising your investment growth.

Tax Efficiency: Equity mutual funds have tax benefits, but gains above Rs. 1.25 lakh are taxed at 12.5%. ULIPs have tax-free withdrawals under certain conditions, but the overall returns may still lag.

Goal Alignment: Mutual funds are better suited for long-term wealth creation and goal-specific planning.

Why Not Index Funds?

Index funds lack active management. They simply replicate market indices without adapting to market conditions.

Actively managed funds, on the other hand, strive to outperform the market. They offer better returns when managed by experienced professionals.

Index funds cannot shield against downside risks during market corrections. Actively managed funds provide better resilience in volatile markets.

Evaluating Policy Continuation After 5 Years
Key Questions to Assess

Is the ULIP’s fund performance aligned with your expectations?

Are the charges within the ULIP justified by the returns it offers?

Would reallocating the premium to mutual funds provide better results for your goals?

Strategic Approach

If ULIP performance is consistently below par, you can stop further premiums after five years.

Shift future premiums to mutual funds. Choose funds based on your risk tolerance and financial goals.

Retain the accumulated corpus in the ULIP until maturity to avoid surrender penalties.

Steps to Optimise Your Investments
Review Fund Performance: Regularly assess the returns generated by your ULIP. Compare them with benchmark indices and mutual funds.

Consult a Certified Financial Planner: A CFP can guide you in selecting suitable mutual funds for reallocation.

Diversify Investments: Spread your investments across equity, balanced, and debt funds for optimal risk management.

Leverage Tax Benefits: Plan withdrawals strategically to minimise tax liabilities under the new mutual fund taxation rules.

Taxation Insights
ULIPs offer tax-free maturity proceeds under Section 10(10D) if annual premiums do not exceed Rs. 2,50,000.

Mutual funds are subject to the following tax rules:

Equity mutual funds: Gains above Rs. 1.25 lakh are taxed at 12.5%.
Short-term gains on equity funds are taxed at 20%.
Debt mutual funds are taxed as per your income tax slab.
Consider these rules when deciding between ULIPs and mutual funds.

Key Takeaways
Annual premium payments are cost-effective if cash flow permits.

Continuing ULIPs beyond five years depends on their performance and alignment with your goals.

Equity mutual funds are a better option for wealth creation due to higher returns and lower charges.

Diversify investments and consult a Certified Financial Planner for personalised advice.

Final Insights
Your decision to invest in ULIPs was a thoughtful one, considering their insurance benefits. However, for long-term wealth creation, mutual funds could offer better appreciation. Evaluating the performance of your ULIPs after five years is crucial. If they underperform, consider reallocating your premiums to equity mutual funds for enhanced returns.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: You’ve taken thoughtful steps for your family—coverage, investment, and planning. That’s a strong start. Now let’s review everything in a 360-degree way.

Reviewing Your ULIP Coverage

You hold three ULIP plans, each with Rs 50L sum assured

Premium term is 8 years; policy term is 25 years

You’ve completed only two quarters of payments

ULIPs combine insurance and market-linked returns

They come with charges—fund management, mortality, admin

These charges reduce investment growth significantly

Your early-stage payments mostly go to charges, not investments

This means low actual gain so far

Coverage Adequacy Analysis

Sum assured totals Rs 1.5 crore

That may seem high, but market ULIPs often pay low returns

Term insurance offers higher cover at low cost

Example: You may get Rs 2–3 crore cover for less premium

ULIP cover might look big but gives weak real benefit

Should You Replace ULIPs with Term Insurance?

Term insurance gives pure risk cover only

For same cost, you can get significantly higher sum assured

Funds under ULIP are underperforming compared to active mutual funds

Term plans have no investment bias, only insurance

Investors often regret early ULIPs due to poor returns and lock-in

A term plan plus separate investing is more efficient

What You Could Do

Continue ULIPs only if surrender value is low

Consider surrender after complete understanding of charges

Use the freed premium to buy term insurance

Use separate investments via actively managed mutual funds

Health Insurance Review

Your Star Health policy covers Rs 3 lakh per year only

Family of four – that’s insufficient

Costs of hospitalisation, surgeries, daycare exceed this easily

Health inflation is typically 10%+ per year

This cover will exhaust quickly

You need at least Rs 10 lakh cover for each adult, Rs 5 lakh for kids

Add top-up or super-top-up cover for full peace of mind

Your Investment Strategy

You invest Rs 15–18K monthly via regular SIPs through advisor

That’s good disciplined investing

It shows long-term goal-building

But are these actively managed funds?

Regular plan via MFD with CFP support is better

You get advice, review, and rebalancing

Make sure these SIPs match your goals: education, retirement, contingency

The Pitfall of ULIP as Investment

ULIP returns are typically moderate, ~4–6%

They fall short against inflation and market-linked gains

Charges in early years eat returns

Surrender costs may reduce fund value

Lock-in period limits liquidity and flexibility

A mixed portfolio with active mutual funds gives better results

Mutual funds can deliver 10–14% returns over long term

Building the Right Insurance & Investment Mix

Let’s structure your finances smartly:

Insurance Cover

Term insurance for you and spouse with Rs 2–3 crore each

This is affordable and ensures financial security

Health Cover

Individual health insurance for family with at least Rs 10 lakh

Add a super-top-up of Rs 10–15 lakh for emergencies

ULIP Evaluation

Review performance and charges

Decide whether to continue or surrender

Consider switching to term + active investing

Savings & Goals

Continue SIPs, focus on actively managed funds

Educate children’s school & college needs

Build contingency/emergency fund amounting to 6–12 months expenses

Long-term Goals

Education fund for two girls

Retirement corpus for you and spouse

Use active funds, not index funds or ULIPs

Why Actively Managed Regular Funds Are Better

Fund managers actively buy and sell to optimize returns

They can exit underperforming sectors

They manage risk during volatile periods

Regular plans include expert guidance and rebalancing

They match your financial timeline and risk capacity

You avoid decision paralysis and behavioural mistakes

Why Not Index Funds or Direct Plans

Index funds mimic benchmarks—they don’t outperform them

Their downside protection is limited

They continue to hold weak sectors by design

Direct funds offer no support or advice

You may panic sell or buy wrong at the wrong time

CFP-backed guidance ensures discipline and clarity

Action Plan You Can Follow

Review ULIPs: charges, terms, lock-in, projected value

Calculate surrender value after 2 years payments

Compare alternative monthly premiums in term insurance

Buy a solid term plan and stronger health cover

Continue or reallocate your SIPs with CFP support

Build goal-wise separate funds for education and retirement

Keep track and revisit your financial plan every year

Final Insights

You’ve taken steps in insurance and investing—appreciate that

ULIPs are often costly and ineffective for growth

Term insurance plus actively managed funds offer clearer benefits

Health insurance needs to be strengthened

Your SIP investments are valuable if reviewed and aligned with goals

With CFP-backed planning, you can balance risk, liquidity, and returns

Gradual shifts now can build a solid foundation for your family's future

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment