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Monday,
March 10, 2003, Chandigarh, India  
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Household insurance need of the hour
Apollo Hospitals in good health
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Pick Tata Chem, Nahar Spg
Q. I am a government employee, my elder brother is 100% physically and mentally handicapped who is totally depend upon me. My father was expired last year. My mother is also pensioner.
Smoke signals
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Household insurance need of the hour With the increasing crime rate in rural and urban areas, the need for household insurance cover has become very pertinent. Despite heavy investment in the household, jewellery and other valuable items, most of the people do not take household insurance. Insurance companies claim that the premium for taking a policy is even less than the amount paid to a chowkidar. Mr G.C. Gaylong, Regional Manager, the Oriental Insurance Company Limited, claims, “Any house owner can take a policy by paying a small premium annually that would provide him compensation in case of fire, burglary or theft. By taking comprehensive package with marginal additional premium, he can take insurance cover for the jewellery, valuable items, breakdown of domestic appliances, TV set and for personal accident as well.” He points out the scheme is becoming very popular especially in the urban areas, as this is among the priority areas of the insurance companies. This is unlike the policy of third party cover for the commercial and private vehicles, where the insurance companies are incurring huge loses in issuing claims. He claims that the ratio of claims to the premium collection for house holder's insurance policy is below than 60 per cent, as compared to up to 300 per cent in case of third party cover for commercial vehicles. Right time to take policy Finance Minister Jaswant Singh, in his Budget speech, again emphasised that house sector would continue to be the priority area, but he has not announced any changes in the general insurance policy. However, officials of the insurance companies claim that it is the right time to take a policy, as the private and national companies have urged the Insurance Regulatory and Development Authority (IRDA) to increase the premium for this policy. Though any relief under Income Tax Act is not given for the premium payment to householder, says Mr G.P.S. Mann, Development Officer, Oriental Insurance, but the customer can claim relief under income tax for the premium paid for the health coverage taken under that policy. All of the four national insurance companies including New India Assurance, United Insurance and National Insurance have almost same products for providing insurance cover to householders.
Coverage from fire Mr Ramesh Goyal, Branch Manager, Oriental Insurance, here says that by paying a nominal premium of Rs 50 to Rs 100 annually, one can take cover for Rs 1 lakh sum assured against fire, lighting, explosion of gas cylinders, riots, floods, earthquakes and other natural calamities. However, he makes it clear that the policy is available only to genuine registered properties, and not for houses sold against power of attorney. The tenant can take a policy for the valuable items of the house, and not against house. Mr J.K. Kapoor, Marketing Manager, Bajaj Allianz General Insurance Company Ltd, admits that as per the IRDA guidelines, the private players are also charging the same premium, but they are offering additional packages and assured customer service. He says, “The sum insured can be either on reinstatement value — the value for replacing the items of the same type, or on market value basis. It would exclude depreciation cost at the time of settlement of claims.”
Due to huge losses suffered in the payment of claims for machinery breakdown, the insurance companies have marginally increased premium. Mr Tilak Raj Kunra, leading development officer, with the New India Assurance, at Ludhiana, says, “By paying a small premium, customers can take a policy to take a cover for the breakdown of appliances. Damage caused to domestic electrical, electronic or mechanical appliance by mechanical or electrical breakdown are covered under the policy.” The annual premium rate is just Rs 2.50 for Rs 1000 sum assured for the breakdown of industry. Officials admit that though people can take an advantage from these policies, yet due to lack of awareness among public, this is not very popular. Private players like the ICICI General Insurance and Bajaj Allianz have devised very packages for the customers. Bajaj Allianz even offers insurance cover for the repair of the window air conditioners including split units at an annual premium rate of Rs 10 for Rs 1000 repair coverage. Similarly, insurance coverage for the electronic equipment such as TV can be taken by paying just Rs 10 annually for Rs 1000 insurance cover. One would have to additional premium if one wants to take insurance cover against terrorist activities, depending upon the risk factor.
How to get claims Allaying aside the criticism that it is always difficult to get claims after paying premium, Mr Ramesh Goyal says, “we are always prompt in clearing the claims, provided the claims are genuine, and the policy holder follows policy guidelines. For instance, in case of fire or burglary one should immediately get FIR registered at the nearest police station, besides informing the company agent in writing immediately. In case of machinery breakdown, he should inform company office the estimates made by an authorised service
dealer. After that we would send the surveyor and clear the payments through cheque.”
Mr Kapoor makes it clear that company would not entertain any claims in case of machinery breakdown or fire in the house, if the appropriate precautions were not taken by the customer. In case of burglary, he says, the company would also insure that the insured has taken all steps for the safety of the house. The company would also demand valuation certificate if the value of individual items exceed R 5,000 or the sum assured is Rs 5 lakh or more.
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Apollo Hospitals in good health I have often repeated that the job of the Finance Minister in India is a fairly thankless one. Given the adverse domestic as well as global backdrop, my personal assessment is that Jaswant Singh did a satisfactory, albeit unexceptional job. Of course, it is no match on Chidambaram’s “dream budget” of the late nineties, which of course, got derailed by his Leftist coalition partners. As always, the Left parties gravely objected to the Budget proposals, but then, what’s new ? What was surprising is that the principal opposition party, while
criticising the Budget, has failed to suggest any suitable alternatives. The bottomline here is, if we have to live with the Budget, why make such a hue and cry about opinions and counter-opinions of persons who are little more than arm-chair critics, if anything at all. My team and I were fairly pleased to note that Apollo Hospitals, a scrip that we track and back strongly has been one of the major Budget beneficiaries. Let us zero in then, on its enhanced prospects. Since starting the first corporate hospital in India at Chennai in 1984, Apollo Hospitals Enterprises (AHEL) has come a long way. Today, the company offers a full range of healthcare services. AHEL has the largest hospital chain in the country comprising primary, secondary and tertiary care hospitals. Apollo has a network of 26 hospitals and 17 clinics and employs over 10,000 employees. Besides, recognising the prospects of the growing health insurance sector, the company has diversified into providing health insurance services also. The company acts as facilitator for insurance services by offering services like third party administration, claims processing, etc, for mediclaim policyholders. Furthermore, the group provides diploma courses to nurses and students. The company also undertakes research in the form of clinical trials. Apollo is also targeting the $250-billion global medical BPO services market. For years, Apollo bore from the reputation of raising capital at frequent intervals and the ownership of a number of subsidiaries which made it difficult for shareholders and analysts to understand the company with clarity. So even though the company performed better than most global peers, it suffered from a low discounting on the bourses. However, with fund managers belatedly realising the value and potential of this company, it does seem that better days lie ahead at the bourses for this company. The boost provided to it by the Budget proposals could well be the trigger that the those having invested in this stock were awaiting. So, what makes this company tick and what is there in the Budget that has provided it a boost? Let’s take that up next week.
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Pick Tata Chem, Nahar Spg The Union Budget is good for long-term investors, even better for senior citizens. Normally, it was expected that the market would welcome it but (as I have stated in this column a fortnight back) the Budget is unlikely to cheer-up the market. In fact the market has declined continuously since February 28 when the Budget was announced. According to an analysis made by Business Standard, Sensex has lost nearly 131 points and the market capitalisation has been eroded by Rs 24,613 crore. Of 112 sectors, nearly 97 slipped in capitalisation. Only 5 sectors had improvement in their valuations. Information technology, refineries, banks, fast moving consumer goods, steel, two and three wheelers, pharmaceuticals, entertainments and cement firms were the worst sufferers. The market capitalisation of information technology stock declined by 7.1 per cent. The main reason for a sharp decline in the stock market in the post-Budget week is nervousness over the possibility of US invasion of Iraq. The probability of the US-Iraq war this week is even greater. For this reason, the market is likely to decline further this week too. Mutual funds are likely to be the sellers in technology stock as they would prefer to convert a part of their holdings into liquid cash. Long-term investors may pick-up
scripts of the companies in this depressed market which have sound fundamentals and managements with good dividends rates that provide to long-term investors a return of 7 per cent-plus or more. Investment made in shares after March 1, 2003, will also be exempt from long-term capital gains tax. Nahar Spinning, for example, is one such share which was quoting around Rs 64.50 when the market closed last Friday. Nahar Spinning has an equity capital of Rs 16.83 crore as equity capital with Rs 237.04 as book-value and an EPS of Rs 12.04. Last year, it declared dividend of 50 per cent which is likely to be repeated. The company, on the basis of its quarterly results for September 2002, had an EPS of Rs 15.1. It is a well-managed company and its usual market rate is around Rs 69/70 per share. Tata Chemicals quoting around Rs 61/62 with a dividend rate of 50 per cent declared last year is also a good and safe investment. Rarely, a patient stricken with a terminal disease is able to recover but it does happen sometimes. The information is that this may happen in the corporate sector in the case of Vikas WSP. In an interview with CNBC, a Company Secretary indicated that the company is now operating at 33 per cent of its capacity and has made a profit of Rs 2 crore during the last quarter. Its negotiations with Nestle for the supply of its product are at an advanced stage in a positive way. It would (as the Company Secretary said) likely to be relisted during the next six months’ time. The family dispute has been settled and a new Board of Directors has been constituted. Let us hope for the best without putting much faith in what the company’s management says. In the interview, the official also said that the company’s equity share (with the face value of Re 1/4 per scrip) will be quoting around Rs 50 after six months again.
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by R.N. Lakhotia Q. I am a government employee, my elder brother is 100% physically and mentally handicapped who is totally depend upon me. My father was expired last year. My mother is also pensioner. But my mother is living with my second elder brother. So I want to know that can I get any rebate on Income-tax. — S.P. Yadav, Mahendergarh Ans: Yes, you will be able to save income-tax by claiming tax deduction in respect of expenses incurred by you on the treatment, etc. of your physically handicapped brother. Please do not forget to comply with the necessary formalities for claiming this deduction like enclosing the certificate, etc. in respect of physically handicapped nature of your brother. Q: A family friend received an amount ‘A’ from my female relative through account payee DD on April 26. Later on she was married to his son on May 6 the same year. Please clarify if the amount ‘A’ returned by father-in-law to her now after marriage shall be treated as return of loan or a gift to her because in later case the income from such amount shall be clubbed with the income of her father-in-law. Ring ceremony took place before giving the amount by her. — Gurbinder Singh, Mohali Ans: There will be no clubbing of income because the gift was given before marriage. Q: You are requested to clarify the following points and oblige. My son and myself hold a house jointly, my son has taken loan for the construction of the house from a bank in addition to our equal investment the house is self-occupied. Please clarify whether he shall be allowed income tax relief on return of principal as well as interest on full loan. If he resides in the full house and gives me the rent for half the portion whether he shall be entitled for income tax relief in respect of the rent paid to me. — G.S. Hira, Mohali Ans: Your son will be entitled to deduction in respect of the interest on loan for part financing of the property by him. He can claim deduction in respect of the interest on loan as well as tax rebate on repayment of loan. If your son makes payment of rent to you for occupying your half-share in the property, then he can take tax deduction in respect of house rent allowance received by your son. Q. On retirement, I receive retiral benefits of Rs 8 lakh out of which I paid Rs 4 lacs to my son and Rs 1 lakh to my cousin as interest free loan to both. They invested the amount in their business independently. Income of my son is not taxable being less than 50,000. But the income of cousin is taxable and he is paying income tax. Can I make interest free loans to relatives? What are my liabilities in respect of loan amount? The income of my wife from tailoring is approx. 40,000/- pa. She is not paying any tax. We hold a joint bank account. Can my wife issue cheques to my son and cousin from our joint account to give interest-free loans and I will be saved from the hassles, if any, if I cannot pay the amount to them, as such? If payment of interest on the loaned amount is must, what minimum interest rate can be charged? Out of the retirement amount received, I want to keep Rs 2 lakh at home to meet any unforeseen requirement/emergency. Is it necessary to keep the amount in bank? — D.R. Singhal, Karnal Ans: You can make interest-free loan to your son and to your cousin. It is presumed that your son is major. In case he is not a major child, then the income arising to the minor child from your gifted amount would be clubbed with your amount. However, this will not apply for a major child. Your wife can make gift to your son and to your cousin. It can be a gift or it can also be interest-free loan. The choice is with you. Interest charging is not a must. You can keep cash of Rs 2 lakh after withdrawing the same from the bank. There would be no tax problem. However, I would suggest you to keep the same in the saving bank account so that you can earn some interest income at least. |
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Smoke signals The corporate cocktail circuit seems a trifle puzzled about the FM’s priorities. Does the fact an unlikely beneficiary of the latest Union Budget is ITC on account of the lowering of excise duty on nicotine, suggest that smoking is welcome? Unreliable Last week, we had buzzed that the grapevine opines that the current FM is not as ‘reliable’ as a large private sector group would have liked. The buzz has been proven, as after a long time, there is no significant budget benefit for this group.
Roll-back whispers The Budget is barely out of the way, and whispers of roll-backs have begun doing the rounds. The buzz however is that, the current FM has factored in that possibility and sold a couple of ‘dummies’ in the Budget so that it exhausts the roll-back demands. |
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Inflation static FII net buyers LIC schemes BPL letter Tata trucks UBI IPO Videocon Petro |
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In case of any untoward incident, such as fire or burglary in the household, the economy of any household is often found totally shattered. Then one thinks, Alas! he had taken insurance cover, he would have got compensation for the financial loss. Four national insurance and new private players have various packages for household, where they offer insurance cover for the household from fire, burglary and natural calamities.
In addition, they also provide cover for the valuable items in the household as well as for the breakdown of electronic and electrical items. One can take a specific package for house insurance or a comprehensive package that would even cover personal accidental policy and medical expenses for treatment.