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Can insurers deny coverage to the differently abled?

Author: Col Sanjeev Govila (retd)/Wednesday, March 29, 2017/Categories: Ask the Finapolis

Can insurers deny coverage to the differently abled?

What is the process for claiming LTA from office? My company has given LTA as part of my compensation, but everybody says it is best not to claim the exemption but take the amount with salary. Please guide why they are making this suggestion and how I can claim the same, as I would really benefit from the tax exemption.

- Jeni Abraham, Kodaikanal

Leave Travel Allowance (LTA) is basically an allowance or the cost of travel granted to employees to travel anywhere in India, while on leave. The amount of exemption depends upon the mode of travel, and it is allowed only towards the travel fare, and not for boarding and lodging. Mode of travel is as per your grade and status of your appointment in the company and follows the general Income Tax guidelines laid down. It is allowed twice in a block of four calendar years – the current block being 2013-17.

To claim LTA, you have to submit the travel expense proof to your employer. The expense incurred by you will be paid in full subject to the maximum limit laid down by your employer as per rules. It is thus in the nature of a reimbursement for an allowable expense to you and is not akin to, say, your salary which becomes due to you every month. Due to this structure, LTA allowed to you is exempt from tax. However, if you do not take it as LTA and include the amount as normal salary, it becomes part of taxable salary and no longer remains tax-exempt. I do not know why your colleagues are making this suggestion to you about taking it as a salary. Maybe you do not wish to travel and hence, LTA will not be payable to you and lapse. If you wish to travel, we see no reason why you should take it as salary and not as LTA.

I am having some physical deformities because of which all insurance company is not willing to give my mediclaim or life insurance. Whether I can take action against such companies and demand that insurance policy be made available to me? Otherwise it is difficult to do proper financial planning without insurance.

- Paras Vakil, Solapur

Please remember that the life and medical insurance companies are there to run a business and make profits. If they think, during the process of doing their underwriting due diligence, that insuring you could be a loss-making proposition for them, they will not go ahead to insure you. The IRDA (Insurance Regulatory and Development Authority of India) has a guideline (in the context of senior citizens but it

will logically apply to all) that any proposal for health insurance, which is denied on any grounds, should be made in writing with reasons furnished and recorded. The regulator has further provided that such reasons should stand the scrutiny of reasonableness and fairness. So from a legal and regulatory perspective, the situation appears to be addressed to a large extent. But the ground situation in a large number of cases does not confirm to this regulatory benignness. Some of this problem also arises in India due to less-sophisticated underwriting procedures in India compared to more sophisticated markets. Until this improves, you could look at a couple of perfectly legal ways as given below to buy insurance if you suffer from a health condition. Please note that hiding or not declaring your medical condition, if the insurers want you to declare it specifically, is not the answer and could actually be counter-productive to you if and when a claim is made. Select products where the disclosures required are specific and not general. Consider this question in a stand-alone health insurer’s proposal form: “Within the past two years have you consulted a doctor or healthcare professional?” Steer clear of such general questions because they put the onus on you to declare all medical ailments even if you perceive them to be unimportant. Instead, opt for the form of a competing health insurer who lists out specific diseases and asks if you suffer from those.

Don’t add extra information. You need not confess to having been overweight a few years ago or the fact that you smoked a cigarette once many years back. Pre-underwrite your insurance if you have a doubt. Some insurers will look at your existing medical records and give you an assessment without your making a formal proposal.

That’s a good option as a rejection does not become part of your permanent record, and you may approach other insurers more willing to insure you. Finally, you can buy top-up health insurance that has high deductibles. In these plans a certain initial amount of the medical bill is paid by the patient and the remaining by the insurer. Because of this deductible, insurers will issue these insurances more readily.

My advisor recommended investing in foreign mutual fund says it will give good variety to my investments. Is there any use in purchasing foreign mutual funds? Many AMCs are showing foreign funds for investment, but is there any check and balance on the money going there and investments happening? Also, how will investing overseas benefit me when everybody says India is the fastest-growing country in the world? Is there any value to this proposition?

- Saeed, Ghaziabad

Investing in foreign mutual funds (or rather international mutual fund, as they are more commonly known in India) is on the same lines as investing in Indian mutual funds. The checks and balances are on the same lines in both types. The only thing that changes is the companies invested in, which would now be listed on foreign exchanges rather than only on Indian exchanges. So, you could have IBM, Coca Cola, Google, Facebook and the likes in the underlying stocks held in your mutual fund portfolio. So, if you fancy that, going in for international MFs could be your calling. However, if you are doing that just to diversify, you need to look more carefully. Diversification into international funds when you are not invested adequately even in Indian markets themselves, may not be logical. Also, as you diversify into foreign markets, the need for knowing those companies, their growth drivers and economic ecosystem becomes more important and complex.

Very few Indian investors are able to do that. Investing in international funds in the hope that you will get better returns there may or may not happen, due to the reasons already brought out by you. In a nutshell, see whether you are well diversified and already adequately invested in Indian stock markets themselves, understand the value preposition of the international fund(s) you are looking at investing in, and also understand the currency fluctuation dynamics. If it is so, you may go ahead with investing in International funds. If not, stick to Indian MFs for the time being. Lastly, you should know that many of International MFs available in India are fund-of-fund leading to double expenses and the taxation of International MFs is like debt funds.

The expert is a Certified Financial Planner and a SEBI Registered Investment Advisor. He is CEO, Hum Fauji Initiatives

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