Ask Mint Money | If housing loan companies push a product with the loan, refuse it

Ask Mint Money | If housing loan companies push a product with the loan, refuse it
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First Published: Thu, Nov 24 2011. 10 01 PM IST

Updated: Thu, Nov 24 2011. 10 01 PM IST
I am 40 years old and live with my parents. I have a two-bedroom flat worth around Rs 55 lakh. I still have to pay Rs 3.5 lakh towards my home loan. I expect a monthly rent of Rs 12,000. I have close to Rs 10 lakh in mutual funds (MFs). I have two pension policies of ICICI Prudential (annual premium: Rs 24,000; I have invested Rs 1.60 lakh so far) and HDFC Standard (stopped after paying Rs 50,000 for three years). I have another plan (it was a forced investment linked to the home loan) in which I have invested Rs 1 lakh so far. I have Public Provident Fund (PPF) of RS 2 lakh and Employees’ Provident Fund of Rs 4 lakh. I invest in monthly systematic investment plans (SIPs) in HDFC Top 200 (Rs 5,000), Reliance Gold Equity Fund (Rs 5,000), Birla Sun Life Reform Fund (Rs 5,000), Reliance Growth (Rs 2,500), Reliance Tax Saver and DSP Merrill Lynch Tax Saver Fund. I have gold jewellery worth Rs 3 lakh. I have a comprehensive health insurance for up to 70 years; the annual premium is Rs 9,000. I spend Rs 30,000 per month. How much do I need if I retire after 10 years? Are my savings enough?
—D. Nandini
If your parents are not dependent on you, you don’t need an insurance cover. Also, get the policies evaluated on the costs, performance and surrender charges to decide whether they should be continued. For the policy where you have stopped paying premiums, the company will debit units against charges. Hence, it is prudent to redeem the same, unless it has high surrender charges. If you need insurance, go for a term cover.
It is sad that some housing loan companies force a product just because you are taking a loan from them. You should have clearly said “no” to it.
What you need is a good health insurance, which apparently you have. With the benefit of portability, ensure you have the best product. There are products available which cover you for a higher age than 70. Other aspects to consider are loading, sub-limits, third-party administrator or in-house settlement.
You should also consider having a critical illness cover.
You need to stop some SIPs—Reliance Growth and Birla Sun Life Reform Fund. Instead consider Fidelity Equity or HDFC Equity in the diversified space; and IDFC Premier Equity, DSP BlackRock Small and Mid Cap in the mid-cap space. You can have one fund in the hybrid space; HDFC Prudence and HDFC Balanced are good options. Also, your existing tax saving fund is not performing. Consider exiting it after the lock-in. Continue your PPF.
It is not clear how much you are saving every month, but it’s clear that you have the potential to save. Monthly savings of Rs 40,000 for the next 10 years (assuming savings are increased by 8% year-on-year and considering an earnings of 9% annualized) with an existing corpus of Rs 19 lakh will make you retire with a corpus of Rs 1.54 crore. This should be enough to last you for 25 years at an average inflation of 7%.
Surya Bhatia is a certified financial planner and principal consultant, Asset Managers
Queries and views at
mintmoney@livemint.com
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First Published: Thu, Nov 24 2011. 10 01 PM IST