Money Matters

Money Matters


I am going to buy a property soon. But I don’t want to wait for loan approval. Should I opt for a pre-approved loan? What are the pros and cons?

—Tanya Kapoor

The bank can offer a pre-approved home loan based on your income details. This has various advantages and disadvantages. The biggest disadvantage is that if the bank is not willing to fund the property, you may not be able to buy it. Second, the best interest rates and other terms are provided for ready disbursement cases. For details, refer to pre-approved property loan calculators at loan advisory websites.

I work with a cruise company on a contract basis. My contract is of 8-10 months. My salary is tax free and the only source of income in India. Can I get a home loan? If yes, then on what status: as a non-resident Indian (NRI) or an Indian citizen?

—Nilesh B.

If you have spent 8-10 months on a ship every year outside India for the last four years, then, as per the Income-tax Act, you need to apply for a home loan as an NRI. The only special requirement is that you will need to convince the lender that the income is likely to continue year after year despite your working on a contract. There are no other special NRI requirements as such for you to fulfil.

Life Insurance

I have just taken a life insurance policy. When will the risk cover commence?

—Abhishek Bharadwaj

Normally, a life insurance policy becomes valid on the date of acceptance of the policy or the date of receipt of the first premium in full, whichever is earlier. But if the acceptance of the proposal is conditional upon the proposer’s (person whose life is insured) compliance with any requirements, the cover will commence on the date on which all requirements are satisfactorily complied with after the receipt of the first premium in full.

This means that even if you have made the payment for the first premium, the policy shall commence covering risk only after you have complied with the requirements to the satisfaction of the insurance company.

I am a 50-year-old salaried employee and want a life insurance for Rs7-8 lakh for 10 years. What’s the cheapest and best option for me?

—Vandana Gosain

If life insurance is the main consideration, you should go for a term insurance plan. The premium for these policies is equal to the mortality premium, which is quite cheap. For a sum assured of Rs8 lakh, if you don’t want the premium amount back, you will pay an annual premium of about Rs6,500.

If you opt for a policy for the same sum assured with return of premium at the end of the term, you pay around Rs10,000 or so, depending on the insurer you chose.

What potential factors should I bear in mind while investing in the growth options of units of a unit-linked insurance plan (Ulip)?

—Prashant Wadhwa

While choosing a growth plan, you must be aware that the investment in units is subject to market and other risks, and there is no assurance that the plans will achieve the objectives.

The scheme’s performance depends on equity and debt markets from time to time, and may be affected by changes in the interest rate levels. You must also note that past performance of the company’s other plans is not necessarily indicative of their future performance.

Normally, such plans don’t offer a guaranteed or assured return. All benefits payable under these are subject to tax laws and other financial enactments as they exist from time to time.

In case the unit value is inadequate for covering the insurers’ charges, the life cover under the policy terminates automatically.

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