Tuesday, May 14, 2013

9 money secrets Insurance agents & salesmen don't tell :

Here are some truths that your insurance broker,
real estate agent, mutual fund adviser, bank manager and car salesman keep under wraps.

Penalty for not maintaining the average bank balance can wipe out a year's gain

Some banks offer a higher interest rate on savings account balance or sweep-in facility. However, they also require the account holder to maintain an average quarterly/monthly balance. If this is not adhered to, the penalty can be stiff and can wipe out an entire year's gain in the form of interest.
Credit card is free only for the first year

Credit card companies entice new customers by offering them free credit cards, but don't believe the salesman till you see the offer in writing. The free offer is typically for the first year and there's an annual fee from the second year onwards.

Personal accident cover is cheap and essential

A young person is more likely to die due to an accident than by natural causes. At an annual premium of Rs 400 for a Rs 5 lakh cover, a personal accident cover is the cheapest form of insurance. However, very few agents sell it because the commission earned from this low-cost product is pitifully small.

Gold funds charge more than gold ETFs

Though both invest in the same underlying product, gold funds have higher charges than gold ETFs. While the latter charge around 1% a year, the former charge 0.5%. However, since gold funds invest in ETFs, it adds another layer of expenses and eats into the returns.

You can enhance your medical cover with a top-up plan

If you have medical cover from your employer but feel it is insufficient, you don't need to buy another full-fledged cover. Just buy a top-up plan that kicks in after the limit of the existing plan is exhausted. A top-up medical cover of Rs 3 lakh with a deductible of Rs 2 lakh costs about Rs 4,000, compared with Rs 7,000 charged by a normal plan.

You don't need insurance if you don't have dependants

Life insurance is meant to replace your income and provide financial assistance to your dependants if something untoward happens to you. If nobody is dependent on your income, you don't need a life cover. Some insurance policies are sold as retirement tools, but this objective is better achieved by bank deposits and other saving options.

There's no guarantee your apartment will be ready on time

The real estate sector is facing a severe cash crunch and projects are being delayed by 2-3 years. The brochure may claim that construction is in full swing and the agent may even give tentative dates, but don't believe them till you see the progress on the ground.

Extended warranty for car is of no real use

The 1-2 year warranty offered on a new car can be extended by another year or so for a small charge. However, this is rarely invoked. If a manufacturing defect hasn't showed up in 1-2 years of driving, it is unlikely to surface later. Also, the company may evade responsibility by attributing the problem to normal wear and tear.

Low rate on home loan is for one year only

Housing finance companies attract customers by offering low rates of interest. However, you need to go through the fine print carefully because the low rate could only be an introductory offer, which could be raised after 12 months. Also check the bank's base rate and how your rate is linked to it.
Source : ET

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