Insurance Regulations

Insurance that you may want to avoid to cut costs

Insurance

Insurance is the most inexpensive way in which you can buy peace of mind, sometimes people  resources may go an extra mile and pay insurance companies to get cover for things they consider dear to them. Therefor people may buy insurance for their body parts, pets, ant farms, and what not.For most of the common people, the question that often arises is whether you are buying the right insurance product and not wasting money on unnecessary insurance covers.Primarily, everyone has to buy unnecessary insurance policies when they come along bundled with other products like electronic goods, home loans, cars, or any other insurance policy as an addition without realizing that these may cost them dearly.The average age of your credit accounts is another important factor in determining your credit score. Having many older accounts has a positive impact on your credit score, and having several new accounts is a negative contributing factor. If you pay off debt on an older account and subsequently close it, your credit score may drop.

Your credit score doesn’t update automatically, so it can take some time before you see whether paying off your debt helped or hurt your score. Expect to wait at least one to two billing cycles from your credit card before seeing your updated balance appear on your credit report.Also remember that paying off your entire balance every month is not reflected in your utilization rate or, ultimately, your credit score and the balance that is used to calculate the utilization rate which is based on your last statement balance. So, you could charge $900 on a credit card with a $1,000 limit and pay it off the same month, but the FICO credit score will still consider that a utilization rate of 90 percent.

Credit protection plan with home loan

The credit protection plans are single-premium insurance policies that cover the loan amount in case of the borrower’s untimely demise and the amount of cover can be reducing as the outstanding amount reduces with every EMI, or could remain the same throughout tenure of the policy. In this plan the premium is added to the loan amount and, therefore, you also pay interest on the premium at the home loan rate. One can instead opt for a term life insurance with a large cover, instead of taking a credit protection plan. However, a borrower may already have a term insurance plan and could still have opted for a credit protection plan.

For example if a 30-year-old healthy man opts for a 10-year, and have a fifty lakh credit protection plan, it would cost him around Rs. 1.2 lakh, or 12,000rupees  a year, if he had instead opted for a term insurance, he could have got a cover of Rs. Seventy-five lakh to Rs. 1 crore by paying the same amount. A Rs. 50-lakh term policy would have cost him Rs. 6,000-8,000 a year.

Hospital cash benefit plan: In case of any hospital benefit plans, it provide a fixed amount from Rs. 500-50,000 per day of hospitalization to cover any additional expenses such as lodging and food, these plans are sold mostly as riders or add-ons with health insurance plans, though one can buy this separately even if an individual has no health insurance.

The premium could be as low as 1,000 rupeesthat can rise up to 10,000 rupees a year, depending on the amount of daily cash benefit, age, and other conditions. But there is a bound on the number of days for which one can avail the daily cash facility in a policy year. The cap may vary from 150-180 days. There are some exclusions like any pre-existing diseases, dental treatment or surgery, hospitalization due to pregnancy and childbirth, natural calamities, accidents resulting from drunken driving, etc.

How can I avoid cut cost ?

While paying off your credit card debt is important, what matters more is on-time payments and your utilization rate. Often, the borrowers will ignore these factors, thinking that clearing up their debt as quickly as possible is the key to a stellar score. But there are a few other methods to consider:

  • Be strategic with the order in which you pay off your debts. Personal loans and credit cards often have higher interest rates than mortgages, car loans and student loans. Paying those off first not only helps keep your credit utilization in check, it will also save you money in interest.
  • Check your credit utilization. When your debt has been paid off and the credit score has decreased, look to just how much of your credit you are using. And if it is above 30 percent, you might consider charging less each month. If this is not an option, you could speak with your issuer about increasing your credit limit. Both of those should help increase your credit score.
  • Open another credit card. While opening accounts could temporarily lower your score due to hard credit checks, opening a new card could increase your total available credit and spread your charging among several cards.

The credit protection plans are single-premium insurance policies that cover the loan amount in case of the borrower’s untimely demise and the amount of cover can be reducing as the outstanding amount reduces with every EMI, or could remain the same throughout tenure of the policy. This is almost never a bad idea to pay off debt, especially high-interest consumer debt. This holds true even if it causes your credit score to temporarily go down. But the financial health is more important than your credit score, especially because there’s no way to fully predict the results of each action you take. Ultimately, if you continue to make timely payments on your outstanding debts and keep your spending in check, you should see your credit score start to rise again with time. Your credit report contains a range of information on your financial history, and all of those data points are used to create your credit score. So even after you pay off debt, there may be other factors that have a higher impact on your credit score.Your credit score could decrease is if you pay off an installment loan but still carry credit card debt.

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