Blog – Page 24 – Pradeept Agarwal

5 Most Popular Ways to Save Tax

1. Equity Linked Saving Scheme (ELSS)

As the name suggests, Equity Linked Saving Scheme or ELSS is a type of mutual fund scheme that primarily invests in the stock market or Equity.

Investments of up to 1.5 Lac done in ELSS Mutual Funds are eligible for tax deduction under section 80C of the Income Tax Act. The advantage ELSS has over other tax-saving instruments is the shortest lock-in period of 3 years.

This means you can sell your investment only after 3 years, from the date of purchase! However, to maximize returns from ELSS funds, it is recommended to keep your investments intact for the maximum duration possible.

If you have an ELSS SIP (Systematic Investment Plan), each installment has a lock-in period of three years, which means each of your installments will have a different maturity date.

2. Life Insurance

Life insurance policies can be useful tax planning tools because the policyholder is eligible for tax benefits under the Income Tax Act 1961 (Act).

Though there are multiple modes for saving tax, life insurance is one of the most effective tax planning instruments. Plans from Life Insurance can be used for protection, long-term savings, and tax planning.

3. Health Insurance

Health care plans provide tax benefits. Premiums paid towards your health care policy are eligible for tax deductions under Section 80D of the Income Tax Act, 1961. The quantum of the deduction is as under:

A) In the case of the individual, Rs. 25,000 for himself and his family
B) If an individual or spouse is 60 years old or more the deduction available is Rs 50,000
C) An additional deduction for insurance of parents (father or mother or both, whether dependent or not) is available to the extent of Rs. 25,000 if less than 60 years old and Rs 50,000 if parents are 60 years old or more.
D) For uninsured super senior citizens (80 years old or more) medical expenditure incurred up to Rs 50,000 shall be allowed

4. National Pension Scheme (NPS)

A tax exemption of Rs.1.5 lakh can be claimed on the employee’s and employer’s contribution towards the National Pension System (NPS). Tax benefits can be claimed under Section 80CCD(1), 80CCD(2), and 80CCD(1B) of the Income Tax Act.

A) 80CCD(1), which comes under Section 80C, covers self-contribution. Salaried employees can claim a maximum deduction of 10% of their salary, while self-employed individuals can claim up to 20% of their gross income.

B) 80CCD(2), which is also a part of Section 80C, covers the employer’s contribution towards NPS. This benefit cannot be claimed by self-employed individuals. The maximum amount that an individual is eligible for deduction is either the employer’s NPS contribution or 10% of basic salary plus Dearness Allowance (DA).

C) Under Section 80CCD(1B), individuals can claim an additional amount of Rs.50,000 for any other self-contributions as an NPS tax benefit.

Therefore, individuals can claim up to Rs.2 lakh as tax benefits under NPS.

5. Home Loans

A) Under Section 80C, you can claim a deduction up to ₹ 1.50 Lakh for the principal repayment done in the financial year.

B) Under Section 24B, you can claim a deduction for up to ₹ 2 Lakh for the accrual and payment of interest on the home loan.

C) Under Section 80EEA, you can claim a deduction for up to ₹ 1.50 Lakh for the interest payment of a home loan availed during the financial year.

D) Under Section 80EE, you can claim an additional deduction of up to ₹ 50,000 for the interest payment of the home loan, if you have availed home loan for an amount less than ₹ 35 Lakh and the value of the property is within ₹ 25 Lakh.

E) In the case of a joint home loan, each borrower can claim a deduction of principal repayment (section 80C) and interest payment (section 24b) if they are also the co-owners of the property.

Pros and Cons of Health Insurance Portability

The common reasons that force most people to switch health insurance providers, let’s discuss the pros and cons of health insurance portability.

Pros:

1.There is a customization option that comes with portability through which you can easily modify the policy as per your requirements and lifestyle.
2.The existing amount will be clubbed with no claim bonus to calculate a new sum insured.
3.All the benefits of your existing plan will remain in force, even after you opt for portability.
4.Because of the high competition, insurance companies provide existing benefits at lower premiums.

Cons:

1.You can opt for portability only when the renewal date is approaching.
2.You can choose only similar kinds of products.
3.Usually, additional benefits can result in higher premiums.
4.If you want to move from group plans to individual plans, then you might have to lose some advantages that you enjoy with your existing plans.

Health Insurance Portability Rules

Permitted Policy Types

An insured can port only similar policies. For example, if a policyholder is entitled to a reimbursement policy, then he can only port to another reimbursement policy or from one top-up plan to another. However, a family or an individual health plan can also be ported into a similar policy.

Permitted Company Type

A policyholder can port his/her insurance plan from any general or specialized insurance company to the other.

Permitted Renewal

Health Insurance Portability is allowed only at the time of renewal. Also, it is important to renew your health plan on time without any breaks to take advantage of the same.

Permitted Intimation

Those who wish to port their health insurance first need to inform the existing insurance company in writing, which should be provided 45 days before the renewal date of the current insurance policy.

Sum Insured

Policyholders are allowed to ask for an increase in the minimum sum insured at the time of portability. However, its approval depends upon the insurance company.

Acknowledgment

Within three days of the application, the company will inform you regarding your portability request.

Premiums And Bonuses

As per the insurer’s specific underwriting norms, they are free to levy premiums. Therefore, the premiums may vary. However, those who come under the high-risk category may have to pay a higher premium on porting.

Grace Period

In case the application of porting is under-process, then the applicants are eligible for a grace period of 30 days. During this time, the insured has to pay the premium on a pro-rata basis to avail of this feature. As per the IRDA guidelines, the insured cannot be forced to pay the premium for the whole year.

Porting Charges

There are no charges for Health insurance portability.

Arbitrage Funds vs Liquid Funds, Which fund suits you best?

While choosing the right investment option most suited to meet your short-term investment need most of you tend to invest in Bank FD or savings account.

However, there are other short-term investment avenues that you can and should explore for your short-term investments. Arbitrage funds and liquid funds are two such investment options that can be considered to meet your short-term investment needs.

Arbitrage funds

These are mutual fund schemes that leverage the price differences in two different markets and thereby earn profits. As arbitrage funds are involved in simultaneous buying and selling of shares and making profits from market inefficiencies, they are considered to be low-risk investments and a safe option to park funds.

The returns generated by these funds depend on the volatility of the underlying asset. As these funds primarily invest in equities, they are categorized as equity mutual funds and taxed like any other equity mutual fund.

Liquid funds

Liquid funds, on the other hand, are open-ended debt schemes, that invest money in debt instruments such as treasury bills, commercial papers, certificates of deposits, and even term deposits, etc. Liquid funds are extremely liquid and have no exit load. The redemptions are processed within 24 hours.

Which fund to choose- Arbitrage Fund or Liquid Fund?

Arbitrage funds gained a lot of popularity after the Union Budget of 2014 when the minimum holding time for long-term capital gains on all debt investments was increased from 1 year to 3 years and long-term tax on equities was nil.

However, now under the new budget, even gains from arbitrage funds would be taxed; 10% if sold after a year and 15% if the holding period is less than a year.

While both arbitrage funds and liquid funds are low-risk, low-return types of investments, there are few things you must compare and choose the investment option most suited to meet your needs.

Time Horizon of Investment

One of the most important things to consider before choosing between the two is the time horizon for which you are looking to invest. If you are looking to invest for a few days or weeks, then you should invest in liquid funds.

Returns from arbitrage funds are dependent on arbitrage opportunities available, which are few.

Thus, for such a short time you may not be able to generate any returns from such funds and hence more suited for investors who are looking to invest for at least 3 months or more.

Tax efficiency

Before you choose to invest in either of the two options, understand the tax implications on your returns. Short-term capital gains on arbitrage funds are taxed at a flat rate of 15% and those from liquid funds are clubbed with your total taxable income and taxed as per your income tax slab.

Thus, the tax efficiency of the investment will primarily depend upon the tax bracket that you fall under. For low-income investors, liquid funds are more tax-efficient as compared to investors in the highest tax bracket.

Similarly, arbitrage funds are more tax-efficient than liquid funds for investors who are in the tax brackets of 20% and above as the short-term capital gains tax is 15% which is lower.

Liquidity of investment

Liquid funds score over arbitrage funds when it comes to liquidity. Redemptions in liquid funds are processed within 24 working hours but in the case of arbitrage funds, the redemption is made within 3 to 5 working days.

Returns

The returns generated by arbitrage funds are slightly higher than liquid funds, especially in volatile market conditions when ample arbitrage opportunities exist.

Exit Charges

The exit charges in case of liquid funds are nil, but there is usually a pre-mature withdrawal charge in arbitrage funds if the withdrawals are in the first few months.

Risk

Liquid funds and arbitrage funds are both low-risk investment options but arbitrage funds are slightly more risky than liquid funds.

While returns on liquid funds are similar to those of bank FDs, returns in the case of arbitrage funds are dependent on the arbitrage opportunities available in the market, which are erratic.

Conclusion

The choice of investment most suited for you will depend on your investment objective. Ideally, investors looking to invest for 6 months or more, especially those in the highest tax bracket should opt for arbitrage funds for better returns and higher tax efficiency

And those investors looking to invest for a shorter time frame or those in lower-income brackets can look at investing in liquid funds to make the most from their investment.

What is the Reinstatement Clause in Fire Insurance?

Fire insurance policies often come with a reinstatement value clause, which determines the methodology of claim settlement. Under the reinstatement value clause, the damaged property is replaced by a new property of the same type.

This clause is also called the ‘New for old’ clause as the insurance company is liable to pay for reinstating the damaged asset with a new asset.

Though the reinstatement value clause pays for a new asset or property, the principle of indemnity is followed.

The asset or property replaced would be of the same specifications as the one which is damaged.

In the case of plant and machinery, if the new asset is technologically better than the older one, the insured would have to bear a portion of the cost of reinstating the damaged asset with the new asset because the old asset did not possess the same advanced technology as the new asset.

Thus, the insured is liable to cover the cost of the new technology which comes in the new machine or equipment.

The important provisions of the reinstatement value clause include the following –

A) Reinstatement of the damaged asset must be done by the insured within 12 months from the date of damage or destruction of the asset.

The insured can also apply for an extension in the time for reinstating the asset and if the insurance company allows an additional time, reinstatement should be completed within the extended time. If the timeline is not followed, the claim would be settled on an indemnity basis only.

B) The pro-rata average method would be applied by comparing the sum insured of the fire insurance policy with the reinstatement cost of the entire property on the reinstatement date

C) Reinstatement value clause would not apply if the insured does not inform the insurance company of his/her intention to replace the damaged asset within 6 months of loss. If an extended time is availed, information should be given within the extended period to avail reinstatement value basis of claim settlement.

Moreover, if the insured is not willing to replace the damaged property, the reinstatement value clause would not apply. In that case, the claim would be settled on an indemnity basis

D) Reinstatement of the damaged property or asset can be done at any alternate location as desired by the insured. However, this would be allowed only if the liability under the fire insurance policy does not increase due to a change in location

E) Reinstatement value clauses in fire insurance policies are applied on building, plant and machinery, equipment, etc. which are in a new condition. The clause is not applicable on stocks even when the stock is covered under a fire insurance policy.

F) The sum insured of the policy would depend on the reinstatement value of the asset or property which is damaged

G) Till the time that reinstatement is not done, the liability under the fire insurance policy would be determined on an indemnity basis which is the market value basis.

The concept of the reinstatement value clause should be properly understood when buying a fire insurance policy so that you know how a claim would be paid.

Source:- SecureNow

Is this the Right Time to Invest in Balanced Advantage Fund?

Are you looking for a dynamically managed investment? Do you want an investment in both equity and debt securities? You may consider putting your money in balanced advantage funds. It is a mutual fund that dynamically shifts between equity, derivatives, and debt instruments based on market conditions.

AMFI data shows net inflows of Rs 2,711 crore in balanced advantage funds in March 2021 compared to Rs 2,005 crore in February.

You could diversify your portfolio with balanced advantage funds if you are a first-time investor in the stock market. Should you invest in balanced advantage funds?

What are balanced advantage funds?

You have balanced advantage funds, also called dynamic asset allocation funds, as a category of mutual funds introduced by SEBI, the capital market regulator, in October 2017. It is a dynamically managed investment that puts your money in a mix of stocks and fixed income instruments.

You have the fund manager changing the asset allocation depending on market conditions to generate an optimum return with minimum risk for the investors.

For instance, the fund manager of the balanced advantage fund will reduce exposure to equities when stock markets peak and shift funds into debt securities. You would find the profits remaining intact, even if the stock markets correct or crash in a short time.

Should you invest in balanced advantage funds?

You may consider investing in balanced advantage funds only if you have a time horizon of at least three years. It balances holdings between equity and debt securities depending on market conditions to earn reasonable returns with low volatility as compared to pure equity funds. You can invest in balanced advantage funds if this is your first time in the stock market.

You must invest in balanced advantage funds if you want to diversify your portfolio against the pandemic-induced volatility of the stock market. The fund manager uses model-based triggers to adjust allocations depending on market conditions, without an upper or lower cap on the exposure to equity and debt instruments. It helps you earn risk-adjusted returns and attain long-term financial goals.

You can invest in balanced advantage funds if you want to avoid timing the stock market. For instance, balanced advantage funds increased exposure to equity instruments when the stock markets crashed in March 2020 due to the coronavirus lockdown.

However, it earned high returns on investment when the markets bounced back due to the economic recovery post-lockdown. You find automatic asset allocation protecting you from the volatility of the stock market.

You may consider investing in balanced advantage funds through the systematic investment plan or the SIP. It is a facility offered by AMCs that helps you invest small amounts of money regularly in a mutual fund scheme. You get the rupee cost averaging benefit, which helps you average out the investment cost over time.

You can invest in balanced advantage funds if you seek a higher return than fixed income instruments. For instance, lower interest rates in the economy mean you could struggle to get an inflation-beating return from bank fixed deposits.

It would help if you invested in balanced advantage funds as the equity allocation may ensure an inflation-beating return over some time. However, you must invest in balanced advantage funds only if it matches your investment objectives and risk tolerance.

Are balanced advantage funds better than balanced funds?

You have balanced advantage funds as a multi-dimensional investment when compared to balanced funds. For instance, balanced advantage funds may reduce equity allocation to around 30% when stock markets peak.

Balanced funds have a narrow allocation band and don’t offer sufficient protection to your portfolio during overvalued stock markets.

You may find balanced advantage funds as a better investment option than balanced funds for undervalued stock markets.

For example, it can increase equity exposure to around 80% when stock markets correct and generate significant returns over some time. However, a balanced fund cannot match the equity exposure of a balanced advantage fund during undervalued stock markets.

You have balanced advantage funds performing even when stock markets are flat. An arbitrage component takes advantage of the price difference in equity shares between the spot and the futures market. However, balanced funds cannot match this performance as they invest mainly in equity and debt securities.

You may invest in balanced advantage funds if you seek a higher return than a bank fixed deposit. It is a tax-efficient investment for those in the highest income tax brackets. It is suitable for first-time investors in stocks and can be a part of your core portfolio.

In a nutshell, you must invest in balanced advantage funds if you seek reasonable returns to achieve long-term financial goals.

Source:- ClearTax Chronicles

Benefits and Risks of International Equity

International investing has become vital for our portfolios as we take part in the global growth story.

Adding international stocks to a portfolio offers diversification and may provide higher returns. However, there are both benefits and risks associated with global investing.

Benefits of International Equity

a. Diversification

Diversification is the most obvious yet the most crucial benefit of global investing. A diversified portfolio acts as a source of stability during market volatility.

When you spread out your investments across geographies, there is a low correlation between them. This means that the volatility in one market is likely not to affect your other assets.

Many of the US-listed companies have global revenues. Over 40% of the revenues of the S&P500 companies come from outside the US. By investing in the US itself, you can build a globally diversified portfolio.

b. Wide range of investment options

Global investing enables you to access investment opportunities that are not present domestically. Developed markets like the US are home to some of the world’s largest tech companies – something you cannot access by investing in India.

You may even choose a theme or a combination of multiple sectors. For example, you can prefer the US market for technology, Europe for engineering, and Australia for commodities.

If you are interested in healthcare or pharmaceuticals, there are several options in the US and Europe.

You can access multiple geographies through ETFs. For example, you can invest in German equities through the US-listed EWG ETF or in the Brazilian market through the EWZ ETF.

c. Investment Protection

Another significant benefit of global investing is the protection of investments against fraud and liquidations.

Developed market companies generally have strong regulations that ensure sound corporate governance and severe penalties for market abuse. This protects retail investors from potential scams and insider trading losses.

Remember, capital is always at risk, but many foreign financial institutions, offer protection from seizures and other threats such as liquidation of the broker-dealer. For instance, in the US, SIPC protects investments up to $500,000 if your broker-dealer faces liquidation.

d. Currency Diversification

Investing overseas exposes you to currency appreciation (or depreciation). For example, the USD has been appreciating, on average, between 3-5 percent versus the INR over the last few years.

Emerging markets’ currencies depreciate over the longer term. Interest rates in domestic savings accounts are at a low of 3-4 percent on average.

By investing globally, portfolios have generally had the dual benefit of better markets and appreciating currencies.

Risks of International Equity

a. Higher Transaction Costs

The most significant barrier to investing in global markets is the added transaction cost, which varies depending on the foreign market you want to invest in. For the US markets, for many other markets, access may not be as inexpensive.

There may be additional costs like FX conversion charges, transfer fees, and annual maintenance fees that you should know on top of the brokerage commissions.

b. Currency Volatility

When investing directly in foreign markets, you first have to convert your Indian rupees into a foreign currency at the current exchange rate. Let’s assume you own a foreign stock for a year and then sell it.

You then convert the foreign currency back into the Indian rupee. That could help or hurt your return, depending on which way the domestic currency is moving.

c. Political Risk

While investing, you should also consider the geopolitical environment of the country. Political events affect the domestic markets of the country and may lead to volatility.

In developing markets, government and policy decisions could hurt even the most prominent companies. We have seen this frequently in countries like Brazil and Argentina.

Conclusion

International investing has become the need of the hour to achieve strong portfolio diversification. While the benefits are lucrative, you must pay attention to the risks as well. There is a lot of information available online to measure the risks and ensure your portfolio’s right mix.

Source:- Winvesta

4 Benefits of buying the Unlisted Stocks | Deeva Ventures Pvt Ltd

4 Benefits of buying the Unlisted Shares

While there are many reasons why a person might invest in unlisted shares the following are some of the common advantages of owning unlisted shares:

1. High-value investments: Since the shares are not very liquid, they are often either undervalued or overvalued for long periods.

Thus, if an investor can invest when the shares is undervalued, then he/she can gain significant returns on the investment.

2. Diversification of risk: Unlisted equity shares are a different asset class by themselves and as a result offer some diversification of risk for investors who are majorly invested in listed equity markets.

3. High growth investments: Often unlisted firms are smaller in size and are yet to reach a stage where they can go public to avail funds for their capital requirements.

As a result, investing when the company is small and invested through its growth when it lists on equity markets often yields high returns due to the small base effect.

4. Peace of mind: Unlike listed equity shares, the prices of unlisted equity shares are relatively stable and the investor need not worry about fluctuations in prices.
Top Unlisted Shares available to invest:

A) Tata Technologies
B) Studds
C) SBI Home Finance
D) Reliance Retail
E) One97 Communications (Paytm)
F) Hero Fincorp
G) HDFC Securities
H) HDB Financial Services
I) Finopaytech
J) Carrier Aircon
K) Care Health Insurance
Call us to invest in unlisted shares.

Why do you need an investment manager?

It’s a common question among investors who don’t have an investment manager: Why would I pay someone to manage my money? Can’t I do that myself with a cheap, online brokerage platform?

The answer of course is ‘yes, you can manage your own money on any number of brokerage sites.

However, as a professional financial planner and investment manager, I’ve noticed at least 3 reasons why you may want to consider hiring a professional to come alongside and help you with such an important responsibility.

And they may not be the reasons you think.

3 Reasons to Consider Hiring a Professional

First, your investment advisor will help you to continuously and quickly invest cash in your investment accounts.

One of the most common issues with do-it-yourself investing is thinking you can time the market with your cash. Over and over, I encounter clients who have been sitting on cash (to varying degrees) in retirement investment accounts.

Remember, you can’t even get at this money until you are 60 years old. Also remember, if you are 60 years old, you likely have a 30-40 year retirement on the horizon. Compound interest only works when you let it work.

That means keeping your cash invested continuously and quickly and a financial advisor will help you do this.

1. When do things always go according to plan?

Second, an investment advisor will help you stay accountable to the savings and investing goals you set for yourself.

When you are going it alone, it’s easy to make excuses, blow past personal finance deadlines, and feel like you are doing alright when you have one too many blind spots. A great financial advisor will help you stick to your investment plan.

But when things don’t go according to plan, your advisor will help you course-correct and make appropriate changes.

And let’s be honest, when do things always go according to plan? Helping you make adjustments and not simply ignore important financial decisions is what your advisor is there to help walk you through.

2. Making progress, moving forward

Next, your advisor should make you a person of action! With financial decisions, it’s far too easy to push a final decision to the background.

Even once you’ve made a final decision, executing that decision can take weeks, or, more likely, months.

Your advisor not only helps you make the decisions but helps you execute the decision promptly.

Whether you need to re-balance your portfolio, make an allocation change, or review your fund expenses, your advisor helps the action happen.

Put simply, your advisor helps keep you moving forward!

3. Do you have a thinking partner?

Third, your advisor should be your thinking partner when it comes to adding or deleting investments from your portfolio.

Every investor faces decisions from time to time on whether to change a certain investment fund in their portfolio.

How do you know when is the right time to make a change? What is your decision framework for making big investment changes? What is the tax impact of the decision? For most investors, the framework is largely emotional.

Your advisor should be your thinking partner when it comes to investment changes.

A fiduciary financial advisor will be able to help put investment decisions into proper context and bring the decision back to you and your financial plan rather than your emotional opinion of the investment.

5 Best Financial Rules to Secure Your Future

1. Create Spending Priorities

By now, you should have a good idea of what you value in life, and what kind of lifestyle you want to lead.

This means that it’s time to stop spending on stuff that isn’t important to you. Do you know how much crap I bought in my 20’s that was a complete waste of money? Too much.

Sit down, think about what you want to accomplish with your money, and then create a list of spending priorities that work for you. Then, spend according to those priorities.

Your spending will be more in line with your values, and you’ll be happier as a result.

If you have a spouse, this involves them, too. My wife and I are constantly talking about what are the important things we want to spend our money on.

In our 30’s the constant topics revolved around upgrades to our home, travel, investing in our businesses, and our kids – three growing boys add up!

2. Buy Health Insurance

Now that you’re getting older, you need to think about health insurance. Even if you live a healthy lifestyle, there are reasons to have health insurance.

If you have kids, you need health insurance. If you can afford a high deductible plan, it can make sense (if you have relatively few health care needs and costs) to purchase one.

You can then put money into a Health Savings Account, earning you a tax deduction and allowing the money to grow tax-free as long as you use it for qualified expenses.

3. Create a Retirement Plan

Many people in their 30s have yet to perform a retirement calculation. Now is the time for you to perform that calculation.

Use one of the many online calculators to figure out what you need in retirement, and what you need to do now to meet your goals later.

Get serious about what you want to do in retirement and make a plan.

4. Diversify Your Income

Now that you’re in your 30s and things have settled down a bit, it’s a good time to consider income diversity.

Don’t rely on your day job for your entire financial well-being. That’s just asking for trouble.

I’ve been able to diversify my income by starting this blog and other online ventures to complement my revenue from my financial planning practice.

Try to cultivate income diversity with side gigs, investments, and other endeavors. That way, your entire family’s financial future isn’t at risk if you’re fired from your job.

5. Get Financial Planning Help

As your finances become more complex, there is a good chance that you will need help working through the ins and outs.

Whether you need help with tax planning (I love my accountant), plotting a retirement course, or figuring out what insurance policy is best for you, consider working with a financial planner that has no conflicts of interest.

Unfortunately, most people assume financial planning services are reserved for individuals with very high net-worths. For a long time, that has been the case.

But, a relatively new company that is bridging the gap between this very helpful financial service and the younger generation (who typically don’t have millions of dollars of assets) is Facet Wealth.

4 Benefits of Buying Engine Protection Cover for Your Car

Engine protection car is one of the most important add-ons covers that are offered by motor insurance companies in India.

Pays for the Most Expensive Car Part

The engine is considered the most expensive part of a car. Naturally, the cost of replacing the engine or any of its parts can cost a lot of money.

Besides, repairing the car’s engine is also quite expensive. But with an engine protection cover, you don’t have to worry about how much money will it cost to get your car’s engine repaired or replaced.

Ideal for People Living in Flood-Prone Areas

People who reside in low-lying areas prone to floods or water-logging often find their car’s engine damaged due to water ingression.

The engine protection cover will ensure that the cost of repairing your four-wheeler’s engine will be covered by your insurer every time water enters inside the engine.

Comes to the Aid of New Cars

If you have recently purchased a new car, any unfortunate damages to the vehicle’s engine can burn a big hole in your pocket as the engine parts of a new car will be expensive. But if you have purchased an engine protection cover with your motor insurance policy, the cost of your car’s engine parts will be covered no matter how expensive it may be.

Things to Keep in Mind When Buying Engine Protection Cover

The engine protection cover comes with certain terms and conditions that apply to car owners who buy this add-on cover.

Take a look at the things that you must keep in mind if you are considering buying the engine protection cover:

1. The engine protection add-on cover is not available for cars that are older than five years.

2. This cover can only be purchased by people with comprehensive or own-damage car insurance policies. This is because engine protection cover is not available under third-party liability car insurance.

3. Since it is an add-on cover, a car owner needs to purchase the engine protection cover by paying an additional insurance premium at the time of purchasing the best car insurance.

4. Most motor insurance companies allow car owners to make up to two claims under their engine protection cover.