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CAN YOU BE SURE AS TO WHAT MAY HAPPEN TO U IN THE NEXT FEW MINUTES???????

DO YOU LOVE YOUR NEAR AND DEAR ONES AS MUCH AS YOU LOVE YOURSELF????

DO YOU WANT TO BE FINANCIALLY SECURE IN THE EVENT OF ANY UNFORSEEN CALAMITY???

PRESENTING INSURANCE!!!
PROVIDING UNPARALLED RISK COVER & PROTECTION AGAINST FUTURE EXIGENCIES!!!!!

Invest the next 15 minutes of your time to understand INSURANCE in the right perspective...

INSURANCE STRATEGIST
Volume I - Basic Module
BY S.Krishnamoorthy

OBJECTIVE OF THE PRESENTATION


Highlighting the fundamentals of insurance as a financial product Insight into the Indian Insurance industry players and products available in the market The tax implications of insurance

FUNDAMENTALS OF INSURANCE

What

is insurance?

Basic Terminology

Insurance is a contract between two parties where one party (the insurer) agrees to protect the other party (the insured) in the event of any loss or unforeseen event. Insurance can be broadly classified into two categories Life Insurance and Non Life Insurance.
What

do you mean by premium payable on an insurance policy?


Premium is the periodical amount that the insured needs to pay to the insurance company to enjoy the benefits of the insurance policy.

Basic Terminology

What do you mean by sum assured? What is meant by death benefit?

Sum assured refers to the amount for which the insurance cover is taken. The amount received from the insurance company on the death of the insured is known as death benefit. Riders are additional benefits that are added on to an insurance policy to make it more compatible to the needs of the policyholder. Riders are generally applicable only for life insurance and not for general insurance. The amount received on the maturity of the policy is known as maturity benefit.

What do you mean by riders?

What is maturity benefit?

Why insurance???
PRIMARY REASON
Life

is full of uncertainties Provides the much required RISK COVER Serves as a financial buffer in the wake of any un-favorable and un-foreseen circumstances Ensures that near and dear ones are not left in financial doldrums due to any exigency The risk cover that insurance provides has no parallels in the financial world

Why insurance ???


SECONDARY REASON Money back plans provides an element of liquidity by returning a portion of the sum assured at regular intervals. This is in addition to the risk cover Unit linked plans invest a percentage of the premiums in market securities and provide returns. This combines market linked returns along with risk cover

Types of insurance policies


Term

plan

A traditional insurance plan Cheapest plan available in the market today The sum assured is returned on death, while maturity benefits are nil. Suitable for persons having dependants Term plan can be made more attractive by taking up riders

Types of insurance policies


Endowment

plan

Advancement over the term plan This plan offers maturity benefits and death benefits Endowment plans are generally participative in nature and pay bonuses to the policyholder at the end of the policy term. E.g. LIC endowment plans offer bonuses @ Rs.50/per thousand sum assured Suitable for persons who believe in asset creation

Types of insurance policies


Money

back plans

Such plans are comparatively more expensive than other insurance plans Money back plans return a certain percentage of the sum assured at regular intervals These plans will be appropriate in cases where the client requires additional funds in the near future along with a risk cover Such plans also offer bonus payments at the of the policy period

Types of insurance policies

Unit linked insurance plans These plans combine market linked returns with the valuable risk cover A portion of the premium is invested in market instruments The returns that are generated are ploughed back into a separate account known as accumulation account. On maturity the policyholder gets the value in the accumulation account or the sum assured whichever is higher. However, in some policies the benefit is sum assured plus the balance in the accumulation account.

ULIPs (Contd.)
Similar

to the concept of mutual funds such ULIPs offer the following investment options to the investors:
Equity centric schemes invest primarily in equity and equity related instruments. This is relevant for aggressive investors having an appetite for risk Balanced schemes invest in a combination of equity and debt instruments. This is suitable for investors who are prepared to take a moderate amount of risk Liquid schemes or money market schemes invest primarily in money market instruments or debt instruments. This is suitable for highly conservative investors, who are not prepared to take risk and prefer safe investment avenues

INSIGHT INTO THE INSURANCE INDUSTRY

This section of the module highlights the various players in the insurance industry, the schemes which have emerged blockbusters in the insurance industry and a critical description of the same

Players in the insurance industry


Public

sector life insurance company:

Life Insurance Corporation of India a state owned leviathan having a majority market share in the country
Private

sector life insurance companies:

ICICI Prudential Life Insurance Company Birla Sun Life Insurance Company OK Kotak Mahindra Life Insurance Company Max New York Life Insurance Company

Other private insurance players


AMP

Sanmar Life Insurance Company Tata AIG Life Insurance Company Alliance Bajaj Life Insurance Company Aviva Life Insurance Company Metlife Insurance Company SBI Life Insurance Company ING Vyaysya Life Insurance Company HDFC Standard Life Insurance Company

Market pulse in the insurance industry


A

shift from traditional term, endowment and money back plans to the new market related unit linked plans. This is because in addition to the risk cover that such plans invest a portion of their premiums in market linked instruments which generate returns, All the plans in the product portfolio of Birla Sun Life Insurance Company are unit linked in nature which proves that such plans are the in thing in todays context.

Blockbusters in the insurance industry (a partial list)


Premier

life plan offered by ICICI Prudential Smart kid plan offered by ICICI Prulife Mahalife Gold offered by Tata AIG Bima Plus offered by Life Insurance Company Life Guard Plan a term plan with a new perspective!

Premier Life Plan offered by ICICI Pru. Life Insurance Co.


Unit

linked insurance plan Minimum contribution is Rs.60,000 per annum Death benefit is higher of the sum assured or the value in the accumulation account whichever is higher Partial withdrawals are possible after 3 years premiums are paid.

Premier Life Plan offered by ICICI Pru. Lifethe premium paying Insurance Co. Flexibility to choose
term 3 year, 5 year, 7 year or 10 year Minimum sum assured is Rs.1,00,000. The multiple can be a minimum of 1 and a maximum of 25 This plan offers the following investment options maximiser, protector, balancer and preserver Minimum top up is Rs.5,000

Life Guard plan of ICICI Prulife


Comes

with 3 variants:

Level term assurance Level term assurance with return of premium Single premium plan
Level

term assurance is a pure risk plan and offers no maturity benefits Level term assurance with return of premium offers

Maha Life Gold by Tata AIG Life Insurance Company


Limited premium paying term with a life long cover Premium paying term is 15 years A highly recommended product for retirement planning purposes Guaranteed addition of 5% (on the sum assured) every year from the 10th year of the policy Non guaranteed cash dividends after the 6th year of the policy Sum assured along with the guaranteed and non guaranteed additions will be returned on death or on maturity which is on the 100th year, whichever is earlier.

A corporation of India This plan offers the following funds:


Bima Plus plan offered by LIC market linked plan offered by Life insurance

Secured fund, balanced fund and risk fund

In case of death the following benefits are payable:


1st 6 months 30% SA + cash value of the units Next 6 months 60% SA + cash value of units 1st year Full sum assured + cash value of units During 10th year 105% of SA + cash value of units

In the case of death at any time amount equal to the sum assured is payable (in addition to the death benefit) Maturity benefit is the total of the sum assured along with the balance in the accumulation account

Smart Kid Plan by ICICI Pru


This

Sum

assured can be a multiple of the amount of premium that is payable Death benefit is that the sum assured is paid immediately and all the future contributions are waived. Waiver of premium rider is available at a very nominal cost. You can choose to make a minimum contribution of Rs.18,000 under this plan

Smart Smart Smart Smart

plan comes in the following variants:


kid kid kid kid regular premium unit linked regular premium unit linked regular premium II unit linked regular premium II

This

policy acquires a surrender value after the first years premiums are paid The 4 kinds of schemes that are available are maximiser, growth, protector and preserver. It is possible to make 4 free switches every year, but after that a switching charge is levied.

Smart Kid Plan by ICICI Pru Life

TAX BENEFITS OFFERED BY INSURANCE

This section of the module highlights the various tax sops that are available with insurance products

Tax implications of insurance


Premiums

towards any insurance policy is eligible for a rebate under section 88 (subject to the gross total income) Premiums towards pension plans is eligible for a deduction under section 80CCC of the income tax law (up to a maximum of Rs.10,000) Premiums towards any mediclaim policy is eligible for a deduction under section 80D up to Rs.10,000 Any sum received from an insurance company either as a death benefit or as a maturity benefit will be exempt from tax under section 10(10D)

Keyman

policy: (discussed in detail later)

Tax implication of insurance

Premiums payable towards a keyman policy is admissible as a business expenditure Maturity benefit in the case of a keyman policy is taxable. Benefit of section 10(10D) is not available to a keyman policy Death benefit is also taxable in the case of a keyman policy

Tax implication of insurance


Single

premium plan Premium towards a single premium plan is eligible for a rebate under section 88. However, this condition will be applicable only when the premium does not exceed 20% of the sum assured. Tax implication on surrender of an insurance plan Amount received on surrender of an insurance policy before the expiry of the term will be taxable

Tax implication of insurance


Tax

treatment in the case of retirement plans Amount contributed towards any pension plans will be eligible for a deduction under section 80CCC up to Rs.10,000 The lump sum amount that is received at the vesting age will be exempt from tax However, regular money received as annuity from the insurance company will be taxable under the head Income from Salaries.

END OF VOLUME I