1. CAN YOU BE SURE AS TO WHAT MAY HAPPEN TO “U” IN THE NEXT FEW MINUTES???????
2. DO YOU LOVE YOUR NEAR AND DEAR ONES AS MUCH AS YOU LOVE YOURSELF????
3. DO YOU WANT TO BE FINANCIALLY SECURE IN THE EVENT OF ANY UNFORSEEN CALAMITY???
4. PRESENTING INSURANCE!!! PROVIDING UNPARALLED RISK COVER & PROTECTION AGAINST FUTURE EXIGENCIES!!!!!
5. Invest the next 15 minutes of your time to understand INSURANCE in the right perspective...
6. INSURANCE STRATEGIST Volume I - Basic Module
7. 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
8. FUNDAMENTALS OF INSURANCE
9. Basic Terminology… What is insurance?
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.
10. Basic Terminology… What do you mean by “sum assured”?
Sum assured refers to the amount for which the insurance cover is taken.
What is meant by death benefit?
The amount received from the insurance company on the death of the insured is known as death benefit.
What do you mean by “riders”?
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.
What is maturity benefit?
The amount received on the maturity of the policy is known as maturity benefit.
11. 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
12. 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
13. 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 person’s having dependants
Term plan can be made more attractive by taking up riders
14. 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
15. 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
16. 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.
17. 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
18. INSIGHT INTO THE INSURANCE INDUSTRY
19. 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
20. 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
21. 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
22. 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 today’s context.
23. 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!
24. 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.
25. Premier Life Plan offered by ICICI Pru. Life Insurance Co. Flexibility to choose the premium paying 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
26. 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
27. 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.
28. Bima Plus plan offered by LIC A market linked plan offered by Life insurance corporation of India
This plan offers the following funds:
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
29. Smart Kid Plan by ICICI Pru This plan comes in the following variants:
Smart kid regular premium
Smart kid unit linked regular premium
Smart kid unit linked regular premium II
Smart kid unit linked regular premium II
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
30. Smart Kid Plan by ICICI Pru Life This policy acquires a surrender value after the first year’s 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.
31. TAX BENEFITS OFFERED BY INSURANCE
32. This section of the module highlights the various tax sops that are available with insurance products
33. 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)
34. Tax implication of insurance… Keyman policy: (discussed in detail later)
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
35. 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
36. 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”.
37. END OF VOLUME I