insurance strategist i

8/3/2019 Insurance Strategist i

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CAN YOU BE SURE AS TO

WHAT MAY HAPPEN TO UIN THE NEXT FEW

MINUTES???????
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DO YOU LOVE YOUR

NEAR AND DEAR ONESAS MUCH AS YOU LOVE

YOURSELF????
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DO YOU WANT TO BE

FINANCIALLY SECUREIN THE EVENT OF ANYUNFORSEEN

CALAMITY???
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PRESENTINGINSURANCE!!!

PROVIDING UNPARALLED RISKCOVER & PROTECTION

AGAINST FUTUREEXIGENCIES!!!!!


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Invest the next 15

minutes of your time tounderstand INSURANCE

in the right perspective...
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INSURANCE

STRATEGISTVolume I - Basic

Module

BY

S.Krishnamoorthy


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OBJECTIVE OF THEPRESENTATION

Highlighting the fundamentals ofinsurance as a financial product

Insight into the Indian Insurance

industry players and productsavailable in the market

The tax implications of insurance


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FUNDAMENTALS OFINSURANCE


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Basic TerminologyWhat is insurance?

Insurance is a contract between two parties whereone party (the insurer) agrees to protect the otherparty (the insured) in the event of any loss orunforeseen event. Insurance can be broadly classifiedinto two categories Life Insurance and Non LifeInsurance.

What do you mean by premium payable on aninsurance policy?

Premium is the periodical amount that the insuredneeds to pay to the insurance company to enjoy thebenefits of the insurance policy.


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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 byriders? Riders are additional benefits that are added on to an

insurance policy to make it more compatible to the needs ofthe 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 knownas maturity benefit.


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Why insurance???

PRIMARY REASON

Life is full of uncertainties

Provides the much required RISK COVER

Serves as a financial buffer in the wake of anyun-favorable and un-foreseen circumstances

Ensures that near and dear ones are not left in

financial doldrums due to any exigencyThe risk cover that insurance provides has no

parallels in the financial world


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Why insurance ???SECONDARY REASON

Money back plans provides an element ofliquidity by returning a portion of the sum

assured at regular intervals. This is inaddition to the risk cover

Unit linked plans invest a percentage of

the premiums in market securities andprovide returns. This combines marketlinked returns along with risk cover


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Types of insurance policies

Term plan

A traditional insurance plan

Cheapest plan available in the market today

The sum assured is returned on death, whilematurity benefits are nil.

Suitable for persons having dependants

Term plan can be made more attractive bytaking up riders


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Types of insurance

policiesEndowment plan

Advancement over the term plan

This plan offers maturity benefits and deathbenefits

Endowment plans are generally participativein nature and pay bonuses to the policyholderat the end of the policy term. E.g. LICendowment plans offer bonuses @ Rs.50/-per thousand sum assured

Suitable for persons who believe in assetcreation


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Types of insurance

policiesMoney 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 caseswhere the client requires additional funds inthe near future along with a risk cover

Such plans also offer bonus payments at the

of the policy period


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Types of insurance

policies Unit linked insurance plans

These plans combine market linked returns withthe valuable risk cover

A portion of the premium is invested in marketinstruments

The returns that are generated are ploughedback into a separate account known asaccumulation account.

On maturity the policyholder gets the value in theaccumulation account or the sum assuredwhichever is higher. However, in some policiesthe benefit is sum assured plus the balance in theaccumulation account.


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ULIPs (Contd.)

Similar to the concept of mutual funds such ULIPsoffer the following investment options to theinvestors:

Equity centric schemesinvest primarily in equityand equity related instruments. This is relevant foraggressive investors having an appetite for risk

Balanced schemes invest in a combination of equityand 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 debtinstruments. This is suitable for highly conservativeinvestors, who are not prepared to take risk and

prefer safe investment avenues


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INSIGHT INTO THE

INSURANCEINDUSTRY


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This section of the module

highlights the various players in theinsurance industry, the schemeswhich have emerged blockbustersin the insurance industry and acritical description of the same


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Players in the insuranceindustry

Public sector life insurance company:

Life Insurance Corporation of India a stateowned 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


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Other private insurance

playersAMP Sanmar Life Insurance Company

Tata AIG Life Insurance Company

Alliance Bajaj Life Insurance CompanyAviva Life Insurance Company

Metlife Insurance Company

SBI Life Insurance Company

ING Vyaysya Life Insurance Company

HDFC Standard Life Insurance Company


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Market pulse in the

insurance industryA 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 inmarket linked instruments which generate returns,

All the plans in the product portfolio of Birla SunLife Insurance Company are unit linked in naturewhich proves that such plans are the in thing intodays context.


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Blockbusters in the insuranceindustry (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 InsuranceCompany

Life Guard Plan a term plan with a newperspective!


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Premier Life Plan offered byICICI Pru. Life Insurance Co.

Unit linked insurance plan

Minimum contribution is Rs.60,000 perannum

Death benefit is higher of the sum assuredor the value in the accumulation accountwhichever is higher

Partial withdrawals are possible after 3years premiums are paid.

P i Lif Pl


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Premier Life Planoffered by ICICI Pru.

Life Insurance Co.Flexibility to choose the premium payingterm 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 amaximum of 25

This plan offers the following investment

options maximiser, protector, balancer andpreserver

Minimum top up is Rs.5,000


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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 andoffers no maturity benefits

Level term assurance with return ofpremium offers


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Maha Life Gold by Tata AIG LifeInsurance Company

Limited premium paying term with a life long cover

Premium paying term is 15 years

A highly recommended product for retirement planningpurposes

Guaranteed addition of 5% (on the sum assured) everyyear 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 onmaturity which is on the 100th year, whichever is earlier.


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Bima Plus plan offered by

LICA market linked plan offered by Life insurancecorporation 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 thesum assured is payable (in addition to the death benefit)

Maturity benefit is the total of the sum assured alongwith the balance in the accumulation account


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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 IISum assured can be a multiple of the amount of

premium that is payableDeath benefit is that the sum assured is paid

immediately and all the future contributions arewaived. Waiver of premium rider is available at avery nominal cost.

You can choose to make a minimum contributionof Rs.18,000 under this plan


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Smart Kid Plan by ICICI PruLife

This policy acquires a surrender valueafter the first years premiums are paid

The 4 kinds of schemes that are available

are maximiser, growth, protector andpreserver.

It is possible to make 4 free switches

every year, but after that a switchingcharge is levied.


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TAX BENEFITS

OFFERED BYINSURANCE


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This section of the modulehighlights the various tax sops that

are available with insuranceproducts


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Tax implications of insurance

Premiums towards any insurance policy iseligible for a rebate under section 88 (subject tothe gross total income)

Premiums towards pension plans is eligible for adeduction under section 80CCC of the incometax law (up to a maximum of Rs.10,000)

Premiums towards any mediclaim policy is

eligible for a deduction under section 80D up toRs.10,000

Any sum received from an insurance companyeither as a death benefit or as a maturity benefit

will be exempt from tax under section 10(10D)


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Tax implication of

insuranceKeyman 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 policyis taxable. Benefit of section 10(10D) is notavailable to a keyman policy

Death benefit is also taxable in the case of akeyman policy


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Tax implication of insurance

Single premium plan

Premium towards a single premium plan iseligible for a rebate under section 88.

However, this condition will be applicable onlywhen the premium does not exceed 20% ofthe sum assured.

Tax implication on surrender of an insurance

planAmount received on surrender of an insurance

policy before the expiry of the term will betaxable


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Tax implication of insurance

Tax treatment in the case of retirement plans

Amount contributed towards any pension planswill 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 annuityfrom the insurance company will be taxableunder the headIncome from Salaries.


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END OFVOLUME I

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