insurance strategist i
TRANSCRIPT
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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