Insurance Digest
About the Book Insurance planning is a critical component of a comprehensive financial plan that includes evaluating risks and determining the proper insurance coverage to mitigate those risks. The principal goal of Life insurance planning is to identify and analyze risk factors in life and seek proper coverage to protect the family financially, in case of an unfortunate event. The idea behind insurance is to get a group to contribute financially to a fund specifically designed to help individuals recover in the case of an unexpected loss. This Handbook would act as a Complete Guide for Life Insurance with popular Insurance Plans that are available in India. This book would help the customer in selecting the relevant Insurance Plan that would secure him financially based on his life stage and requirements. “Prevention is better than cure”as the saying goes it is very much necessary to take up insurance as the concept of insurance was born out of the necessity to protect, ensure and manage risk. Hope you find this book informative and useful. Stay protected with Insurance. Happy Reading !!
Introduction to Life Insurance One way of contributing toward our desired purpose is by carrying adequate insurance. This is a device people have invented for taking the sting out of risks. It is a way of distributing losses and eliminating uncertainty. It offers a plan (the policy) that enables a person (the policy- holder) to join a large group of people (the life insurance company) which undertakes to pay a sum of money to his family or others (the beneficiaries) at the time of his death, or to him if he is still living on a named date. In return, the policy-holder invests a sum of money (the premium) with the insurance company. Life Insurance is playing an important part in our national and economic welfare as well as in individual well-being. It is preserving family life where its existence is threatened by the death of a bread-winner; it provides ready funds to meet emergencies by way of loans against the value of policies;.
Life Insurance Types of Life Insurance Protection v/s Savings Savings/ Investment Oriented plans Investment Anticipated Endowment Endowment Whole life Term Insurance Protection 1
Life Insurance P Term Insurance P Endowment Insurance P Anticipated Endowment Insurance P Whole Life Insurance P Annuities P Unit Linked Insurance Plan (ULIP) 2
Term Insurance Term insurance plans provide life cover to protect your loved ones at most affordable rates. This is the simplest form of life insurance. Term plans offer financial security to your loved ones' future even in your absence. No maturity value on survival of the policy term. 150,000 Sum Assured 100,000 RISK COVER ONLY 50,000 In case of death during the policy term, the Sum Assured is paid 1 2 3 ---------------30 In case of death No.of Policy years after term there is no benefit 3
Endowment Insurance Plan of Insurance where the insured is eligible for death benefit or maturity benefit whichever happens earlier before the end of the term In case of death Else on at age 45 Maturity Death Benefit 150,000 SA + Bonus 100,000 Bonus gets added and paid in case of survival SA remains constant 50,000 30 35 40 45 50 55 Age of Insured 4
Anticipated Endowment Insurance Plan of Insurance which has regular payouts during the term of the policy In case of death Else on at age 45 Maturity 150,000 full SA paid 100,000 SA + Bonus SA - Survival ben + Bonus 50,000 Survival benefit at regular intervals 30 35 40 45 50 55 Age of Insured 5
Whole Life Insurance Whole Life Insurance Plan covers you up till 99 years of age. They are different from ordinary insurance policies which have a defined term of say 10, 20 or 30 years, and are of use when you have financial dependents for a relatively long period, possibly your entire life. Life cover continues along with other benefits till the death of the policy holder Start Date of policy purchase 6
Annuities Pensions are also called Annuities. The annuity in which the purchaser pays the purchase price in lumpsum and starts getting the Annuity immediately is called an Immediate Annuity. Lump sum Premium Purchase of Annuity Annuity by annuitant End Start Monthly/ quarterly/ half yearly/ Yearly Till death of annuitant or fixed no. of years 12 7
Unit Linked Insurance Plan Unit linked insurance plans, better known as ULIPs, combines life insurance with financial investment. Unit- linked insurance plans offer a wide choice of fund options and portfolio strategies. ULIPs allow you to withdraw money regularly from your policy after 5 years lock-in. Some features of ULIPs: • Choice of investment funds • Flexibility of choosing term, premium & cover • Transparency • Tax benefits Life Insurance Investment Protection + 8
Human Life Value - HLV Human Life Value (HLV) also known as the economic value of an individual life. A number that tells the present value of future income expenses, liabilities and investments. The HLV number is taken usually to understand how much money would be required to secure the lives of your dependents with term insurance, in case you are no longer around. 9
HLV Calculator Human Live Value Calculator The Human Life Value (HLV) Calculator helps you identify your life insurance needs on basis of income expenses, liabilities and investments and secure your family’s future. Personal Details 40 Yrs >> RESULT 60 Yrs Current Age Required Life cover to Desired Retirement Age Graduate and Above Protect your Family’s Future is Educational Qualification ` 8,00,000 ` 1,90,00,000 Financial Details Eight lakh One crore ninety lakh Annual Income ` 40,000 Edit Check Premium Monthly Expense Forty thousand Existing Insurance Cover ` 50,00,000 Liabilities (eg. Outstanding Loans) Fifty lakh Upto 10 Lacs Calculate 10
Traditional Participating Plan Traditional Policies mostly invest in bonds and are low risk investment products. Policy holders get a guarantee on the amount they would receive over the policy term. Traditional Policies are further classified into Participating policies and Non participating policies. Participating policies are the ones that participate in the performance of the Insurer. The benefits include a combination of guaranteed payouts along with declared bonuses. In non participating policies, the policy holder is certain of the benefits he would receive over the policy term. It is suitable for investors with low risk appetite. 11
Traditional Participating Plan 1. ICICI Cash Advantage 2. ICICI Savings Suraksha 3. ICICI Future Perfect 4. Kotak Smart Life 5. Kotak Premier Income Plan 6. HDFC Life Sanchay Par Advantage 7. Reliance Nippon Life Bluechip Savings Insurance Plan 8. Reliance Nippon Life Milestone Plan 9. Bajaj Allianz Life Flexi Income Goal - Income Benefit 9. Bajaj Allianz Life Flexi Income Goal - Enhanced Benefit 10. Bharti Axa life Monthly Income Plan+ 11. Edelweiss Tokio Life - Active Income Plan 12. Edelweiss Tokio Life - Smart Lifestyle 13. Tata AIA Life Insurance - Value Income Plan 12
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Traditional Participating Plan Premium Holiday: This is a unique flexibility option, where a policy holder can take a break from premium payments. The policy holder has to inform the insurer in writing one month before the end of the grace period of the next premium due. The insurer will mark the status of the policy as Premium holiday. The policy holder can avail the premium holiday after the payment of certain annualised premiums and that too for certain period only. The policy remains in- force during this period and all benefits are available. 22
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Traditional Participating Plan Rebates: The benefits offered to the policy holder by choosing specific features of the plan. For example, certain discounts on premium for availing higher sum assured or certain discounts on premium for female lives. Risk premium Component: Risk premium is used to provide the guaranteed sum assured on death and deducted from the premium received. It is calculated as Risk Premium= Sum Assured * Mode based Mortality Rate. BANCASSURANCE: Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base. This partnership arrangement can be profitable for both companies. Banks earn additional revenue by selling insurance products, and insurance companies expand their customer bases without increasing their sales force or paying agent and broker commissions. 24
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Traditional Non Participating Plan A non participating plan is one where the policy holder does not receive any bonuses or add-ons in the form of dividends declared by the insurer from time to time. As the name suggests the insurer don’t participate in the insurance company profit, provides guaranteed benefits. 1. ICICI Pru Guaranteed Income for Tomorrow (GIFT) 2. HDFC Life Sanchay Plus 3. Reliance Nippon Life Super Money Back Plan 4. Bharti Axa life Guaranteed Income Pro 5. Tata AIA Life Guaranteed Return Insurance Plan 6. Tata AIA Life Fortune Guarantee Plus 30
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Non Traditional Participating Plan Keyman insurance: Key person insurance, also called keyman insurance, is an important form of business insurance. In general, it can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business. It is an insurance of standard life insurance or trauma insurance policy that is used for business succession or business protection purposes. The policy's term does not extend beyond the period of the key person’s usefulness to the business. Key person policies are usually owned by the business and the aim is to compensate the business for losses incurred with the loss of a key income generator and facilitate business continuity. Key person insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified in the insurance policy. 36
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Term Insurance Term insurance plans provide life cover to protect your loved ones at most affordable rates. This is the simplest form of life insurance. Term plans offer financial security to your loved ones' future even in your absence. No maturity value on survival of the policy term. 1. HDFC Life Click2 Protect 3D Plus 2. Kotak eTerm 3. ICICI Pru - iProtect Smart 4. TATA AIA Life Insurance Maha Raksha Supreme 5. TATA AIA Life iRaksha TROP 39
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Unit Linked Insurance Plan Term Insurance A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan. The insurer pools money from all the policyholders and invests the same in the funds chosen by them. Once the money is invested, the total corpus is divided into ‘Units' with a certain face value. Each investor is then allocated 'Units' in proportion to the invested amount. 1. HDFC SL ProGrowth Flexi 2. Kotak Ace Investment 3. TATA AIA Life Insurance Smart Sampoorna Raksha 44
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