FINtastic Women Your Pathway To Be The Household CFO
CASE STUDY • Mr. X aged 35, currently working with ABC ltd for last 10 years. He is withdrawing Rs.40 lacs p.a. @ 10% p.a. increment. Assuming his job is pretty much secured. • Wife > home maker • Kids > 5yrs, 1 yr • Assets > Own house > 1 cr • Own car > 10 lacs • Financial assets > 1 cr FINtastic Women Program International College of Financial Planning
• Mr. Satbir and his wife Komal , two kids Rahul and Neha. • He was earning Rs.1 lac p.m. from a private company. • He was living at Alipur in Delhi. • He was living in his own house in which loan outstanding Rs.20 lacs. • Rahul was in 10th class and Neha was in 6th class. • While coming to home from office he had an heart attack and assed away on same day.
• Mr. Rajesh aged 34, dependent wife, 2 kids. Was earning Rs.40000 p.m. He fell from the stairs, hospitalized due to crack in rib cage, hospitalized for 7 months.
• Mr. Monty aged 35 having dependent wife, 2 school going kids. While driving his he met with an accident and got injured severely. He was working with private company, annual package was of Rs.24 lacs. He had been bed ridden for 2 years.
• Mr. Ram Singh had an tractor which was parked on roadside, insurance expired 2 days back. • It was time of winter. An NRI was passing by the same road around 9 p.m. • Fogy night. • He could not see tractor parked roadside, and collided and died on the spot.
• Mr. Amitabh Bachan really worked hard to give the best education and facility to his four sons through out his working life. • Once he retired from job, he had to live apart from his wife Hema Malini. • Why?
• Mr. Vedpal Mann, got a house constructed in 2012 , costing Rs.2 crore 70 lakhs. He managed this by selling his agriculture land. His house was one of the most beautiful in that area.
• In Feb, 2017, one of my friend was diagnosed with lungs cancer, his age was at that time 40 years. • He was working with ABC ltd. Drawing annual package of Rs.22 lakhs. His wife and 3 kids were completely dependent on him. He has just passed away in lockdown.
S.NO. 1 2 3 4 5 POLICY HOLDER NAME COMPANY NAME PRODUCT NAME TYPE OF PRODUCT SUM ASSURED POLICY NUMBER DATE OF COMMENCEMENT DATE OF MATURITY PREMIUM SURRENDER VALUE TILL NOW
INSURANCE PLANS FINtastic Women Program International College of Financial Planning
• The basic concept of insurance is that one party, the insurer, will guarantee payment for an uncertain future event. • Meanwhile, another party, the insured or the policyholder, pays a smaller premium to the insurer in exchange for that protection on that uncertain future occurrence
• Two types of insurance • Life Insurance • Non –life insurance
LIFE INSURANCE COMPANIES
TERM ASSURANCE PLAN: • 1. As it covers only death risk, mortality based ‘risk’ premium is charged. • Hence, it is a very low cost plan at young ages. • A mortality rate is the number of deaths during a particular period of time among a particular type or group of people dx • Mortality Rate qx = ------------------ lx • Risk’ premium = qx * SA • How much risk cover should be taken? International College of Fin9a/ n2 c2 i/ a2 l0 P2 1lannin1g7 FINtastic Women Program
HUMAN LIFE VALUE • Human Life Value (HLV) — the monetary value of a human life, measured by determining the net present value of benefits that others (the decedent's spouse, dependents, partners, employers) might reasonably expect to receive from the future efforts of the individual whose life is being valued. • There are basically two approaches to calculate HLV: • (1) Income replacement method • (2) “Need Based” approach FINtastic Women Program International College of Financial Planning
• Calculate HLV to recommend adequate insurance cover for Mr. RAJEEV, age 30 retirement age 60 as per income replacement method • Present annual income Rs.10 lacs • Self maintenance expenses Rs.1 lac p.a. • House hold expenses Rs.6 lacs p.a. • Rate of Interest assumed is at 8% p.a. • Salary increment = 6% p.a. FINtastic Women Program International College of Financial Planning
NEED BASED APPROACH • Analyze ‘needs’ of the client • Then earmark funds against each need like : • 1. Spouse fund • 2. Education Fund • 3. Marriage fund • 4. Outstanding loan • Then we need to check financial assets. FINtastic Women Program International College of Financial Planning
• Mr. and Mrs. Rao aged 46 and 42 years. • life expectancy of Mr. Rao 80 age, and Mrs. Rao is 85 of age. • Current investment Rs 25 lacs • Expenses Rs.09 lacs ( 2 lacs p.a. Mr. Rao’s Personal expenses) • Marriage fund required Rs.25 lacs • Education fund required Rs.10 lacs • Outstanding loan Rs.20 lacs • Interest rate is 10% p.a. and inflation is 7% p.a. FINtastic Women Program International College of Financial Planning
FINtastic Women Program International College of Financial Planning
TYPES OF TERM INSURANCE PLANS Pure Term Insurance Plan Term Insurance with return of premium FINtastic Women Program International College of Financial Planning
Ex1. Which option is better Option 1 > pure term insurance of S.A. 50 lacs, term 30 years, premium 7000 p.a. Option 2 > term insurance with return of premium, premium 12000 p.a. FINtastic Women Program International College of Financial Planning
FINtastic Women Program International College of Financial Planning
FINtastic Women Program International College of Financial Planning
2. WHOLE LIFE PLAN: • Whole Life Plan: • It is a plan with an unspecified period. • The claim is paid whenever the insured dies irrespective of age. FINtastic Women Program International College of Fin9a/ n2 c2 i/ a2 l0 P2 1lannin2g7
ENDOWMENT PLAN: • Hence, the Sum Assured is payable: on survival to the end of the term or on earlier death. • The accrued bonus are paid along with the Sum Assured at the time of claim. • Maturity = sum assured + bonus1 + bonus2 FINtastic Women Program International College of Fin9a/ n2 c2 i/ a2 l0 P2 1lannin2g8
1. Simple Reversionary bonus (SRB) >This type of bonus is calculated on the sum assured only. This bonus is declared every year (not fixed) and is accrued to be paid out at the time of a claim or maturity. 2. Guaranteed simple reversionary bonus > This type of bonus is guaranteed and calculated on the sum assured only. FINtastic Women Program International College of Financial Planning
• Ex. Sum assured 2 lacs, term 20 years, premium 10000 p.a. has guaranteed simple reversionary bonus of Rs.50 per thousand sum assured. Terminal bonus Rs.200 per thousand sum assured. • Maturity = 2 lacs + 50/1000 * 200000 *20 + 200/1000*200000 = 4.2 lacs • Yield = ? FINtastic Women Program International College of Financial Planning
MONEY BACK PLAN • In this plan insured gets some % of basic SUM ASSURED after regular interval of time • And balance is paid along with bonuses end of the term. • S.A. = 200000 • Term = 20 years • Premium = 12000 p.a. • G Simple reversionary bonus = Rs.44 per thousand sum assured • Final Additional Bonus = Rs.80 per 1000 S.A. • Survival Benefits are paid 20% of S.A. after 5,10,15 years and 40% at maturity. • Calculate maturity and yield? FINtastic Women Program International College of Fin9a/ n2 c2 i/ a2 l0 P2 1lannin3g1
Maturity = 40% of S.A. + Bonus1 + Bonus2 = 80000 + 44/1000 * 200000*20 + 80/1000 *200000 = 272000 FINtastic Women Program International College of Financial Planning
ENDOWMENT PLAN ( Insurance Plan ) PPF MUTUAL FUND ( Tax Saving ) FINtastic Women Program International College of Financial Planning
ENDOWMENT PLAN , S.A. 16 LACS, AGE 30, TERM 16 YEARS YEARS YEAR BONUS/ BONUS PREMIUM 1 2002-2003 1000 96000 100000 2 2003-2004 60 92800 100000 3 2004-2005 58 81600 100000 4 2005-2006 51 72000 100000 5 2006-2007 45 64000 100000 6 2007-2008 40 67200 100000 7 2008-2009 42 67200 100000 8 2009-2010 42 67200 100000 9 2010-2011 42 67200 100000 10 2011-2012 42 67200 100000 42 FINtastic Women Program International College of Financial Planning
11 2012-2013 42 67200 100000 12 2013-2014 100000 13 2014-2015 42 67200 100000 14 2015-2016 100000 15 2016-2017 42 67200 100000 16 2017-2018 100000 42 67200 42 67200 42 67200 TOTAL 1145600 FAB 40000 MATURITY 27,85,600 ROI 6.25% P.A. FINtastic Women Program International College of Financial Planning
PUBLIC PROVIDENT FUND 2002-2003 PPF RATE INVEST FUTURE VALUE 2003-2004 8% 100000 108000 2004-2005 8% 100000 224640 2005-2006 8% 100000 350611.2 2006-2007 8% 100000 2007-2008 8% 100000 486660.096 2008-2009 8% 100000 633592.9037 2009-2010 8% 100000 792280.336 2010-2011 8% 100000 963662.7629 8% 100000 1148755.784 1348656.247 FINtastic Women Program International College of Financial Planning
PUBLIC PROVIDENT FUND 2011-2012 8.60% 100000 1573240.684 2012-2013 8.80% 100000 1820485.864 2013-2014 8.70% 100000 2087568.134 2014-2015 8.70% 100000 2377886.562 2015-2016 8.70% 100000 2693462.693 2016-2017 8.10% 100000 3019733.171 2017-2018 8.00% 100000 33,69,311.84 ROI 8.3% P.A. FINtastic Women Program International College of Financial Planning
TAX SAVER MUTUAL FUND 1/4/2002 NAV INVESTMENT UNITS 1/4/2003 20.11 100000 4972.650423 1/4/2004 18.79 100000 10294.6302 1/4/2005 41.18 100000 12722.99348 1/4/2006 68.67 100000 14179.23347 1/4/2007 134.32 100000 14923.72424 1/4/2008 128.42 100000 15702.41915 1/4/2009 155.39 100000 16345.9612 1/4/2010 97.72 100000 17369.29317 1/4/2011 208.19 100000 17849.62364 232.77 100000 18279.23226 FINtastic Women Program International College of Financial Planning
TAX SAVER MUTUAL FUND 1/4/2012 223.7 100000 18726.25953 1/4/2013 19167.09889 1/4/2014 226.84 100000 19525.40625 1/4/2015 1/4/2016 279.09 100000 1/4/2017 1/4/2018 408.44 100000 19770.24025 360.5 100000 20047.63276 484.59 100000 20253.99278 516.47 MATURITY 1,04,60,579 ROI 19.96% P.A. IF WE CONSIDER LTCG CG 8860579 9574521.749 10% LTCG TAX 886057.9 19.07% P.A. FINtastic Women Program International College of Financial Planning
year cashflow tax saved mortality charge final cashflow 1 -100000 -31200 2000 -66800 2 -100000 -31200 2000 -66800 3 -100000 -31200 2000 -66800 4 -100000 -31200 2000 -66800 5 -100000 -31200 2000 -66800 6 -100000 -31200 2000 -66800 7 -100000 -31200 2000 -66800 8 -100000 -31200 2000 -66800 9 -100000 -31200 2000 -66800 10 -100000 -31200 2000 -66800 11 0 0 12 185000 185000 13 185000 185000 14 185000 185000 15 185000 185000 16 185000 185000 17 185000 185000 18 185000 185000 19 185000 185000 20 185000 185000 21 185000 185000 5.752% 9.7028% FINtastic Women Program International College of Financial Planning
ULIP ULIP or Unit Linked Investment Plan is a combination of insurance and investment. A portion of the premium paid by the policyholder is utilized to provide insurance coverage to the policyholder, while the remaining portion is invested in equity and debt instruments. FINtastic Women Program International College of Fin9a/ n2 c2 i/ a2 l0 P2 1lannin4g1
SALIENT FEATURES OF ULIPS • ULIPs are different from other plans of insurance due to their different features. These salient features are described below: • The Funds Equity Funds> – Debt Funds> Balanced Funds > Safe fund > FINtastic Women Program International College of Financial Planning
• Life Cover • Since ULIPs are insurance plans, insurance cover is available and is expressed as a percentage or multiple of the premium paid. In case of death, higher of the Sum assured or the Fund Value is paid. Charges> These charges include the premium allocation charges, administration charges, fund management charges, mortality charges, etc. and are deducted every year or every month depending on the type of charge and policy terms. FINtastic Women Program International College of Financial Planning
• Switching • – Switching means transferring investments from one chosen fund to another. Partial withdrawals > In ULIPs, the policyholder can withdraw the Fund Value partially for any financial requirements without hampering the plan continuity. Top-ups • – ULIPs also provide the facility of making additional investments into the plan through the facility of top-up premiums. Thus, the policyholder can use any surplus fund for investment in the plan apart from the premiums which are paid and reap the benefits of good returns. FINtastic Women Program International College of Financial Planning
ULIP Age : 30 Sum assured = 1000000 Term 20 years premium 100000 p.a. Mortality charges Rs.1500 p.a. Policy admin charges Rs.250 p.a. Premium allocation charge: 1st year 10% of premium & thereafter 4% Fund management charges 1.35% p.a. Gross return of fund 10% p.a. FINtastic Women Program International College of Financial Planning
Comparison of ELSS and ULIP features Concept ULIP ELSS A pure Investment Product An Insurance cum Investment Product Objective A product that gives A professionally managed fund that leverage to enjoy gives benefits from diversified Lock in period investments benefits along equity investments. Tax Implications with tax relief with life coverage. 5 years 3 years Investments exempted from Investments non-taxable u/s 80C taxation u/s 10(10D) and returns upto Rs. 1 Lakh a year provided life coverage is are exempted from tax under LTCG minimum 10 times of annual . premium. FINtastic Women Program International College of Financial Planning
Comparison of ELSS and ULIP features ULIP ELSS Regulator IRDA SEBI Switching Can be shifted from equity You need to redeem then shift Charges fund to debt or balanced or in another fund, capital gain safe fund, but no capital will arise. gain will arise. Capped to 2.25% for policies Fund management charges 15 years and above applicable depending upon the fund which is around 2%. FINtastic Women Program International College of Financial Planning
Ex. you have been Investing Rs.5 lakhs p.a. in ELSS and ULIP plan. Today is 1-3-2020. Assuming roi 10% p.a. after 10 years you feel equity market will not perform well due to CORONA & CHINA. What to do? Switching from equity to debt fund FINtastic Women Program International College of Financial Planning
• Current fund value = 8765583 Fund value ELSS ULIP FUND VALUE 8765583 8765583 TAX (8765583-5000000- NIL 100000)*.1 366558 FINtastic Women Program International College of Financial Planning
ANNUITY PLANS • An annuity plan – commonly called a pension plan - provides regular income to the annuitant as per the plan provisions. • Annuity is called the ‘reverse’ of life insurance because • (i) ‘life insurance’ covers the risk of dying early whereas ‘annuity’ covers the risk of living too long. • (ii) under a life insurance contract, the insurer pays upon the death; but under an annuity, the insurer stops paying upon the death. FINtastic Women Program International College of Financial Planning
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