Life Insurance Policy or Life Assurance

8/13/2019 Life Insurance Policy or Life Assurance

1/89

Life Insurance policy

1


2/89

CONTENTS

Chapter IIntroduction of the Study 3

Purpose of the Study 4

Scope of the study 5

Research Methodology 6

Limitations 7

Chapter II

Industry Profile ! 17

"ompany Profile 1# ! $4

Product Profile $5 % $

Chapter III

"onceptual &rame'or( 3$ % 41

)or(ing Mechanism 4$ % 4#

Chapter IV

*ata analysis and Interpretation 5+ % 65

,LIPs -s. Mutual &unds 66 % 7$

,LIPs -s. /raditional Policies 73 % 76

Similarities 0 ' ,LIPs -s. M& 2

,LIPs -s. /raditional Policies 77

Chapter V

&indings from the study 7

"onclusions #+

i0liography #1

ppendices #$

$


3/89

CHAPTER - I

3


4/89

INTRODUCTION

Life Insurance or life assurance is a contract between the policy owner and

the insurer, where the insurer agrees to pay a sum of money upon theoccurrence of the insureds death. In return, the policy owner (or policy

payer) agrees to pay a stipulated amount called a premium at regular

intervals. Life Insurance is a contract for payment of money to the person

assured (or to the person entitled to receive the same) on the occurrence of

the event insured against.

Usually the contract provides for:

1. Payment of an amount on the date of maturity or at specified periodic

intervals or at death if it occurs earlier.. Periodical payment of insurance premium by the assured, to the

corporation who provides the insurance.

Who can take Life insurance policy?

1. !ny person above 1" years of age, who is eligible to enter into valid

contract,

. #ub$ect to certain conditions a policy can be ta%en on the life of a

spouse or children.

&ow life insurance policies are available in two types'

1. raditional policies'

. nit lin%ed insurance plans( LIP*)'

No ULI!s are food in "arket:

LlP stands for nit Lin%ed Insurance Plan. It provides for life insurance where

the policy value at any time varies according to the value of the underlying

assets at the time. LIP is life insurance solution that provides for the

benefits of protection and fle+ibility in investment. he investment is d"noted

as units and is represented by the value that it has attained called as &et

!sset alue (&! ).

LIP came into play in the 1- /s and became very popular in 0estern

urope and !mericas. he reason that is attributed to the wide spread

4


5/89

popularity of LIP is because of the transparency and the fle+ibility which it

offers.

!s times progressed the plans were also successfully mapped along

with life insurance need to retirement planning. In todays times, LIP

provides solutions for insurance planning, financial needs, financial planning

for childrens future and retirement planning. hese are provided by the

insurance companies or even ban%s. hese investments can also be used for

ta+ benefit under section "/2.

!UR!O#$ O% #TUD&:

o study the concept and wor%ing mechanism of LIPs

3easons why LIPs get thumps up

3easons for investing systematically o study in detail about two LIP product of 4a$a$ !llian5 Life Insurance

2o Ltd

o ma%e a comparison between 6utual 7unds 8 LIPs

o study the comparison between raditional Policies 8 LIPs

o understand the relationship between 6utual 7unds 8 LIPs and

raditional Policies 8 LIPs

o have an awareness of I39! :uidelines with respect to LIPs

5


6/89

#CO!$ O% #TUD&:

he pro$ect entitled ; LIP as an Investment !venue< is a detailed study

about the inception of the concept of nit lin%ed insurance policies and

its wor%ing mechanism. he study is confined only to the analysis

about the LIP# and its effectiveness in comparison with the traditional

policies and the 6utual funds. he #cope is limited only to the detailed

understanding of the two products of the 4a$a$ !llian5.

6


7/89


8/89

collected and complied. his data has been collected from the e+isting

surveys in the company.

Information has been gathered from the company brouchers,

periodicals, websites and other boo%s. !fter gathering the data from the

#ources, the data was analy5ed, tabulated, interpreted and finally

conclusions were made regarding the entire pro$ect.

LI)IT'TION# O% T($ #TUD&:

he study is limited only to 4a$a$ !llian5. he study does not include any comparison with product of other

companies. 6ore focused on LIPs only.

#


9/89

C('!T$R , II


10/89

INDU#TR& !RO%IL$

1+


11/89


12/89

optimism in the air that the mar%et would automatically create a vibrant

competition leading to the customer being the ultimate winner.

Insurance in India:

Insurance in India started without any regulation in the nineteenth century. Itwas a typical story of a colonial era' a few 4ritish Insurance companies

dominating the mar%et sewing mostly large urban centers. !fter the

independence, it too% a dramatic turn. Insurance was nationali5ed. 7irst, the

life insurance companies were nationali5ed in 1-* , and then the general

business was nationali5ed in 1-? . @nly in 1--- private insurance companies

have been allowed bac% into the business of insurance with a ma+imum of

A of foreign holding.

0e describe how and why of regulation and deregulation. he entry of

the #tate 4an% of India with its proposal of ban% assurance brings a new

dynamic in the game. 0e study the collective e+perience of other countries

in !sia already deregulated their mar%et and have allowed foreign companies

to participate. If the e+perience of other countries is any guide, the

dominance of Life Insurance 2orporation is not going to disappear any time

soon.

he Indian insurance mar%et, with a population of over one million,

offers tremendous opportunities and can easily sustain 1// insurers. his

article analyses the development of the insurance sector, which will result in

higher domestic savings and investments, significant e+pansion of flue

capital mar%et, enhanced insurance infrastructure financing and increased

foreign capital inflow and employment.

he opening up of the Indian insurance sector has been hailed tie a

groundbrea%ing move towards further liberali5ation of the Indian economy.

he si5e of the e+isting insurance mar%et is growing at a rate of ten percent

per year. he estimated potential of the Indian insurance mar%et in terms of

premium was around 3s. BCC/// crores ( #D billion) in 1---. he Indianplayers have tapped only tent per cent of the mar%et share and the

remaining -/ per cent of the mar%et remain untapped.

he Indian :overnment has recently enacted the insurance 3egulatory

9evelopment !uthority !ct 1---, which amends e+isting Insurance laws

dating from 1-B . he act establishes an authority called the Insurance

1$


13/89

3egulatory 9evelopment !uthority, designed to regulate the Insurance

sector. his article e+amines the provisions of the new !ct from the point of

view of a company with diverse business interests wishing to establish a $oint

venture with an Indian company.

Insurance under the -ritish Ra.:

Life insurance in modern form was first set up in India through a 4ritish

company called the @riental Life Insurance 2ompany in 1"1" followed by the

4ombay !ssurance 2ompany in 1 B and 6adras =uitable Life Insurance

#ociety in 1" -. !ll of these companies operated in India but did not insure

the lives of Indians. hey were there insuring the lives of uropeans living in

India. #ome of the companies that started later did provide insurance for

Indians. 4ut they were treated as ;substandard and therefore had to pay an

e+tra premium of /A or more. he first company that had B policies that

could be bought by Indians with Efair value was the 4ombay 6utual Life

!ssurance #ociety starting in 1"?1.

4y 1-B", the insurance mar%et in India was bu55ing with 1?

companies (both life and non>life). Fowever, the industry was plagued by

fraud. Fence a comprehensive set of regulations was put in place to stem this

problem. 4y 1-* , there were 1*C Indian companies, 1 non>Indian insurance

companies and ?* provident societies that were issuing life insurance

policies. 6ost of these policies were entered in the cities (especially aroundbig cities li%e 4ombay, 2alcutta, 9elhi and 6adras). In 1-* , the finance

minister #ri # 9. 9eshmu%h announced nationali5ation of the life insurance

business.

)ilestones of Insurance Re+ulations in the /0 th Century

&ear #i+nificant Re+ulatory $vent

1-1 he Indian Life Insurance 2ompany !ct enacted.

1- " he Indian Insurance 2ompanies !ct enhanced to enable the

government to collect statistical information about both life and

non>life insurance business.

13


14/89


15/89

@n the recommendation of 6alhotra committee an Insurance 3egulatory

9evelopment !ct (I39!) passed by Indian Parliament in 1--B. Its main aim

was to activate an insurance regulatory apparatus essential for proper

monitoring and control of the insurance Industry. 9ue to this !ct #everal

Indian private companies have entered into the insurance mar%et, and somecompanies have $oined with foreign partners.

In economic reform process, the insurance 2ompanies have given

boost to the socio > economic development process. he huge amount of

funds that are disposal of insurance are directed as desired avenues li%e

housing safe drin%ing water, electricity primary education and infrastructure.

!bove all the policyholders gets better pricing of products from competitive

insurance companies.

Li1erali2ation: he opening up of insurance #ector was a part of the ongoing liberali5ation in

the financial sector of India. he domain of state>run insurance companies

was thrown open to private enterprise on 9ecember ?, 1---, with the

introduction of the Insurance 3egulatory !uthority (I39!) 4ill. he opening up

of the sector gave way to the world %nown names in the industry to enter the

Indian mar%et through tie>ups with the eminent business houses. 0hat was

once a =uiet business is becoming one of the hottest businesses todayH

!ost Li1erali2ation: he changing face of financial sector and the entry of several companies in

the field of life insurance segment are one of the %ey results of these

liberali5ation efforts. Insurance business by way of generating premium

income adds significantly to the :9P. stimates show that a meager B*>C/

million, out of a population of -*/ million, have come so far under the

Insurance industry. he potential mar%et is so huge that it can grow by 1* to

1? per annum. 0ith the entry of private players the Indian insurance mar%et

may finally be able to ma%e deeper penetration in to newer segments ande+pand the mar%et si5e manifold. he =uality of service will also improve and

there will be wide range of product catering to the needs of different

customers. he pace for claims settlements is also e+pected to improve due

to increased competition. he life insurance mar%et in India is li%ely to be

ris%y in the initial stages, but this will improve in the ne+t three to five years.

15


16/89


17/89

)a.or !layers In Indian Insurance Life Insurance '

!u1lic: Life Insurance 2orporation of India

!rivate: F972 #tandard Life Insurance 6a+ &ew Jor% Life Insurance

I2I2I Prudential Life Insurance Kota% 6ahindra Life Insurance 4irla #un>Life Insurance ! ! !I: Life Insurance #4I Life Insurance I&: ysya Life Insurance 4a$a$ !llian5 Life Insurance 6etLife Insurance !6P #anmar Life insurance !viva Life Insurance #ahara India Life Insurance #hriram Life Insurance 4harathi! ! Life Insurance

*eneral Insurers

!u1lic:

&ational Insurance &ew India !ssurance @riental Insurance nited India Insurance

!rivate:

4a$a$ !llian5 :eneral Insurance I2I2I Lombard :eneral Insurance

17


18/89

I772@> o%yo :eneral Insurance 3eliance :eneral Insurance 3oyal #undaram !lliance Insurance ! ! !I: :eneral Insurance 2holamandalam :eneral Insurance +port 2redit :uarantee 2orporation F972 2hubb :eneral Insurance

Re,insurer

:eneral Insurance 2orporation of India

1#


19/89

Types of Life Insurance !olicies Jour family counts on you every day for financial support' food, shelter

transportation, education, and much more. Insurance provides you with that

uni=ue sense of security that no other form of investment provides. It gives

you a sense of financial support especially during that time of crisis

irrespective of the fluctuations in the stoc% mar%et. Insurance provides for

your career goals right from your childhood years.

Insurance is all about ma%ing sure your family has ade=uate financial

to ma%e those plans and dreams come true. It provides financial protection to

help your family or business to manage after your death.

%e of the Life insurance policies are:

Life policies , 2over the insured for life. he insured does not receive money

while he is alive the nominee receives the sum assured plus bonus upon

death of the insured.

Endowment policies , 2over the insured for a specific period. he insured

receives money on survival of the term and is not covered thereafter.Money back policies , he nominee receives money immediately on death

of the insured. @n survival the insured receives money at regular intervals

during the term. hese policies cost more than endowment with profit

policies.

Annuities / Childrens policies , he nominee receives a guaranteed

amount of money at a pre>determined time and not immediately on death of

the Insured. @n survival the insured receives money at the same pre>

determined time. hese policies are best suited for planning childrens future,

education and marriage costs.

Unit Linked Insurance Plan , LIP provides for life insurance and at the

same time provides suitable Investment avenues. he policy value is the sum

assured plus the appreciation of the underlying assets it is life insurance

solution that provides for the benefits of protection and capital appreciation

1


20/89

at the same time. he product is =uite similar to a mutual fund in the sense

that the investment is denoted as units and is represented by the value that

it has attained called as &et !sset alue (&! ), and apart from the insurance

benefit the structure and functioning of LIP is e+actly li%e a mutual fund.

CO)!'N& !RO%IL$

$+


21/89

-'3'3 'LLI'N4 LI%$ IN#UR'NC$!rofiles

4a$a$ !llian5 Life Insurance 2o. Ltd. is a $oint venture between two leading

companies> !llian5 !:, one of the worlds largest insurance companies, and

4a$a$ !uto, one of the biggest and B wheeler manufacturers in the world.4a$a$ !llian5 Life Insurance is the fastest growing private life.

Insurance 2ompany in India 2urrently has over CC/,/// satisfied

customers. 0e have a presence in more than **/ locations with /,///

Insurance 2onsultant providing the finest customer service. @ne of Indias

leading private life insurance companies

Indian perations!

:rowing at a brea%nec% pace with a strong pan Indian presence 4a$a$ !llian5

has emerged as a strong player in India. 4a$a$ !llian5 Life Insurance 2ompany

Limited is a $oint venture between two leading conglomerates !llian5 !: and

4a$a$ !uto Limited.

2haracteri5ed by global presence with a local focus and driven by

customer orientation to establish high earnings potential and financial

strength, 4a$a$ !llian5 Life Insurance 2o. Ltd. was incorporated on 1 th 6arch

//1. he company received the Insurance 3egulatory and 9evelopment

!uthority (I39!) certificate of 3egistrahon (3B) &o 11 on Brd !ugust //1 to

conduct Life Insurance business in India.

"hared #ision!

$1


22/89


23/89


24/89

committed to offering you financial solutions that provide all the security you

need for your tCmily and yourself. 4a$a$ !llian5 brings to you several

innovative products, the details of which you can browse in this section.

)ey Achie*ements!

3aces past :0P of over 3e. 1 //12r, with growth of over B*?A

over previous years :0P of 3s. 1- 2rores 7JP of 3s " /cr a B"/A growth over last years 7JP of 3s 1?- or. 3oc%eted to &o. position as against &o at the end of last

financial year amongst Pvt. Life Insurance cos., with a clear lead of 3s

C/ 2r. 7astest growing insurance company with B"/A growth 6ar%et share $umps almost C times from /.-* A to B.B- A

amongst all life Insurance cos. Increased its product portfolio from ? to 1- simple and fle+ible

products Launched complete suite of employee benefit solutions (:roup

products for 2orporate) &o.1 Pvt. Life Insurer 7J /// . Leading by 3#. ?"2r. &o.1 Pvt. Life Insurer in 3etail 4usiness Leading by 3# BB- 2r. 0hopping growth of 1 A for the 7J //*>/

Fave sold over 1B,//,/// policies to satiated customers Is bac%ed by a networ% of **/ offices spanning the country !ccelerated :rowth !ssets under management 3s B,B C 2r. #hareholder capital base of 3s *// 2r.

&o of Policies &o of policies sold in 7J :0P in 7J

//?> //"( monts) 1,B? 3s. ? 2r.

//"> //- 1,1*,- * 3s. - 2r.

//-> /1/ 1," ,CCB 3s. 1 2r.

/1/> /11 ,"",1"- 3s. 1// 2r.

/11> /1 ?,"1, "* 3s. B1BC 2r.

/1 > /1B -,B ,*C* 3s. C *1 2r.

$4


25/89

-a.a. 'llian2 ,The !resent

Product tailored to suit your needs 9ecentrali5ed organi5ation structure for faster response 0ide reach to serve you better O a nationwide networ% of ?// N

branches #peciali5ed departments for 4anc assurance, 2orporate !gency

and :roup 4usiness 0ell networ%ed 2ustomer 2are 2enters (222*) with state of art

I systems Fighest standard of customer service 8 simplified claims

process in the Industry 0ebsite to provide all assistance and information on products

and services, online buying and online renewals.

oll>free number to answer all your =ueries, accessible fromanywhere in the country.

#wift and easy claim settlement process e+perience of running a

large organi5ation.

%ocused #ales Net ork:

$5


26/89

Tie Ups ith -anks

!ioneers of -anc assurance in India:

Faving pioneered the phenomenon, 4an% assurance is one our corebusiness strategies. wo of our strong 4anc assurance tie>ups are'

#tandard 2hartered 4an% #yndicate 4an%

0e have developed a range of life insurance products e+clusively forour 4an% assurance partners. !lso, our products are customi5ed to suitspecific needs of ban%s.

$6

Agency Channel Bancassurance Group and Alternate Channel

Standard Chartered Bank

Syndicate Bank

Various Cooperative banks

7 RRB and Numerousother Tie ups

Group !mployee Bene"it

Corporate Agency

#ranchise

Brokers

Branches

SatelliteSatelliteSatellite

Ba$a$ Allian% &i"e 'nsurance


27/89

!RODUCT !RO%IL$

!RDUCT# O% -'3'3 'LLI'N4

Individual !lans

Unit *ain !lus *old

$7


28/89

! uni=ue nit Lin%ed Plan

Ne %a"ily *ain

! nit Lin%ed 7le+ible Investment Plan

Ne Unit *ain !lus #!

#ingle Premium Plan

!ension *uarantee

!n !nnuity Pension Plan

Ter" Care

erm Plan with 3eturn>of>Premium

Invest *ain!n ndowment Plan

Lifeti"e Care

0hole Life Plan

Child *ain

2hildrens Policy

Loan !rotector

! 6ortgage 3educing erm Insurance Plan

Cash *ain

6oney 4ac% Plan

# arna 5ishranti

3etirement Plan

Ne Unit *ain !lus

nit Lin% plan with higher allocation

%uture Inco"e *enerator

3etirement Pension Plan

Ne Unit *ain $asy !ension !lus #!

ni=ue nit Lin%ed pension

$#
http://bajajallianzlife.co.in/product-detail.asp?prodid=65http://bajajallianzlife.co.in/product-detail.asp?prodid=113http://bajajallianzlife.co.in/product-detail.asp?prodid=110http://bajajallianzlife.co.in/product-detail.asp?prodid=110http://bajajallianzlife.co.in/product-detail.asp?prodid=76http://bajajallianzlife.co.in/product-detail.asp?prodid=65http://bajajallianzlife.co.in/product-detail.asp?prodid=113http://bajajallianzlife.co.in/product-detail.asp?prodid=110http://bajajallianzlife.co.in/product-detail.asp?prodid=76


29/89

'lp Nivesh &o.ana

!n endowment plan with Life cover and 6aturity benefit

#aral #uraksha &o.ana

6ost economical term insurance policy

*roup !lans

*roup Credit #hield

!vailable for mployer > mployee :roups and &on mployer>

mployee :roups

*roup Ter" Life

!vailable for mployer > mployee :roups and &on mployer>

mployee :roups

Ne *roup *ratuity Care

mployer > mployee :roup plan

Ne *roup #uperannuation Care

mployer > mployee :roup plan offering stable and independent

post retirement life

*roup Ter" Life #che"e

In lieu of 9LI ( mployees 9eposit Lin%ed Insurance)

hese are the insurance plans that offer fle+ibility with ta+ benefits'

Unit +ain Plus +old! A Unit Linked Plan

4a$a$ !llian5 nit :ain Plus :old is a ni=ue plan with the combination of

protection and prospects of earning attractive returns with investments in

$
http://bajajallianzlife.co.in/product-detail.asp?prodid=105http://bajajallianzlife.co.in/product-detail.asp?prodid=107http://bajajallianzlife.co.in/product-detail.asp?prodid=105http://bajajallianzlife.co.in/product-detail.asp?prodid=107


30/89

various mi+es of securities that ma%es a perfect plan to last you a lifetime of

prosperity and happiness. nder this plan there is a high allocation up to

"*A. !lso, it guaranteed Life 2over with a choice of Investment 7unds.

Unit +ain Plus "P! A "in,le Premium Unit Linked Plan!

his plan enables one to protect hisMher loved ones, while ma%ing the money

grow faster with the advantage of low charges. It provides one the option of

allocating -"A of the single premium to purchase units in anyMall of the

funds available with 4a$a$ !llian5.

Customer!

4a$a$ !llian5 has products suitable for all income groups. 2ompany is a legal

entity and has legal e+istence, but actually comes into life when it obtains

customer. 2ustomers are first and last real asset of the company. In themar%eting era customer is whole 8 sole. In our life insurance all the

categories of human being comes and covers that varies from B@days of

birth to 1yrs, and our company targeting lower, middle and higher incomes

of group and our policies economical and access able to all income groups.

Competitors!

he main competitors for 4a$a$ !llian5 Life Insurance 2o Ltd are'

Life Insurance 2orporation of India

I2I2I Prudential Life Insurance 2o. Ltd 4irla #un Life Insurance 2o. Ltd

F972 #tandard Life Insurance 2o. Ltd

I&2 ysya Life Insurance 2ompany Pvt. Ltd

6a+ &ew Jor% Life Insurance 2o. Ltd

6et Life India Insurance 2ompany Put. Ltd.

Kota% 6ahindra @ld 6utual Life Insurance Limited

#4I Life Insurance 2o. Ltd

ata !I: Life Insurance 2ompany Limited

3eliance Life Insurance 2ompany Limit

!viva Life Insurance 2o. India Pvt. Ltd

#ahara India Life Insurance 2o, Ltd

#hriram Life Insurance 2u, Ltd

3+


31/89

4harathi!+a Life Insurance 2o Ltd

31


32/89

Chapter , III

3$


33/89

CONC$!TU'L %R')$WOR6

Unit Linked Insurance !lans

33


34/89

ULI! is a mar%et lin%ed investment where the premium paid is invested in

funds. 9ifferent options are available, li%e 1//A =uity, 4alanced, 9ebt,

Li=uid etc and according to the fund selected, the ris%s and returns vary.

he costs are upfront and are transparent, the investment made is

%nown to the investor (!s he is the one who decides where his money should

be invested). here is a greater fle+ibility in terms of premium payments i.e.

! premium holiday is possible. Jou can also invest surplus money by way of

top ups which will increase your investment in the fund and thereby provide a

push to returns as well.

here is no assured #um on survival, the higher of the #um !ssured or

7und alue is paid at the maturity or incase of death.

7ew reasons why we thin% LIPs are better'

1. 7ree insurance cover' !s seen in the above e+ample, the insurance

cover is free the policy even provides better returns

. 4est solution for childrens educationMfuture needs LIPs not only help

save money systematically for a particular goal, but also helps protect

that goal

B. #witches without capital gains and entry loads' nli%e e=uity and

mutual fund investments which are sub$ect to capital gains when sale

is made LIPs have the convenience of switching among the fundswithout any entry loads or capital gains

C. he 6ortality charges are lower than traditional policies.

Unit-linked insurance plans ( LIPs) are the flavor of the season. Launched

a couple of years ago, these plans have contributed over */ percent of the

new business of insurance companies such as I2I2I Prudential, 4irla #un Life

and 4a$a$ !llian5 Life Insurance 2o Ltd.

ncouraged by the response, other players, too, are launching variants

of savings and endowment plans in the unit>lin%ed format, a recent additionto the range of insurance products.

he introduction of unit>lin%ed insurance plans ( LIPs) has been,

possibly, the single>largest innovation in the field of life insurance in the past

several decades. In a swoop, it has addressed and overcome several

34


35/89


36/89

he %ey to good financial planning is to understand one s current and

future financial goals, ris% appetite and portfolio mi+. his done, the ne+t step

is to allocate assets across different categories and systematically adhere to

an investment pattern, so that they wor% in tandem to meet one s

re=uirements over the ne+t month, year or decade. 4ecause of their fle+ibilityto ad$ust to different lifestage needs, LIPs fit in very well with financial

planning efforts. 6oreover, as a systematic investment plan, LIPs greatly

diminish the ha5ards of investing in a volatile mar%et, and using the concept

of 3upee 2ost !veraging , allow the policyholder to earn real returns over the

long term.

0hen you re buying a LIP, ma%e sure you select one that wor%s well for you.

he important thing is to loo% for and understand the nuances, which can

considerably alter the way the product wor%s for you. a%e the following into

consideration. Char,es! nderstand all the charges levied on the product over its

tenure, not $ust the initial charges. ! complete charge structure would

include the initial charges, the fi+ed administrative charges, the fund

management charges, mortality charges and spreads, and that too, not

only in the first year but also through the term of the policy. It might

seem confusing at first, but a company provided benefit illustration

should help ma%e this clearer. #ome companies levy a spread between

the buy and sell rates of the units, which can significantly reduce thevalue of the investment over the long>term. 2lose e+amination and

=uestioning of such aspects will reveal the growing power of your

investment.

.und ptions and Mana,ement! nderstand the various fund options

available to you and the fund management philosophy and ob$ectives of

each of them. +amine the trac% record of the funds thus far and how

they are performing in comparison to benchmar%s. 0ho manages the

funds and what e+perience do they haveH !re there ade=uate controlsHImportantly, loo% at how easily you can access information about your

fund s performance when you need it >> are their daily &! sH Is the

portfolio disclosed regularlyH

.eatures! 6ost LIPs are rich in features such as allowing one to top>up

or switch between funds, increase or decrease the protection level, or

36


37/89

premium holidays. 2arefully understand the conditions and charges

associated with each of these. 7or instance, is there a minimum amount

that must be switchedH Is there a charge on the sameH 6ust you go

through medical underwriting if you want to increase the sum assuredH

Company! Last but not least, insure with a brand you can trust to honor

its commitment and service you according to your re=uirements.

Faving bought a LIP, its important that you monitor it on a regular basis,

though not as fre=uently as you would a stoc% or mutual fund. Jour LIP is a

long>term investment and daily fluctuations in the &! should not impact

you. 2hec% once a =uarter to see how your fund is performing, and consider a

switch if there is a change in the level of ris% you are willing to ta%e or in your

personal mar%et view. 6onitor your fund value it in the few wee%s or months

before a planned withdrawal or top>up, or a change in your life stage or

lifestyle. 7or those who are still finding their feet with their LIP and its

multitude of options, the best thing to do is to consult your advisor.

Life insurance as a form of protection is the single>most important

financial product any earning member of a family must have. Faving said

this, a well>diversified portfolio is one of the first rules of financial planning,

and as such one should consider different instruments as the ability to save

increases. 2ertainly LIPs successfully combine the first and most important

need of protection, with savings, and hence are an e+cellent addition to yourportfolio. hese can be combined with various other products, after ta%ing

into account your ris% appetite, financial goals and need for portfolio

diversification.

Possible investment options range from ban% deposits and government

small saving schemes to mutual funds, stoc%s and property.

4uying a LIP is =uite different from buying a traditional insurance

product and sometimes there are cases of people who believe they have

been mis>sold a LIP, the complaint most often being that they were notaware of the ris%s or the charges.

!ll financial products have a certain amount of ris% and charges, be it a

mutual fund, property, or even a ban% deposit. It would be unrealistic to

assume that the features and benefits of a LIP come at no cost, though the

charges are considerably lower than that of a traditional product.

37


38/89


39/89

". o enable customers to actively manage their own funds according to

their perceptions and changing mar%et situations.

Disadvanta+es of ULI!s:

1. 0ide choice of fund options.

. !bility to withdraw money after some time, to avoid long loc%, 4ird in

hand is worth in the bush.

B. o get inflation beating returns on investment

C. 4rea%ing up of premium into insurance and investments.

*. !bility to ma%e the LIP as mainly insurance oriented (low premium

and high sum assured) or predominantly Investment oriented (reverse)

. nables customers M policy holders to understand the companys

Investment style, through investment reports.

?. Premium holidays > accommodating fluctuating and unpredictable

incomes.

". Policy never lapses, thus , ma%ing the optimum usage of insurancebenefit

-. 7le+ibility.

1/. #uitable to business classes with unsure incomes.

11. 4lending of safety, attractive returns and li=uidity.

3


40/89

The follo in+ points 1efore +oin+ in for a ULI!:

1. It is prudent to ma%e e=uity>oriented investments based on an

established trac% record of at least three years over different mar%et

cycles. LIPs do not fulfill this criterion now.

. Insurance and savings are two different goals and it is better to

address them separately rather than bundle them into a single product.

! combination of a term plan and a mutual fund could give better results

over the long term

B. If investment returns are your priority, you should compare alternative

investment products before loc%ing in your money.

C. a+ advantages do wor% in favor of LIPs for debt>oriented funds. 7ore=uity>oriented funds, e=uity>lin%ed savings products, which en$oy ta+

advantages and provide mar%et>lin%ed returns, are comparable.

*. he e+pense structure of insurance products does significantly dent

returns.

7 Reasons hy ULI!s +et the thu"1s up:

4+


41/89

!s% any individual who has purchased a life insurance policy in the past year

or so and chances are high that the policy will be a unit lin%ed insurance plan

( LIP). LIPs have been selling li%e proverbial Ehot ca%es in the recent past

and they are li%ely to continue to outsell their plain vanilla counterparts going

ahead. #o what is it that ma%es LIPs so attractive to the individualH Fere, wehave e+plored some reasons, which have made LIPs so irresistible.

89 Insurance co*er plus sa*in,s! o begin with, LIPs serve the

purpose of providing life insurance combined with savings at mar%et>

lin%ed returns. o that e+tent, LIPs can be termed as a two>in>one plan in

terms of giving an individual the twin benefits of life Insurance plus

savings. his is unli%e comparable instruments li%e a mutual fund for

instance, which does not offer a life cover.

/9 Multiple in*estment options! LIPs offer a lot more variety thantraditional life insurance plans. #o there are multiple options at the

individuals disposal LIPs generally come in three broad variants' !ggressive LIPs (which can typically invest "/A>1//A in

e=uities, balance in debt) 4alanced LIPs (can typically invest around C/A> /A in e=uities) 2onservative LIPs (can typically invest up to /A in e=uities)

!lthough this is how the LIP options are generally designed, the e+act

debtMe=uity allocations may vary across insurance companies. Individuals

can opt for a variant based on their ris% profile. 7or e+ample, a B/>Jr old

individual loo%ing at buying a life insurance plan that also helps him build

a corpus for retirement can consider investing in the 4alanced or even the

!ggressive LIP. Li%ewise, a ris%>averse individual who is not comfortable

with a high e=uity allocation can opt for the 2onservative LIP.

9 .le ibility! Individuals may well as% how LIPs are any different from

mutual funds. !fter all, mutual funds also offer hybridMbalanced schemes

that allow an individual to select a plan according to his ris% profile. he

difference lies in the fle+ibility that LIPs afford the individual Individuals

can switch between the LIP variants outlined above to capitali5e on

investment opportunities across the e=uity and debt mar%ets. #ome

insurance companies allow a certain number of Efree switches. his is an

important feature that allows the informed individualMinvestor to benefit

from the vagaries of stoc%Mdebt mar%ets. 7or instance, when stoc%

41


42/89

mar%ets were on the brin% of ?,/// points (#ense+), the informed investor

could have shifted his assets from an !ggressive LIP to a low>ris%

2onservative LIP. #witching also helps individuals on another front. hey

can shift from an !ggressive to a 4alanced or a 2onservative LIP as they

approach retirement. his is a reflection of the change in their ris%appetite as they grow older.

79 $orks like an "IP! 3upee cost>averaging is another important

benefit associated with LIPs. Individuals have probably already heard of

the #ystematic Investment Plan (#IP) which is increasingly being

advocated by the mutual fund industry, 0ith an #IP, individuals invest

their monies regularly over time intervals of a 6onthM=uarter and dont

have to worry about Etiming the stoc% mar%ets. hese are not benefits

peculiar to mutual funds. &ot many reali5e that LIPs also tend to do thesame, albeit on a =uarterlyMhalf>yearly basis. !s a matter of fact, even the

annual premium in a LIP wor%s on the rupee cost>averaging principle. !n

added benefit with LIPs is that individuals can also invest a one>time

amount in the LIP either to benefit from opportunities in the stoc%

mar%ets or if they have an investible surplus in a particular year that they

wish to put aside for the future.

%ive Reasons for Investin+ #yste"atically

@ver the last 1 months investors in e=uity mar%ets have seen it all,

from all time high level of // levels to dismal low level of C //. ! lot of

investors who entered at , // e+pecting the mar%et to go even higher are

very upset. 6ost investors cannot really stomach the %ind of volatility that isinherent in e=uity mar%ets. !t the end of the day, investors who can ta%e

some ris% are actually shunning e=uities only because they entered e=uity

mar%ets at the Ewrong time #ystematic investment plans (#IPs) ta%e care of

this problem. 4ut mar%et timing is not the only reason for you to plump for

#IPs, there are other advantages.

4$


43/89

89 Li,ht on the wallet! :iven that average per capital income of an

Indian is appro+imately only 3s. *,/// (i.e. monthly income of 3s ,/"B),

a 3s *,/// one>time entry in a mutual hind is still as%ing for a lot ( .C

times the monthly income). !nd mutual funds were never meant to be

elitist far from it, the retail investor is as much a part of the mutual fundtarget audience as the ne+t high networth investor (F&I). #o if you cannot

shell out 3s *,///, thats not a huge stumbling bloc%, ta%e the #IP route

and trigger your mutual fund Investment with as low as 3s. *// (in most

cases).

/9 Makes market timin, irrele*ant! If mar%et lows give you the $itters

and ma%e you wish you had never invested in e=uity mar%ets, then #IPs

can help you blunt that depression. 6ost retail investors are not e+perts

on stoc%s and are even more out>of>sorts with stoc% mar%et oscillations.4ut that does not necessarily ma%e stoc%s a loss>ma%ing investment

proposition. #tudies have repeatedly highlighted the ability of stoc%s to

outperform other asset classes (debt, gold, property) over the long>term

(at least * years) as also to effectively counter inflation. #o if stoc%s are

such a great thing, why are so many investors complainingH Its because

they either got the stoc% wrong or the timing wrong. 4oth these problems

can be solved through an #IP in a mutual fund with a study trac% record.

9 0elps you build for the future! 6ost of us have needs that involve

significant amounts of money, li%e childs education, daughters marriage,

buying a house or a car. If you had to save for these milestones overnight

or even a couple of years in advance, you are unli%ely to meet your

ob$ective (wedding, education, house, etc). 4ut if you start saving a small

amount every monthM=uarter through #IPs that is treated as sacred and

that is set aside for some purpose, you have a far better chance of ma%ing

that down payment on your house or getting your daughter married

without drawing on your P7 (provident fund).

79 Compounds returns! he early bird gets the worm, is not $ust a part

of the $ungle fol%lore even the early investor gets a lions share of the

investment booty via>a>via the investor who comes in later. his is mainly

due to a thumb rule of finance called compounding. !ccording to a study

by Principal 6utual 7und if Investor arly and Investor Late begin

investing 3s 1,/// monthly in a balanced fund (*/'*/ O e=uity' debt) at

43


44/89

* years and B/ years of age respectively, Investor early will build a

corpus of 3s " m (3s "/ la%hs) at / years, which is twice the corpus of 3s

C m that Investor Late will accumulate. ! gap of * only years results in a

doubling of the investment corpusQ hat is why #IPs should become an

investment habit. #IPs run over a period of time (decided by you) and helpyou avail of compounding.

;9 Lowers the a*era,e cost! #IPs wor% better as opposed to one>time

investing. his is because of rupee>cost averaging. nder rupee>cost

averaging an investor typically buys more of a mutual fund unit when

prices are low. @n the other hand, he will buy fewer mutual fund units

when prices are high. his is a good discipline since it forces the investor

to commit cash at mar%et lows, when other investors around him are wary

and e+iting the mar%et. Inventors may even be pleased when prices fallbecause the fi+ed rupee investment mould now fetches more units.

Workin+ )echanis"

0or%ing 6echanism of LIPs includes the following steps'

44


45/89

"ales! !gents and other channel sales people collect premium from

customers.

Allocation! @nce sales people collect premium from customers, all that

money is not invested at once. Part of it is deducted towards administration

e+penses, insurance e+penses (6ortality 2harges as they are usually called),

and management e+penses.

!fter deducting money for the !I6 (admin, insurance, management

e+penses), the rest of the money is invested into the fund choice chosen by

the customer.

Administration E penses : is the e+pense for ma%ing the policy document M

bond ma%ing #tamp duty (insurance is a legal document sub$ect to Indian

stamp act), agent commission and other fi+ed over heads spread. !dmin

charges are deducted I66 9I! LJ after premium is paid. &ot at the end of

the year.

Insurance E penses or mortality char,es : hese are nothing but the

erm Insurance 2harges chosen by the customer (for e+ample, let us say,

3s.1/ la%h), for a given premium (for e+ample, let us say, 3s.?/, ///M>).

6ortality charges (and any rider benefit premium) are deducted ! F

4 :I&&I&: of the policy year and not at the end.

.und Mana,ement char,es! 0hen company invests money into e=uity

mar%ets, they incur bro%erage etc e+penses. 0hen they invest into debt

based Mgilt scurrilities and other interest yielding instruments, they have to

spend of bond trading charges.

!ll these e+penses are passed on to the policy holders by the way of

7und 6anagement 2harges. his is done ! F &9 of policy year. !fter

money is deducted for !I6, the rest is invested into different funds, (6etLife

has , and 4ata (has C or * customers choice and agents discretion.

his fund is uniti5ed and a face value of 3s.1/M> is given to each unit

during the &ew 7und @ffer. Let us for instance say, company invests 3s.1/la%hs into e=uity M debt based fund. It has allocated 1 lac% units to all policy

holders, depending on the premium each customer paid.

&ow, &et !sset alue (&! ) is calculated by the following formula'

Total fund value < no of units

45


46/89

0here, the denominator (units) does not change. @nly the numerator

changes (total fund value) depending on the mar%et variations.

If the fund, after one year of investment management, has attained a value

of, say, 3s.1B lac%s, then, the &et !sset alue (&! ) of each unit would be

Rs98 lacks < 8 lack units = Rs98 < per unit9

his &! is published every day in financial news papers. 6echanisms are

same for a debt based fund or e=uity based fund. In case company feels

necessary, they ta%e investment advice from =uity 3esearch !nalysts (in

case of e=uity based funds) and 2redit 3ating 2ompanies (such as 23I#IL,

I23!, 2!3 etc) for due diligence and for minimi5ing the ris%.

ach Life Insurance 2ompany has software installed into their system

(many companies use 2isco #ystems #0). !t the end of the trading session,

that is after C.B/ P6 every evening, that software calculates the total value of

each investment fund and divides the same by number of units (less

withdrawals M death benefits given if any) and by C !.6 early morning, &!

computation would be over.

hat &! is published in newspapers and published in the respective

companys website. In most Life Insurance companies, customer has the

option to choose the fund, switch the fund when heMshe wants, re>direct the

new premiums, withdraw etc.

Net asset value:

he Net 'sset 5alue or N'5 is a term used to describe the value of an

entitys assets less the value of its liabilities. he term is commonly used in

relation to collective investment schemes. It may also be used as a synonym

for the boo% value of a firm.

Contents:

#ariations! 0hile the above definition is simple, there are many different

types of entities, and different ways of measuring the value of assets andliabilities. In the conte+t of collective investments (mutual funds, net asset

value is the total value of the funds portfolio less liabilities. he &! is

usually calculated on a daily basis. In terms of corporate valuations, net asset

value is the value of assets less liabilities.

46


47/89

!nd, to give an indication of what we could mean by the value of

assets considers some of these variations each one achieves something

slightly different, and is applied in different ways'

4oo% value 2arrying value Fistorical cost !morti5ed cost 6ar%et value

Usa,e! Investors might want to %now if a company is cheap or e+pensive to

invest in. @ne possibility is to compare its current mar%et capitali5ation with

its net asset value since, all things being e=ual one might e+pect them to be

the same. here are reasons why this might not be true.

&! covers the companys

current asset and liability position. Investors might e+pect the

company to have large growth prospects, in which case they would

be prepared to pay more for the company than the &! suggests. he &! is usually below the

mar%et price because the current values of the funds assets are

higher than the historical financial statements used in the &!

calculation. 4ut in the case of, for e+ample, Liberty 6edia

2orporation, analysts and management have estimated that it isactually trading for B/>*/A below its net asset value (or ;core asset

valueend fund will always e=ual its price. 4ut the price of a

closed>end fund may not e=ual its &! as closed>end funds are traded in the

secondary mar%et and the above reasons cause price to vary from &!

(premium or discount applied)

&et assets are sometimes the same as net worth, or shareholders

e=uity > assets minus liabilities. In ;3eturn on &et !ssets< (3@&!) its oftenfi+ed assets plus net wor%ing capital (current assets minus current liabilities)

which may be slightly less than total assets.

he &! is usually below the mar%et price because the current values

of the funds assets are higher than the historical financial statements used in

the &! calculation.

47


48/89

Calculatin+ Net 'sset 5alue >N'5

he investor may have heard the term &et !sset alue (&! ) used when

referring to LIPs. &ow it is important to learn how to calculate a LIPs &!

and understand what it really means.

Calculatin+ N'5s: 2alculating LIP net asset values is easy. #imply ta%e

the current mar%et value of the funds net assets (securities held by the fund

minus any liabilities) and divide by the number of shares outstanding. #o ifs

fund had net assets of D*/ million and there are one million shares of the

fund, then the price per share (or &! ) is D*/.//.

he most important thing to %eep in mind is that &! change daily and is not

a good indicator on how your portfolio is doing because things li%e

distributions mess with the &! (it also ma%es mutual funds hard to trac%.

ULI! *uidelines: IRD' "akes a start:

his article was written by Personalfn for 4usiness India, and was carried in

its #eptember C, // issue with the title, I39! ma%es a start. he original

draft, in its entirety, has been retained here.

!fter being witness to rampant misrepresentation of LIP* (unit lin%ed

insurance plans) the regulatorO Insurance 3egulatory and 9evelopment

!uthority (I39!) finally introduced some much>needed guidelines to lend an

element of insurance to an otherwise investment product. Fowever, we

maintain that there is still more to be done to ma%e LIP* more transparent

and ma%e it even more insurance oriented.

7irst some bac%ground O LIPs made an entry at a rather opportune

time for insurance companies. he mood in e=uity mar%ets was very

pessimistic, however, at those levels) 4# #ense+ less than B,/// points)

mar%ets could go in only one direction > up. !nd ta%e off they did in an

unprecedented manner. 7rom B,/// points, the 4# #ense+ surged furiously

to over 1 ,/// points leaving investors breathless.

0hy are we tal%ing of stoc% mar%ets in an insurance article where wepropose to discuss the latest LIP guidelinesH 4ecause unfortunately, not $ust

fund managers, but also insurance companies were rather e+cited by the

sharp rise in stoc% mar%ets. 0hen you come to thin% of it, insurance

companies should be more concerned about insuring lives than the vagaries

4#


49/89

of stoc% mar%ets. Fowever, in LIPs, they had a product that was more

geared towards Eoffering a return than insuring lives.

!nd this anomaly was put to good use by insurance agents. LIP* were

spo%en of in the same breath as mutual funds. In fact, many agents even

went as far as pro$ecting LIPs superior to mutual funds because they attract

ta+ benefits (under #ection "/2) on all options, unli%e mutual funds where

you get a ta+ benefit only on the L## (e=uity>lin%ed savings scheme)

category. 6oreover, LIP* were shown to be a short>cut

investmentMinsurance avenue Ofor instance, investors were encouraged to

pay premiums only for the first B years and not necessarily over the entire

tenure of the policy. he reason is because the e+penses in the initial B

years premium are so high that insurance companies recover the entire cost

of the policy (including life cover charges) and can Edo without the remainingpremiums.

0hile these mar%eting gimmic%s were glaring, the I39!, to their credit,

did intervene at regular intervals to infuse some much>needed sanity. 4ut as

we, at Personalfn, have seen on the mutual fund side, at times the regulator

must come down heavily as financial service providers can ta%e =uite awhile

to get the hint.

@n Ruly I, // , the I39! introduced revised LIP guidelines to correct

Esome< of these anomalies, we say some because much is yet to be achieved,

but more on that later.

7or one I39! has given the new LIP a Eface, in insurance a face can

be ta%en as the sum assured and the tenure. he old LIP lac%ed both and

individuals did not have in%ling about either even after ta%ing the LIP. he

latest guidelines dictate that'

Ter"


50/89

"um Assured! @n the same lines, now there is a sum assured that clients

can associate with. he minimum sum assured is calculated as'

>Ter"


51/89


52/89

5$


53/89

C('!T$R I5

To #tudy in detail a1outA t o ULI! products of -a.a.'llian2 Life Insurance Co Ltd9

The -a.a. 'llian2 Unit *ain !lus B*old

0ith 4a$a$ !llian5 nit :ain Plus E:old we have formulated a uni=ue

combination of protection and prospects of attractive returns with investmentin various mi+es of securities to ma%e a perfect plan to last you a lifetime of

prosperity and happiness.

#o"e of the key features of this plan are:

:uaranteed life cover, with a fle+ibility to choose insurance cover

53


54/89

according to your changing needs. Presenting a uni=ue investment E!sset !llocation 7und wherein you have

not to worry to switch funds in case mar%et condition changes rather our

e+perienced 7und 6anagers will monitor the mi+ of assets in the fund and

will manage the mi+ in such situations to ma+imi5e your returns. If you want to manage the mi+ of assets for your policy on your own, you

have the choice of * other investment funds with complete fle+ibility to

switch money from one fund to other to manage your investments better. Jour policy continues to participate in investment performance of the

fund(s) even if you are not able to pay B full years premium. 7le+ibility of partial withdrawals at any time after three years from

commencement of the policy provided three full years premiums are

paid. :et maturity value e=ual to the 7und alue at maturity date or in periodic

installments spread over a ma+imum period of five years. ! host of optional additional rider benefits which includes assurance to

your family with family income benefit and waiver of premium benefit.

(o does the plan ork?

Premiums paid by you, net of premium allocation charge, are invested in

fund(s) of your choice and units are allocated depending on the unit price of

the fund(s). he value of your policy is the total value of units that you hold inthe fund(s). he insurance cover charges, policy administration charges and

the additional rider benefit charges (if any) are deducted through monthly

cancellation of units. 7und 6anagement 2harge is priced in the unit value.

-a.a. 'llian2 Unit *ain !lus B*old offers you the follo in+cover choices:

6inimum #um !ssured S * times !nnuali5ed premium, @3 half of the Policy

erm times !nnuali5ed Premium, whichever is higher.6a+imum #um !ssured S ;y< times the annual premium, where y will be as

per the following table'

!ge :roup /TB/ B1TB* B TC/ C1TC* C >** * T /;y< for base cover orbasecover with L !94 8Mor

1// " * ? / */ B / /

54


55/89

L !P P94 rider

;y< for base cover orbasecover with L 2I andMor

L F24 rider

/.* times Policy erm

;J< for base cover withL 7I4, provided L 2I

8Mor L F24 rider hasnot been opted for.

If age of 7I4 life assuredN policy term is lessthan or e=ual to /

*/ or base covermultiplier, which everis lower.

If age of 7I4 life assuredN policy term is greaterthan /

/.* times policy term

-enefits availa1le under the plan:

@n death occurring before the age of ? years' he death benefit will be

the fund value as on date of receipt of intimation of death at the office. @n death after the age of ? years and before the age of / years' he

benefit payable would be the sum assured less value of partial

withdrawals made in the last C months prior to the date of death or the

fund value as on date of receipt of intimation of death at the 2ompanys

office, whichever is higher. he death benefit payable would be

calculated separately for regular premiums and top up premiums. @n death of the life assured on or after attaining the age of / years' he

benefit payable would be the sum assured less value of partial

withdrawals made, within C months before attaining age / years andall partial withdrawals made after attaining age / years or the fund

value as on the date of receipt of intimation of death at the office,

whichever is higher. he death benefit would be calculated separately for

regular premiums and top up premiums @n 6aturity, the 7und alue in respect of regular premium and top up

premium will be paid.

he surrender value of the policy will be e=ual to the fund value less

surrender charge, if any. !nytime after three years from the date ofcommencement of the policy, provided due premiums for first three

policy years have been paid, the policyholder will have the option to avail

of surrender benefit by complete surrender of units. 7urther if first three

years regular premiums have not been paid and the policy is lapsed for

insurance cover, the #urrender alue, if any, would be payable at the

55


56/89

e+piry of the revival period or at the end of third policy year, whichever is

later.

Unit Price! he unit price of each fund is arrived at by dividing the &et !sset

alue (&! ) of the fund by the number of units e+isting in the fund at the

valuation date (before any new unit is allocated or cancelled)

#aluation 1ate! he 2ompany aims to value the 7unds on each day the

financial mar%ets are open. Fowever, the 2ompany reserves the right to

value less fre=uently in e+treme circumstances, where the value of the

assets may be too uncertain. In such circumstances, the 2ompany may defer

valuation of assets until a certainty on the value of assets is resumed. he

deferment of valuation of assets will be sub$ect to prior consultation with

I39!.

2urrently, the cut>off time is B.// p.m. for applicability of nit Price of a

particular day for switches, redemptions and publication of nit Price.

Co"putation of N'5:

$hen Appropriation price is applied ! he &! of a fund shall be

computed as 6ar%et value of investment held by the fund plus the e+penses

incurred in the purchase of the assets plus the value of any current assets

plus any accrued income net of fund management charges less the value of

any current liabilities less provision, if any. his gives the net asset value of

the fund.

9ividing by the number of units e+isting at the valuation date (before any

new units are allocated), gives the unit price of the fund under consideration.

his is applicable when the company is re=uired to purchase assets to

allocate units at the valuation date.

$hen E propriation price is applied : he &! of a fund shall be

computed as 6ar%et value of investment held by the fund less the e+penses

incurred in the sale of the assets plus the value of any current assets plus

any accrued income net of fund management charges less the value of any

current liabilities less provision, if any. his gives the net asset value of the

fund. 9ividing by the number of units e+isting at the valuation date (before

any units are redeemed), gives the unit price of the fund under consideration.

his is applicable when the company is re=uired to sell assets to redeem

units at the valuation date.

56


57/89

Invest"ent Options:

4a$a$ !llian5 offers you a choice of si+ ( ) investment funds as given below'

Asset Allocation .und2 3isk Profile 2 0i,h! he investment ob$ective of

this fund will be to reali5e a level of total income, including current incomeand capital appreciation, which is consistent with reasonable investment ris%.

he investment strategy will involve a fle+ible policy for allocating assets

among e=uities, bonds and cash. he fund strategy will be to ad$ust the mi+

between these asset classes to capitali5e on the changing financial mar%ets

and economic conditions. he fund will ad$ust its weights in e=uity, debt and

cash depending on the relative attractiveness of each asset class.

%ond .und - 3isk profile - Moderate! he investment ob$ective of this

fund is to provide accumulation of income through investment in high =ualityfi+ed income securities.

E4uity +rowth .und - 3isk profile - #ery 0i,h! he investment ob$ective

of this fund is to provide capital appreciation through investment in selected

e=uity stoc%s that have the potential for capital appreciation.

E4uity Inde .und II - 3isk profile - 0i,h! he investment ob$ective of

this fund is to provide capital appreciation through investment in e=uities

forming part of &I7 J.

Accelerator Mid-Cap .und - 3isk profile - #ery 0i,h : he investmentob$ective of this fund is to achieve capital appreciation by investing in a

diversified bas%et of mid cap stoc%s and large cap stoc%s. 6inimum */A of

=uity Investments would be in 6id 2ap stoc%s.

hese funds are professionally managed by asset managers of 4a$a$ !llian5,

bac%ed with the rich e+perience of !llian5 !:, one of the largest asset

managers in the world today, managing assets worth over a rillion uros

(over 3s. **,//,/// 2rores)

I"portant Details of the B-a.a. 'llian2 Unit *ain !lus B*old!lan:

Parameter 9etails6inimum !ge atntry

/ years, ris% commences at age ?.6inimum age at entry for all riders is 1" years

57


58/89

6a+imum !ge atntry

/ years (*/ years in case of all !dditional3ider 4enefits e+cept L 0@P. * years for L0@P)

6inimum 6aturity!ge 1" years

6a+imum6aturity !ge ?/ years!dditional 3ider4enefit2easing !ge

* years for all riders e+cept L 0@P.?/ years for L 0@P

6inimum erm 1/ years. In case of minor life minimum policyterm is 1" less age at entry of the minor life.

6a+imum erm 2ustomer selectable term sub$ect to ma+maturity age

6inimum

Premium

3s 1 ,/// per yearly installment, 3s ,/// perhalf>yearly installment, 3s. B,/// per =uarterlyinstallment 3s 1,/// per monthly mode

(6onthly mode is available through 2# and#alary #aving #cheme only). 6inimum op pPremium is 3s. *,///.

UJou can change the premium payment mode on any policy anniversary.

"ettlement ption!

Plan your maturity proceeds by e+ercising the #ettlement @ption with us.

his facilitates you to receive your maturity proceeds in e=ual installments

(payable yearly, half yearly, =uarterly or monthly, at your option) spread over

a ma+imum period of * years. he amount paid out in each installment will

be the outstanding fund value at that date divided by the number of

outstanding installments.

&o ris% cover will be available during the settlement period. he company

however will deduct all the charges (e+cept the mortality charge and rider

premium charge, if any). &o partial withdrawals or switches are allowed

during the settlement period.

.ree Look Period!

0ithin 1* days from the date of receipt of the policy, you have the option toreview the terms and conditions and return the policy, if you disagree to any

of the terms 8 conditions, stating the reasons for your ob$ections. Jou will be

entitled to a refund of the premium paid, sub$ect only to a deduction of a

proportionate ris% premium for the period on cover and the e+penses

incurred on medical e+amination and stamp duty charges. he refund paid to

5#


59/89


60/89

Partial 0ithdrawals, #urrender alue, 9eath 4enefit and 6aturity4enefit are eligible for ta+ benefits as per #ection 1/(1/9) of theIncome a+ !ct. he charges paid for L 2ritical Illness and LFospital 2ash 4enefit are eligible for ta+ benefits as per #ection "/(9)

of the Income a+ !ct. In case of change in any ta+ laws relevant tothe policyholder or the fund performance, the same will be applied asper regulations prevailing at that point of time.

+eneral E clusion! In case the life assured commits suicide withinone year of the date of commencementMrevival of the policy theamount payable would be the value of the units in your account.

Char,es under the Plan!

Policy Administration Char,e:

3s. // per annum inflating at *Aevery 1st of !pril will be deducted at each monthly anniversary bycancellation of units. 7und )ana+e"ent Char,e : 1.?*A p. a. of the &!for =uity :rowth 7und and !ccelerator 6id>2ap 7und, 1. *A p.a. of the &!

for =uity Inde+ 7und II and !sset !llocation 7und, /.-*A p.a. of the &! for

4ond 7und and Li=uid 7und. he 7und 6anagement 2harge is charged on a

daily basis and ad$usted in the unit price. !ll op up premiums has a

premium allocation charge of A.

.und "witchin, Char,es! hree free switches would be allowed every year.

#ubse=uent switches would be charged V *A of switch amount or 3s. 1//,

whichever is lower, on each such occasion.

Miscellaneous Char,e! he miscellaneous charge would be 3s.1//M> per

transaction in respect of reinstatement, alteration of premium mode, increase

M decrease in regular premium or issuance of copy of policy document.

"urrender Char,e ! If any due regular premium is not paid within the grace

period in the first three policy years, the surrender charge would be /A of

the first years !nnuali5ed Premium. If first three years regular premiums

have been paid in full, the surrender charge would be as follows' W1 T (1M1.1/)

X&Y U 7irst Jears !nnuali5ed Premium.

0here & is 1/ years less the elapsed policy duration in years and fraction

thereof .

&o #urrender 2harge will be applied on units in respect of op up Premium .

Mortality Char,es! he mortality charge would vary according to the

6+


61/89


62/89

and 4a$a$ !llian5 nit :ain Plus E:old is only the name of the policy and

does not in any way indicate the =uality of the policy, its future prospects

or returns.

Please %now the associated ris%s and the applicable charges from your

policy document or by consulting the 2ompany, your Insurance agent or

your Insurance intermediary.

=uity Inde+ 7und II, !ccelerator 6id>2ap 7und, =uity :rowth 7und,

!sset !llocation 7und, 4ond 7und and Li=uid 7und are the names of the

funds offered currently with 4a$a$ !llian5 nit :ain Plus E:old, and in any

manner do not indicate the =uality of the respective funds, their future

prospects or returns.

he investments in the nits are sub$ect to mar%et and other ris%s and

there can be no assurance that the ob$ectivities of any of the funds will

be achieved.

he =uity :rowth 7und, =uity Inde+ 7und II, !ccelerator 6id>2ap 7und,

!sset !llocation 7und, 4ond 7und and Li=uid fund do not offer a

guaranteed or assured return.

!ll benefits payable under the Policy are sub$ect to the ta+ laws and other

financial enactments, as they e+ist from time to time.

he past performance of the funds of the company is not necessarily an

indication of the future performance of any of these funds.

6$


63/89


64/89

4a$a$ !llian5 &ew nit :ain plus #P comes with a host of features to allow you

to have the best of all worlds T Protection and Investment with fle+ibility li%e

never before.

6ey features of -a.a. 'llian2 Ne Unit *ain !lus #! plan are:

It is a single premium unit lin%ed plan with ma+imum maturity age ?/. -"A of the single premium is allocated towards nits. 6inimum :uaranteed death benefit' #um !ssured. 2hoice of C investment funds with fle+ible investment management' you

can switch between funds at any time. !ttractive investment alternative to fi+ed>interest securities. Provision for surrender or partial withdrawals any time after three years

from commencement. nmatched fle+ibility Tto meet your changing needs.

0ow does the plan work(

In this plan -"A of the single premium is invested in a fund(s) of your choice

8 units are allocated depending on the price of units for the fund(s). he fund

value of your policy is the total value of units that you hold in the fund(s). he

mortality charges and policy administration charges are deducted through

cancellation of units. he 7und 6anagement 2harge is ad$usted in the nit

Price.

"um Assured : Jou can choose a #um !ssured (Level of Protection) that you

want in the &ew nit :ain Plus #P Plan.

6inimum #um !ssured S 1 *A of the #ingle premium6a+imum #um !ssured S J times the #ingle Premium where J will be as per

the following table'

!ge :roup /T1? 1"TB* B TC* C T*/ *1T** * T *

J 1/ 1/ ? * B U

U 6ultiplier may be increased to * in special cases on a case>to>casebasis.

-enefits availa1le under this plan:

@n death before the age of ? years' 7und alue as on date of receipt of

intimation of death at the office.

64


65/89

@n death on or after the age of ? years and before the age of / years'

sum assured less the value of partial withdrawals made in the last C

months prior to the date of death or the fund value as on date of receipt

of intimation of death at the office, whichever is higher. @n death of the life assured on or after the age of / years' sum assured

less the value of partial withdrawals made within two years before

attaining age / years and all partial withdrawals made after attaining

age / years or the fund value as on the date of intimation of death at

the office, whichever is higher. @n maturity, the fund value is payable to the policyholder.

.und #alue! he fund value is e=ual to the number of units under this policy

multiplied by the respective unit price on the relevant valuation date.

Unit Price! he unit price of each fund is arrived at by dividing the &et !sset

alue (&! ) of the fund by the number of units e+isting in the fund at the

valuation date (before any new unit is allocated or cancelled)

#aluation 1ate! he 2ompany aims to value the funds on each day the

financial mar%ets are open. Fowever, the 2ompany reserves the right to

value less fre=uently in e+treme circumstances, where the value of the

assets may be too uncertain. In such circumstances, the 2ompany may defer

valuation of assets until a certainty on the value of assets is resumed. he

deferment of valuation of assets will be sub$ect to prior consultation with

I39!.

2urrently, the cut>off time is B p.m. for applicability of unit price of a

particular day for switches, redemptions and publication of unit price.

Co"putation of N'5:

$hen Appropriation Price is applied! he &! of a nit Lin%ed Life

Insurance Product shall be computed as mar%et value of investment held by

the fund plus the e+penses incurred in the purchase of the assets plus the

value of any current assets plus any accrued income net of fund

management charges less the value of any current liabilities less provision, if

any. his gives the net asset value of the fund. 9ividing by the number of

units e+isting at the valuation date (before any new units are allocated),

gives the unit price of the fund under consideration. his is applicable when

the company is re=uired to purchase assets to allocate units at the valuation

65


66/89

date.

$hen E propriation Price is applied! he &! of a nit Lin%ed Life

Insurance Product shall be computed as mar%et value of investment held by

the fund less the e+penses incurred in the sale of the assets plus the value of

any current assets plus any accrued income net of fund management

charges less the value of any current liabilities less provision, if any. his

gives the net asset value of the fund. 9ividing by the number of units e+isting

at the valuation date (before any units are redeemed), gives the unit price of

the fund under consideration. his is applicable when the company is

re=uired to sell assets to redeem units at the valuation date.

In*estment ptions!

4a$a$ !llian5 &ew nit :ain Plus #P offers you a choice of C funds. Jou can

choose to invest fully in any one fund or allocate your single premium into

the various funds in a proportion that suits your investment needs. he four

funds offered are as under'

E4uity Inde .und II- 3isk Profile 20i,h! he investment ob$ective of this

fund is to provide capital appreciation through investment in e=uities forming

part of &I7 J.

E4uity +rowth .und- 3isk Profile 2 #ery 0i,h ! he investment ob$ective

of this fund is to provide capital appreciation through investment in selected

e=uity stoc%s that have the potential for capital appreciation.

%ond .und- 3isk Profile 2 Moderate! he investment ob$ective of this fund

is to provide accumulation of income through investment in high =uality fi+ed

income securities.

Li4uid .und- 3isk Profile 2 Low! he investment ob$ective of this fund is to

have a fund that protects the invested capital through investments in li=uid

money mar%et and short>term instruments.

hese funds are professionally managed by asset managers of 4a$a$

!llian5, bac%ed with the rich e+perience of !llian5 # , one of the largest asset

managers in the world today, managing assets worth over a rillion uros

(over 3s. **,//,/// 2rores).

Apportionment of "in,le Premium! Jou can apportion your #ingle

Premium between various funds available. he apportionment to any chosen

fund must be at least *A of the #ingle Premium.

66


67/89

.le ibility to mana,e your in*estments! Initially, you can allocate the

#ingle Premium into the C funds that are available in a proportion of your

choice. 9epending on the performance of funds, you can switch between

funds with three free switches every policy year, sub$ect to a minimum

switching amount of 3s. *,/// or the value of the total units held in the fund

to be ;switched


68/89

0ithin 1* days of the receipt of this Policy, the Policyholder may, if

dissatisfied with it for any reason, give the 2ompany a written notice of

cancellation along with reasons for the same, and return the Policy 9ocument

to the 2ompany, sub$ect to which the 2ompany shall send the Policyholder a

refund comprising the #ingle Premium paid less the proportionate ris%premium for the period the Life !ssured that was on cover, and the e+penses

incurred on medical e+amination and stamp duty charges. he refund paid to

the Policyholder will also be reduced by the amount of any reduction in the

7und alue due to fall in the nit Price between the date of allocation and

redemption of units (without reference to any premium allocation rate or

2harges).

5ermination of the Policy!

he Policy shall automatically terminate on the occurrence of any of the

following events'

he units in the policy are fully surrendered and full surrender value is

paid to the Policyholder. he 7und alue becomes e=ual to one tenth of the #ingle Premium paid he death of the Life !ssured. @n maturity, unless the policyholder has opted for #ettlement @ption. he e+piry of the period for settlement option.

5a %enefits!

Premiums paid will be eligible for ta+ deduction as per #ection "/2 of the

Income a+ !ct and partial withdrawals, full surrender and maturity benefits

are eligible for ta+ benefits as per #ection 1/(1/)9 of the Income a+ !ct.

6omination! &omination can be made for receiving policy proceeds incase of death. Jou can nominate your beneficiaries under this policy. Incase of death, the policy proceeds will be given to the nominee. Joucan also change the nominee during the lifetime of the policy.

+eneral E clusion! In case the life assured commits suicide withinone year of the date of commencement of the ris% cover (Policy!nniversary following !ge ? in the case of a minor) the amountpayable would be the 7und alue.

Char,es under the Plan!

6#


69/89

:iven below are the details of the various charges that will be recovered from

the plan to meet e+penses.

Policy Administration Char,e! 3s // per annum deductible monthly

through cancellation of units, inflating at the rate of *A per annum.

.und Mana,ement Char,e! he fund management charge would be levied

on &! and the rate is as follows' =uity :rowth 7und 1.?*A p.a., =uity

Inde+ 7und II 1. *A p.a., Li=uid 7und /.-* A p.a., and 4ond 7und /.-*A p.a.

"witchin, Char,es! hree free switches would be allowed every Policy

year. #ubse=uent switches would be charged a fi+ed amount of 3s. 1// or *A

of the switch amount, whichever is lower, on each such occasion.

Mortality Char,es! he mortality charge would vary according to the

attained age of the life assured at the time of deduction of the charge andwould be recovered through cancellation of units on a monthly basis. #ample

standard mortality charge per annum per thousand of sum at ris% is given in

the table below. he sum at ris% is sum assured less fund value.

3e*ision of char,es!!fter ta%ing due approval from the Insurance 3egulatory and 9evelopment

!uthority, the company reserves the right to change the following charges' 7und 6anagement 2harge up to a ma+imum of .?*A p.a. for

=uity :rowth 7und, . *A p.a. for =uity Inde+ 7und II and 1.?*A p.a. for

!ge 6ortality 2harge/ 1.*?B/ 1.?CC/ ."

*/ .*B/ 1*.*

6


70/89

4ond 7und 8 Li=uid 7und. #witching charge up to a ma+imum of 3s. // per switch or *A

of the switching amount, whichever is lower.

Risks of Invest"ent in the Units of the !lan:

he ProposerMLife !ssured should be aware that the investment in thenits is sub$ect to the following, amongst other ris%s and should fullyunderstand the same before entering into any unit lin%ed insurancecontract with the 2ompany.

nit Lin%ed Life Insurance products are different from thetraditional insurance products and are sub$ect to the mar%et ris%factors.

he premium paid in unit lin%ed life insurance policies are sub$ectto investment ris%s associated with capital mar%ets and nit Priceof the units may go up or down based on the performance of thefund and factors influencing the capital mar%et and theinsuredMpolicyholder is responsible for hisMher decisions.

4a$a$ !llian5 Life Insurance is only the name of the insurancecompany and 4a$a$ !llian5 &ew nit :ain Plus #P is only the nameof the product and does not in any way indicate the =uality of thepolicy, its future prospects or returns.

Please %now the associated ris%s and the applicable charges fromyour policy document or by consulting the 2ompany, yourInsurance agent or your Insurance intermediary.

=uity Inde+ 7und II, =uity :rowth 7und, Li=uid 7und and 4ond7und are the names of the funds offered currently with 4a$a$ !llian5&ew nit :ain Plus #P, and do not in any way indicate the =uality ofthe respective funds, their future prospects or returns.

he investments in the nits are sub$ect to mar%et and other ris%sand there can be no assurance that the ob$ectives of any of thefunds will be achieved.

=uity Inde+ 7und II, =uity :rowth 7und, Li=uid 7und and 4ond7und do not offer a guaranteed or assured return.

!ll benefits payable under the Policy are sub$ect to the ta+ laws andother financial enactments, as they e+ist from time to time.

7+


71/89

he past performance of the funds of the company is notnecessarily indicative of the future performance of any of thesefunds.

To )ake a Co"parison 1et een )utual %unds vs9 ULI!s:

nit Lin%ed Insurance Policies ( LIPs) as an investment avenue are

closest to mutual funds in terms of their structure arid functioning. !s is the

case with mutual funds, investors in LIPs is allotted units by the insurance

company and a net asset value (&! ) is declared for the same on a daily

basis.

#imilarly LIP investors have the option of investing across various

schemes similar to the ones found in the mutual funds domain, i.e. diversified

e=uity funds, balanced funds and debt funds to name a few. :enerally

spea%ing, LIP# can be termed as mutual fund schemes with an insurance

component. Fowever it should not be construed that barring the insurance

element there is nothing differentiating mutual funds from LIPs.

(o ULI!s can "ake so"eone rich?

9espite the seemingly comparable structures there are various factors

wherein the two differ.

71


72/89

In this article we evaluate the two avenues on certain common

parameters and find out how they measure up.

ULI!s 5s )utual %unds:

Mode of in*estment / in*estment amounts!

6utual fund investors have the option of either ma%ing lump sum

investments or investing using the systematic investment plan (#IP) route

which entails commitments over longer time hori5ons. he minimum

investment amounts are laid out by the fund house.

LIP investors also have the choice of investing in a lump sum (single

premium) or using the conventional route, i.e. ma%ing premium payments on

an annual, half>yearly, =uarterly or monthly basis. In LIPs, determining thepremium paid is often the starting point for the investment activity. his is in

star% contrast to conventional insurance plans where the sum assured is the

starting point and premiums to be paid are determined thereafter.

ULI!s )utual %unds

Investment amounts9etermined by the investor and

can be modified as well.

6inimum investment

amounts are determined

by the fund house.

+penses

&o upper limits e+penses

determined by the Insurance

2ompany.

pper limits for e+penses

2hargeable to investors

have been set by the

regulator.

Portfolio 9isclosure &ot mandatoryZuarterly disclosures are

mandatory

6odifying asset

allocation

generally permitted for free or

at a nominal cost

ntryMe+it loads have to be

borne by the investor

a+ benefit #ec "/2 benefits are available

on all LIP investments

#ection "/2 benefits are

available only on

investments in ta+ saving

funds

7$

8/13/2019 Life Insurance Policy or Life A

Life Insurance Policy or Life Assurance

Documents

Transcript of Life Insurance Policy or Life Assurance