Learning Resources
Salient LI Pitches




Wealth Management Workshop   1
@ Pivot Training
Salient Life Insurance pitches

Pitch-1
MWPA, 1874
The Married Women’s Property Act, 1874 is a simple yet powerful way of ...
Caveat
A policy can be brought under MWPA only at inception i.e. at proposal stage, by
indicating “policy under Section 6 ...
purposes as may be desired by the client, rather than being squandered away by one or
two “black sheep”.
Pitch-4
Business ...
Insurance - A key component of financial planning

Insurance solutions can provide a sophisticated means of managing wealt...
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Lr 9 Salient Li Pitches

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Lr 9 Salient Li Pitches

  1. 1. Learning Resources Salient LI Pitches Wealth Management Workshop 1 @ Pivot Training
  2. 2. Salient Life Insurance pitches Pitch-1 MWPA, 1874 The Married Women’s Property Act, 1874 is a simple yet powerful way of creating safe wealth for the immediate family viz. wife and children; under MWPA, a trust is created under which the money is absolutely encumbrance-free, free from creditors, court attachments and also tax attachments. Importance of MWP Act In terms of Section 6 of the Act, a life insurance policy can be effected by any married man on his life and expressed on the face of it to the benefit of his wife and/or of his wife and children or any of them shall ensure and be deemed to be a trust for the benefit of the wife or of his wife or children or any of them according to the interest so expressed and shall not, so long any object of the trust remains, be to the controlled of the husband or his creditors or form part of his estate. Benefits A simple way of making the settlement for the benefits of the wife and/or the children without formality of the deed of settlement and without incurring any expense It gives the beneficiaries certain statutory privileges by virtue of which they secure special protection against the creditors of the assured The policy monies will not be aggregated with other estate, since it is an estate in itself Non-Aggregations of MWP Policies A policy under MWP operates as a valid declaration of trust giving the beneficiary a vested interest in the said policy. Such a policy will not be aggregated with the other property left by the policyholder provided he never had any interest of any kind in the said policy. There is no limit as to amount of the policy or to the number of policies taken under section 6 of the MWP Act. Who is a customer for MWPA provisions? People running business on borrowed capital People who have not made sufficient provision for wife and children financially People who consider that it is imperative to make certain amount available for wife and children free from creditors and court attachments. Section 6 provisions Buying insurance under Section 6 amounts to creating a trust The moment the policy is issued, it shall insure as a trust and no separate trust is required to be created Policyholder (married man) loses control over the policy and the policy no longer forms part of his estate The beneficiaries can only be wife and children Policyholder can appoint a beneficiary as a trustee (wife or major child) or even appoint a corporate trustee for a fee In case no trustee is appointed, the official trustee of the state shall be the trustee. Wealth Management Workshop 2 @ Pivot Training
  3. 3. Caveat A policy can be brought under MWPA only at inception i.e. at proposal stage, by indicating “policy under Section 6 (married man) or Section 5 (married woman) of MWPA, 1874 in the columns “Nomination” and “Purpose of Insurance” Pitch-2 Assignment Assignment is a way of creating a benefit for any specified member of the immediate or extended family or parent. In case of unfortunate death of the client, wealth would automatically get transferred to the legal heirs; Sometimes, an HNI client may be interested in keeping aside a portion of their wealth for their parents, siblings, family of a relative or a charitable organization, with or without the knowledge of their immediate family, viz. wife and children Under Section 39 of the Insurance Act, 1938, a policy on the life of self can be assigned, either conditionally (usually in case of taking a loan) or absolutely (out of love and affection) to another individual or non-individual by endorsing the policy in the favour of the assignee, by routing it through the insurer. A nomination only serves such purpose as to discharge the insurer and may or may not be the legal heir of the insured. Also, a nomination can be cancelled by a will or a legal order. An assignment is on the other hand a transfer of ownership of asset to another entity; which cannot be over-ridden by a will or a court order, thus ensuring that what the client decided as benefit for an “x” family member would be received by that individual alone. Caveat Assignment can only be made after the policy has been issued and not at proposal stage. Pitch-3 HUF Insurance A Hindu Undivided Family (HUF) is the creation of the Hindu Law; an HUF consists of all persons lineally descended from a common ancestor including their wives and unmarried daughters. Sometimes HNI clients opine that in their absence a huge amount of wealth going to their wife and/or son may not be the best arrangement and may spoil them, so on and so forth. Another provision of income tax that can come handy is the Hindu Undivided Family clause. An HUF created by the client or of which the HUF is a co-parecener (male) /member (female) can propose life insurance on the life of any of its co-parecener/members. The effect is that the maturity/death proceeds do not go to any one individual but become a part of the HUF corpus thus benefiting the entire family and used for such Wealth Management Workshop 3 @ Pivot Training
  4. 4. purposes as may be desired by the client, rather than being squandered away by one or two “black sheep”. Pitch-4 Business Insurance cases Key Person Insurance (KPI) Under KPI, a business can protect itself against economic setback in the event of death of its key personnel; the business by having such risk management practices in place can attract better talent, have the trust of creditors, bankers, vendors, clients etc. and can have a business continuation/succession plan in place. Under KPI, the company/firm proposes insurance, pays premium while the life insured is the KP. Premiums paid under KPI are allowed as expenditure under section 37(1) thereby helping the firm reduce its profits for the year and thereby lowering taxes. Claim, if any, is payable to the firm as compensation/corpus to undertake necessary expenditure in hiring and training a replacement of the KP, thereby allowing business continuity and free from disruptions. Partnership Insurance (PSI) A firm has insurable interest in the life of its partners and can buy insurance on the lives of partners. Like KPI, a partnership firm can protect itself against interruptions to business, interference from family members and costly litigation in the event of unfortunate death of a business partner. Again, premium paid by a firm for keeping a policy on the life of a partner in force, is deductible as business expenditure under section 37(1) and claim, if any is payable to the firm. HNI clients who are in business and in arrangements such as partnerships can secure their business, built with sweat and intellect; ensure that the business continues to exist for future generations and carries their dream forward. Note: Only Term Insurance is permitted under KPI and PSI. Employer-Employee Insurance (EEI) HNI clients, who are in business or in high ranking positions with organizations can consider arrangements to increase loyalty of their employees and in turn improve motivation and reduce turnover in this era of high aspirations of employees. Employer-Employee insurance arrangement permits a business to pay premiums for life insurance on the life of their employees (not necessarily KP) and allow the benefits to accrue to the employees. Unlike KPI or PSI above, EEI claim proceeds are payable to employee/their beneficiaries only and no benefit accrue to the employer. Due to this, the premiums paid on behalf of employees are treated as perquisite in the hands of the employees under section 17(2) and can in turn be claimed as deduction from income under section 80(c). Arrangements can be made where the employer is the Proposer (scheme A) or the employee (scheme B) itself is Proposer and Life Insured while the Employer is only the premium payor. Note: All type of insurance plans can be pitched under EEI, including pension plans. Wealth Management Workshop 4 @ Pivot Training
  5. 5. Insurance - A key component of financial planning Insurance solutions can provide a sophisticated means of managing wealth, offering generational planning tools for high net worth clients. Distinct advantages Insurance may offer an important solution not always considered in overall wealth management. Not only may it help protect against life’s uncertainties, but it can also provide advantages in terms of investment efficiency, taxation and risk coverage. “Life insurance is increasingly looked upon as a tool to protect and enhance savings; not as an alternative to trusts but as a complementary estate planning option,” explains Simon Pavitt, Global Wealth Solutions Insurance Director for Europe and the Middle East. “Indeed, it can provide liquidity to facilitate the distribution of business and financial assets to loved ones when someone dies, releasing cash-flow which might otherwise have to come from the sale of, or borrowing against other assets.” Whilst benefits vary by jurisdiction, insurance can offer a deferral of tax liability as well as protection of assets by holding them within a policy that may not be directly owned by the individual. Some clients may also hold investments where net return after tax could be improved by combining them with a tailor-made policy that has local life insurance tax benefits as well as those of gross roll up. quot;As parents, we all wish our children to benefit from our effortsquot; Nigel Nicholson Succession planning Leaving money for children can be an emotional, complex and expensive process. Nigel Nicholson, Director, Insurance Development, Global Wealth Solutions explains: “As parents, we all wish our children to benefit from our efforts. In some circumstances, the sheltering of assets to ensure their delivery to loved ones in the most tax-efficient manner can mean using offshore life insurance structures. Clients can specify the amount their beneficiaries will receive and may be able to leave their assets to named individuals rather than to the estate. Life insurance may also be used to pass the whole asset value of the policy to beneficiaries without creating a charge to inheritance tax or death duties. This is often best delivered by using a life policy in conjunction with a trust so that the trust is the beneficiary of the policy on the death of the insured person.” Wealth Management Workshop 5 @ Pivot Training

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