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Etica Wealth Management Pvt Ltd - Insurance Planning


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Insurance Planning is a very vital component of Financial Planning. This presentation is all about various types of Life and General Insurance available in India. It also talks about the benefit of Term Insurance Policy. One should only go for Term Insurance Policy as it is best cover for Protection. This presentation also talks about the Mis-selling happening in India when it comes to insurance selling.

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Etica Wealth Management Pvt Ltd - Insurance Planning

  1. 1. 28-05-2012 Risk Planning A simple way to invest in equity and create wealthINDEX Origins of Insurance Life insurance Industry in India Types of Life Insurance Policies Term Insurance Policy Whole Life Policy Endowment Policy Money Back Policy Unit-Linked Insurance Plans (ULIPS) Annuities & Pension Plan Riders Term Plan Comparison FAQs on Life Insurance Myth Busters General Insurance Industry 1
  2. 2. 28-05-2012 Risks and uncertainties are part of lifes great adventure -- accident, illness, theft, natural disaster - theyre all built into the working of the universe, waiting to happen. happen. Insurance then is mans answer to the vagaries of life. If you life. cannot beat man-made and natural calamities, well, at man- least be prepared for them and their aftermath. aftermath.PROCESS OF ANALYSING INSURANCE NEED Identifications of Risks Assessing Risk Manage & Control the risk Risk avoidance Risk Reduction Risk Retention Risk transfer Monitor & Review 2
  3. 3. 28-05-2012COMMON RISKS FACED BY US Death (Loss of Income) Disability (Loss of Income temporarily) Critical Illness (High treatment charges) Illness & injuries (Hospitalization expenses) House: Fire, theft, calamity Motor: Accidents, theft, calamityORIGINS OF INSURANCE Insurance in India can be traced back to the Vedas. For instance, yogakshema, Vedas. the name of Life Insurance Corporation of Indias corporate headquarters, is Veda. derived from the Rig Veda. The term suggests that a form of "community insurance" was prevalent around 1000 BC and practised by the Aryans. Aryans. Life insurance had its origins in ancient Rome, where citizens formed burial clubs that would meet the funeral expenses of its members as well as help survivors by payments. making some payments. Marine Insurance (Europe) / Fire Insurance (London fire) The government decided to nationalize the life assurance business in India. As a India. result, The Life Insurance Corporation of India was set up in 1956 to take over companies. around 250 life companies. The Insurance Regulatory & Development Authority, an autonomous insurance regulator set up in 2000 3
  4. 4. 28-05-2012 LIFE INSURANCE INDUSTRY 1999- Life Insurance Industry was liberalized in the year 1999-2000. Currently there are 24 players in the Life Insurance Industry. 22 Insurance companies have JV’s with foreign partners. LIC and Sahara Life Insurance company do not have JV’s. All the major international players are present in the Indian Insurance market. A high capital intensive industry - Rs.31,437 Cr deployed Foreign partners have brought in capital of around Rs.5,053 Cr as FDI. in- India has the largest in-force policies in the world. SNAPSHOT OF INDIAN LIFE INSURANCE INDUSTRY Parameter FY 99-00 FY 06-07 FY 07-08 FY 09-10 FY 10-11 (provisional)Number of players 1 16 18 23 24Capital Deployed (Rs. Cr) 5 9,485 16,692 28,943 31437Branches 2,048 5,373 8,913 12,018 11465Employees (in Lacs) 1.23 1.87 2.54 2.70 2.42Individual Agents (in Lacs) 7.14 19.93 25.20 29.78 26.47New Business Policies (In Cr) 1.69 4.61 5.08 5.32 4.81In force Policies (In Cr) 10.14 22.70 25.76 30.40 32.54India’s share of world premium 0.50% 1.53% 1.83% NA NAPenetration as % of GDP 1.39% 4.1% 4.0% 4.90* NATotal Death Benefit paid(Rs.Cr) NA 4,794 5,288 8,385 10,270Total Maturity claim paid(Rs. Cr) NA 34,356 34,543 NA NA Over 70% of the branches are located in Class C cities or lowerSource: IRDA, Life Insurance Council 4
  5. 5. 28-05-2012FAQS ON LIFE INSURANCE What is Life Insurance? Do you need life insurance? How much does life insurance cost? How much do I insure myself for? What will I receive on maturity of my policy? Are there any advantages in buying insurance at an early age? How do I buy a policy? Where can I get all the relevant information?TYPES OF LIFE INSURANCE POLICIES Term Insurance Policy Whole Life Policy Endowment Policy Money Back Policy Unit- Unit-Linked Insurance Plans (ULIPS) Annuities & Pension Plan Riders 5
  6. 6. 28-05-2012TERM INSURANCE POLICY Provides cover for a specific period only Premium is very low. No returns/refund of premium No investment element 100% Risk Cover Sum assured paid on death Best policy for adequate life cover Buy based on life insurance need analysisWHOLE LIFE POLICY Pays either at death or maturity Maturity usually 100 years age. Premium paid for life time Works for estate planning as benefits are generally enjoyed by family (upto Very High Commission (upto 35%) Not Very flexible Expected Retun : 4 – 6% 6
  7. 7. 28-05-2012ENDOWMENT POLICY Most popular insurance policy in India Combines Investment + Risk Cover Sum assured paid on death or survival at maturity Bonus paid along with Sum Assured on maturity Premiums are higher than term plan due to a savings component (upto Very High Commission (upto 40%) Not Flexible Expected Retun : 4 – 6%MONEY BACK POLICY Covers death & survival benefits Lump sum paid periodically. 20% + 20% + 20% + 40% of SA at predefined intervals Full sum assured paid on death Popular for planning Children’s Education & Marriage (upto Very High Commission (upto 40%) Expected Retun : 4 – 6% 7
  8. 8. 28-05-2012ANNUITIES AND PENSION Immediate Annuity Policy Single Premium Monthly Pension Meant for Retirees investing Retirement Proceeds Deferred Annuity Policy Invest regularly for some years Monthly pension starts at retirement age Can commute upto 1/3 of accumulationWHAT ARE RIDERS? Accidental Death Additional Sum Assured if death Critical Illness If critical illness diagnosed Waiver of Premium Waives off premium if something happens to person who is paying premium Used mainly in Children’s Policies 8
  9. 9. 28-05-2012UNIT LINKED INSURANCE PLANS (ULIPS) Market linked investment where the premium paid is invested in funds Different Options - Equity, Balanced, Debt. Switch facility available Greater flexibility in policy structure Sold as “Investment” Plans Higher of the SA or Fund value is paid at death / maturity Higher Liquidity Mis- Highest Mis-selling as earlier commission was very high SEBI- Recent SEBI-IRDA spat and subsequent IRDA clampdown on ULIPS Highest NAV guaranteed - A big fraudVARIOUS COSTS - ULIPS Mortality charges Cost of insurance coverage Premium allocation charges Usually goes towards agents commission Fund management charges To manage investment component like MFs Policy administration charges To cover operational costs Surrender charges Higher charges for early surrender 9
  10. 10. 28-05-2012LIC SAMRIDHI PLUS Premium Allocation Charge First Year – 27.5% Second & Third Year – 7.5% Thereafter 5% Mortality Charge – 0.5% Policy Administration Charge – Rs 360 p.a Fund Management Charge – 0.40% Surrender Charge – 1st year 6% Guarantee Charge – 0.40% Miscellaneous Charges Dark side of insurance mis-selling 10
  11. 11. 28-05-2012Policy date:December 28, 2010 11
  12. 12. 28-05-2012 Sum Assured: Rs 5,00,000 Highest NAV guaranteed Various Charges Premium Allocation Charge : 4%Premium Administration Charge : 3.6%Fund Management Charge : 1.35%Mortality Charge : As ApplicableSurrender Charge : 6% 12
  13. 13. 28-05-2012 Highest NAV Charge : 0.5% Additional Service Charge : Rs 250Total First year Charges : 9.45% Surrendered on January 5th, 2011 13
  14. 14. 28-05-2012HAPPY ENDING !!!! 14
  15. 15. 28-05-2012 The nameinspires trust 15
  16. 16. 28-05-2012A ULIP CUSTOMER & HIS AGENT 16
  18. 18. 28-05-2012TERM PLANS COMPARISON CHART Sum Assured: Rs 5,00,000.00 Annual Premium: Rs 19,603.00 18
  19. 19. 28-05-2012Sum Assured: Rs 100,00,000.00Annual Premium: Rs 22,500.00Sum Assured: Rs 100,00,000.00Annual Premium: Rs 15,111.00 19
  20. 20. 28-05-2012Sum Assured: Rs 2,50,00,000.00Annual Premium: Rs 22,600.00Sum Assured: Rs 1,50,00,000.00Annual Premium: Rs 11,300.00 20
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  22. 22. 28-05-2012LIC ASHA DEEP II – ENDOWMENT PLAN ICICI I-PROTECT – TERM PLAN Sum Assured - Rs 5,00,000 Sum Assured - Rs 100,00,000 Annual premium - Rs 19,603 Annual premium - Rs 8,300 Value at maturity based on LIC’s Difference in Premium - Rs 11,303 projection chart - Rs 13,27,500 Invested in Mutual Funds - @12% - Rs 18,80,073 @15% - Rs 31,38,062 @20% - Rs 74,80,026ITS UPTO YOU TO DECIDE !!!!!LIC ASHA DEEP 22
  23. 23. 28-05-2012ASHA (NIRASHA) DEEP Continue to pay annual premium Surrender value: Rs 82,220 Maturity value after 25 years – Annual Premium: Rs 19,603 Rs 13,27,500 Remaining Tenure: 18 years Invests in Mutual Funds - @12% - Rs 18,33,596 @15% - Rs 26,90,627 @20% - Rs 51,24,223LIC ASHA DEEP SURRENDER 23
  25. 25. 28-05-2012INVESTMENT BY LIFE INSURANCE COMPANIES Parameter FY 09-10 % ageCentral Government Securities 3,61,520 57%State Government and other approved securities 1,36,998 21.5%Investment in Infrastructure Sector 1,39,710 21.5% Instruments FY 2009-10 FY 2010-11Equity 4,46,881 5,06,895 (34%)Fixed Income (Debt) 8,10,904 9,52,993 (64%)Others 32,161 20,425 (2%)Total 12,89,946 14,80,313 (100%)LIFE INSURANCE DEATH CLAIMS LIC Private Kotak Aegon Religare ICICI PruAmount inRs crs 4,799.55 1,158.58 55.91 1.08 218.04No of Policies 6,53,909 72,200 1,983 24 14,479Avg Amountper policy 73,397.83 1,60,468.1 2,81,946.5 4,50,000 1,50,590.5 Sum Assured: More than 6 times Tenure of LIC - Avg 15 years ; Private - 2 to 5 yrs Agent / RM Mis-selling Vs Claims settled by Claims department 25
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  28. 28. 28-05-2012 Are you still concerned??? Started in 1844 25,000 people Presence in 20 markets in US, Asia and Europe 4 crore customers across the globe Founded in 1696, Since 1834 associated with India The worlds 6th largest Insurance group Biggest in the UK 44.5 million-customer base worldwide with £402 billion assets under management at 31 December 2010. History of 140 years 9 crore customers Presence in 50 markets in US, Asia, latin America and Europe Founded in 1845 is the oldest company in US Fortune 100 company The Company holds the highest possible ratings for financial strength currently awarded to any life insurer from the life insurance industrys four principal rating agencies History of only 52 yearsMYTH BUSTERS Myth 1: Insurance is for tax saving Myth 2: Insurance is Investment Myth 3: I don’t need Insurance. 28
  29. 29. 28-05-20125 EASY STEPS TO BUYING A POLICY Initially, calculate the exact amount of insurance that you need; need; Decide which product suits you best based on your life stage and need Calculate the premium Once you have decided on all the above parameters, get in touch with a Life Advisor The Life Advisor will assist you in filling up a proposal form. In addition to a proposal form, you need to submit some financial documents that are required in order to buy a policy. The Life Advisor will notify the list of financial documents required for the same.10 COMMANDMENTS OF LIFE INSURANCE Thou shall buy insurance only for risk cover Thou shall not consider insurance as an investment option Thou shall preferably buy only a term policy Thou shall not trust his agent blindly Thou shall be wary of the hype (advertisements) Thou shall not buy ULIP at any cost Thou shall not insure yourself if you a lone bird Thou shall not insure if you are wealthy Thou shall not buy a child insurance plan or a plan for a non-earning member Thou shall read the fine print carefully 29
  30. 30. 28-05-2012HOW TO BUY LIFE INSURANCE Buy insurance only from a licensed agent / intermediary Shop around Understand the scope of cover, terms and conditions of the policy Fill in your application carefully – Never sign blank proposals Health related particulars should be true Age and Address Proof should be correct Ensure premiums are paid to your insurance company Read your policy when you receive it 15 day free look up periodWHERE TO BUY LIFE INSURANCE? Individual Agents - Corporate Agents - Bancassurance - Insurance Brokers Directly from companies Branches Online from websites 30
  31. 31. 28-05-2012INFORMATION FOR EXISTING POLICY HOLDERS Always remember your premium due dates to avoid a policy lapse. Always insist on a premium receipt as a proof of payment. Ensure your age is stated correctly in the proposal. If it is incorrect, get it rectified at the earliest Keep your policy in a safe place until the life insurance policy money is received. Always keep the nomination under your policy alive and he/she should be aware about it. Always intimate change in address to insurance company immediately Always clarify any doubts you have about your policy with the life insurance company / insurance advisor.5 COMMON LIFE INSURANCE MISTAKES Treating life insurance as a savings avenue Trusting your life insurance agent / advisor completely Considering life insurance as a one time activity Buying the wrong product (99% are victim of this) - Child plan, Life insurance for non-earning spouse Buy Life insurance purely to save Tax 31
  32. 32. 28-05-2012FILING A LIFE INSURANCE CLAIM Maturity claim Fill the claim form Original policy bond Death claim Claim intimation/notification Contact the respective life insurance branch office. Contact your insurance advisor Call the respective Customer Helpline Documents required for claim processing Original policy document, Death certificate, Police FIR and post mortem exam report (for accidental death), Certificate and records from the treating doctor/hospital (for death due to illness) Settlement of Claim (within 30 days of receipt of all documents)PROTECTION OF POLICY HOLDERS INTEREST Grievance Redressal Mechanism Register a Complaint with the Toll free number / helpline of the Company Complaint to the Grievance officer of the company Complaint to Council / IRDA / OmbudsmanNote:-There are 12 ombudsman Centres in India.The companies cannot challenge the decision of the ombudsman 32
  33. 33. 28-05-2012No timeAgent’s Job GENERAL INSURANCE 33
  34. 34. 28-05-2012TYPES OF GENERAL INSURANCE Motor Insurance Health Insurance Fire Insurance Travel Insurance Home Insurance Critical Illness coverHEALTH INSURANCEWhy is Health Insurance important? Rising medical costs Uncertain hospital bills Expensive / quality health care services Family health insurance at a lesser premium Tax benefit Changing lifestyle – Most Important reason 34
  35. 35. 28-05-2012POOR EATING HABITS RESULTING IN POOR HEALTH Acidity, Diabetes, High Cholestrol, Obesity and the list goes on………EVERY FAMILY HAS ONE…….. 35
  36. 36. 28-05-2012IS THIS THE TREND???Mr Raghu Pillai, Mr Ranjan Das,CEO, Future Group CEO, SAP IndiaAge - 54 yrs, Heart Attack Age - 42 yrs, Cardiac Arrest Some reasons Blackberry’s Mr R Ravimohan, Excessive Travelling Former CEO, Crisil Peer Pressure Age - 52 yrs, Heart Attack Easy Lifestyle 36
  37. 37. 28-05-2012A grim reminder…. Before its too late Are we prepared for this ???? 37
  38. 38. 28-05-2012HEALTH INSURANCE Hospitalization Expenses over 24 hours Room charges, Medicine & Test Charges, Operation, doctor fees etc covered Family floaters available Group mediclaim policy Eligible for tax benefits under 80D Rs 1 to 5 lakhs cover recommended based on affordabilityHOW MUCH HEALTH INSURANCE COSTS?Source: 38
  39. 39. 28-05-2012CRITICAL ILLNESS COVER Benefit paid immediately on first diagnosis of the covered Major Medical Illnesses and Procedure, Accidental Death /Permanent Total Disablement (PTD) due to accident Choose between a cover of 3 Lakh, 6 Lakh or 12 Lakh sum insured and policy duration between 1 year, 3 years or 5 years. Major Medical Illness & Procedures : Cancer Coronary Artery Bypass Graft Surgery Myocardial Infarction (Heart Attack) End Stage Renal Failure Major Organ Transplant Stroke Paralysis Heart Valve Replacement Surgery Multiple SclerosisCRITICAL ILLNESS CHARGES 39
  40. 40. 28-05-2012STEPS TO BUY A HEALTH INSURANCE Pay attention to policy conditions Read the exclusions and limitations very carefully co- Compare premium costs, deductibles, co-payments Take an informed decision 40
  41. 41. 28-05-2012GET WELL SOON !!! 41
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