Post on 04-Jun-2018
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Life Insurance policy
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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 #$
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CHAPTER - I
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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$ect to certain conditions a policy can be ta%en on the life of a
spouse or children.
&ow life insurance policies are available in two types'
1. raditional policies'
. nit lin%ed insurance plans( LIP*)'
No ULI!s are food in "arket:
LlP stands for nit Lin%ed Insurance Plan. It provides for life insurance where
the policy value at any time varies according to the value of the underlying
assets at the time. LIP is life insurance solution that provides for the
benefits of protection and fle+ibility in investment. he investment is d"noted
as units and is represented by the value that it has attained called as &et
!sset alue (&! ).
LIP came into play in the 1- /s and became very popular in 0estern
urope and !mericas. he reason that is attributed to the wide spread
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popularity of LIP is because of the transparency and the fle+ibility which it
offers.
!s times progressed the plans were also successfully mapped along
with life insurance need to retirement planning. In todays times, LIP
provides solutions for insurance planning, financial needs, financial planning
for childrens future and retirement planning. hese are provided by the
insurance companies or even ban%s. hese investments can also be used for
ta+ benefit under section "/2.
!UR!O#$ 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
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#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.
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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.
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C('!T$R , II
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INDU#TR& !RO%IL$
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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
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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.
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@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.
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)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
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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
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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
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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$
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-'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!
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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.
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-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:
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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
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!RODUCT !RO%IL$
!RDUCT# O% -'3'3 'LLI'N4
Individual !lans
Unit *ain !lus *old
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! 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
$#
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'lp Nivesh &o.ana
!n endowment plan with Life cover and 6aturity benefit
#aral #uraksha &o.ana
6ost economical term insurance policy
*roup !lans
*roup Credit #hield
!vailable for mployer > mployee :roups and &on mployer>
mployee :roups
*roup Ter" Life
!vailable for mployer > mployee :roups and &on mployer>
mployee :roups
Ne *roup *ratuity Care
mployer > mployee :roup plan
Ne *roup #uperannuation Care
mployer > mployee :roup plan offering stable and independent
post retirement life
*roup Ter" Life #che"e
In lieu of 9LI ( mployees 9eposit Lin%ed Insurance)
hese are the insurance plans that offer fle+ibility with ta+ benefits'
Unit +ain Plus +old! A Unit Linked Plan
4a$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
$
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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
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4harathi!+a Life Insurance 2o Ltd
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Chapter , III
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CONC$!TU'L %R')$WOR6
Unit Linked Insurance !lans
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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
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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
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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.
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". 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.
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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:
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!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%
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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.
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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
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* 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'
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"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
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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.
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!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.
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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 $ust
fund managers, but also insurance companies were rather e+cited by the
sharp rise in stoc% mar%ets. 0hen you come to thin% of it, insurance
companies should be more concerned about insuring lives than the vagaries
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of stoc% mar%ets. Fowever, in LIPs, they had a product that was more
geared towards Eoffering a return than insuring lives.
!nd this anomaly was put to good use by insurance agents. LIP* were
spo%en of in the same breath as mutual funds. In fact, many agents even
went as far as pro$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'
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"um Assured! @n the same lines, now there is a sum assured that clients
can associate with. he minimum sum assured is calculated as'
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5$
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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
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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 / /
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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
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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.
$hen E propriation price is applied : he &! of a fund shall be
computed as 6ar%et value of investment held by the fund less the e+penses
incurred in the sale of the assets plus the value of any current assets plus
any accrued income net of fund management charges less the value of any
current liabilities less provision, if any. his gives the net asset value of the
fund. 9ividing by the number of units e+isting at the valuation date (before
any units are redeemed), gives the unit price of the fund under consideration.
his is applicable when the company is re=uired to sell assets to redeem
units at the valuation date.
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Invest"ent Options:
4a$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
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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$ect only to a deduction of a
proportionate ris% premium for the period on cover and the e+penses
incurred on medical e+amination and stamp duty charges. he refund paid to
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Partial 0ithdrawals, #urrender alue, 9eath 4enefit and 6aturity4enefit are eligible for ta+ benefits as per #ection 1/(1/9) of theIncome a+ !ct. he charges paid for L 2ritical Illness and LFospital 2ash 4enefit are eligible for ta+ benefits as per #ection "/(9)
of the Income a+ !ct. In case of change in any ta+ laws relevant tothe policyholder or the fund performance, the same will be applied asper regulations prevailing at that point of time.
+eneral E clusion! In case the life assured commits suicide withinone year of the date of commencementMrevival of the policy theamount payable would be the value of the units in your account.
Char,es under the Plan!
Policy Administration Char,e:
3s. // per annum inflating at *Aevery 1st of !pril will be deducted at each monthly anniversary bycancellation of units. 7und )ana+e"ent Char,e : 1.?*A p. a. of the &!for =uity :rowth 7und and !ccelerator 6id>2ap 7und, 1. *A p.a. of the &!
for =uity Inde+ 7und II and !sset !llocation 7und, /.-*A p.a. of the &! for
4ond 7und and Li=uid 7und. he 7und 6anagement 2harge is charged on a
daily basis and ad$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
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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$ect to the ta+ laws and other
financial enactments, as they e+ist from time to time.
he past performance of the funds of the company is not necessarily an
indication of the future performance of any of these funds.
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4a$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.
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@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
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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.
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.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$ect to a minimum
switching amount of 3s. *,/// or the value of the total units held in the fund
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0ithin 1* days of the receipt of this Policy, the Policyholder may, if
dissatisfied with it for any reason, give the 2ompany a written notice of
cancellation along with reasons for the same, and return the Policy 9ocument
to the 2ompany, sub$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!
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: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*.*
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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.
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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.
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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
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