ULIP as an Alternative Investment Avenue (Comparative Study of difference ULIP Plans of HDFC) by Sanjay Gupta

A Summer Placement Report on ULIP as an Alternative Investment Avenue (Comparative Study of difference ULIP Plans of HDFC)

Submitted in partial fulfillment for MBA Programme 2008-2010

Submitted by: Meenakshi Garg Roll No:-0806870030

Submitted to: Mr. Sandeep Kapoor Faculty of Finance

MEERUT INSTITUTE OF ENGINEERING AND TECHONOLOGY MEERUT PREFACE

India’s rapid rate of economic growth over the past decade has been one of the more significant developments in the global economy. This growth has its roots in the introduction of economic liberalization in the early 1990s, which has allowed India to exploit its economic potential and raise the population’s standard of living. Insurance has a very important role in this process. Health insurance and pension systems are fundamental to protecting individuals against the hazards of life and India, as the second most populous nation in the world, offers huge potential for that type of cover. Furthermore, fire and liability insurance are essential for corporations to keep investment risks and infrastructure projects under control. Private insurance systems complement social security systems and add value by matching risk with price. Accurate risk pricing is one of the most powerful tools for setting the right incentives for the allocation of resources, a feature which is key for a fast developing country like India. By nature of its business, insurance is closely related to saving and investing. Life insurance, funded pension systems and (to a lesser extent) non-life insurance, will accumulate huge amounts of capital over time which can be invested productively in the economy. In developed countries (re)insurers often own more than 25% of the capital markets. The mutual dependence of insurance and capital markets can play a powerful role in channeling funds and investment expertise to support the development of the Indian economy. ULIP as an Alternative Investment Avenue (Comparative Study of difference ULIP Plans of HDFC) report aims to promote a better understanding of ULIP Insurance products associated with HDFC in India today and covering a broad range of HDFC’s ULIP Plans.

ACKNOWLEDGEMENT This project has been prepared as a part of summer training during the completion of MBA programme 2008-09. I was involved with HDFC STANDARD LIFE INSURANCE for a period of 2 months, and on the successful completion of this project I would like to express my gratitude to all the people who have helped me throughout the project. At first, I owe my debt of thanks to HDFC Standard Life, which gave me an opportunity to do this project work I wish to extend my deep and sincere gratitude to Mr. MANU Agarwal who provided me with their guidance from day one and also helped me whole heartedly to achieve the ultimate goal of the project. He had introduced me to an idea of Insurance business and what goes behind it. Also under his guidance and leadership I was able to enhance my inter-personal skills. I would also like to express my greetings to him for his immense support and guidance in the selection of the project, its study and preparation of the report. I would also like to wish a special thanks to my Faculty Guide Mr. Sandeep Kapoor without whose guidance this project would have been a distant dream. I would also like to thank all the employees of HDFC SLIC MEERUT, for their expert guidance and encouragement they have given me in spite their demanding schedule. Their informal discussions and constructive criticism of has helped this project a rewarding experience for me. Last but not the least; these past 2 months were of utmost importance as they added value towards my path of knowledge. I would like to end this

acknowledgement by thanking the customers, distributor people at large with whom I have interacted during the course of my training.

Table of Contents INTRODUCTION...............................................................................................................4 INSURANCE SECTOR REFORMS ..................................................................................8 HDFC STANDARD LIFE INSURANCE.........................................................................12 OBJECTIVES OF THE STUDY.......................................................................................15 RESEARCH METHODOLOGY.......................................................................................16 BASIC CONCEPTS .........................................................................................................17 POINTS OF PARITY........................................................................................................32 HDFC SLIC PRODUCTS.................................................................................................36 ANALYSIS & INTERPRETATION.................................................................................74 FUTURE LINE OF RESEARCH......................................................................................86 CONCLUSION .................................................................................................................87 RECOMMENDATIONS...................................................................................................98 CHALLENGES & LIMITATIONS..................................................................................99 BIBLIOGRAPHY & REFERENCES.............................................................................100

INTRODUCTION INSURANCE IN INDIA In 2003, the Indian insurance market ranked 19th globally and was the fifth

largest in Asia. Although it accounts for only 2.5% of premiums in Asia, it has the potential to become one of the biggest insurance markets in the region. A combination of factors underpins further strong growth in the market, including sound economic fundamentals, rising household wealth and a further improvement in the regulatory framework. The insurance industry in India has come a long way since the time when businesses were tightly regulated and concentrated in the hands of a few public sector insurers. Following the passage of the Insurance Regulatory and Development Authority Act in 1999, India abandoned public sector exclusivity in the insurance industry in favor of market-driven competition. This shift has brought about major changes to the industry. The inauguration of a new era of insurance development has seen the entry of international insurers, the proliferation of innovative products and distribution channels, and the raising of supervisory standards. The insurance sector in India has come with a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. Insurance in India used to be tightly regulated and monopolized by state-run insurers. Following the move towards economic reform in the early 1990s, various plans to revamp the sector finally resulted in the passage of the Insurance Regulatory and Development Authority (IRDA) Act of 1999. Significantly, the insurance business was opened on two fronts. Firstly, domestic private-sector companies were permitted to enter both life and non-

life insurance business. Secondly, foreign companies were allowed to participate, albeit with a cap on shareholding at 26%. With the introduction of the 1999 IRDA Act, the insurance sector joined a set of other economic sectors on the growth march. During the 2003 financial year1, life insurance premiums increased by an estimated 12.3% in real terms to INR 650 billion (USD 14 billion) while non-life insurance premiums rose 12.2% to INR 178 billion (USD 3.8 billion). The strong growth in 2003 did not come in isolation. Growth in insurance premiums has been averaging at 11.3% in real terms over the last decade.

A brief history of the Insurance Sector The business of life insurance in India in its existing from started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are: 1912:

The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928:

The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and nonlife insurance businesses.

1938:

Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956:

245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 Crores from the Government of India.

The General Insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India are: 1907:

The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.

1968:

The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

1972:

The

General

Insurance

Business

(Nationalization)

Act,

1972

nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies' viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

INSURANCE SECTOR REFORMS In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra, was formed to evaluate the Indian Insurance Industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the

reforms initiated in the financial sector. The reforms were aimed at 'creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms...'. In 1994, the committee submitted the report and some of the key recommendations included: I) Structure 1 Government stake in the insurance companies to be brought down to 50%. 2 Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. 3 All the insurance companies should be given greater freedom to operate. II) Completion 4 Private Companies with a minimum paid up capital of Rs. 1bn should be allowed to enter the industry. 5 No Company should deal in both Life and General Insurance through a single entity.

6 Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. 7 Postal Life Insurance should be allowed to operate in the rural market. 8 Only one State Level Life insurance company should be allowed to operate in each state. III) Regulatory Body 9 The Insurance Act should be changed. 10 An Insurance Regulatory body should be set up. 11 Controller of Insurance (Currently a part from the Finance Ministry) should be made independent. IV) Investments 12 Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. 13 GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time). V) Customer Service 14 LIC should pay interest on delays in payments beyond 30 days.

15 Insurance companies must be encouraged to set up unit linked pension plans. 16 Computerization of operations and updating of technology to be carried out in the insurance industry. The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs. 100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.

IRDA (The Insurance Regulatory and Development Authority) Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies.

The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA's online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products, which are expected to be introduced by early next year. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. In the private sector 12 life insurance and 6 general insurance companies have been registered.

HDFC STANDARD LIFE INSURANCE HDFC Standard Life Insurance Company Ltd. is one of India's leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC LTD.), India's leading housing finance institution and

a group company of Standard Life, U.K. Both the promoters are well known for their ethical dealings and financial strengths and are thus committed to being a long term player in the life insurance industry - all important factors to consider when choosing your insurer. HDFC as on March 31, 2007 holds 81.9% of Equity in joint venture. HDFC Standard Life is one of the leading life insurance companies having a track record of declaring bonuses every year since inception. The company attributes this success to their people, who are the most important asset. Company believes they are a key facet of the company and it is their contribution that has enabled the company to achieve the current status. Since people deserve the best, and the company's effort is to provide them with best environment, best culture and best development opportunities possible. HDFC Standard Life Insurance Company is a joint venture between India's largest housing finance provider HDFC and Europe's largest mutual life assurance company-THE STANDARD LIFE ASSURANCE COMPANY (U.K.). HDFC Standard Life Insurance Company Limited is the first private sector Life Insurance Company to be granted a license. SNAPSHOT •

Incorporated in 1977 as the first specialized Mortgage Company in India.

•

Almost 90% of initial shareholding in the hands of domestic institutes and retail investors. Current 77% of shares held by foreign institutional

investors. Besides the core business of mortgage HDFC has evolved into a financial conglomerate with holdings in: •

HDFC Standard Life insurance Company- HDFC holds 78.07 %.

•

HDFC Asset Management Company – HDFC holds 50.1%

•

HDFC Bank- HDFC holds 22.25%.

•

Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.

•

HDFC Chubb General Insurance Company – HDFC holds 74%.

Foreign Partner: Standard Life, U.K. Standard Life U.K. founded in 1825, has been at the forefront of the U.K. insurance industry for 175 years by combining sound financial judgment with integrity and reliability. It is the largest mutual life company in Europe and has total assets of Rs. 5, 50,000 crores. It is one of the very few insurance companies in the world to have received "AAA" rating from two of the leading international credit rating agencies, Moody's and Standard & Poor's. Standard Life was recently voted 'Company of the Decade" in U.K. by the independent Brokers called IFAs. BUSINESS GROWTH Track Record so far

The gross premium income of HDFC, for the year ending March 31, 2007 stood at Rs. 2,856 crores and new business premium income at Rs. 1,624 crores. The company has covered over 8,77,000 lives year ending March 31, 2007. Company also declared our 5th consecutive bonus in as many years for our ‘with profit’ policyholders. KEY STRENGTH Financial Expertise As a joint venture of leading financial services groups. HDFC standard Life has the financial expertise required to manage long-term investments safely and efficiently. Range of Solutions HDFC SLIC has a range of individual and group solutions, which can be easily customized to specific needs. These group solutions have been designed to offer complete flexibility combined with a low charging structure. Strong Ethical Values HDFC SLIC is an ethical and Cultural Organization. False selling or false commitment with the customers is not allowed.

OBJECTIVES OF THE STUDY The Objective of the study is to determine the extent of awareness of financial planning in India and the understanding of insurance among the masses. The Scope of the study involves 

To understand the concept of financial planning.



To compare traditional investment instruments (Mutual Funds etc.) with investment in Insurance.



To analyze various Unit Linked Plans offered by HDFC Standard Life Insurance Company.

RESEARCH METHODOLOGY Type of data collected There are two types of data used. They are primary and secondary data. Primary data is defined as data that is collected from original sources for a specific purpose. Secondary data is data collected from indirect sources. (Source: Research Methodology, By C. R. Kothari) PRIMARY SOURCES These include the survey or questionnaire method, telephonic interview as well as the personal interview methods of data collection. SECONDARY SOURCES These include books, the internet, company brochures, product brochures, the company website, competitor’s websites etc, newspaper articles etc. SAMPLING Sampling refers to the method of selecting a sample from a given universe with a view to draw conclusions about that universe. A sample is a representative of the universe selected for study. SAMPLE SIZE The sample size for the survey conducted was 270 respondents. This sample size was taken on 95% confidence level and 6 significant level. Data universe for this sample is 10,00,000 which is approx population of Jodhpur excluding people below age of 18 years. SAMPLING TECHNIQUE Random sampling technique was used in the survey conducted. PLAN OF ANALYSIS Tables were used for the analysis of the collected data. The data is also neatly presented with the help of statistical tools such as graphs and pie charts. Percentages and averages have also been used to represent data clearly and effectively.

STUDY AREA The samples referred to were residing in Meerut City.

BASIC CONCEPTS FINANCIAL PLANNING A comprehensive financial advisory service involving financial strategies, tax, corporate/trust structures, estate planning, legal issues, family law, asset allocation, asset protection and investment advice.

Financial Planning takes into account: 

Desired asset allocation, risk profile and return expectations.



Building cash flows correlating all expenses and income. Inflation and outflows due to loans are considering in building the financial plan.



Future goals like retirement, housing and children's education / marriage or other needs.

Why do you need Financial Planning? You may have many dreams, needs and desires. For example, you could be dreaming of: •

Owning a new car,

•

Buying a dream house,

•

Providing your children with the best education,

•

Planning a grand wedding for your children

•

Having a great time after your retirement

But in today's world of skyrocketing costs and increasing inflation, how many of these dreams can you hope to turn into reality? By planning well, you can utilize your limited resources to the fullest. EXPERIENCE THE POWER 360º FINANCIAL PLANNING The only thing permanent in life is change. Times changes, people changes and so does life. You expect life to be much better tomorrow than it is today. Tomorrow, you hope to fulfill all your dreams and aspirations. But what happens if things take an untoward turn? Or, if there is an eventuality? Perhaps it's time for you to

change the way you

plan

investments...

your

How will 360° Financial Planning help? Instead of investing in an ad-hoc manner, 360° Financial Planning helps you take a holistic, all-round view. Briefly, 360° Financial Planning comprises: 

Investment Planning



Cash Flow Planning



Tax Planning



Insurance Planning



Children’ Future Planning



Retirement Planning

INVESTMENT PLANNING: To make your wealth grow Everyone needs to save for a rainy day. Once you have saved enough to take care of emergencies, you should start thinking about investing and to make your money grow. Investment Planning Service includes: •

Risk Profiling

•

Asset Allocation and Portfolio Construction

•

Creation and Accumulation of Wealth through Systematic Investment Plans (SIP)

•

Regular review of progress and Portfolio Rebalancing

CASH FLOW PLANNING: To provide for assets and meet the periodic cash requirements

In simple terms, cash flow refers to the inflow and outflow of money. It is a record of your income and expenses. Cash flow planning refers to the process of identifying the major expenditures in future (both short-term and long-term) and making planned investments so that the required amount is accumulated within the required time frame. TAX PLANNING: To save on taxes and increase your income Proper tax planning is a basic duty of every person which should be carried out religiously. According to the Income Tax Act, 1961, One will be eligible for Tax Benefits under Section 80C and Section 10(10D) of the act. One has to compare the advantages of several tax saving schemes and depending upon your age, social liabilities, tax slabs and personal preferences, decide upon a right mix of investments, which shall reduce your tax liability to zero or the minimum possible. INSURANCE PLANNING: To protect yourself, your family and your Assets. "Insurance is not for the person who passes away, it for those who survive," goes a popular saying that explains the importance of Insurance Planning. It is extremely important that every person, especially the breadwinner, covers the risks to his life, so that his family's quality of life does not undergo any drastic change in case of an unfortunate eventuality. Insurance Planning is concerned with ensuring adequate coverage against insurable risks. CHILDREN'S FUTURE PLANNING: To give your children a financially secure future

Like every parent, you too must be overjoyed to watch your child grow. All parents want to give the best possible upbringing to their children. This includes good education and security, in case of any eventuality. Soon, your little bundle of joy will grow up, and it will be time to provide for his or her higher education and wedding. The purpose of Children's Future Planning is to create a corpus for foreseeable expenditures such as those on higher education and wedding, and to provide for an adequate security cover during their growing years. RETIREMENT PLANNING: Because retirement is a time to relax, not to get worried Some like it. Some don’t. But retirement is a reality for every working person. Most young people today think of retirement as a distant reality. However, it is important to plan for your post-retirement life if you wish to retain your financial independence and maintain a comfortable standard of living even when you are no longer earning. This is extremely important, because, unlike developed nations, India does not have a social security net.

WHAT IS INSURANCE? Insurance is pooling of risks. In a contract of insurance, the insurer (insurance company) Agrees/undertakes, in consideration of a sum of money (premium), to make good the loss suffered by the insured against a specified risk such as fire and any other similar contingency or compensate the insured/beneficiaries on the happening of a specified event such as accident or death.

Life insurance is a contract for the payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) on the happening of the event insured against.

What Is Investment? Investment may be said as keeping a sum of money aside from the present savings with the view of earning returns on it. It is done on the cost of sacrifice of present consumption of that part of money.

Why Invest? 

Financial reasons

To earn returns.

To protect and increase capital.

To supplement income.



Non Financial reasons

To have money for important events.

To provide for contingencies.

Where one can invest? Securities Market: a.

Money Market

Bond Market

Mortgage Market

Stock Market

Foreign Exchange Market

Derivatives Securities Market

Depository Institutions: a.

Commercial Banks

Thrift Institutions

Other Financial Institutions: a.

Insurance Companies

Securities firms and investment banks

Mutual funds

Finance companies

Pension funds

What Is Risk? When we use the word “Risk, we mean either an event which leads to a variations from the most likely outcome in either direction (e.g. the risk of structure collapsing) or the probability of occurrence of such an event. To live is to risk dying; To hope is to risk despair; To try is to risk failure; But risks must be taken, because a greatest hazard in life is to risk nothing.

Meaning and definition of Risks: The entire modern world process has to face numerous risks and uncertainties. Thus in business, as in private life, there are dangers and risks of every kind. The concept of risk may explain as the possibility of unfavorable results from any occurrence. Risks arise due to uncertainties in regard to cost, loss or damage. The loss or damage may be related to financial loss or non financial loss. The risk may mean that there is a possibility of loss or damage. It may or may not happen. Methods of handling Risks: The following methods are usually adopted for handling risks

Prevention of risks (or) Avoiding of risks.



Reduction of risks.



Shifting of risks (or) Transferring of risks.



Acceptance of risks



Spreading of risks.

MORE RISK means MORE RETRURN. It’s a universal concept that with higher returns, higher is the risk. The concept is true everywhere from daily life situations to more complex investment situations. The one who takes more risk is ought to get more returns. One can say “take risk, but don’t gamble”. Risk takers move ahead with their eyes open. Gamblers shoot in the dark.

Risk taking is relative. The concept of risk varies from person to person and can be a result of training. To both a trained mountain climber and a novice, mountain climbing is risky, but to the trained person it is not irresponsible risk taking, responsible risk taking is based on knowledge, training careful study, confidence and competence-factors that give you the courage to act while facing fear. In short one can say that risk must be taken in a well calculated manner. Risk can never be avoided; it can only be minimized by diversifying it.

Diversification can de done by not investing in a single stock, but distributing the money in different stocks. So that if one fetches the loss other should compensate for it. Traditional Market vs. Insurance Why not invest in Traditional Market? Whenever insurance is compared to investment in traditional market ,the thing which comes first to our mind is how insurance is better investment instrument as compared to traditional market. While comparing insurance we talk about Unit Linked Insurance Products because Traditional insurance products can not be compared to opportunities available in share market , bond market, Government bonds and securities, Mutual Funds, Foreign exchange market etc.

The ULIPs are very frequently compared with Mutual funds. The reason is their resemblance with each other as far as their design and funds are concerned. Due to similarities of ULIPs and Mutual funds, I have laid stress on comparing them thoroughly so that a clear cut image can be made.

Investment in Share market: Advantages:  High rate of returns.  Wide range of options available to the Investors.  Easy liquidity.  Help of brokers is easily available.  Speculations can be fruitful sometimes. Disadvantages:  Lack of expertise can cause huge losses.  Investors must have complete knowledge of the market.  No protection from any miss happening.  Influenced by greed of some people.  Substantial amount of money is required to invest in the market.  Investments made are not flexible.  Very high risk.

Investment in Government bonds and securities: Advantages:

 Very low risk promises safe investments.  Tax benefits up to certain limit.  Better rate of interest then banks.  No big deal of expertise is required. Disadvantages:  Very low returns.  No hedge against inflation.  Liquidity is not easy.  No options for Investors.  Less flexible.

Investment in Mutual fund Vs Investment in ULIPS Are unit-linked insurance plans good? Most insurers in the year 2004 have started offering at least a few unit-linked plans. Unit-linked life insurance products are those where the benefits are expressed in terms of number of units and unit price. They can be viewed as a combination of insurance and mutual funds. The number of units that a customer would get would depend on the unit price when he pays his premium. The daily unit price is based on the market value of the underlying assets (equities, bonds, government securities, et cetera) and computed from the net asset value. The advantage of unit-linked plans is that they are simple, clear, and easy to understand. Being transparent the policyholder gets the entire upside on the

performance of his fund. Besides all the advantages they offer to the customers, unit-linked plans also lead to an efficient utilization of capital. Unit-linked products are exempted from tax and they provide life insurance. Investors welcome these products as they provide capital appreciation even as the yields on government securities have fallen below 6 per cent, which has made the insurers slash payouts. According to the IRDA, a company offering unit-linked plans must give the investor an option to choose among debt, balanced and equity funds. If you opt for a unit-linked endowment policy, you can choose to invest your premiums in debt, balanced or equity plans. If you choose a debt plan, the majority of your premiums will get invested in debt securities like gilts and bonds. If you choose equity, then a major portion of your premiums will be invested in the equity market. The plan you choose would depend on your risk profile and your investment need. The ideal time to buy a unit-linked plan is when one can expect long-term growth ahead. This is especially so if one also believes that current market values (stock valuations) are relatively low. So if you are opting for a plan that invests primarily in equity, the buzzing market could lead to windfall returns. However, should the buzz die down, investors could be left stung. If one invests in a unit-linked pension plan early on, say when one is 25, one can afford to take the risk associated with equities, at least in the plan's initial stages. However, as one approaches retirement the quantum of returns should

be subordinated to capital preservation. At this stage, investing in a plan that has an equity tilt may not be a good idea. Considering that unit-linked plans are relatively new launches, their short history does not permit an assessment of how they will perform in different phases of the stock market. Even if one views insurance as a long-term commitment, investments based on performance over such a short time span may not be appropriate. Various ULIP plan provided by companies: ProtectionNeed for a sound income protection in case of your unfortunate demise. InvestmentNeed to ensure long-term real growth of your money. SavingSave for the milestones and protect your savings too. PensionNeed to save for a comfortable life Post retirement.

Once you have analyzed your needs as per above classification, you need to then ascertain important factors such as type of cover, insurance amount as per one's income, life stage and dependents. It is difficult to arrive at all these figures yourself. Our financial consultants can help you with all analysis to offer a customized solution by doing a thorough need analysis. So contact financial

consultants to help you choose the right plan for you. Your insurance need will change as your life does, from starting to work to enjoying your golden years and all the stages in between. Each one of these stages may pose a different insurance need/cover for you. In this section, we have drawn up the basic life stages and help you analyze various insurance needs accordingly. STAGE 1 Young and Single- Am important Stage where one lays down the foundation of a successful life ahead. Take advantage of the time and power of compounding to ensure that you build up your dreams. Start saving early; You’re Needs 1 Save for a home and wedding 2 Tax Planning 3 Save for Golden years STAGE 2 Just Married - Marriage brings about a significant change. New dreams and new opportunities also bring in additional responsibilities. While both of you look forward to a happy and secure life, it is equally important to ensure that

eventualities don't come in the way of shaping your dreams. You’re Needs 1 Planning for home/securing your home loan liability 2 Save for vacation 3 Save for your first child STAGE 3 Proud Parents - Once you have children, your need for life insurance is even more. You need to protect your family from an untoward incident. Ensure your protection umbrella takes into account the future cost of securing your child's dream. You will want life to go on for your loved ones, and having enough life insurance is a way to help ensure that. Your needs 1 Provide for children's education 2 Safeguarding family against loan liabilities 3 Savings for post-retirement

STAGE 4 Planning for Retirement - While you are busy climbing the ladder of success today, it is important for you to take time and plan for your life after retirement. Having an early start for retirement planning can make a significant difference to your savings. Think about your golden years even before you have reached them. The Key is to think ahead and plan well using your time and money. Your needs 1 Provide for regular income post retirement 2 Provide for regular income post retirement 3 Lead a secure, independent and comfortable life style in your retirement years.

POINTS OF PARITY Funds available with ULIP Plans

General Description

Nature of Investments

Primarily Equity Funds

Risk Category

invested

company

stocks with the general aim of capital High appreciation

Income,

Fixed Invested

corporate

bonds,

Interest

government securities and other fixed income Medium

and Bond Funds

instruments

Sometimes Cash Funds

known

Money

Market Funds — invested in cash, bank Low deposits and money market instruments

Balanced Funds

Combining

equity

investment

Medium

with fixed interest instruments

Generally all life insurance companies have three types of fund which are Equity fund, Debt fund and Balance fund. These funds have different risk profile. Equity fund has high risk but it gives high return, Debt fund has low risk so it gives low return and balanced fund is combination of both Equity and Debt fund so risk is medium and return is also low. Both HDFC SLIC and Tata AIG LIC have 7 types of funds based on combination of

Debt–Equity fund. These are liquid fund, stable managed fund, secure managed fund, defensive managed fund, balanced managed fund, equity managed fund, growth fund. Indexation You have the option to increase your regular premiums by an indexation rate at any policy anniversary to protect the real value of your investment against inflation. The rate of indexation will be in line with the increase in the Whole Sale Price Index (or in the event that this Index ceases to be published such other index as the Company may select for this purpose). The base sum assured and sum assured of any attached rider would also be increased by the corresponding indexation increase. Charges, Fees and Deductions in ULIP •

Premium Allocation Charge

This is a premium-based charge. After deducting this charge from premiums, the remainder is invested to buy units. The Allocation charges are guaranteed for the entire duration of policy term. •

Mortality Charge

The Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the Fund Value pertaining to regular premiums). It will be deducted by monthly

cancellation of units from the accumulation unit account. The Mortality Charge shall remain guaranteed throughout the policy term. •

Fund Management Charge

1% p.a. on With Profits Fund, 1% p.a. on Debt Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth Fund. FMC will be applied on the fund while calculating NAV on a daily basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA. •

Policy Administration Charge

Rs. 60 per month, which will increase by 5% p.a. on the 1st of January each year. PAC will be deducted monthly by cancellation of units from the accumulation unit account. If premiums are discontinued, this charge would reduce to 60% of the charge applicable for the premium paying policies •

Surrender Charge

This is the charge that applies when the policy is surrendered. It is equal to 50% of the difference between regular premiums expected and those paid in the first year of the contract. •

Service Tax Deductions

12.36% service tax is applicable on the first premium of life insurance policy.

Tax Benefits Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act, 1961. Insurance is tax free up to Rs. 100000 per annum and the returns on investment on maturity of the policy are also tax free.

HDFC SLIC PRODUCTS At HDFC Standard Life, we offer a bouquet of insurance solutions to meet every need. We cater to both, individuals as well as to companies looking to provide benefits to their employees. This section gives you details of all our products. We have incorporated various downloadable forms and products details so that you can make an informed choice about buying a policy.

For individuals, we have a range of protection, investment, pension and savings plans that assist and nurture dreams apart from providing protection. You can choose from a range of products to suit your life-stage and needs. For organizations we have a host of customized solutions that range from Group Term Insurance, Gratuity, Leave Encashment and Superannuation Products. These affordable plans apart from providing long term value to the employees help in enhancing goodwill of the company. Individual Products We at HDFC Standard Life realize that not everyone has the same kind of needs. Keeping this in mind, we have a varied range of Products that you can choose from to suit all your needs. These will help secure your future as well as the future of your family. Protection Plans You can protect your family against the loss of your income or the burden of a loan in the event of your unfortunate demise, disability or sickness. These plans offer valuable peace of mind at a small price. Our Protection range includes our Term Assurance Plan & Loan Cover Term Assurance Plan. Investment Plans

Our Single Premium Whole of Life Plan is well suited to meet your long term investment needs. We provide you with attractive long term returns through regular bonuses. Pension Plans Our Pension Plans help you secure your financial independence even after retirement. Our Pension range includes our Personal Pension Plan, Unit Linked Pension, Unit Linked Pension Plus. Savings Plans Our Savings Plans offer you flexible options to build savings for your future needs such as buying a dream home or fulfilling your children's immediate and future needs. Our Savings range includes Endowment Assurance Plan, Unit Linked Endowment, Unit Linked Endowment Plus, Money Back Plan, Children's Plan, Unit Linked Youngster, Unit Linked Youngster Plus. Let’s have a look to the some of the plans which I have picked up for my project report in the following section:

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HDFC TERM ASSURANCE PLAN

Secure your family's financial independence and self-respect. You have always ensured that your loved ones keep living a respectable life with their heads held high. But life can be uncertain. As a prudent family man, you need to secure your family's future and protect your pride and your family's self respect. You need to have a plan to take care of your family if something unfortunate were to happen to you. With our Protection Plans, you can protect your family from uncertainties in

life such as your unfortunate death or critical illness. And ensure that your family lives a life of self-respect and dignity even in your absence. One Protection Plan gives you: 1 An ideal way to secure the financial future of your loved ones. 2 High Cover at a very nominal cost plus an option of adding optional benefits to cover for other eventualities. 3 A choice of two plans depending on your requirements: 

HDFC Term Assurance Plan: A pure risk cover plan, which gives you protection against the uncertainties of life.



HDFC Loan Cover Term Assurance Plan: An ideal way to cover your home loan or other loan liabilities.

4 Choice of premium payment options-regular premium or a single onetime premium 5 Choice of taking the plan on a single life basis or a joint life (first claim) basis. ┼

HDFC Term Assurance Plan

The HDFC Term Assurance Plan is an insurance policy that is designed to help secure your family's financial needs. The plan does this by providing a lump

sum to the family of the life assured in case of death or critical illness (if option is chosen) of the life assured during the term of the contract. One can choose the lump sum that would replace the income lost to one's family in the unfortunate event of one's death. 3 EASY STEPS TO YOUR OWN PLAN Step 1 Choose the life cover required to secure your family's future in your absence Step 2 Choose from any one of the 3 additional optional benefits as per your requirement. Step 3 Work out the premium payable along with our Financial Consultant. ┼

HDFC LOAN COVER TERM ASSURANCE PLAN

family lives a life of self-respect and dignity even in your absence. Our Protection Plans give you: 1 An ideal way to secure the financial future of your loved ones. 2 High cover at a very nominal cost plus an option of adding optional benefits to cover for other eventualities. 3 A choice of two plans depending on your requirements: 4 HDFC Term Assurance Plan: A pure risk cover plan, which gives you protection against the uncertainties of life. 5 HDFC Loan Cover Term Assurance Plan: An ideal way to cover your home loan or other loan liabilities. 

Choice of premium payment options-regular premium or a single onetime premium.



Choice of taking the plan on a single life basis or a joint life (first claim) basis.

HDFC Loan Cover Term Assurance Plan This Plan provides a lump sum on the unfortunate death of the life assured within the policy term. If you are taking a loan to buy a house for your family, this plan can help you ensure that life's uncertainties do not affect their

shelter. It is an affordable plan that has been designed to help your family repay the outstanding loan in case of your unfortunate death. The lump sum will be a decreasing percentage of the initial Sum Assured as the outstanding loan decreases as per the loan schedule, the cover under the policy also decreases as per the policy schedule. 3 EASY STEPS TO YOUR OWN PLAN Step 1 Choose the life cover required to secure your family's future in your absence. Step 2 Choose from any one of the 3 additional optional benefits as per your requirement. Step 3 Work out the premium payable along with our Financial Consultant. ┼

HDFC SINGLE PREMIUM WHOLE LIFE PLAN

Secure your financial independence "Money is like manure. You have to spread it around or it smells." - J. Paul Getty

The well-informed rightly said and proves how important investments are in today's date and age. The question that we all feat is - What about the risks attached? GOOD NEWS for all the people who are anxious the same way! HDFC Standard Life Insurance brings to you a safe investment plan that would take care of your savings and nurture your earnings.

HDFC Single Premium Whole of Life Insurance Plan HDFC Single Premium Whole of Life Insurance Plan is a tailor-made plan well suited to meet your long-term investment needs. This participating plan offers you the following benefits: 1 Whole of life plan aimed at providing long-term growth of your money 2 Single premium investment plan 3 In case of your unfortunate demise during the policy term, this participating ('With Profits') insurance plan will pay your family the Sum Assured and compound Reversionary Bonuses, which are usually added annually. An additional Terminal Bonus may be paid depending on the performance of the underlying investments. 4 During Guaranteed Surrender Periods you get the Sum Assured and all bonuses vested as at the date of surrender.] ┼

HDFC PERSONAL PENSION PLAN

Hold your head high. Even after retirement. Today, you are busy climbing the ladder of success and realizing your dreams. Today, time is with you. Just take a moment and think. Will you be able to continue at the same pace? Will your income be the same forever? Will you be able to live life on your own terms even after you retire?

HDFC Personal Pension Plan We understand your need to build a secure future for yourself. Hence, the HDFC Personal Pension Plan is an insurance policy that is designed to provide a post-retirement income for life with the freedom to choose your retirement date. You can choose your premium, the Sum Assured and your retirement date. At the end of the policy term, you will receive the Sum Assured plus any attaching bonus, which will provide your post - retirement income. The HDFC Personal Pension Plan is an insurance policy, which can benefit you in the following ways: 1 Provides a post retirement income in your golden years. 2 Gives you the flexibility to plan your retirement date. 3 Gives you tax benefits on your premiums. The plan receives simple Reversionary Bonuses, which are usually added annually. At the end of the term an additional Terminal Bonus may be paid depending on the performance of the underlying investment. (See 'Bonuses' for more details). Don't compromise on your self-respect, ever. Go ahead, hold your head high and enjoy life with the HDFC Personal Pension Plan. 3 EASY STEPS TO YOUR OWN PLAN

Step 1 Choose your retirement age Step 2 Choose the premium you wish to invest, based on your retirement needs Step 3 Choose the investment fund or funds you desire.

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HDFC UNIT LINKED PENSION

Lead of life of respect and dignity. Even after retirement. Today, you are busy climbing the ladder of success and realizing your dreams. Today, time is with you. Just take a moment and think. Will you be able to continue at the same place? Will your income be the same forever? Will you be able to live life on your own terms even after you retire? The HDFC Unit Linked Pension is an insurance Policy that is designed to provide a retirement income for life with the freedom to maximize your investment returns. Stride into your golden years of retirement with dignity and pride. HDFC Unit Linked Pension The HDFC Unit Linked Pension gives you: 1 An outstanding investment opportunity by providing a choice of thoroughly researched and selected investments.

2 A post retirement income for life. 3 Flexibility to plan your retirement date. 4 Freedom to invest premiums as per your preference. You can choose your premium and the investment fund or funds. We will then invest your premium, net of premium allocation charges in your chosen funds in the proportion you specify. At the end of the policy term, you will receive the accumulated value of your funds, which will be used to provide your pension income. In the event of your unfortunate demise during the policy term, your spouse will receive a cash lump sum to help him or her manage the retirement years. Use HDFC Standard Life's excellent investment options to maximize your savings & secure your golden years. Don't compromise on self-respect, ever. Go ahead, hold your head high and enjoy life with the HDFC Unit-Linked Pension. All Unit Linked Life Insurance Plans are different from traditional insurance plans and are subject to different risk factors. HDFC Standard Life is the name of our Insurance Company and HDFC Unit Linked Pension is the name of this plan. The name of our company and the name of our plan do not, in any way, indicate the quality of the plan, its future prospects or returns.

3 EASY STEPS TO YOUR OWN PLAN Step 1 Choose your retirement age Step 2 Choose the premium you wish to invest, based on your retirement needs Step 3 Choose the investment fund or funds you desire. ┼

HDFC UNIT LINKED PENSION PLUS

Lead a life of respect and dignity. Even after retirement. Today, you are busy climbing the ladder of success and realizing your dreams. Today, time is with you. Just take a moment and think. Will you be able to continue at the same pace? Will your income be the same forever? Will you be able to live life on your own terms even after you retire? The HDFC Unit Linked Pension Plus is an insurance policy that is designed to provide a retirement income for life with the freedom to maximize your investment returns. Stride into your golden years of retirement with dignity and pride. HDFC Unit Linked Pension Plus The HDFC Unit Linked Pension Plus gives you: 1 An outstanding investment opportunity by providing a choice of

thoroughly researched and selected investments. 2 Regular Loyalty Units to boost your fund value every year. 3 A Post retirement income for life. 4 Flexibility to plan your retirement date. 5 Freedom to invest premiums as per your preference. You can choose your premium and the investment fund or funds. We will then invest your premium, net of premium allocation charges in your chosen funds in the proportion you specify. At the end of the policy term, you will receive the accumulated value of your funds, which will be used to provide your pension income. In the event of your unfortunate demise during the policy term, your spouse will receive a cash lump sum to help him or her manage the retirement years. Use HDFC Standard Life's excellent investment options to maximize your savings & secure your golden years. Don't compromise on self-respect, ever. Go ahead, hold your head high and enjoy life with the HDFC Unit-Linked Pension Plus. All Unit Linked Life Insurance plans are different from traditional insurance plans and are subject to different risk factors.

HDFC Standard Life is the name of our Insurance Company and HDFC Unit Linked Pension Plus is the name of this plan. The name of our company and the name of our plan do not, in any way, indicate the quality of the plan, its future prospects or returns. 3 EASY STEPS TO YOUR OWN PLAN Step 1 Choose your retirement age Step 2 Choose the premium you wish to invest, based on your retirement needs Step 3 Choose the investment fund or funds you desire.

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HDFC ENDOWMENT ASSURANCE PLAN

Secure Your Family's Financial Independence. You have given your family the very best. And there is no reason why they shouldn't get the very best in the future too. As a judicious family man, your priority is to secure the well-being of those who depend on you. Not just for today, but also in the long term. More importantly, you have to guard your loved ones against any eventuality. How will they sustain their way of life, so lovingly built by you, in your absence? With our HDFC Endowment Assurance Plan, you can ensure that your family

remains financially independent, even if you are not around. You can ensure that they live a life of respect and dignity. Endowment Assurance Plan The HDFC Endowment Assurance Plan gives you: 6 An ideal way to secure your long-term financial goals. 7 Valuable protection to your family by way of lump sum payment in case of your unfortunate demise within policy term. 8 Lump sum payment (basic Sum Assured plus any bonus additions) on survival up to maturity date. 9 Very flexible benefit options and payment options. In case of your unfortunate demise during the policy term, this participating ("With Profits") insurance plan will pay your family the Sum Assured (together with the attached bonuses) you had chosen. The plan receives simple Reversionary Bonuses, which are usually added annually. At the end of the term and additional Terminal Bonus may be paid depending on the performance of the underlying investment. 3 EASY STEPS TO YOUR OWN PLAN Step 1 Choose the amount of targeted savings and policy term using our

Financial Planning Tool. Step 2 Choose from any one of the 4 additional benefit options as per your requirement. Step 3 Work out the premium payable and Sum Assured with our Financial Consultant.

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HDFC UNIT LINKED ENDOWMENT

Invest in financial security and self-respect for you and your family. You have given your family the very best and there is no reason why they should not get the very best in the future too. With HDFC Unit Linked Endowment, you can ensure that your family remains financially independent, even if you are not around. You can ensure that they live a life of respect and dignity. HDFC Unit Linked Endowment

The HDFC Unit Linked Endowment Plans gives you: 1 An outstanding investment opportunity by providing a choice of thoroughly researched and selected investments. 2 Valuable protection to your family in case you are not around 3 Flexible benefit combinations and payment options 4 Flexible additional benefit options such as critical illness cover 5 Access to your accumulated fund before maturity. You can choose your premium and the investment fund or funds. We will then invest your premium, net of premium allocation charges in your chosen funds in the proportion you specify. At the end of the policy term, you will receive the accumulated value of your funds. In case of your unfortunate demise during the policy term, we will pay the greater of your Sum Assured (less any withdrawals you have made in the two years before your claim) and your total fund value to your family. Use HDFC Standard Life's excellent investment options to maximize your savings & secure your and your family's future. We will provide financial security for your family in your absence. All Unit Linked Life Insurance plans are different from traditional insurance

plans and are subject to different risk factors. HDFC Standard Life is the name of our Insurance Company and HDFC Unit Linked Endowment is the name of this plan. The name of our company and the name of our plan do not, in any way, indicate the quality of the plan, its future prospects or returns. 4

EASY STEPS TO YOUR OWN PLAN

Step 1 Choose the premium you wish to invest. Step 2 Choose the amount of protection (Sum Assured) you desire. Step 3 Choose the additional plan benefits you desire. Step 4 Choose the investment fund or funds you desire. ┼

HDFC UNIT LINKED ENDOWMENT PLUS

Invest in financial security and self-respect for you and your family. You have given your family the very best and there is no reason why they should not get the very best in the future too. With HDFC Unit Linked Endowment Plus, you can ensure that your family remains financially independent, even if you are not around. You can ensure that they live a life of respect and dignity. HDFC Unit Linked Endowment Plus

The HDFC Unit Linked Endowment Plus gives you: 1 An outstanding investment opportunity by providing a choice of thoroughly researched and selected investments. 2 Regular Loyalty Units to boost your fund value every year. 3 Valuable protection to your family in case you are not around. 4 Flexible benefit combinations and payment options. 5 Flexible additional benefit options such as critical illness cover. 6 Access to your accumulated fund before maturity. You can choose your premium and the investment fund or funds. We will then invest your premium, net of premium allocation charges in your chosen funds in the proportion you specify. At the end of the policy term, you will receive the accumulated value of your funds. In case of your unfortunate demise during the policy term, we will pay the greater of your Sum Assured (less any withdrawals you have made in the two years before your claim) and your total fund value to your family. Use HDFC Standard Life's excellent investment options to maximize your savings & secure your and your family's future. We will provide financial security for your family in your absence.

All Unit Linked Life Insurance plans are different from traditional insurance plans and are subject to different risk factors. HDFC Standard Life is the name of our Insurance Company and HDFC Unit Linked Endowment Plus is the name of this plan. The name of our company and the name of our plan do not, in any way, indicate the quality of the plan, its future prospects or returns. 4

EASY STEPS TO YOUR OWN PLAN

HDFC MONEY BACK PLAN

Secure your financial independence and live life on your own terms. So why let the changing realities of everyday life over when you and make your aspirations take a back seat? You can plan now to ensure that you have the necessary funds to meet your future financial needs. The table below will help you identify and classify some of your financial goals. You can prioritize these goals and set your objectives accordingly (see

indicative table given below).

LONG - TERM GOALS Provide adequate cover Critical Illness or disability

for

SHORT TERM GOALS Life, Buying a Car

Saving for big-ticket assets like your Saving for your marriage house Saving for your children's education

Vacation abroad

Having a regular system for savings. HDFC Money Back Plan The HDFC Money Back Plan is a 'With Profit' Plan that gives you: 1 A proportion of the basic Sum Assured as Cash lump sums at regular 5 years intervals within the policy term (see the table given below) an ideal way to secure your long - term as well as short-term financial goals. 2 A lump sum payment on survival up to maturity date. 3 Valuable protection to your family by way of lump sum payment in case of your unfortunate death within the policy term. This is over and above any earlier payouts. Making the right kind of investment will enable you to achieve your objectives -be it your immediate expenses or else securing your future financial needs.

Our Money Back Plan gives you a wide range of terms and cash benefit schedules to choose from. A summary of Key Benefits including the cash lump sum payments, expressed as a percentage of Sum Assured is shown below. Key Benefits

Total Policy Survival Benefit Term 5th 10th 15th Yrs. Yrs. Yrs.

20th Yrs.

25th Yrs.

30th Yrs.

40%

60% + Bon uses

30%

30% + Bon uses

40% + Bon uses

25%

25% + Bon uses

20%

20% + Bon uses

15%

15% + Bon uses

25% + Bon uses

Maturity Value On maturity you receive survival benefit due at that point of time along with attaching bonuses for the full Sum Assured calculated for the full term. You can

ensure your financial independence. And be able to live life on your own terms. 3 EASY STEPS TO YOUR OWN PLAN Step 1 Choose the amount of targeted savings and policy term using our Financial Planning Tool. Step 2 Choose from any one of the 4 additional optional benefits as per your requirement. Step 3 Work out the premium payable and Sum Assured with our Financial Consultant.

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HDFC CHILDREN'S PLAN

Give your child the perfect start in life. As a parent, your priority is your child's future and being able to meet your child's dreams and aspirations. Today, providing a good education, establishing a professional career or even a modest wedding is expensive. Costs are increasing fast. Just imagine how much you'll need when your child takes these important steps in life!

Plan today to ensure a bright future for your child. Start building savings today with out HDFC Children's Plan. So that your child is able to lead a life of respect and dignity with a secured financial future. HDFC Children's Plan The HDFC Children's Plan gives you: 1 Invaluable Financial support to your child. 2 Invaluable Financial support to your child. 3 Multiple options for multiple benefits. The HDFC Children's Plan is designed to secure your child's future by giving your child (the beneficiary) a guaranteed lump sum, on maturity or in case of your unfortunate demise, early in the policy term. the premiums, paid by you, are invested by the company to give you good long-term returns. The plan receives simple Reversionary Bonuses, which are usually added annually. At the end of the term an additional Terminal Bonus may be paid depending on the performance of the underlying investment. 3 EASY STEPS TO YOUR OWN PLAN Step 1 Choose the amount of targeted savings and policy term using our

Financial Planning Tool. Step 2 Choose from any one of the 4 additional optional benefits as per your requirement. Step 3 Work out the premium payable and Sum Assured with our Financial Consultant.

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HDFC UNIT LINKED YOUNG STAR

Invest in your child's dreams, and secure your self-respect. As a parent, your priority is your children's future and being able to meet their dreams and aspirations. Today, providing a good education, establishing a professional career or even a modest wedding is expensive. Cost are rising fast. Just imagine how much you will need when your children take these important steps in life.

Plan today to ensure a bright future for your children. Start saving today with our HDFC Unit Linked Young Star so that your child is able to lead a life of respect and dignity with a secured financial future. HDFC Unit Linked Young Star gives you: 1 An outstanding investment opportunity by providing a choice of thoroughly researched and selected investments. 2 Valuable protection to your child in case you are not around. 3 Flexible benefit combinations and payment options. 4 Flexible additional benefit options such as critical illness cover. 5 Access to your accumulated fund before maturity. You can choose your premium and the investment fund or funds. We will then invest premium, net of premium allocation charges in your chosen funds in the proportion you specify. At the end of the policy term, you will receive the accumulated value of your funds. In case of your unfortunate demise during the policy term, we will: 1 Pay the sum assured you had chosen to your child. 2 Continue your policy AND continue to pay the original regular premiums you had chosen.

This means we will continue to make your savings on your behalf, in your absence. The fund will be available for your family's use until the original Maturity Date. Use HDFC Standard Life's excellent investment options to maximize your savings & maximize your child's achievements. We will provide financial security for your child. All Unit Linked Life Insurance Plans are different from traditional Insurance plans and are subject to different risk factors. HDFC Standard Life is the name of our Insurance Company and HDFC Unit Linked Young Star is the name of this plan. The name of our company and the name of our plan do not, in any way, indicate the quality of the plan, its future prospects or returns. 4 EASY STEPS TO YOUR OWN PLAN Step 1 Choose the premium you with to invest. Step 2 Choose the amount of protection (Sum Assured) you desire. Step 3 Choose the additional plan benefits you desire. Step 4 Choose the investment fund or funds you desire.

GROUP PRODUCTS

One-stop shop for employee-benefit solutions HDFC Standard Life has the most comprehensive list of products for progressive employers who wish to provide the best and most innovative employee benefit solutions to their employees. We offer different products for different needs of employers ranging from term insurance plans for pure protection to voluntary plans such as superannuation and leave encashment. We now offer the following group products to our esteemed corporate clients: 1 Group Term Insurance. 2 Group Variable Term Insurance. 3 Group Unit-Linked Plan. 

An investment solution that provides funding vehicle to manage corpuses with Gratuity, Defined Benefit or Defined Contribution Superannuation

Leave

Encashment

Schemes

your

company. 

Also suitable for other employee benefit schemes such as salary saving schemes and wealth management schemes.

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GROUP TERM INSURANCE PLAN

Whatever the business - It's the people who make it a success. Everybody

requires some type of life insurance, especially when others depend on them financially. The Group Term Insurance (GTI) plan meets this need and serves as an ideal way for companies to reinforce their bond with their employees. The sort of needs, you, as an employer needs to cater to could be in form of: 1 Employee benefits 2 Cover for housing or vehicle loans given by you to your employees. 3 A GTI cover for future service gratuity liability to be taken along with the HDFC Group Unit Linked Plan. The HDFC Group Term Insurance is a cost-effective plan that addresses these needs. In addition you have the choice to opt for a GTI with an experience discount feature ("Profit Share"), where a discount is given on future premiums in case of favorable claim experience (subject to group size). The HDFC group term insurance plan will have the following structure: 1 One year renewable term insurance plan 2 One master policy issued covering all members of the group 3 Sum assured is payable on death (either due to natural causes or accidents).

The plan covers death due to any cause; accidental or natural, and hence is more comprehensive than Group Personal Accident Insurance. Several multinational Corporations, large Indian companies, foreign banks and software companies have already chosen the HDFC Group Term Insurance, an innovative product from HDFC Standard Life Insurance, to protect their employees. ┼

GROUP VARIABLE TERM INSURANCE

The Group Variable Term Insurance is a tailor made insurance policy for third party institutions. HDFC Standard Life Insurance Company will offer life insurance to customer's of one or more of the third party's specific products in order that in the event of their death, there will be a lump sum available. The Group Variable Term Insurance: 1 On death, will pay a lump sum known as a sum assured. The sum assured varies over time in order that the customer receives the cover that they need. 2 Is a group policy. 3 Has no lengthy underwriting procedure. 4 Is simply to administer. ┼

GROUP UNIT LINKED PLAN

Gratuity Schemes Most employers have a statutory obligation to pay a gratuity to its employees on termination of employment. This gratuity is in the form of a one-off payment made on termination of employment. It depends on salary and number of years of service, so will therefore, increase with time. The HDFC Group Unit Linked Plan is a new and innovative unit-linked plan, which offer employers and gratuity scheme trustees a flexible and cost effective way to fund this gratuity liability. The plan helps a corporate by: 1 Building a fund systematically, this will be used to meet your future gratuity liability. 2 Providing the opportunity to maximize investment returns and thus provide the benefit in a cost-effective manner. One factor that helps you to maximize the investment returns is low charges. Our charges are the lowest in the industry and therefore, can improve your long-term returns. ┼

GROUP UNIT LINKED PLAN Leave Encashment Schemes

Many employers provide their employees with the option of enchasing their leave to their credit at the time of retirement or resignation. Accounting

Standard 15 requires that an actuarial valuation of a company leave encashment liability be carried out and reflected in the books of accounts. The HDFC Group Unit Linked Plan is an innovative plan, which offers employers a flexible and cost effective way to fund this Leave Encashment liability. The plan helps an organization by: 1 Creating a fund that can be built up to meet your future leave encashment liability. 2 Providing the opportunity to maximize investment returns and thus provide the benefit in a cost-effective manner. One factor that helps maximize investment returns is low charges. Our fund management charges are the lowest in the industry today and therefore, can improve your long-term returns. ┼

GROUP UNIT LINKED PLAN Superannuation Schemes

Many organizations realize that the statutory requirement benefits are not sufficient for their trusted employees to continue enjoying their quality of life after they retire. The HDFC Group Unit Linked Plan is a great way for an employer to show his employees that he not only takes care of them while in service, but has also ensured that they can lead a comfortable life after retirement.

The HDFC Group Unit Linked Plan is also a great employee retention and motivation tool that helps employers to fund their employees' post-retirement needs in a systematic, tax-efficient and cost-effective manner. Moreover, as a unit-linked plan, it gives you tremendous flexibility and freedom to customize individual retirement funds for your employees based on their appetite for risk and the stage of life they are in. This plan helps an organization by: 1 Providing an investment vehicle to trustees for making the contribution for each member. 2 Helping build a substantial retirement fund for each member. 3 Presenting a potential to provide higher benefits to employees. 4 Offering tax benefits for investments made through the formation of a trust.

SOCIAL PRODUCT DEVELOPMENT INSURANCE PLAN Development Insurance plan is an insurance plan which provides life cover to members of a Development Agency for a term of one year. On the death of any

member of the group insured during the year of cover, a lump sum is paid to that member's beneficiaries to help meet some of the immediate financial needs following their loss. Eligibility Members of the Development Agency and their spouses with: –

Minimum age at the start of the policy 18 years last birthday.

–

Maximum age at the start of policy 50 years last birthday.

Employees of the Development Agency are not eligible to join the group. The group to be covered is only eligible if it contains more than 500 members. Premium Payments The premium to be paid will be quoted per member in the group and will be the same for all members of the group. The premium can only be paid by the Development Agency as a single lump sum that includes all premiums for the group to be covered. Cover will not start until the premium and all the member information in our specified format has been received. The premium rate is Rs. 25 per Rs. 10,000 of lump sum, per member.

Benefits On the death of each member covered by the policy during the year of cover a lump sum equal to the sum assured will be paid to their beneficiaries or legal heirs. Where the death is as a result of an accident, an additional lump sum will be paid equal to half the sum assured. There are no benefits paid at the end of the year of cover and there is no surrender value available at any time. The role of the Development Agency Due to the nature of the groups covered, HDFC Standard Life will be passing certain administrative tasks onto the Development Agency. By passing on these tasks the premium charges can be lower. These tasks would include: 1 Submission of member data in a specified compute format 2 Collection of premiums from group members. 3 Recording changes in the details of group members. 4 Disbursement of claim payments and the mortality rebate (if any) to group members. These tasks would be in addition to the usual duties of a policyholder such as: 5 Payment of premiums 6 Reporting of claims

7 Keeping policyholder information up to date. Training and support will be available to give guidance on how to complete the tasks appropriately. Since these additional tasks will impose a burden on the Development Agency, the Development Agency may charge a Rs. 10 administration fee to their members. Prohibition of rebates Section 41 of the Insurance Act, 1938 states1 No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectus or tables of the insurer. 2 If any person fails to comply with sub regulation (previous point) above, he shall be liable to payment of a fine which may extend to rupees five hundred.

TAX BENEFIT PRODUCTS

INCOME TAX GROSS SELECTION ANNUAL SALARY

HOW MUCH HDFC STANDARD TAX CAN YOU LIFE PLANS SAVE?

Sec. 80C

Across All Upto Rs. 33,660 All the life insurance income Slabs. saved on plans. investment of Rs. 1,00,000.

Sec. 80CCC

Across all Upto Rs. 33,660 All the income slabs. saved on plans. investment of Rs. 1,00,000.

Sec. 80D*

Across all Upto Rs. 3,366 income slabs. saved on Investment of Rs. 10,000.

TOTAL SAVINGS POSSIBLE**

Rs. 37.026 Rs. 33,660 under Sec. 80C and Under Sec. 80CCC, Rs. 3,366 under Sec. 80D, calculated for a male with gross annual income not exceeding Rs. 10,00,000.

Sec. 10 (10)D

Under Sec. 10 (10D), the benefits you receive are completely tax-free, subject to the conditions laid down therein.

pension

All the health insurance riders available with the conventional plans.

Applicable to premiums paid for Critical Illness Benefit, Accelerated Sum Assured and Waiver of Premium Benefit.

These calculations are illustrative and based on our understanding of current tax legislations.

Please contact your tax consultant for exact calculation of your tax liabilities. CUSTOMER SERVICE

HDFC Standard Life is committed to maintaining the highest level of customer service. Interacting with you via this website is an extension of this commitment and designed the 'Customer Service' section keeping in mind all the information you may want to seek regarding procedures such as paying your premium, various policy servicing options, processing a claim and so on. We have also provided relevant forms that can be downloaded easily for your use.

ANALYSIS & INTERPRETATION

Age group of surveyed respondents Table: 1 Age group 18 – 25 Years 26 - 35 years 36 - 49 years More than 50 years Chart: 1

No. of Respondents 127 67 46 30

AGE GROUP OF SURVEYED RESPONDENTS

More than 50 years, 11% 18 – 25 Years, 47%

36 - 49 years, 17%

26 - 35 years, 25%

18 – 25 Years

26 - 35 years

36 - 49 years

More than 50 years

Analysis: From the chart above we find that 47% of the respondents fall in the age group of 18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36 – 49 years. Therefore most of the respondents are relatively young (below 26 years of age). These individuals could be induced to purchase insurance plans on the basis of its tax saving nature and as an investment opportunity with high returns. Individuals at this age are trying to buy a house or a car. Insurance could help them with this and this fact has to be conveyed to the consumer. As of now many consumers have a false perception that insurance is only meant for people above the age of 50. Contrary to popular belief the younger you are the more insurance you need as your loss will mean a great financial loss to your family, spouse and children (in case the individual is married) who are financially dependent on you. Gender classification of surveyed respondents Table: 2 Particulars No. of Respondents Male

193

Female

Chart: 2 GENDER CLASSIFICATION OF SURVEYED RESPONDENTS 250

No of Respondents

200

150

Male, 193 100

Female, 77

0 Male

Female

Gender

No. Of respondents who have life insurance policy in their name Table: 3 Persons who have life insurance policy Yes 103 No 167

Chart: 3 Persons who have Life Insurance Policy

Yes, 38%

No, 62%

Analysis:

This graph shows that out of total 270 respondents only 103 or 38% respondents have life insurance policy in their name. Rest all don’t have a single policy in their name. So there is a very big scope for life insurance companies to cover these people. So in future business of life insurace will gro further. Annual premium paid by individuals for life insurance Table: 4 Premium paid (p.a.)

No. of respondents

Rs. 5000 - Rs. 10000

Rs. 10001 - Rs. 15000

Rs. 15001 - Rs. 24900

Rs. 25000 - Rs. 50000

Rs. 50001 - Rs. 60000

Rs.60001 - Rs. 80000

Rs. 80001 - Rs. 100000 3

Chart: 4

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

Rs.60001 - Rs. 80000, 2%

Rs. 50001 - Rs. 60000, 4%

Rs. 80001 - Rs. 100000, 3%

Rs. 25000 - Rs. 50000, 10% Rs. 5000 - Rs. 10000, 39%

Rs. 15001 - Rs. 24900, 17%

Rs. 10001 - Rs. 15000, 25%

Analysis: From the chart above we find that, 39% of the respondents surveyed pay an annual premium less than Rs. 10001 towards life insurance. 25% of the respondents pay an annual premium less than Rs. 15001 and 17% pay an annual premium less than Rs. 25000. Hence we can safely say that HDFC SLIC would be able to capture the market better if it introduced products/plans where the minimum premium starts at Rs. 5000 per annum. Only 19% of the respondents pay more than Rs. 25000 as premium and most products sold by HDFC SLIC have Rs.12000 as the minimum annual premium amount. They should introduce more products like Easy Life Plus and Safe Guard where the minimum premium is Rs.6000 p.a. and Rs. 12000 p.a. respectively. This would definitely increase their market share as more individuals would be able to afford the policies/plans offered. Popular life insurance plans Table: 5 Type of Plan Term Insurance Plans

No. of Respondents 105

Endowment Plans

122

Pension Plans

Child Plans

Tax Saving Plans

Chart: 5 POPULAR LIFE INSURANCE PLANS Tax Saving Plans, 7% Child Plans, 3%

Term Insurance Plans, 39%

Pension Plans, 6%

Endowment Plans, 45%

Term Insurance Plans

Endowment Plans

Child Plans

Tax Saving Plans

Pension Plans

Analysis: From the chart given above we can clearly see that 45% of the respondents hold endowment plans and 39% of the respondents hold term insurance plans. Endowment plans are very popular and serve two purposes – life cover and savings. If the policy holder dies during the policy term the nominee gets the death benefit that is, sum assured and accumulated bonus. On survival the policy holder receives the survival benefit with a bonus. A term plan is a pure risk cover plan wherein the insured pays a lower premium for a higher sum assured. Term insurance is the cheapest form of insurance and helps the policy holder insure himself for a relatively low premium. For the returns sensitive investor term plans do not find favor as they do not offer a return in case the individual does not die during the policy term.

Consumer willingness to spend on life insurance premium Table: 6 Willingness premium

spend

on No. of respondents

Less than Rs. 6,000

Rs. 6,001 - Rs. 10,000

Rs. 10,001 - Rs. 25,000

110

Rs. 25,001 - Rs. 50,000

Rs. 50,001 - Rs. 1,00,000

Chart: 6 CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM Rs. 50,001 - Rs. 1,00,000, 2% Rs. 25,001 - Rs. 50,000, 15%

Less than Rs. 6,000, 15%

Rs. 6,001 - Rs. 10,000, 27% Rs. 10,001 - Rs. 25,000, 41%

Less than Rs. 6,000

Rs. 6,001 - Rs. 10,000

Rs. 25,001 - Rs. 50,000

Rs. 50,001 - Rs. 1,00,000

Rs. 10,001 - Rs. 25,000

Analysis: From the graph above, we can clearly see that 41% of the respondents would be willing to spend between Rs. 10001 – Rs. 25000 for life insurance. 27 % would be willing to spend between Rs. 6001 – Rs. 10000 per annum. Only 15% would be willing to spend more than Rs. 25000 per annum as life insurance premium.

We could say that the maximum premium payable by most consumers is less than Rs. 25000 p.a. HDFC SLIC is faced with a large amount of competition. There are 18 insurance companies in India inclusive of LIC. Hence to capture a larger part of the market the company could introduce more reasonable plans with lesser premium payable per annum. Chart showing ideal policy term Table: 7 Ideal policy term

No. of respondents

3 - 5 years

6 - 9 years

10 - 15 years

16 - 20 years

21 - 25 years

26 - 30 years More than years

5 30

Whole life Policy

Chart: 7

3 13

IDEAL POLICY TERM 95

100

No. of Respondents

90 80 70 60

30 20

13 5

0 3 - 5'

6 - 9'

10 - 15'

16 - 20'

21 - 25'

26 - 30'

More than Whole life 30' Policy

Years

Analysis: From the chart given above it can be seen that 35% of the respondents prefer a policy term of 10 – 15 years, 19% prefer a term of 3 – 5 years and 15% prefer a term of 6 – 9 years. This means that HDFC SLIC could introduce more plans wherein the premium paying term is less than 15 years. The outlook of insurance as a product should be changed from something which you pay for your whole life (whole life policy) and do not receive any benefit (the nominee only receives the benefit in case of your death) to an extremely useful investment opportunity with the prospects of good returns on savings, tax saving opportunities as well as providing for every milestone in your life like marriage, education, children and retirement. Factors that motivate respondents to purchase insurance Table: 8 Parameter Advertisements High returns Advice from friends

No. of Respondents 35 84 46

Family responsibilities Others

89 16

Chart: 8 FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE

Others, 6% Advertisements, 13% Family responsibilities, 33%

High returns, 31% Advice from friends, 17%

Advertisements

High returns

Advice from friends

Family responsibilities

Others

Analysis: From the chart above it can be seen that 33% of the respondents purchase life insurance to secure their families, 33% take life insurance to get high returns, 17% purchase insurance on the advice of their friends and 13% purchase insurance because of the influence of advertisements. The main purpose of insurance is to cover the financial or economic loss that occurs to the family in case of the uncertain death of the policy holder. But now days this trend is changing. Along with protection (life cover), a savings element is being added to insurance. With the introduction of the new unit linked plans in the market, policy holders get the option to choose where their money will be invested. They can invest

their money in the equity market, debt market, money market or a combination of these. The debt and money markets usually have low risk attached whereas the equity market is a high risk investment option. Preferred company type of the respondents Table: 9 Type of Company Government Company

No. of Respondents Owned 127

Public Limited Company

Private Company

Foreign Company

Chart: 9 PREFERRED COMPANY TYPE OF THE RESPONDENTS 140

127

No. of Respondents

120 100 80 62 60

49 32

40 20 0 Government Owned

Public Limited

Private

Foreign

Type of Companies

Analysis: From the graph above we find that 60% of the respondents preferred to purchase insurance from a government owned company, 29% of the respondents preferred to purchase insurance from a public limited company

and only 4% of the respondents preferred a foreign based company. Heavy advertising through television, newspapers, magazines and radio is required. Minimum expected return on investment Table: 13 Expected Returns

No. of respondents

Less than 5%

5% - 10%

11% - 15%

16% - 20%

21% - 25%

26% - 30%

31% - 40%

41% - 50%

More than 50%

Chart: 13 MINIMUM EXPECTED RETURN ON INVESTMENT 60

No of Respondents

22 14

0 Less than 5% - 10% 5%

11% 15%

16% 20%

21% 25%

26% 30%

31% 40%

41% 50%

More than 50%

Percentage (%)

Analysis: From the chart above it can clearly been seen that 18% of the respondents would like 16 – 20% returns, 17% would like returns between 21 – 25% and 17%

would like returns of 11 – 15% on their investments. Therefore the average return on investment should be at least 16 – 20 %. Most consumers are willing to adapt to some amount of risk but still want some guaranteed returns. Therefore the bulk of investment should be made in the balanced fund with 50% debt and 50% equity. The returns on the Secure Fund are guaranteed as these involve investment is government securities and the debt market. But the returns on these instruments are low (8 – 10%). If the company invests in shares, returns are higher (39%) but correspondingly risk borne by the policy holder is also higher. Therefore a good combination of the two instruments is often a wise choice.

FUTURE LINE OF RESEARCH The future topics for research in the organization could be setting up of an appropriate ad campaign. It is very vital to the companies’ success that the people of India know about HDFC SLIC, its products and their special features and how insurance in general can help them in their future. The advertisements have to be emotionally appealing. They might also include a celebrity. The brand name of HDFC could be used to give a push to HDFC SLIC and its products. The general perception of insurance as “inauspicious” should be done away with and individuals and corporations accept insurance on power with other investment opportunities. The other area of research could be in the management of funds HDFC SLIC possesses and how it can maximize returns for its investors. A research project could be undertaken on how to ensure that the money gets invested in the right companies and earns a medium – high return on investment. Another area of research could be an analysis of the sales and marketing techniques used by

HDFC SLIC. A large number of changes could be introduced and this would help in saving operating costs and improving the efficiency of the firm.

CONCLUSION

ULIPs Vs Mutual Funds: Who's better? Unit Links Insurance Plan (ULIP) and Mutual Fund (MF) are the two most preferred options for a part time investor to invest into equity. But how do we decide which one should we go for. Though it is very easy to decide, people tend to confuse themselves most of the time. This article talks about some points that you need to consider while deciding which option we want to take. Mutual Fund is pure investments. ULIP are combination of Insurance and Investment. First question that we need to answer while buying ULIP is - Do I need to buy insurance?

1) Does the person seeking insurance have any financial liabilities? 2) If something happens to the person, is there someone who can be in a financial crisis? If the answer to the above two question is yes, I NEED TO BUY INSURANCE.

Now let us compare ULIP and MF based on certain well known facts: 1) Insurance ULIPs provide you with insurance cover. MFs don’t provide you with insurance cover. A point in favor of ULIPs. But let me tell you that you don’t get this insurance cover for free. Mortality charges (i.e. the price you pay for the insurance cover) get deducted from your investment. 2) Entry Load ULIPs generally come with a huge entry load. For different schemes, this can vary between 5 to 40% of the first year’s premium. MFs have a small entry load of a maximum of 2.5% which can also be waved off if you apply directly (i.e. not through an agent). Here MFs have a huge advantage. If we consider a conservative market return of about 10-15% you may get a zero percent return in the first year.

3) Maturity ULIPs generally come with a maturity of 5 to 20 years. That what ever money you put in, most of it will be locked-in till the maturity.

Taxes saving MF (Popularly called as Equity Linked Saving Scheme or ELSS) come with a lock-in period of 3 years. Other MFs don’t have a lock-in period. Again MFs have advantage over ULIPs. ULIPs do allow you to take money out prematurely but they also put penalties on you for doing that.

4) Compulsion of Investing ULIPs would generally make you pay at least first three premiums. MFs don’t have any compulsion on future investments. If you have invested in a MF this year, and in the next year you don’t have enough income or money to do investments you can decide not to make any investments’. Also if you notice that the MF that you invested in is not giving good returns as compared to some other Funds scheme, you can decide to invest in some other MF.

5) Tax Saving Both the ELSS and ULIP come under 80C and can save you tax. Returns in the both form of investments are tax free.

6) Market exposure ULIPs give you both moderate and aggressive exposure to equity market Debt and Liquid MF let invest with low risk, but don’t give you tax benefit. ULIPs need not be aggressive in equity exposure. That is ULIPs need not keep more that 60% of their funds in equity market. ULIPS also allow changing your

equity market exposure. Thus it can help you time the market and still give you tax savings. If a MF has a less than 60% exposure to equity market the returns from it are not tax free. Thus you don’t get to take a conservative stand on returns.

7) Flexibility of time of redemption ULIP will get redeemed on maturing. Premature redemption is allowed with some penalty. In MF premature redemption is not allowed. For a open ended scheme one can redeem the MF anytime after maturity

This is mainly useful if the market is down at the maturity time of the investment. In case of ELSS you can wait till the market comes up again and then redeem them. ULIP scheme won’t allow you to wait.

Thus, according to my opinion

1) If you wish to take an aggressive exposure to equity market, go ahead any buy MF. ULIP won’t be able to give you similar returns.

2) If you think you are not disciplined enough to make regular investments and need a whip to make you invest, invest in ULIP.

3) If you want to take a low exposure to equity market and still get tax free returns, invest in ULIP but make sure that fund you are invested is conservative fund.

4) If you want Insurance cover and also good return on investment. I would suggest that you invest in MFs and take a term plan.

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. As is the cases with mutual funds, investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component. However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs.

How ULIPs can make you RICH! Despite the seemingly comparable structures there are various factors wherein the two differ. In this we evaluate the two avenues on certain common parameters and find out how they measure up.

1. Mode of investment/ investment amounts Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house. ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity. This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter. ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts. 2. Expenses In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to

pre-determined upper limits as prescribed by the Securities and Exchange Board of India. For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors. Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. ULIP-related expenses have been dealt with in detail in the article "Understanding ULIP expenses". 3. Portfolio disclosure Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio. There is lack of consensus on

whether ULIPs are required to disclose their portfolios. During our interactions with leading insurers we came across divergent views on this issue. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand. Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions. As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load. On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches).

Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. This can prove to be very useful for investors, for example in a bull market when the ULIP investor's equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan. 4. Flexibility in altering the asset allocation As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load. On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches). Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. This can prove to be very useful for investors, for example in a bull market when the ULIP investor's equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan.

5. Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds well, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%. Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain is taxed at the investor's marginal tax rate. Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and make informed decisions.

Life Insurance is now being regarded as a versatile financial planning tool. Research indicates that Indians have four basic financial needs during their life time: 1. Asset accumulation such as buying a house or a car. 2. Protecting their family 3. Securing their children’s education

4. Planning for their retirement. India being a country of vast population of over one billion with only 33.2% of the insurable population in India possessing Life insurance, the country has a vast potential which has been left untapped now. Till some years back, most of the people used to invest in traditional market (i.e. Equity, Bonds, Mutual funds, Government securities and bonds etc.), but with the emergence and popularity of Unit Linked Insurance products, the mindset has changed. One can see that insurance is a better choice while making investment decisions because of features like: 1. Tax savings 2. Better returns 3. Protection from any miss happening. The need of the hour is recognize the power of the Financial Planning. One who can draw out a well defined financial plan according to his needs would expect good returns from the market in the long run. How ever the awareness of financial planning among the consumers is still low but with the increase in purchasing power of the customers and with coming up of new innovative products customers has started to plan for their financial needs and in coming years the awareness is expected to increase. Thus insurance industry has tremendous growth opportunities provided that it meets the expectations of the customers. The changing products of insurance with changing needs of the customers can be a major cause for the growth of the insurance industry.

RECOMMENDATIONS 

Need to innovate and use differentiated strategies in sales, distribution and marketing.



Distribution channel should be made more efficient.



The edge of the ULIPs over the products like mutual funds and investment in equities should be appropriately promoted and should be made known to the people.



The quality of the sales force should be improved.



Right customer identification and thus segmentation which needs to be accurate.



The population residing in the rural areas must be prompted to invest in Insurance products.



Customer should be informed beforehand about the fluctuating returns from the market.



After sales services should be improved



Claim settlement etc. should be made less harassing.

CHALLENGES & LIMITATIONS 1.

Lack of financial assistance caused the study to be limited over a confined area.

Lack of awareness among people about insurance as a investment product remained

the cause for not getting proper responses from some of the

people. 3.

As the Unit Linked plans are market dependent and have certain amount of risk associated with them, people do not easily trust them.

Aggressive sales strategy of Private insurance players may cause inconvenience to some people. Thus they do not furnish correct information in the questionnaire filled by them

BIBLIOGRAPHY & REFERENCES

Books Referred: 1.

Kothari, C.R., Quantitative Techniques, 2nd edition, New Delhi, Vikas Publishing House Pvt. Ltd. 1984.

Khan, M.Y., Financial services, 3rd edition, New Delhi, TATA McGraw Hill Publishing Company Ltd., 2004.

Saunders, Anthony & Cornett, Millon, Marcia, Financial Markets and Institutions-A

Modern

Perspective,

2nd

edition

(

International

edition),New York, Mc Graw Hill/Irwin an imprint of the Mc Graw Hill Companies, Inc., 2003. 4.

Peraswamy, P., Principles and Practices of Insurance, 1st edition, Himalaya Publishing house 2003.

Internet sites: 1.

www.moneycontrol.com

www.indiacore.com

www.personalfn.com

www.myiris.com

www.thehindu.com

www.hdfcinsurance.com

www.metlife.com

www.Bajajallianzlife.com

www.tata-aig-life.com

10.

www.sbi-insurance.com

11.

www.google.com

12.

www.ingvysya.com

13.

www.scribd.com

Research papers:

Sinha, Tapen, An Analysis of the Evolution of Insurance in India, CRIS Discussion Paper Series III,The University of Nottingham, 2005.

“A SURVEY ON ‘INSURANCE INDUSTRY”

Personal Details Name:

___________________________________

Address:

___________________________________ ___________________________________

Contact No: ___________________________________

 Age Group • •

18 – 25 Years 26 - 35 years

• •

36 - 49 years More than 50 years

• •

Business / Self – Employed Government Employee

 Profile of respondent: • • •

Student Housewife Working Professional

 Are you aware about the Unit Linked Insurance Plans in the market? •

Yes

•

 Do you have a life insurance policy/investment plan in your name? •

Yes

•

 What is the approximate premium paid by you annually (in Rupees)? • • • • •

Rs. 5,000 – Rs. 10,000 • Rs. 15,001 – Rs. 25,000 Rs. 10,001 – Rs. 15,000 • Rs. 25,001 – Rs. 50,000 Rs. 50,001 – Rs. 60,000 • Rs. 60,001 – Rs. 80,000 Rs. 80,001 – Rs. 1, 00,000 More than Rs. 1,00,000 (specify premium)

 What kind of insurance policy would suit you best in your current stage of life? • • •

Life Insurance Life Insurance and Investment Plans Tax saving plans

• •

Pension Plans Child Plans

 How much would you be willing to spend per annum if you were to go for an investment/insurance plan? • • •

Less than Rs. 6,000 Rs. 6,001 – Rs. 10,000 Rs. 10,001 – Rs. 25,000

• • •

Rs. 25,001 – Rs. 50,000 Rs. 50,000 – Rs. 1,00,000 More than Rs. 1,00,000

 Which according to you is an ideal policy term? (Number of years you would be willing to pay premium) • • • •

3 to 5 years 6 to 9 years 10 to 15 years 16 to 20 years

• • • •

21 to 25 years 26 to 30 years More than 30 years Whole life policy

 What motivates you to purchase insurance/investment plans? • • •

Advertisements High Returns Others (specify)

• •

Advice from friends Family responsibilities

 In which kind of company would you prefer to make a purchase of insurance? • •

Government owned company Public Limited Company

• •

Private Company Foreign based company

 Typically what kind of returns would you look at from your investments? (Please note: Higher returns involve greater risk) • • • • •

Less than 5% 6% - 10 % 11% - 15 % 16% - 20 % 21% - 25%

• • • •

26% - 30% 31% - 40% 41% - 50% More than 50%

Thanks for your help and time!!!