Introduction to ULIP

Transcription

1 Introduction to ULIP

2 Common myths and apprehensions Insurance only provides money in the event of death Insurance plans do not provide high returns What if I cannot pay premium for the entire term?. What if I need my money back due to a financial emergency?

3 Solution: Unit linked insurance plan Risk cover A ULIP is a Life Insurance Policy which provides a combination of Life Insurance Protection and Investment Returns *A pension plan can also be in the form of ULIP

4 Let us talk about our Needs And many more

5 Classifying needs Short term 1 to 5 years Long term More than 10 years

6 Needs Short term Long term Buying a bike or car Household assets Going on vacation Buying gifts for your loved ones Upgrading lifestyle Planning for kids education & marriage Protection for dependents/ Parent Securing future of your family Wealth creation for long term Retirement planning Buying a house

7 Long term goals (> 10 years) Non negotiable Cannot be postponed Cannot be modified Can never be dropped No alternate available

8 To achieve long term goals one needs A solution that provides protection and beats inflation year on year

9 Impact of Inflation 10L 10 years 22L Anything that costs 10 lakhs today would cost 22 lakhs* after 10 years * Considering rate of 8% per annum

10 Gold Real estate Investment avenues Debt instruments Equity

11 Equity as an asset class has the potential to outperform all other asset classes in the long run

12 Challenges while investing in real estate Average ticket size for real estate investments is very high Real estate investments attract High transaction cost (stamp duty) Regular maintenance Pre investment due diligence Industry is not regulated Extremely non liquid asset class Tax implications on exit unlike ULIP

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14 Ideal solution ULIPs provides good mix of equity and debt

15 ULIP : PAANCH KA FUNDA Investments Tax savings Paanch ka Funda Flexibility Transparency Protection

16 ULIP : PAANCH KA FUNDA Investments Tax savings Paanch ka Funda Flexibility Transparency Protection

17 How is the policyholder s money invested? The money from different policyholders are invested in a Fund Fund

18 Who takes care of investments? Funds managed at home Just like the head of the family manages the home funds Funds managed under ULIP The fund manager manages all investments pertaining to the fund under ULIP

19 Where is the money invested? Policyholder can choose from a basket of equity, debt and balanced funds Investors are allotted Units which represent the composition of their investment

20 Funds strategies High Fixed Portfolio Strategy Investor involvement Low Life Cycle Based Portfolio Strategy Low Investor awareness High

21 Choice of portfolio strategies Fixed portfolio strategy Option to allocate your savings in the funds of your choice Life cycle based portfolio strategy A unique and personalize strategy to create an ideal balance between equity and debt, based on your age

22 Fixed Portfolio Strategy This portfolio strategy offers the flexibility of allocating investments as per customer s choice Customers can choose their own asset allocation using any of the following available funds:

23 ICICI Prudential offers various Funds for investment

24 Superior Fund Performance Performance Maximiser As on Feb 28, 2015

25 Superior Fund Performance Performance Protector * calculated with effect from 2-Apr-02, as benchmark did not exist before this date CRISIL index excludes Fund Management Charges (FMC) effective April 01, As on Feb. 28, 2015

26 Lifecycle based portfolio strategy Initial allocation based on customer s age Rebalancing on a quarterly basis to maintain asset allocation As age progresses, allocation changed to suit change in Life stage In the last 10 quarters corpus shifted from equity to debt to ensure safety of your money as you approach the age of 75

27 Age based allocation table Age Band Allocation Multi Cap Growth Fund Income Fund % 15% % 25% % 35% % 45% % 55% % 65%

28 Flowchart for lifecycle based strategy NAV CHANGES ALTER THE EQUITY-DEBT RATIO WITH CHANGE IN AGE, ALLOCATION IS ALTERED TOWARD THE END OF TERM Customer Age = 30 Age = 36 Policy Inception Every Quarter Every shift in age band Last 10 quarters 75% EQUITY 25% DEBT ALLOCATIONS BASED ON AGE 75% 50% 50% 25% PORTFOLIO REBALANCING 65% EQUITY 35% DEBT 65% SAFETY 35% 100%

29 Success Mantra Our solutions are meant for achieving long-term financial goals through proper financial planning We do not recommend opportunistic investing based on market movement Recommend investing in debt and equity, rather than only debt or only equity Tools are available to manage short term volatility Automatic Transfer Strategy Switching Don t Time the Market. Spend Time in the Market

30 ULIP : PAANCH KA FUNDA Investments Tax savings Paanch ka Funda Flexibility Transparency Protection

31 ULIP offers numerous flexibilities to its investors Investment Flexibilities relating to. Liquidity Choice of SA, premium & term Let s explore how will this benefit our customer

32 Switching: Policy holder can transfer investments from one fund to another FREE switches which vary from product to product with minimum Rs 2000 per switch Subsequent switches charged Rs. 100/- per switch Helps in making the most even in a volatile market

33 Premium Redirection: This option allows the policy holder to change the allocation of future premiums Policy holder can exercise this option when the Premium falls due Allocation of previous premiums remains unaffected Helps the policy holder choose as to where his future money would get invested

34 Partial Withdrawal: Option to withdraw money from policy after the minimum lock in period of 5 years Extent of withdrawal and frequency varies from plan to plan The life assured must be at least 18 years of age Helps the policy holder utilize part of his funds during financial exigencies

35 Surrender: Policy holder has an option to discontinue his policy before the maturity Can be availed only after the completion of 5 policy years Policy terminates and Fund Value is paid to the policyholder

36 Settlement options: Policy holder has flexibility in receiving maturity benefit The client can either receive the benefit as : Lump sum: The entire fund value in one go Settlement option: Receive the money in installments. Helps the policy holder in receiving his fund value systematically over a period

37 Automatic Transfer Strategy: Transfer small amount every month from debt to equity Funds get transferred every month on a fixed date (1st or 15th) from Income Fund to the chosen equity Policy holder can suggest a fixed amount which will be automatically transferred every month on a fixed date minimum amount Rs.2000 Money Market Assists the client to optimize his return by way of Rupee-Cost averaging

38 Let s take an example of rupee cost averaging You are given Rs You have to buy oranges over 10 days. The prices will be published Your task is to buy maximum number of oranges at the least possible price

39 Cost of oranges per day (Activity) Day 1 - Rs. 30 Day 2 - Rs. 25 Day 3 - Rs. 20 Day 4 - Rs. 24 Day 5 - Rs. 19 Day 6 - Rs. 22 Day 7 - Rs. 26 Day 8 - Rs. 16 Day 9 - Rs. 13 Day 10 - Rs. 11

40 Activity Day Price Amount Invested Units Acquired Total Average Cost of acquisition = 994/ 53 = 18.8 Average unit price = 206/ 10 = Buy regularly and systematically, which will benefit you through a lower cost of acquisition. This is also called Rupee cost averaging

41 Flexibility ULIP also offers client, multi capability of choosing: Sum Assured depending on the needs of the client Flexibility Amount of premium Term depending on his financial goal

42 ULIP : PAANCH KA FUNDA Investments Tax savings Paanch ka Funda Flexibility Transparency Protection

43 ULIP offers protection Provides security to the policyholder s family in the form of death benefit

44 Death Benefit: Protection is provided in the form of death benefit, which varies according to the plan selected There are 2 variants of death benefit: Option 1 SA + FUND VALUE Option 2 SA or the FUND VALUE which ever is higher is paid * Option 1 & 2 are dependent on product features available Investor can choose the amount of Life cover from the multiple options provided

45 ULIP : PAANCH KA FUNDA Investments Tax savings Paanch ka Funda Flexibility Transparency Protection

46 ULIPS offer a high degree of transparency All charges in the plan are made known to the customer

47 Charges in ULIPS Mortality Charges Premium - + = Net invested amount Other Charges Mortality charge Cost of life insurance cover Other Charges Allocation charge Policy issuance and entry load charge Policy Admin Deducted every year or for few years for service provided Fund Management Charge Deducted every year for managing the Customer s investment through Fund management experts

48 Reduction in Yield Gross Return : 10% Impact of Charges : FMC + PAC (2.25%) Net Return : 7.6% Therefore RIY 2.4% When it comes to investment products High RIY is not good RIY of 0.7% means that on a 8 % fund return, the customer gets at least 7.3% post charges Conceptually, this is applicable for all type of investment products

49 EBI Sample

50 ULIP : PAANCH KA FUNDA Investments Tax savings Paanch ka Funda Flexibility Transparency Protection

51 ULIP s are an efficient tax saving instruments Premium paid towards ULIPs up to 1.50 lakhs are eligible for tax benefits u/sec 80C Maturity proceeds are tax free in the hands of the customer under sec 10 (10D) if the death benefit is minimum 10 times of premium