COMPARATIVE STUDY OF HDFC SLIC, BAJAJ
ALLIANZ, BIRLA SUN LIFE AND LIC
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF M.B.A
SUBMITTED BY: ASAF ALI
UNDER SUPERVISION OF: UNDER GUIDANCE OF MR. SANCHIT SACHDEVA MRS. VEERA LAKSHMI SALES DEVELOPMENT MANAGER ASST. PROF MBA DEPT HDFC SLIC COER SCHOOL OF MGT
UTTRAKHAND TECHNICAL UNIVERSITY, DEHRADUN SESSION 2007-2009
TO WHOM IT MAY CONCERN
This is to certify that aforesaid candidate of MASTER OF BUSINESS ADMINISTRATION (MBA) of the COER SCHOOL OF MANAGEMENT (COER-SM), have satisfactorily completed dissertation project on the topic “” as per rules of UTTRAKHAND TECHNICAL UNIVERSITY, DEHRADUN in academic session 2007-2009.
His performance was satisfactory during development of the project. Project Guide
(Mrs. Veera Lakshmi) COER-SM
Dated: ASAF ALI
CANDIDATE’S DECLARATION
I, Asaf Ali, a bonafide student of MBA at the COER School of Management, Roorkee, hereby declare that I have undergone the Summer Training at HDFC SLIC LTD under the supervision of Mr. Sanchit Sachdeva.
I also declare that the present project report is based on the above summer training and is my original work. The content of this project report has not been submitted to any other university or institutes either in part or in full for the award of any degree, diploma or fellowship.
(Signature) Name: Asaf Ali
Roll No: 07060500016
Place: Roorkee Date:
ACKNOWLEDGEMENT
I would like to take this opportunity to thank all those who have helped me tremendously during the course of the project.
My heartiest thanks are due to many persons for assistance in this project to present state. The profound gratitude to our teachers especially;
Mrs. Veera Lakshmi for being my guide throughout the completion of this project.
Mr. Hridesh Chauhan, Branch Manager of HDFC Standard Life Insurance Corporation, Roorkee for clarifying the problems which I encountered during the preparation of this project.
I would also like to thank Mr. Sanchit Sachdeva, Sales development Manager, for guiding me throughout my project. I also extend my gratitude to other SDM's and my friends who have helped me directly or indirectly to complete my project.
I also acknowledge the Knowledge that I have gained during the preparation of this project.
CONTENT
1. INTRODUCTION 6
2. EXECUTIVE SUMMARY 7
3. OBJECTIVE OF THE STUDY 8
4. COMPANY PROFILES 9-13
5. DEPARTMENT OVERVIEW 15-17
6. INSURANCE FUNCTION 18-20
7. SOME TERMS ABOUT ULIP PLANS 21-23
8. PRODUCT PROFILE 24-44
9. TAXATION BENEFIT 45-48
10.COMPARATIVE STUDY OF DIFFERENT FIRMS 48-51
11.RESEARCH METHODOLOGY 52-54
12. CONCLUSION & RECOMMENDATION 55
INTRODUCTION
The project started with class room sessions involving lectures and interactions with the mentors Mr. Sanchit Sachdeva (SDM) and Mr. Hridesh Chauhan (BM). They explained all the plans available with HDFC SLIC in detail and the pension plan comparison of BIRLA SUN LIFE, BAJAJ ALLIANZ & LIC. The classroom also involved role plays and games. The role plays and games involved students being asked to play the roles of customers or clients and that of a person trying to persuade the customer to go in for a plan with HDFC SLIC.
These class room lectures and role-plays helped me to gain a substantial understanding of the plans. This in turn helped me to effectively explain these plans to people whom I meet or took appointment to meet.
The connect of life insurance has undergone several changes over the years and what has myriad array of attractive options apart from the basic of life cover. Life insurance schemes also offer tax benefits. In today’s scenario life insurance solves the three objectives.
1. Security 2. Saving 3. Tax Benefit.
EXECUTIVE SUMMARY
This project is based upon the fact & figure gathered from the websites about the plans of the firm.
In the first part of the report there are some plans which are frequently sold by HDFC SLIC in the market, and then comparative study of pension plan of different firm namely BIRLA SUN LIFE, BAJAJ ALLIANZ and LIC is there
.
In the last part of the project I have given some of the findings and conclusion about the life insurance market and what is the potential of the market. In the end I have give all the sources from which I have collected all the information.
OBJECTIVE OF STUDY
1. Comparative study of HDFC SLIC, BIRLA SUN LIFE, BAJAJ
ALLIANZ and LIC.
2. To analyze the pension plan on the basis of features offered.
3. To observe working of various departments of the organization.
COMPANY PROFILE HDFC LIMITED
HDFC was incorporated in 1977 with the primary objective of meeting a social need – that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.
Business Objectives
The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and
professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.
Organizational Goals
HDFC’s main goals are to
a) Develop close relationships with individual households,
b) Maintain its position as the premier housing finance institution in the country,
c) Transform ideas into viable and creative solutions, d) Provide consistently high returns to shareholders,
HDFC STANDARD LIFE The Partnership:
HDFC is an organization that strives for excellence, with the twin objectives of enhancing customer satisfaction and shareholder value”
HDFC and Standard Life first came together for a possible joint venture, to enter the Life Insurance market, in January 1995. At the outset it was clear that both companies shared similar values and beliefs and a strong relationship quickly formed. In October 1995 the companies signed a 3 year joint venture agreement.
Around this time Standard Life purchased a 5% stake in HDFC, further strengthening the relationship. The next three years were filled with
uncertainty, due to changes in government and ongoing delays in getting the IRDA (Insurance Regulatory and Development authority) Act passed in parliament.
Despite this both companies remained firmly committed to the venture. In October 1998, the joint venture agreement was renewed and additional resource made available. Around this time Standard Life purchased 2% of Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also started to use the services of the HDFC Treasury department to advise them upon their investments in India.
Towards the end of 1999, the opening of the market looked very promising and both companies agreed the time was right to move the operation to the next level. Therefore, in January 2000 an expert team from the UK joined a hand picked team from HDFC to form the core project team, based in Mumbai.
Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake in HDFC Bank. In a further development Standard Life agreed to participate in the Asset Management Company promoted by HDFC to enter the mutual fund market. The Mutual Fund was launched on 20th July 2000.
The company was incorporated on 14th August 2000 under the name: HDFC Standard Life Insurance Company Limited.
Their ambition from as far back as October 1995 was to be the first private company to re-enter the life insurance market in India. On the 23rd of October 2000, this ambition was realized when HDFC Standard Life was the only life company to be granted a certificate of registration.
HDFC are the main shareholders in HDFC Standard Life, with 81.6%, while Standard Life owns 18.4%. HDFC and Standard Life have a long and close relationship built upon shared values and trust. The ambition of HDFC Standard Life is to mirror the success of the parent companies and be the yardstick by which all other insurance companies in India are measured. HDFC Standard Life Insurance Company has been signed on by Blue Star to provide insurance cover to its 1,805 employees across India and overseas. HDFC Standard Life Insurance is one of the leading players in the group insurance segment of the life insurance business. Its group business has grown significantly since inception and now covers over 25,000 lives, across the entire industry spectrum including software, FMCG, pharmaceuticals, banking, consultancy, BPOs, retailing, and consumer electronics
MISSION:-HDFC Standard Life aims to be the top new life insurance company in the market.
This does not just mean being the largest or the most productive company in the market, rather it is a combination of several things like:
Customer service of the highest order Value for money for customers
Professionalism in carrying out business
Innovative products to cater to different needs of different customers Use of technology to improve service standard
Increasing market share
VALUES:-1. SECURITY: Providing long term financial security to its policy holders
will be the company’s constant endeavor. It will do this by offering life insurance and pension products.
2. TRUST: HDFC Standard Life appreciates the trust placed by its policy
holders in it. Hence, it will aim to manage their investments very carefully and live up to this trust.
3. INNOVATION: Recognizing the different needs of its customers, it will be offering a range of innovative products to meet these needs. The company’s mission is to be the best new life insurance company in India and these are the values that will guide it in this
Why HDFC Standard Life?
There are many reasons why one may choose HDFC Standard Life Insurance Company Ltd. as your partner in meeting your insurance needs:
a) Innovative products to meet your needs. b) Efficient customer service team.
c) Good financial track record of both parents – HDFC and Standard Life. d) Certified Financial Consultants to advise you.
e) Professional approach in managing your investments. f) Income Tax benefits for our insurance products.
FINANCE DEPARTMENT AT HDFC STANDARD LIFE
The finance department of HDFC Standard Life Insurance is headed by the General Manager (Finance), who reports to the MD and CEO. There are four other departments under the Finance Departments. These are:
1. Accounts Department 2. Actuary Department 3. Investment Department 4. Underwriting Department
The Accounts Department:
The Accounts Department functions like any other Accounts department. It is concerned with the disbursement of salaries, reimbursements, incentives,
commissions to agents. It also handles the payments due to other agencies with which the Company interacts, viz. event management companies etc. The work of an Accounts department assumes much importance in an insurance company because it has to be able to pay the claims arising time to time.
The Actuary Department:
The Actuary Department is the “Pricing Department” of an insurance company. It must be understood that the basic premise on which the insurance companies work is “use the corpus of policy holders for disbursement for any claim”. Based on this principle, this department decides the amount of premium to be charged from a client for a particular policy. This is normally done with the help of Mortality Tables, which can either be prepared by the company itself, or the company can use the existing tables available for its use. The IRDA (Insurance Regulation Development Authority) has prescribed the use of the mortality tables used by LIC for all other companies.
The Actuary Department is also responsible for Asset-Liability Management of the insurance company. It must ensure that the Solvency margin
(Assets-Liabilities) must be at least Rs 50 crores, as prescribed by IRDA. 95% of the surplus above this has to be distributed to the investors a bonus. HDFC Standard Life has till now declared three bonuses to its policyholders
The Investment Department:
The Investment Department is responsible for the investment of the money of the investors. Since the basic reason for the investors investing their money in Life Insurance is security, IRDA has put certain regulations on such companies for investments so that the money of investors is safe.
These guidelines are:
1. not less than 50% of the corpus will be invested in Government Securities (G-Sec)
2. Up to15% of the corpus will be invested in infrastructure, social and rural sectors.
3. Not less than 20% can be invested in government and other equities. 4. Remaining 15% can be invested in “unapproved” equities.
Till recent time, HDFC has not been investing in equities. But now it has decided to follow the footsteps of its Joint-Venture partner Standard Life, which invests around 75% of its corpus in equities. The Investment
Department is also responsible for calculating the returns of the investment to the investors. Here also the insurance companies are bound by regulations and guidelines. According to IRDA, the returns have to be in the range of 6 %-9 %.
The Underwriting Department
This department is responsible for taking the decision on whether to insure a person or not. For this it must take into account the risk premium associated, the reinsurance opportunities etc. normally, there are charts available with the people of this department on the basis of which they can come to a viable decision.
· Financial Grounds: here the underwriters decide on the worth of the person by taking into account his tax returns of the last three years. On this basis they are able to assess the premium paying ability of that person and accordingly take a decision.
· Medical Grounds: each new customer is required to undergo a
comprehensive medical test, which determines the person’s general health. On the basis of this report, the underwriters decide upon the premium to be
charged from customer.
Functions of Insurance
The functions of Insurance can be bifurcated into three parts: 1. Primary Functions
2. Secondary Functions 3. Other Functions
The primary functions of insurance include the following:
1) Provide Protection - The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk.
Insurance is actually a protection against economic loss, by sharing the risk with others.
2) Collective bearing of risk - Insurance is a device to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums
towards a fund and out of which the persons exposed to a particular risk is paid.
3) Assessment of risk - Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for
determining the premium rate also
4) Provide Certainty - Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain.
The secondary functions of insurance include the following:
1) Prevention of Losses - Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc.
Prevention of losses causes lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and better protection to the insured.
2) Small capital to cover larger risks - Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty.
3) Contributes towards the development of larger industries - Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.
The other functions of insurance include the following:
1) Means of savings and investment - Insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing income-tax exemptions also, people invest in insurance.
2) Source of earning foreign exchange - Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways.
3) Risk Free trade - Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover
SOME TERMS ABOUT ULIP PLANS Fund Management
The crux of the entire product is the returns that this product can generate and this is dictated by the management of the fund. There is no great value in doing well in all other aspects of the product delivery if the fund does not perform well.
The insurance company has two options with regards to the management of the fund i.e. external and internal. External funds usually have a proven track record that could be used as a significant marketing too. In India many of the insurance companies, which are apart of the larger financial services groups, already have a sister fund Management Company and they could bank on their performance. For others, they would usually be having an in-house investment
team and this could be extended to management of the funds too. The expenses and hence the cost should be kept in mind as by nature the unit linked insurance product is a very transparent product and hence this would become a significant selling point in the long run.
Charges and Expenses
There are different charges that can be levied by the insurance companies, some of the more common ones are:
1) Initial charges 2) Annual charges 3) Investment charges 4) Morality charges 5) Surrender charges Initial charges
Initial charges are applied at the time of setting up the policy; this could be in the form of a bind offer spread and also in the form of allocation of units known as the allocation factor. It is also possible to be levying a per member level charge.
Annual charges
The annual charges can either be fixed or can be linked to the size of the fund. It could also be linked to the number of members in the scheme. This charge is usually taken to cover the maintenance expenses of the insurer.
A fund management charge is levied to take care of the fund management expenses depending upon whether the fund is managed internally or externally. Mortality charges
It is possible to have an insurance element built into the super annuation contract and in case of a gratuity there would be an element of insurance the degree and the form could differ from company to company.
The insurance premium can be taken as a part of the gratuity contract of it can be administered outside this but packaged to look as if it is a whole some product offering gratuity and insurance to the employees of the organization. Surrender Charges
The surrender charges can be used in multiple ways. It could be used as a way of recouping the initial outlay of the insurer in case the company decides to withdraw in the early years of the contract or it could be used as a deterrent for the company to shift the service provider at any point of the contract. Usually the surrender charges/ penalty would decrease over a period of time and would be expressed as a percentage of the fund.
Administration
The unit –linked policies are significantly complex to administer and also would need a very highly technically trained customer service department to handle enquiries. Much of the administer the policy, As the allocation of units would be time dependent it is extremely important to have a very robust system that can take care of allocation, de allocation and reallocation of units.
It is essential to have a system that would be able to talk/ interact with other systems to capture the unit price details, to give outputs to accounting packages, report generators etc.
INDIVIDUAL PRODUCTS:
Each of us leads a unique life and so has unique needs. HDFC Standard Life offers a range of products and invites you to choose the one that suits you best.
PLAN BENEFIT
Savings Plans
Endowment Assurance Plan Unit Linked Endowment Plan Children’s Plan
Money Back Plan
Unit Linked Young Star Plan
Life Insurance with Savings
Life Insurance & Savings with choice of investment funds
Financial Security for your child Financial security for your child with choice of investment funds
Life Insurance with Savings Investment Plans
Term Assurance Plan
Loan Cover Term Assurance Plan
Life Insurance customized for home loans
Life Insurance at an affordable price Retirement Plans
Personal pension plan
Unit Linked Pension Plan
Savings for retirement
Retirement Savings with a choice of investment funds
Endowment Assurance Plan
Endowment assurance plan is a participating (with profits) insurance plan that offers the following features:
Provides financial support to the family by way of a lump sum payment in case of the unfortunate death of the life assured within the term of the policy.
provides a lump sum payment to the life assured on survival up to maturity This plan is with profits saving plan and is well suited for saving money for your long term financial goals. This plan also helps provide for the needs of your family in your absence by paying out a lump sum in the event of your unfortunate death during the term of the policy.
Optional benefits
You can add the following optional benefits to customise your policy to suit your needs:
• Critical Illness (CI) Benefit provides an amount, equal to the sum assured chosen under this optional benefit, on diagnosis of any one of the 6 common critical illnesses(1). The sum assured is payable if you survive for 30 days after the date of the claim. Once such a claim has been met, no further Critical Illness Benefit is payable. However, your basic policy continues even after we pay a claim On this benefit.
• Additional Term Benefit (ATB) provides an additional amount equal to the sum assured chosen under this optional benefit, in case of your unfortunate death.
• Accidental Death Benefit (ADB) provides an additional amount, equal to the sum assured chosen under this optional benefit, in case of your unfortunate death:
-due to an accident and within 60 days of an accident.
• Waiver Of Premium (WOP) Benefit waives the premium for you in case you become totally disabled. The waiver is applicable during the period of total disability.
This plan can be taken on a single life basis or a joint life (first claim) basis.
Eligibility
This plan can be taken as a single life basis or a joint life (first claim) basis. The eligibility ages are as follows:
Basic Policy
Basic policy with optional benefits CI ATB ADB WOP
Min. age of entry 12 18 18 18 18
Max. age of entry 60 5 60 55 50
Max. age of expiry 75 70 75 65 60
Minimum term: 10 years Maximum term: 30 years
Tax benefits described in Section 88, Section 80D and Section 10 (10D) of the income Tax Act are applicable.
Applicable to premium paid for CI and WOP Payment options
you have the choice of paying your premium either in yearly, half-yearly or quarterly modes, depending on your convenience
Unit Linked Endowment Plan:
The unit linked endowment plan is an insurance policy that is designed to pay a lump sum on maturity or on earlier death. The Unit Linked Endowment Plan also gives the option of additional protection against the six common critical illnesses, as well as additional protection if death is as the result of an accident. Your premiums are invested in units of the investment fund of your choice, based on the prevailing unit price. On maturity you receive the value of your units. On death (or critical illness, if chosen) you receive the greater of the value of your units and your selected basic sum assured.
Premiums
Premiums can be paid either quarterly, half-yearly or annually, throughout the term of the policy. The minimum premium amount is Rs. 10,000 each year. Premiums can be paid by cash, cheque or demand draft.
Benefits
There are 4 different options available to choose from: 1. Life Option
On death within the policy term, the greater of the Sum Assured and the value of the unit-linked fund will be paid to your nominee.
On survival to the end of the policy term the value of the unit linked fund will be paid to you.
2. Life and Health Option
On death or earlier diagnosis of any one of six common critical illnesses within the policy term, the greater of the Sum Assured and the value of the unit-linked fund will be paid to your nominee.
On survival to the end of the policy term the value of the unit-linked fund will be paid to you.
“The illnesses covered under this option are cancer, coronary artery by pass graft surgery, heart attack, kidney failure, major organ transplant (as recipient) and stroke”.
3. Extra Life Option
This option pays the same benefits as the Life Option but, should death occur within the policy term as the result of an accident, an extra benefit equal to the Sum Assured will be paid.
4. Extra Life and Health Option
This option pays the same benefits as the Life and Health Option but, should death occur within the policy term as the result of an accident, an extra benefit equal to the Sum Assured will be paid.
Levels of protection
Depending on your age at entry, you may choose between 3 levels of cover – Low, Medium or High. For each level the Sum Assured is based on the amount of premium you pay each year.
Age at entry Levels of cover
Low Medium High
18 to 40 5XPremium 10XPremium 20XPremium 41 to 50 5XPremium 10XPremium
Over 51 5XPremium
Eligibility
The age and term limits for taking out a Unit Linked Endowment Plan are: (years) Minimum term Maximum term Minimum age at entry Maximu m age at entry Maximum age at expiry Life 10 10 30 18 60 75 Life and health 10 30 18 5 65 Extra life 10 30 18 55 70 Extra life and health 10 30 18 55 65
The alteration of premium, surrendering of the policy, conditions on stopping of payment of premiums and charges are the same as that of the unit linked pensions plan.
Tax benefits under section 88 and section 10 (10D) of the income tax act are applicable.
Surrendering the policy
The policyholder can surrender the policy at any point of time during the contract term. The amount payable will be the unitised fund value after applying additional surrender charges mentioned below.
Accessing money?
You can make lump sum withdrawals from you funds provided the fund
balance after withdrawal and charges does not fall below the Sum Assured. The minimum withdrawal amount is Rs. 10,000.
Children's Plan
Children’s Plan is designed to provide a lump sum to the child at maturity. It also provides financial security to the child in the future, even in case of the insured parent’s unfortunate death during the policy term. Children’s Plan receives simple reversionary bonuses, which are usually added annually. This is a flexible plan with three options for you to choose from, depending on your requirements. The details of these options are explained in the next section. Options
Option On the death of the insured parent during the policy term
On maturity
Maturity Benefit Plan
Future premium waived and the policy continues till maturity.
Accelerated Benefit plan
Sum assured + bonuses paid and the policy stops.
On the survival of the insured parent to the
maturity date, sum assured + bonuses paid.
Double Benefit plan
Sum assured paid, future premiums waived, and the policy continues till
maturity.
Sum assured + bonuses paid.
Tax Benefits
The premiums you pay will be eligible for tax relief under Section 88 of the Income Tax Act, 1961. The benefits received under the policy are eligible for tax relief under Section 100 (10D) of the income tax act, 1961.
Eligibility
The eligibility ages for the life assured under the plan are as follows: Minimum Age of Entry
18 years
Maximum Age of Entry 60 years
Maximum Age of Maturity 75 years
Min. Term: 10 years Max. Term: 25 years
Payment options
You have the choice of paying the premium either in yearly, half-yearly or quarterly modes, depending on your convenience
Unit Linked Young Star Plan
HDFC Unit Linked Young Star Plan is designed to provide a lump sum to the child at maturity. It also provides financial security to the child in the future, even in case of the insured parent's unfortunate death during the policy term. The Unit Linked Young Star Plan also gives the option of additional protection against the six common critical illnesses.
Your premiums are invested in units of the investment funds of your choice, based on the prevailing unit prices. On maturity the value of the units will be paid. On death (or critical illness, if chosen) the selected basic sum assured is paid, and the policy continues until maturity. Following a valid death or critical illness claim, we will pay the future premiums (at the level originally chosen at inception) into your policy, as and when they would have fallen due.
Premiums
You agree to pay a level premium regularly, either quarterly, half-yearly or annually, throughout the term of the policy. The minimum premium amount is Rs. 10,000 each year.
Premiums can be paid by cash, cheque or demand draft. Benefits
There are 2 different options available: 1. Life Option
This option consists of a Maturity Benefit and a Death Benefit.
The Maturity Benefit will pay the value of the unit-linked fund at the end of the policy term.
The Death Benefit will pay the basic Sum Assured on death of the life assured during the policy term. Following payment of this benefit, no further premiums are due from the policyholder.
Following a valid death claim, we will pay future premiums on your behalf, as and when they become due. The level of premium will be that chosen by you at inception of the policy.
2. Life and Health Option
This option consists of a Maturity Benefit, a Death Benefit and an Extra Health Benefit.
The Maturity Benefit will pay the value of the unit-linked fund at the end of the policy term.
The Death Benefit will pay the basic Sum Assured on death of the life assured during the policy term. Following payment of this benefit, no further premiums are due from the policyholder and the Extra Health Benefit will lapse without value.
The Extra Health Benefit will pay the basic sum assured on diagnosis of any one of six critical illnesses during the policy term. Following
payment of this benefit, no further premiums are due from the policyholder and the Death Benefit will lapse without value. The illnesses covered under this benefit are cancer, coronary artery by pass graft surgery, heart attack, kidney failure, major organ transplant (as recipient) and stroke.
Following a valid death or critical illness claim, we will pay future premiums on your behalf, as and when they become due. The level of
Eligibility
The age and term limits for taking out a Unit Linked Young Star Plan are: (Years) Minimum Term Maximum Term Minimum Age at Entry Maximum Age at Entry Maximum Age at Expiry Life Option 10 25 18 60 75 Life and Health Option 10 25 18 55 65
Surrendering the policy
The policyholder can surrender the policy at any point of time during the contract term. The amount payable will be the unitised fund value after applying additional surrender charges mentioned below.
Accessing money
You can make lump sum withdrawals from you funds provided the fund balance after withdrawal and charges does not fall below Rs. 15,000. The minimum withdrawal amount is Rs. 10,000.
Money Back Plan
It is a participating (with profits) insurance plan that offers the following features:
Payment of cash lump sum, each of which is a proportion of the basic sum assured, at 5-year intervals during the term of the policy. (Please refer to the table given below.)
on survival up to maturity, a payment equal to the basic sum assured plus any bonus additions less the cash lump sums paid earlier is provided.
In case of the unfortunate death of the life assured within the term of the policy, the basic sum assured plus any bonus additions is provided. This is over and above the earlier payouts.
This plan helps you plan for future anticipated expenses by paying periodic cash lump sum to you at regular intervals. This plan also helps provide for the needs of your family in your absence by paying them the basic sum assured plus any bonus additions in the event of your unfortunate death during the term of the policy.
Benefits
You can add the following optional benefits to customise your policy to suit your needs:
• Critical Illness (CI) Benefit provides an amount, equal to the sum assured chosen under this optional benefit, on diagnosis of any one of the 6 common critical illnesses. The sum assured is payable if you survive for 30 days after the date of the claim. Once such a claim has been met, no further Critical Illness Benefit is payable. However, your basic policy continues even after we pay a claim on this benefit.
• Additional Term Benefit (ATB) provides an additional amount, equal to the sum assured chosen under this optional benefit, in case of your unfortunate death.
\
• Accidental Death Benefit (ADB) provides an additional amount equal to the basic sum assured in case you die:
- due to an accident, and
- within 90 days of the accident.
• Waiver Of Premium (WOP) Benefit waives the premium for you in case you become totally disabled. The waiver is applicable during the period of total disability.
All optional benefits must be selected at the outset of your plan. Eligibility
This plan can be taken on a single life basis or a joint life (first claim) basis. The eligibility ages are as follows:
Basic Policy
Basic policy with optional benefits CI ATB ADB WOP
Min. age of entry 12 18 18 18 18
Max. age of entry 60 5 60 55 50
Max. age of expiry 75 70 75 65 60
PAYMENT OPTIONS
You have the choice of paying your premium either in yearly, half-yearly or quarterly modes, depending on your convenience
SINGLE PREMIUM WHOLE LIFE INSURANCE
Single Premium Whole of Life Insurance Plan is well suited to meet your long term investment needs. This participating (with profits) plan offers you the following
Benefits:
A sound investment:
Your money will be invested in our With Profits fund. The fund aims to provide secure and stable long term growth. Normally, we will declare a compound reversionary bonus for your policy every year and add it to your policy on its anniversary. In addition, on death, surrender or on the guaranteed dates, a terminal bonus might be payable. You pay a single premium and the policy will pay you a lump sum.
Flexibility of term:
Even after choosing your policy, you can decide on the policy term. For 4 weeks after any one of the 10th, 15th, 20th and subsequent five-year
anniversaries, you can choose to receive the sum assured plus any attaching bonuses, in full. Once the money has been received, your policy will cease.
Surrender value:
You can terminate the policy any time, after it has been in force for at least 6 months, and receive a surrender value.
In case of unfortunate death:
Your nominee gets the sum assured secured by your premium, plus any attaching bonuses.
No medical requirements:
We do not require you to undergo any medical test for this plan. Eligibility
You can buy the product on a single life basis. Tax benefits
Tax benefits under Section 88 of the income Tax Act are applicable on premiums up to 20% of the sum assured.
Payment options Minimum age at entry : 18 years
Maximum age at entry : 70 years
PENSION PLAN
• The policy is basically a saving contract, which is designed to provide an income for life from retirement, with an option to take the lump sum elsewhere to buy the annuity, provide it is permitted by the prevailing regulations.
• Your commitment. You agree to pay a single premium or level premiums with installments due every quarter half-year or year throughout the deferment period of the policy, after which you will start receiving your pension.
• Plan is basically a savings contract, which is designed to provide an income for life from retirement. It does this by accumulating a national lump sum on retirement, comprising of sum assured plus any attaching bonus.
Can I take the national lump sum as cash on retirement?
Subject to the prevailing legislation and regulations, part of this can be taken as a lump sum and the rest used to buy an immediate annuity.
Mode of premium
You can pay either a single premium or pay premiums is quarterly half yearly or annual form by cheque, in cash or by bank drafts.
Eligibility
The age and term limits for looking out a personal pension plan area:
Minimum Term Maximum Term Maximu m Age Maximu m Age of entry Minimum age of Retirement Maximum age of Retiremen t RP SP RP SP RP SP 10 5 40 15 18 35 60 50 70
What if I need money? Loans
There is no facility for loans against this contract. Tax benefits
Tax benefits described in Section 80 CC of the income tax act are applicable (up to Rs. 10,000)
Unit Linked Pension Plan
The unit linked pension plan is basically an insurance contract, which is designed to provide a retirement income for life.
Your premiums are invested in units of the investment fund of your choice, based on the prevailing unit price. On vesting the value of your units will be used to buy your retirement benefits.
On earlier death, the beneficiary receives the value of your units plus a cash lump sum of Rs 1000.
Premiums
You agree to pay level premiums regularly, either quarterly, half-yearly or annually, throughout the term of the policy or a single premium at the start of the policy. The minimum premium amount for regular premium mode is Rs. 10,000 each year and for single premium, it is Rs. 25,000.
To facilitate increased investment, we allow additional single premium top-ups at any time. The minimum single premium top-up is Rs. 5,000.
Premiums can be paid by cash, cheque or demand draft. Benefits
At the chosen vesting date, the unitised fund value will be available to secure pension benefits. Subject to the prevailing regulations, part of this value can be taken in the form of a cash lump sum and the rest converted to an annuity at the rate then offered by HDFC Standard Life. Alternatively, if it is permitted by the prevailing regulations, the proceeds net of any cash lump sum can be used to buy an annuity with any other insurance company who will accept such business. The current maximum limit for any cash lump sum is one-third of the
On death the unitised fund value will be paid along with a cash lump sum of Rs. 1,000. The beneficiary may use the proceeds to purchase pension benefits for the surviving spouse.
Your basic benefits will be paid by cheque. Eligibility
The age and term limits for taking out a Unit Linked Pension Plan are: (Years) Minimu m Term Maximu m Term Minimu m Age of Entry Maximu m Age of Entry Minimu m Age of Vesting Maximu m Age of Vesting Regular Premiu m Version 10 40 18 60 50 70 Single Premiu m Version 5 40 18 65 50 70 TAXATION
TAX BENEFITS OF INSURANCE AND PENSION PLAN.
Life insurance and retirement plans are effective ways of saving taxes. The tax breaks that are available under various insurance and pension policies are described below:
1. Life insurance plans are eligible for deduction under Sec. 80C. 2. Pension plans are eligible for a deduction under Sec. 80CCC. 3. Health riders are eligible for deduction under Sec. 80D.
4. The proceeds or withdrawals of life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section.
Tax Rates for Individuals
The rates of income tax for FY 2005-06 are as follows: Total Income (Rs.) Rate of tax Senior citizen Women below 65 years Others
Up to Rs 1, 10,000/- Nil Nil Nil
Above Rs 110,000/- to 125,000/-Nil Nil 10% Above Rs 125,000/- to 150,000/-Nil 10% 10% Above Rs 150,000/- to 250,000/-20% 20% 20% Above Rs 250,000/- 30% 30% 30%
Surcharge on Income Tax: In case where the Total Income exceeds Rs 10, 00,000, there would be a surcharge @ 10%.
Premiums paid for Life insurance - Deduction under Section 80C
1 Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.
2 Eligible Savings: Premiums paid or deposited by assessee to effect or to keep in force insurance on the life of following persons:
In case of individual assessee – Himself/herself, spouse, children of such individual
In case of HUF assessee – any member
3. 20% limit: If the amount of premium paid in a financial year for a policy is in excess of 20% of the actual capital sum assured, then deduction will be allowed only for premiums up to 20% of the sum assured.
4 Limit on amount of deduction: Deduction will be restricted to investments of up to Rs 100,000 in savings specified under Section 80C (including life insurance premiums). If any investments have been made under Section 80CCC and 80CCD, then the qualifying amount under Section 80C will stand reduced to that extent.
5. Deduction limit: The amount of deduction will be equal to the amount by which the income tax payable on such total income is in excess of the amount by which the total income exceeds 100,000.
Premiums paid for Pension plans - Section 80CCC
1 Permitted Deduction: Section 80CCC allows for deduction of premiums paid under a pension plan. As per this Section, a premium paid up to Rs 10,000 by an individual is allowed as deduction from his total income.
3 Limit: It may be noted that from FY2005-06, the limit of deduction under Section 80CCC will be part of the overall limit prescribed under Section 80CCE.
Premiums paid for medical insurance - Section 80D
I) Category of assessee allowed deduction: Individual assessee and Hindu Undivided Family assessee.
II) Eligible premiums: Premiums paid by assessee by cheque out of his taxable income to effect or to keep in force an insurance on the health of following persons: In case of individual assessee – Himself/herself, spouse, dependant children and dependant parents.
In case of HUF assessee – any member of HUF
III) Deduction and upper limit: The qualifying amounts under Section 80D is up to Rs 10,000/-. However, a higher amount of up to Rs 15,000/- is permitted if the person, for whose health insurance the premium was paid, was aged 65 years or more at any time during the financial year in which the premium was paid. Such amounts of premium paid would be allowed as deduction from the total income of the assessee.
Overall deduction limit - Section 80CCE
A new Section 80CCE is proposed to be inserted from FY2005-06. As per this section, the maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC and 80CCD will be limited to Rs 100,000.
Benefits under insurance policy - Section 10(10D)
As per Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax. However, this rule does not apply to following amounts:
Any sum received under a Key man Insurance Policy, or
Any sum received other than as death benefit under an insurance policy which has been issued on or after April 1 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the sum assured.
Rebate in respect of Securities Transaction Tax (STT) paid
1 Section 88E has been introduced by Finance Act (No 2) of 2004.
2 As per the provisions, where total income of an assessee includes any income under the head ‘Profits and Gains from Business or Profession’ arising from taxable securities transactions, he shall be entitled to a deduction from the income tax on such income.
3 Amount of deduction: Amount of STT paid in respect of taxable securities transactions entered into in the course of business during that previous year 4 The deduction will be allowed if proof of payment of STT is furnished along with the return. The proof has to be furnished as per the format prescribed by Income Tax.
5 Maximum deductions shall be equal to the amount of income tax on above income.
COMPARITIVE ANALYSIS
1. HDFC PENSION-II VS BIRLA FLEXI SECURELIFE RETIREMENT 2. HDFC PENSION-II VS BAJAJ ALLIANZ UNIT GAIN
3. HDFC PENSION –II VS LIC BIMAPLUS
HDFC PENSION-II VS BIRLA FLEXI SECURE LIFE RETIREMENT VS BAJAJ ALLIANZ UNIT GAIN VS LIC BIMAPLUS
Features
HDFC PENSION
BIRLA Flexi Secure Life Retirement
Allianz Bajaj
Unit gain LIC Bima Plus Age 18 - 60 years 18 - 60 years 0 – 60 years 12 - 55 years Term 10 - 30 years Minimum Term of
10 years
Choice rests with the consumer with a minimum premium payment term of 3 years 10 years Sum Assured Only 5, 10, 20
(age-based) multiples are allowed as Sum Assured. Minimum Sum Assured is Rs. 50,000. Zero Death Benefit is also available. Minimum Sum Assured is 5 times the premium paid. Maximum limit up to Rs. 2 lakhs Survival benefit Value of units partly in cash partly
Unit Value is used to purchase an annuity
Value of Fund at Bid price
Bid Value of the fund units
annuity.
Death benefit Value of units, no sum
assured is given.
Value of units in this case the Sum
Assured is zero. Higher of Sum Assured or value of units. Death during the first 6 months - 30% of SA + value of units, next 6 months - 60% of SA + value of units. Death after 1st year - SA + value of units. Death during the 10th year - 105% of SA + value of units. Withdrawal benefit No Partial withdrawals are available. No Partial withdrawals are available Partial or complete withdrawal at bid price after 3rd year Premature withdrawal allowed after one year (after applying bid-offer spread. Contribution/ premium Minimum: Rs. 10,000 p.a. Minimum Rs. 5,000 p.a. Minimum: Rs. 10,000 p.a. Minimum Rs. 10,000 p.a Flexible contribution
Available Not available Only an increase in contribution is allowed
Not available
options Options- Balanced, Defensive Managed, Safe Managed, Liquid & Growth
Enrich Debt Fund,
Balanced Fund, Cash Fund
Secured & Risk
Surrender Value The surrender charge is 25% of 3 years of regular premium. No charges after 3 years Surrender is
available from the 1st year itself. In the 1st year surrender charges are 75%, in the 2nd year the charges are 50%, in the 3rd year the charges are 25%..
A selling / purchase price spread of 5% will be applicable from the 3rd year onwards Partial surrender up to 50% of bid value of units allowed after 3 years from date of commencement
Top-up Available with a minimum top-up of Rs 5,000 and maximum of 20% of sum assured. Available, with a minimum top-up of Rs. 10,000 Available Available (Charges: 1.5% of the top-up) Switch 24 Switches are free.
2 free switches every year. Every additional switch Three free switches every policy year. No free switches. Cost of switching is
0.5% of the switch amount. switches would be charged @1% of switch amount or Rs. 100, whichever is higher. value. Initial Charge Charges Charges Charges
1st yr-27%, 2nd yr- 27%, 3rd yr onwards- 1% 20% of the initial premium in the 1st year and 2% of the premium from the 2nd year onwards.
1st year - 70%; 2nd year - 2%; 3rd year - 1%; No charges from the
4th year onwards Not Disclosed Admin Charge Admin
charges of Rs.180 fixed charge
Per annum.
Policy admin fee of Rs. 20 per month
Annual admin charges of 1.25% p.a. of net assets
Not applicable Fund Management Charges Least in the industry 0.8% of the fund per annum
A fund based fee of 2.25 % p.a. of the policy fund. Annual investment charge of 1% p.a. of fund. 1% of the fund per annum
Bonus units Available Not Available Not Available Available RESEARCH METHODOLOGY
STUDY
The present investigation is a descriptive type of study undertaken to estimate the comparative study pension plan of HDFC SLIC, BIRLA SUN LIFE, BAJAJ ALLIANZ, LIC.
For the purpose of analysis a sample size of different companies were selected. The sample size taken was 4.
SAMPLING METHOD
The sampling method used for the project was “Random Sampling”. This type of sampling is also known as probability sampling where each and every item in the population has an equal chance of inclusion in the sample and each one of the possible samples. This procedure gives each item an equal probability of being selected.
DATA COLLECTION
SECONDARY DATA
The secondary data was collected by referring through web sites, and the final data was analyzed systematically to achieve the desired result.
DATA ANALYSIS AND INTERPRETATION After analyzing the data above in the table we came to the following interpretation. Interpretation has been done on the basis of the features mentioned in the table.
1. AGE AND TERM OF POLICY : Since the minimum age is minimum in BAJAJ ALLIANZ and the term depends on the customer. The
2. SWITHCHES : After analyzing the feature the conclusion drawn is that
HDFC is offering the most switches in the year.
3. CHARGES : The charges levied on the policy of the insurer is lowest in HDFC SLIC like FMC, PAC, but initial charge is second lowest which is also not bad in terms of investment.
4. WITHDRAWALS : Withdrawals not allowed in HDFC SLIC & BIRLA
SUN LIFE because if withdrawals are there plan would not yield good return.
5. INVESTMENT OPTIONS : HDFC SLIC provides you the maximum funds for investment (Balanced fund, Defensive Managed fund, Safe Managed fund, Liquid fund & Growth fund). So HDFC SLIC provides you better portfolio to diversify your funds which reduces the risk and maximizes the return.
6. TOP UP : In HDFC SLIC the minimum top up is of RS 5000 with no charges levied but in others it is Rs 10000. Here we could see that people with low income can increase the premium with small amount.
7. BONUS UNIT : Only two firms are offering bonus unit to the customer
and they are HDFC SLIC and LIC.
8. FLEXIBLE CONTRIBUTION : This feature is available in HDFC SLIC where a customer can increase or decrease its premium, but only Bajaj Allianz is offering an increase option only.
RECOMMENDATIONS
1. Premium allocation charge (initial charge) should be reduced to provide customer with better return.
2. Policy administration charge should be reduced to gain more advantage in the market.
3. Surrender charges should be reduced.
CONCLUSION
HDFC SLIC based on the comparative study has many advantage in this segment of product like fund management charge, switches facility and maximum number of investment funds in offering (i.e., 5 namely Balanced fund, Defensive Managed fund, Safe Managed fund, Liquid fund & Growth fund ) but the rest of the insurance player that is LIC, Birla sun life, Bajaj Allianz are also not far behind HDFC SLIC.
