Vision Endowment Plan

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Prepared by Product Management TRA/1/13-14/6550

Vision Endowment

A traditional with profits life insurance plan

UIN – 109N080V02

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For Internal Circulation only

Frequently Asked Questions

Endowment Plan

traditional with profits life insurance plan

January, 2014

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Prepared by Product Management

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Contents

Section A ... 3

BSLI Vision Endowment Plan – Summary ... 3

1. What is BSLI Vision Endowment Plan? ... 3

2. What are the significant features of BSLI Vision Endowment Plan? ... 3

3. Am I eligible for this plan? ... 3

Section B ... 3

4. How long will I be covered under this plan? ... 3

5. Can I choose the amount of Sum Assured? ... 3

Section C ... 4

Premium ... 4

6. How many years do I need to pay my premium? ... 4

7. What is the minimum and maximum premium to be paid? ... 4

8. How can I pay my premiums? ... 4

9. Do I have any rebates/discount on the premiums? ... 4

10. Can I increase or reduce my premium amount? ... 5

No, you cannot increase or reduce your premiums during the policy tenure ... 5

Benefits ... 5

11. What are the benefits offered under the plan? ... 5

12. When shall BSLI declare the bonus under the plan? ... 5

13. What are the bonuses available under Vision Endowment plan? ... 6

14. What is the Death Benefit in this plan? ... 7

15. What is the Maturity Benefit? ... 8

16. What is the Surrender Benefit in this plan? ... 9

17. Do I have a loan facility? ... 10

18. Is there any rider benefit in this plan? ... 10

19. Can I avail of tax benefits? ... 10

Premium Discontinuance and Revival ... 10

20. What happens if I do not pay my premium on time? ... 10

21. What happens if I do not pay my premium within the grace period? ... 10

22. What is a Reduced Paid-up policy? ... 10

23. What would be the death benefit for a Reduced Paid-up policy? ... 11

24. What would be the Maturity Benefit for a Reduced Paid-up policy? ... 11

25. How can I reinstate my policy?... 11

26. Will I be eligible for bonuses during the period of two years given for reinstatement? ... 11

Termination ... 11

27. When will my policy terminate? ... 11

Section D... 12

Operational Guidelines ... 12

28. What application form is required for BSLI Vision Endowment Plan? ... 12

29. Can life insured and proposer be different under this plan? ... 12

30. Can this plan be given to NRI/PIO/FNIO? ... 12

31. Can this plan be given under Employer/Employee/HUF/MWP cases? ... 12

32. What are the underwriting guidelines are for this plan? ... 12

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Section A

BSLI Vision Endowment Plan – Summary

1. What is BSLI Vision Endowment Plan?

BSLI Vision Endowment Plan is a traditional participating endowment plan knitting together savings and protection for you and your family and helps you ensure a secure future for them.

2. What are the significant features of BSLI Vision Endowment Plan?

Key features of BSLI Vision Endowment plan are:

Complete security of your loved ones through life insurance cover

Double sum assured payable on accidental death

Limited premium payment term for your convenience

Secured growth of your investment through regular bonus

Premium rebate on high sum assured

Additional premium rebate on annual and semi-annual payments

Facility to avail policy loans

Tax benefits on the premiums paid and the benefits received under policy as per prevailing income tax laws 3. Am I eligible for this plan?

You are eligible if

- your age at entry is between ages 1 year - 55 years - you want to choose a sum assured of at least Rs. 100,000 - you want to contribute a premium of at least Rs. 10,000 - you want a policy term of 20 years

Section B

Plan Structure

4. How long will I be covered under this plan?

Vision Endowment Plan offers a fixed policy term of 20 years. The insurance cover is applicable for the entire policy term of 20 years.

5. Can I choose the amount of Sum Assured?

You can customize your policy to suit your particular insurance and savings needs by choosing the Sum Assured at policy inception. This is the amount of life insurance cover during the policy term. The Minimum Sum Assured is Rs.

100,000.

Simple 3 step sales process

1. Choose the level of protection (Sum Assured) 2. Choose you premium paying term (PPT) 3. Fill the relevant application form.

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Your chosen Sum Assured belongs to one of the 4 bands as given below:

Sum Assured Band Band 1 Band 2 Band 3 Band 4

Sum Assured (Rs.) 100,000 to 199,999 200,000 to 399,999 400,000 to 799,999 800,000 +

Your plan benefits are based on the Sum Assured; therefore higher the Sum Assured higher will be the benefits. In addition by choosing a higher sum assured, you will also be eligible for premium rebate/discount as explained in later sections.

Section C

Premium

6. How many years do I need to pay my premium?

This is a limited pay plan, at policy inception you may choose to pay your premiums for a term of 7 years or 10 years, while your policy benefits will continue for 20 years.

7. What is the minimum and maximum premium to be paid?

This is a Sum Assured based plan; the premium amount payable depends on the gender, entry age of the life insured, the sum assured, pay term and the premium paying mode. You can choose any sum assured subject to a minimum sum assured of Rs. 100,000 and a minimum premium of Rs. 10,000 p.a.

8. How can I pay my premiums?

You can pay your policy premium annually, semi-annually or monthly. For annual and semi-annual installments, you can pay your policy premium by cash (up to Rs. 50,000), cheque, credit card, and direct debit. For monthly installments, you can pay by salary deduction or ECS only. In case of monthly mode, minimum two months policy premium has to be paid.

9. Do I have any rebates/discount on the premiums?

You shall be eligible for premium rebate based on your choice of ‘Sum Assured’ and ‘premium payment mode’.

Sum Assured Rebate

For higher Sum Assured, you will get a premium rebate as explained below.

Sum Assured Band Band 1 Band 2 Band 3 Band 4

Sum Assured (Rs.) 100,000 to 199,999 200,000 to 399,999 400,000 to 799,999 800,000 +

Premium Rebate as a % of SA nil 1% 5% 7%

Modal Rebate

You will get a modal rebate of 5% and 2% if your mode of premium payment is annual or semi-annual respectively.

The premium is calculated based on tabular rate; which is then reduced by Sum Assured rebate, as applicable and modal rebate, as applicable.

The calculations of premiums for different ages and Sum Assured can be accessed from iChamp. We have also provided the product ready reckoner and the premium rate table for your easy reference. The premium rate table provides the premium rates per 1000 of sum assured applicable to all the ages, it also explains; using an example; how

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Example: Mr. Atul aged 30 years, chooses sum assured: Rs. 5,00,000; pay term 7 years; pay frequency:

annual:

Applicable premium rate for male age 30 is 76.0811 per 1000 Sum Assured.

The chosen Sum Assured of Rs. 5,00,000 falls in band 3, therefore he is eligible for Sum Assured rebate of 5% of SA

Modal premium = (Base premium rate x (1- High Sum Assured rebate)) x Sum Assured / 1000 = (76.0811 x (1– 0.05) ) X 5, 00,000/1000 = 72.277 x 500,000/1000

= Rs. 36,140

Less Premium Rebate on account of ‘annual’ mode selected = 5% of Modal premium = Rs. 1,807 i.e. 36,140 – 1,807 = Rs. 34,333

The service tax & cess in the 1^st year is 3.09% & from 2^nd year onwards is 1.545% therefore Installment premium in 1^st policy year is Rs. 34,333 x 1.0309 = Rs. 35,394

Installment premium from 2^nd policy year is Rs. 34,333 x 1.01545 = Rs. 34,863

The above calculation of the Modal Premium, Premium Rebate and the Installment Premium Payable is calculated automatically in iChamp. You can also refer to the premium rate table to manually calculate premium for different sum assured at different ages

Example: On 1^st July 2014; BSLI declares a bonus of 4.0% or 40 per 1000 sum assured

The annual rate as declared by BSLI shall be added to all policies having policy anniversaries between 1^st July 2014 and 30^th June 2015. Once this bonus is added to a policy on its policy anniversary it becomes payable under all circumstances in the policy under the policy.

to calculate the premium. You can manually calculate the premium for any sum assured by doing the simple calculation of applying the High Sum Assured Rebate and Modal Rebate as applicable.

10. Can I increase or reduce my premium amount?

No, you cannot increase or reduce your premiums during the policy tenure

Benefits

11. What are the benefits offered under the plan?

The plan offers you Maturity and Death benefits in addition to the facility of policy surrender. As this is a participating plan, your policy shall participate in the profits arising out of the BSLI’s with profit business in the form of bonus. Your benefits shall increase every year with bonuses declared by us from time to time.

12. When shall BSLI declare the bonus under the plan?

BSLI shall declare a bonus on 1^st of July every year and this bonus rate shall be applicable to all the policies having policy anniversary between 1^st July and 30^th June of the following year. Bonus is either represented as a percentage or can also be expressed as per 1000 of sum assured. For e.g. a bonus rate of 3% can also be defined as 30 per 1000 sum assured.

The bonus rate declared by BSLI will depend on the actual experience regarding various factors and the prevailing economic conditions hence it may vary from year to year.

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Example: Assuming policy is bought on 1^st February 2014 and BSLI declares the simple reversionary bonus of 4.0% on 1^stJuly2014.

The bonus vests on the policy only on policy anniversary. As the policy is brought on 1^st Feb 2014, the 1^st policy anniversary falls on 1^st Feb 2015. The revisionary bonus rate declared in the first year is 4.0% or 40 per 1000 Sum Assured; therefore,

Bonus attached to policy on 1^st policy anniversary is 5,00,000 x 40/1000 = Rs. 20,000.

Assuming on 1^st July 2015 i.e. the second year BSLI declares an simple reversionary bonus of 4.5%or 45 per 1000 sum assured

Bonus to be attached on 2^nd policy anniversary i.e. on 1^st Feb 2016 is 5,00,000 x 45/1000 = Rs. 22,500 Therefore accrued bonuses at the end of 2^nd policy year is Rs. 20,000 + Rs. 22,500 = Rs. 42,500

Continuing from the previous example:

Assuming on 1^st July 2014 BSLI declares an interim bonus of 4.0% and the simple revisionary bonus of 4.5%

The revisionary bonus will be added to the policy on the policy anniversary i.e. on 1^st Feb 2015 (policy issued on 1^st Feb 2014), however in the interim the life insured dies on 15^th Oct 2014 i.e.

before the policy anniversary. In this case, the interim bonus declared by BSLI will form a part of the death benefit. Hence the nominee will receive an interim bonus of = 5,00,000 x 40/1000 = 20,000 as a part of the death benefit.

Accrued bonus in this case shall be 20,000 (in the previous year) + 20,000 (interim bonus in the year of death) = Rs. 40,000

13. What are the bonuses available under Vision Endowment plan?

Your policy shall participate in the profits arising out of the BSLI’s participating business in the form of bonus. Bonus declaration depends on factors like company’s investment performance, expenses incurred and various assumptions (like future bonuses; anticipated investment returns etc). This product offers the following bonuses:

Simple Reversionary Bonus: BSLI may declare a rate of reversionary bonus at the end of every financial year. The Reversionary Bonus declared is expressed either as a percentage or per 1000 of the sum assured of the policy.

Provided the policy is in effect for the full sum assured, the declared reversionary bonus shall be added to the policy on its policy anniversary date immediately following the date of bonus declaration. In case of surrender the surrender value of the attached bonuses will be payable.

This reversionary bonus, once added to the policy shall vest along with interim bonus and will be payable as part of the death, surrender or maturity benefit as the case may be.

Interim Bonus: the interim bonus is declared annually along with the reversionary bonus. This is a temporary or provisional bonus which is declared and paid for policies where the declared revisionary bonus is yet to be vested but the policy is due for a death claim. In such scenarios the interim bonus will be paid so that the customer does not loose on the entitled bonus.

Terminal Bonus: After declaring reversionary bonuses if there are still residual profits available in the policy, they are declared as terminal bonus. At company’s discretion on death, surrender or maturity based on the actual

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Example: Mr. Atul aged 30 years, chooses sum assured: Rs. 5,00,000; pay term 7 years; pay frequency:

annual:

Assuming a reversionary bonus and interim bonus rate of 40 per 1000 sum assured in all years Bonus added to the policy for a year = 5,00,000 x 40/1000 = Rs. 20,000

If Mr. Atul dies in the 10^th year; the nominee shall receive

Sum Assured on death + Accrued bonuses as on date of death + Terminal Bonus (if any) Death is in 10^th policy year i.e. 9 bonuses have been added/vested in the policy Accrued bonuses over 9 years= 20,000 x 9 = Rs. 1,80,000

Since the death is during the policy year before the bonus of the 10^th years is added company shall also pay interim bonus of Rs. 20,000. (interim bonus @ 40 per 1000 sum assured)

Therefore accrued bonuses at death = 1,80,000 + 20,000 = Rs. 2,00,000

The nominee shall receive 5,00,000 + 2,00,000 = Rs. 7,00,000 + Terminal Bonus (if any)

If the death is due to an accident BSLI shall pay to nominee an additional accidental death benefit amount equal to the Sum Assured

Thus the total death benefit shall now be 5,00,000 + 2,00,000 + 5,00,000 = Rs. 12,00,000 + terminal bonus (if any)

experience and the prevailing economic conditions a terminal bonus may be paid.. Participating policies usually take time to build up cash values therefore there may be a low or no terminal bonus in the initial years of the policy

14. What is the Death Benefit in this plan?

In the unfortunate event of death of the life insured during the policy term; the beneficiary shall receive

• Sum Assured on death^; plus

• Accrued bonuses as of date of death; plus

• Terminal Bonus (if any)

^Sum Assured on death is maximum of Sum Assured or Maturity Sum Assured or 10 times the annual premium payable or 105% of total premiums paid excluding Tax & Cess, any applicable rider premiums and underwriting extras, if any

This product has an inbuilt accidental death benefit; in the event life insured dies due to accident; BSLI shall pay an additional amount equal to the sum assured under the plan.

Maximum additional amount payable as accidental death benefit is limited to Rs. 1 crore across all BSLI Vision Endowment Plans. The benefit is payable only if the life assured has attained age 18 years or more when the event occur. The accidental death benefit offered under this plan is excluding any other accidental death benefit covered in the other products by BSLI.

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Example: If the life insured under the plan was a minor; and death due to accident

BSLI shall pay the additional amount of accidental death only if the life insured has attained age of 18 years when the event occurs.

Therefore if the Life Insured has not attained age of 18 years when the event occurs; BSLI shall not not pay the additional accidental death benefit.

Example: If the life insured already has BSLI Accidental Death & Disability Rider with a sum assured of Rs. 50 lacs. Is he eligible for accidental death benefit under Vision Endowment Plan

Accidental death benefit offered with Vision Endowment Plan is not a rider benefit. This is an inbuilt plan feature and is independent to accidental riders offered with any products of BSLI.

Therefore Vision Endowment Plan can be offered to all individuals even if they have availed for maximum sum assured limits under accidental riders with BSLI

Example: If a customer has a Vision Endowment Policy with Sum Assured of Rs. 75,00,000 (75 lacs). Can he buy another policy with Sum Assured of Rs. 50,00,000 (50 lacs)

BSLI doesn’t have any restriction on the maximum sum assured that can be given to a client with Vision Endowment Plan (subject to underwriting). However the inbuilt accidental death benefit payable in addition to the sum assured is limited to a maximum of Rs. 1 Crore.

Since the 1^st policy was with the sum assured of Rs. 75 lacs; the additional amount payable on accidental death shall be Rs. 75 lacs (equal to sum assured).

When the client buys 2^nd policy; his total sum assured becomes 1.25 Crores (75 lacs + 50 lacs);

since the additional amount payable in case of accidental death is limited to Rs. 1 Crore;

accidental death benefit under the 2^nd policy shall be limited to Rs. 25 lacs

Thus total amount payable as accidental death benefit across all Vision Endowment Plans is capped at Rs. 1 Crore

15. What is the Maturity Benefit?

On policy maturity you shall receive

• Maturity Sum Assured⁽¹⁾; plus

• Accrued Bonuses till date; plus

• Terminal Bonus (if any)

(1) where Maturity Sum Assured is sum of all premiums paid till date excluding service tax and rider premium or underwriting extra (if any)

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Example: Continuing with the previous example.

Premium before service tax and cess is Rs. 34,333 every year for 7 years

Therefore Maturity Sum Assured (before service tax and cess) = Rs. 34,333 x 7 = Rs. 240,331 Assuming a reversionary bonus of 40 per 1000 sum assured in all years and a Terminal bonus of 100 per 1000 sum assured at maturity

Bonus added to the policy for a year = 500,000 x 40/1000 = Rs. 20,000, Bonuses accrued over 20 years is = 20,000 x 20 =Rs. 400,000

Terminal bonus = 500,000 x 100/1000 = Rs. 50,000

Maturity Benefit payable to Mr. Atul is = 240,331 + 400,000 + 50,000= Rs. 690,331

Any premium paid towards service tax & cess; underwriting extra and rider premium shall be excluded in the calculation of sum of premiums paid under maturity benefit

16. What is the Surrender Benefit in this plan?

Buying a life insurance policy is a long-term commitment. Early termination/surrender of the policy usually involves high costs and the surrender value payable to you may be less than total premiums paid. In case of financial emergencies you can opt for a loan on your policy or you may choose to surrender the policy for its surrender value.

Your policy will acquire a surrender value after all due premiums for at least 3 years are paid (2 years for premium paying term of 7 years). The surrender value payable to you will be higher of

• Guaranteed Surrender Value

• Special Surrender Value

Guaranteed Surrender Value is a percentage of premiums paid (excluding any premiums paid towards rider benefit, underwriting extra and service tax) plus the surrender value of accrued regular bonuses. The Guaranteed Surrender Value will vary depending on the premium paying term and the year the policy is surrendered.

Guaranteed Surrender Value is equal to percentage of premiums paid plus surrender value of accrued regular bonuses is as given below -

as a % of premiums paid

(excl. rider premium | service tax | u/w extra) as a % of accrued regular bonuses

Year of Surrender

% of premium

% of accrued bonuses

2-3 30% 12 63% 2-3 2% 12 9%

4 50% 13 65% 4 2% 13 11%

5 50% 14 68% 5 3% 14 13%

6 50% 15 70% 6 3% 15 16%

7 50% 16 73% 7 4% 16 19%

8 53% 17 75% 8 4% 17 23%

9 55% 18 78% 9 5% 18 28%

10 58% 19 80% 10 6% 19 33%

11 60% 20 80% 11 8% 20 40%

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Your policy shall also be eligible for a Special Surrender Value; this Special Surrender Value is not guaranteed and can be reviewed by BSLI from time to time. The Special Surrender Value as per current administrative guidelines has been built in the iChamp illustration system for your reference. You can refer to the projected Surrender Benefit applicable in different years in the current rate illustration report. . The policy shall be terminated once the Surrender Value is paid.

17. Do I have a loan facility?

In case of financial emergencies you may opt for facility of loan under your policy once your plan acquires a surrender value i.e. due premiums for at least 3 years are paid (2 years for premium paying term of 7 years)

The minimum loan amount is Rs. 5,000 and the maximum is 85% of your surrender value.

We shall charge interest on the outstanding loan balance at a rate declared by us from time to time based on then prevailing market conditions (The existing rate of interest we charge on the policy loan is 11.70% p.a.).

Should the outstanding policy loan balance equal or exceed the surrender value of your policy at any time, when the policy is in reduced paid up status, then the policy shall be terminated without value.

• Note that prior to this happening, we shall give you an opportunity to repay all or part of your outstanding loan balance in order for your policy to continue uninterrupted

The death benefit, maturity benefit or surrender benefit will be reduced by the outstanding loan balance (if any).

You are free to repay all or part of your outstanding policy loan balance at any time, subject to our then current administration guidelines.

18. Is there any rider benefit in this plan?

You can further enhance your insurance coverage by adding waiver of premium rider.

19. Can I avail of tax benefits?

As per extant tax laws, this plan offers tax benefits under Section 80Cand Section 10(10D) of the Income Tax Act, 1961, subject to fulfillment of the other conditions of the respective sections prescribed therein.

You are advised to consult your tax advisor for details.

Premium Discontinuance and Revival

20. What happens if I do not pay my premium on time?

If you are unable to pay your premium by the due date, you will be given a grace period of 30 days (15 days for monthly mode) and during this grace period all coverage under your policy will continue.

21. What happens if I do not pay my premium within the grace period?

If you do not pay your premium within the grace period, the following will be applicable:

a. In case you have not paid premiums for three full years (two full years for premium paying term of 7years), then all benefits under your policy will cease immediately and your policy shall be terminated.

b. In case you have paid premiums for at least three full years (two years for premium paying term of 7 years), then your policy will continueon a Reduced Paid-Up basis.

22. What is a Reduced Paid-up policy?

Any time after paying 3 full year installment premiums (two years for premium paying term of 7 years), if you are unable to pay future premiums, you can continue the policy for the rest of the policy term on reduced paid-up basis.

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Under Reduced Paid-Up,

a. Your Sum Assured on death | Maturity Sum Assured | Accidental Death Benefit shall be reduced in proportion to the premiums actually paid to the total premiums payable during the policy term.

b. Your accrued bonuses to the date of premium discontinuance will not be reduced but there will be no further accrual. Any bonus payable in the year of premium discontinuance shall be reduced by the same proportion as the number of unpaid premium installments to the total number of due installment premiums for that policy year.

c. No new bonuses will be declared on the policy d. Rider benefit, if any, will cease.

23. What would be the death benefit for a Reduced Paid-up policy?

For policy that is continued on a reduced paid-up basis; the death benefit payable shall be

• Reduced paid-up Sum Assured on death ; plus

• Accrued Bonuses

Additional benefit payable in case of accidental death shall also be reduced in proportion to the premiums actually paid to the total premiums payable during the policy term.

24. What would be the Maturity Benefit for a Reduced Paid-up policy?

The maturity benefit for a Reduced Paid-Up shall be

• Reduced Maturity Sum Assured; plus

• Accrued Bonuses

Any premium paid towards service tax & cess; underwriting extra and rider premium shall be excluded in the calculation of sum of premiums paid under maturity benefit

25. How can I reinstate my policy?

You can reinstate your policy for its full coverage within two years from the due date of the first unpaid premium by paying all outstanding premiums together with interest as declared by us from time to time and by providing evidence of insurability satisfactory to us.

Upon reinstatement, all your benefits (death and maturity) to date of reinstatement shall be restored to their full value.

26. Will I be eligible for bonuses during the period of two years given for reinstatement?

No. The policy will earn bonus only when it is still in effect for full sum assured and all due premiums have been paid in full.

As answered in Q. 25 above, once the policy has been reinstated by payment of all outstanding premiums together with interest, then your Sum Assured and accrued bonuses from due date of first unpaid premium to date of reinstatement shall be restored to their full value.

Termination

27. When will my policy terminate?

Your policy will get terminated on any of the following events:

the date of settlement of the death benefit; or

the date of payment of the surrender value, if any; or

the policy maturity date; or

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the date on which the reinstatement period ends after your policy has lapsed as per Premium Discontinuance provision or

the date when outstanding loan value exceeds the surrender benefit for reduced paid up policy.

Section D

Operational Guidelines

28. What application form is required for BSLI Vision Endowment Plan?

For this plan you can use a short application and the main application form.

• Short application from will be used in following circumstances

1. If the applied sum assured is less than or equal to Rs. 10 lacs (applied sum assured for the client would be clubbed along with the sum assured for Guaranteed Wealth Plan); and

2. If the policy is sourced without WOP rider

• Main application form will be used in the following circumstances -

1. if the applied sum assured is more than 10 lacs (applied sum assured for the client would be clubbed along with the sum assured for Guaranteed Wealth Plan); or

2. if the policy is sourced with WOP rider

29. Can life insured and proposer be different under this plan?

Yes, there can be a proposer and s/he can be different from the Life Insured under the plan. In case the proposer and the life insured are different then all the proceeds for the policy will be paid to the proposer.

30. Can this plan be given to NRI/PIO/FNIO?

Yes, this plan can be offered to NRIs/FNIOs & PIOs, however riders cannot be offered to them.

31. Can this plan be given under Employer/Employee/HUF/MWP cases?

Yes, this plan can be offered as Employer- Employee/HUF/MWP policies 32. What are the underwriting guidelines are for this plan?

The underwriting guidelines remain unchanged for this product.