Slide 1

ContentsInsuranceIs a promise of compensation Is designed to protect the financial well-being.Involves a group of people agreeing to share risks.

Types of Insurance

TerminologiesHow does insurance worksWhen you buy a policy you make regular payments, known as premiums, to the insurer. If you make a claim your insurer will pay out for the loss that is covered under the policy. If you dont make a claim, you wont get your money backIf you make a claim the money comes from the pool of policyholders premiums.Insurance sector in IndiaRegulated by IRDAForeign Investment caps- FDI limit was raised from 26 per cent to 49 per cent in the sector

Industry dynamics:The total insurance market stood at US$ 72 billion in FY12 and is expected to touch US$ 139 billion by 2015.Rs.107,010.7 crore (US$ 16.85 billion) worth of new premiums for FY 201213

CAGR of 1215 per cent over the next five years was projectedInsurable population is expected to grow to 750 million by 2020LIC is still the market leader, with 70.7 per cent share in FY12, followed by ICICI Prudential, with 4.9 per cent share.Crop insurance market in India is the largest in the world, covering around 30 million farmers.

MAJOR COMPANIES

Is it worthy????Do not confuse Insurance with investmentInsurance and investments must be mutually exclusiveJust remember that investing is deferring spending in hopes of a financial gain. Insuring is spending now in hopes of avoiding financial loss. In that respect, the two activities are almost opposites.

ExampleTata AIG Life Insurance plan - PURE TERM PLANInsured individual: 30 years of ageLife cover: 10 lakhsTenure: 10 yearsAnnual premium: Rs.3510 Outlives DeathReceivable Amount(Rs.) 0 10,00,000

Tata AIG Life Insurance plan - TERM PLAN WITH ASSURED SUMInsured individual: 30 years of ageLife cover: 10 LakhsTenure: 10 yearsAssured sum: 10 Lakhs + 10 percent + Bonus(If any)Annual premium: Rs.151250 Outlives DeathReceivable Amount(Rs.) 13,00,000 10,00,000

*13,00,000=10,00,00+1,00,000+2,00,000*Bonus is paid from the percentage on premium

Suppose if insurer had invested in the Pure Term plan of the company thenThe insurer could have invested the balance amount of Rs-1,47,740 Per annum 1,47,740 / 12 = Rs. 12,312 per monthInvestment in recurring deposit Period : 10 years Interest Rate: 9% P.A (Hypothetical value)Maturity value (Including interest): Rs. 9,59,243

Thus when coming to choosing investment between Pure Term plan and Term plan with assured sum, it is always better to invest in the former plan

*1,47,740= 1,51,250-3,510

Unit Linked Insurance Plan (ULIP)A Unit Linked Insurance Plan (ULIP) gives investors the benefits of both insurance and investment under a single integrated plan.A part of the premium is utilized in insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes. ULIP policy holders are also allotted units and each unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the value based on which the net rate of returns on ULIPs are determined.

CONCLUSIONWhen choosing Insurance there are so many policies to chose from, and they all cost money, thus it must be regarded that it is not the means of earning returns but to Hedge against risks.Before you buy any policy, read it carefully to make sure that you understand the terms, coverage and costs. Don't sign on the dotted line until you are comfortable with the coverage and are sure that you need it.