report_on_wealth_management - Copy mohit `

A

SUMMER TRAINING PROJECT REPORT

ON

WEALTH MANAGEMENT SERVICE OF

ADITYA BIRLA MONEY

IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE

OF

MASTER IN BUSINESS ADMINISTRATION (M.B.A.)

(MARKETING)

2011-2013

APEX INSTITUTE OF ENGG. & TECHNOLOGY

(RAJASTHAN TECHNICAL UNIVERSITY)2011-2013

A PROJECT REPORT ONINSURANCE IN WEALTH MANAGEMENT

OF

ADITYA BIRLA MONEY

Company’s guide name -: Ms. SANGEETA UPADHYAY (AREA MANAGER)

Under the guidance of -: Ms. NEHA ARORA (RELATIONSHIP MANAGER)

SUBMITTED TO -: SUBMITTD BY-:

MRS. PALLAVI AGARWAL SURENDRA SINGH SOLANKI

[2]

DECLARATION

I hereby declare that this project work titled “INSURANCE IN WEALTH MANAGEMENT AT ADITYA BIRLA MONEY” is the result of my own

research work.

This has not been submitted earlier to any other university or institution for

the award of any degree/diploma/certificate or published any time before.

PLACE: JAIPUR SURENDRA SINGH SOLANKI

DATE: (M.B.A.)

[3]

ACKNOWLEGEMENT

I would like to express my sincere gratitude to the branch manager of Wealth management department, Mrs. Sangeeta Upadhyay and project guide Ms. NEHA ARORA for her guidance

and support throughout my training at Wealth Management Department (ABM).

I would also like to show my greatest appreciation to all those who have directly & indirectly

supported me with their encouragement & guidance. Without their encouragement & guidance

this project would not have been a success.

Finally, I thank my institute Apex Institute of Management and Science for making this

experience of summer training in an esteemed organization like ABM.

[4]

TABLE OF CONTENTS

S.NO. CHAPTER PAGE NO.

1 Introduction To The Topic 7-8

2 Objective of the study 9

3 Concept of the wealth management 10-13

4 Company Profile 14-20

5 Financial Services provided by the company

21-26

6 INTRODUCTION OF INSURANCE 27-61

7 Advantages and limitations 62

8 Strategy and outlook 63

9 Research 64-65

10 Conclusion and recommendation 66

11 Bibliography 67

12 Annexure 68

13 Questionnaire 69-71

[5]

[6]

INTRODUCTION

The term wealth management now a day’s having very importance. So many financial

institutions are engaged in the business of wealth management. Now a days, Wealth

Management has very craze in the business world. In a survey, it was found that India

had 100,000 milliners day end of year 2006 is now growing up by 21% from a year

earlier (Asia pacific Wealth report).

Wealth management services area in financial sector has been witnessing more

attention during last couple of years. Capgemini Merrill Lynch Wealth Report 2007 cites

number of HNIs (high net worth individuals) globally to be around 9.5 million with wealth

held by them totaling to US$37.2 trillion in year 2006. Value of wealth held by HNIs

represents an increase of around 11.4% since 2005.

Considering long-term high value business proposition, number of banks and niche

players has started offering full range of wealth management services targeted to HNIs

and emerging affluent

While growing volume of premium services to affluent clients becomes the key driver for

most of the service provider firms, many unique elements inherent to wealth

management services requires completely different service offering model than the

existing model for transactional services.

Greatly accustomed in offering commoditized financial services so far, demand of

unconventional form of service model poses a big challenge in charting growth path for

these wealth management firms.

[7]

OBJECTIVE OF THE STUDY

The main objective of the study is to understand the procedure of wealth

management department.

To understand the concept of wealth management to the protection of assets from

creditors.

To understand the working principle of wealth management during ups and downs.

To understand the concept of wealth management for diversifying the risks.

To understand the investment strategies with the help of wealth management.

To understand the importance of accumulating and growing assets with the help of

wealth management.

To understand the concept of wealth management in reference of portfolio

allocation.

To understand the cash flows and maintain by understanding wealth management.

To know the potential market in urban and semi-urban area.

To know the investor’s preference for investment.

To understand the risk tolerance of people in the current scenario.

Investor’s awareness for wealth management services provided by the Aditya Birla

Money.

[8]

CONCEPT OF WEALTH MANAGEMENT

Wealth management is a service provided by financial institutions to help high net worth

individuals protect and grow their wealth. This advanced investment advisory discipline

involves providing a diverse range of services, such as financial planning, investment

management, tax planning and cash flow and debt management, based on client

requirements.

There are two aspects to the wealth management process; protecting assets from

creditors, market crashes or slowdowns, taxes, lawsuits and other unexpected events,

and growing asset values through methods that actively manage risk and reward

profiles to clients needs.

The term wealth Management formed with two words “Wealth” & “Management”. The

meaning of management they have already seen in the steering introduction. The

meaning of wealth is – Funding, assets, investments and cash. It means the term

Wealth Management deft with fund assets, instrument, cash, and any other item of

similar nature. While defining the Wealth Management, they have to think in planned

manner. “Wealth Management is an all inclusive set of strategies that aims to grow,

manage, protect and distribute assets in a much planned systematic and integrated

manner”.

[9]

DEFINITION:

Wealth management is a practice that in its broadest sense describes the combining of

personal investment management, financial advisory, and planning disciplines directly

for the benefit of high-net-worth clients.

In the narrowest context, a wealth manager helps a client construct an entire investment

portfolio and advises on how to prepare for present and future financial needs. The

investment portion of wealth management normally entails both asset allocation of a

whole portfolio as well as the selection of individual investments. The planning function

of wealth management often incorporates tax planning around the investment portfolio

as well as estate planning.

“A type of financial service that combines personal investments, tax planning strategies,

estate planning and legal counsel. It is designed to provide a broad array of services

within the confines of one office”.

WEALTH MANAGEMENT RANGE:

The Indian market has been segmented by the wealth management service providers

into five categories namely;

Ultra high net worth individuals (UHNIs)-in excess of US $30 million

Super high net worth individuals (SHNIs)-between US $ 10 million- $30 million

High net worth individuals (HNIs)-between US $ 1 million- $ 10 million

Super affluent-between US $125,000- $1 million

Mass affluent –between US $25,000- $ 125,000

[10]

OBJECTIVE OF THE WEALTH MANAGEMENT:

Diversification of the risk- Enhance value by broad-basing asset classes that

mitigate risks while maximizing returns for clients.

Risk management- Judicious use of equities for above average returns.

Confidentiality and integrity- Protect client interest and serve with utmost

confidentiality and integrity.

Strong research guidance- Research back recommendations and portfolio

monitoring.

KEY ELEMENTS OF WEALTH MANAGEMENT:

Wealth management services involve various responsibilities in providing professional

investment advice and investment management services to a client. Dependent on the

mandate of the services given to the Wealth Manager, wealth management services

could be packaged at various levels:

• Advisory Wealth manger’s role is limited to the extent of providing guidance on

investment / financial planning and tax advisory, based on client profile. Investment

decisions are solely taken by the client, as per his /her own judgment.

• Investment Processing (transaction oriented) Client engages wealth manager to

execute specific transaction or set of transactions. Investment planning, decision and

further management remain vested with the client

• Custody, Safekeeping and Asset Servicing Client is responsible for investment

planning, decision and execution. Wealth manager is entrusted with management,

administration and oversight of investment process.

• End-to-end Investment Lifecycle Management Wealth manager owns the whole gamut

of investment planning, decision, execution and management, on behalf of the client.

He is mandated to make financial planning, implement investment decisions and

manage the investment throughout its life.

[11]

WEALTH MANAGEMENT PROCESS:

Wealth management process includes strategic asset planning, family

philanthropy, cash management, diversified portfolio, family, education and

reporting, financial advisory, annual management review, estate and tax

planning.

[12]

[13]

ADITYA BIRLA MONEY

BACKGROUND:

A US $40 billion corporation, the Aditya Birla Group is in the league of Fortune 500. It is

belonging to 42 different nationalities. The Group has been ranked number 4 in the

Global ‘Top Companies or Leaders’ survey and ranked number 1 in Asia Pacific for

2011.

The Group operates in 36 countries – Australia, Austria, Bangladesh, Brazil, Canada,

China, Egypt, France, Germany, Hungary, India, Indonesia, Italy, Ivory Coast, Japan,

Korea, Laos, Luxembourg, Malaysia, Myanmar, Philippines, Poland, Russia, Singapore,

South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tanzania, Thailand, Turkey, UAE,

UK, USA and Vietnam.

The Aditya Birla Group nurtures a culture where success does not come in the way of

the need to keep learning afresh, to keep experimenting.

In India it is:

:: A top fashion (branded apparel) and lifestyle player

:: The second-largest player in viscose filament yarn

:: The largest producer in the chlor-alkali sector

:: Among the top three mobile telephony companies

:: A leading player in life insurance and asset management

:: Among the top two supermarket chains in the retail business

Among the top 10 BPO companies.

[14]

PRODUCTS AND SERVICES PROVIDED BY THE

ADITYA BIRLA GROUP

Supermarkets

IT- ITes services

Financial services

Cellular services

Insulators

Wind power generation

Noble ferro alloys

Iron ore

Carbon black

Fertilizers, seeds, agrochemicals

Fibres, fabrics

Cement

[15]

ADITYA BIRLA MONEY

Aditya Birla Money is a single brand offering the combined

products and services of Aditya Birla Money Limited and Aditya Birla Money Mart

Limited.

Aditya Birla Money Limited is a broking and distribution player, offering equity and

derivative trading through NSE and BSE and currency derivative on MCX-SX. It is

registered as depository participant with both NSDL and CDSL and also provides

commodity trading on MCX and NCDEX through its subsidiary company.

Aditya Birla Money Mart Limited is a wealth management and distribution player,

offering third party products like company deposits, mutual funds, insurance, structured

products, alternate investments, property services and has a premier wealth

management service arm to cater to HNI customers.

These offerings are delivered through a strong pan India distribution network of about

1000 own and franchisee branches, a robust online and offline model with a strong

technology backbone to a large customer base, in excess of 4 lakhs.

VISION OF THE COMPANY

To be a global conglomerate with a clear focus on each business.

MISSION OF THE COMPANY

To deliver superior value to our customers, shareholders, employees, society at large.

[16]

KEY MANAGEMENT:

AJAY SRINIVASAN, CHIEF EXECUTIVE- FINANCIAL SERVICES

He has been with the Aditya Birla Group since July 2007

He sets the vision and provides strategic direction and leadership for the Group’s

Financial Services Business.

PANKAJ RAZDAN, DY. CHIEF EXECUTIVE- FINANCIAL SERVICES

He has been with the Aditya Birla Group since July 2007

He makes strategies and operationalises the Aditya Birla’s Group Growth in Financial

Services.

GIRISH VENKAT, HEAD- WEALTH MANAGEMENT, ADITYA BIRLA MONEY

He has 14 years of experience with financial services.

JOSEPH THOMAS, HEAD- INVESTMENT ADVISORY AND FINANCIAL PLANNING, ABM

VIVEK MAHAJAN, HEAD-RESEARCH, ABM

[17]

COMPANY’S PHILOSOPHY:

Some might say investing is a science, one that follows a fixed discipline, with

well defined principles and rules. But calculations and numbers will only take

one’s to a certain point. Beyond that, it’s the expertise that counts.

For ABM creating the perfect portfolio is a skill; that we have polished and

mastered over the years. Picking the right investments, identifying growth

opportunities and knowing when to enter and quit the market, requires immense

skill and a keen sense of timing. Aditya Birla Money Wealth Management, offers

an expert panel of professionals who help to mould the goals and expectations

into sound investment strategies. With their guiding factors like capital protection

and strategic asset allocation, they help in translating one’s financial dreams into

reality by carefully crafting individually specific portfolios that are Centered on

one’s profile, risk appetite and of course aimed at getting the optimum out of

one’s investment.

Deciding where to invest one’s hard earned money can be a daunting task for

many people. But it doesn’t have to be when they are with the ABM. With Aditya

Birla Money Wealth Management, one have a dedicated Relationship Manager

who not only ensures that his/her financial goals are met but also exceeds their

expectations at every step.

[18]

Wealth Management Services:

Wealth management offers the following services:

Investment planning: assists you in investing your money into various

investment markets, keeping in mind your investment goals.

Insurance planning: assists you in selecting from various types of insurances,

self insurance options and captive insurance companies.

Retirement planning: is critical to understand how much funds you require in

your old age.

Asset protection: begins with your financial advisor trying to understand your

preferred lifestyle and then helping you deal with threats, such as taxes,

volatility, inflation, creditors and lawsuits, to maintaining this lifestyle.

Tax planning: helps in minimizing tax returns. This might include planning for

charity, supporting your favorite causes while also receiving tax benefits.

Estate planning: helps in protecting you and your estate from creditors,

lawsuits and taxes. This service is critical for every person whose net worth is

high.

Business planning: This service aims at optimizing the tax free advantages of

running your own business.

Business succession planning: assists in planning for the inevitable to

maximize returns.

Wealth transfer: helps you pass on your wealth to your dependents.

[19]

FINANCIAL PRODUCTS AND SERVICES PROVIDED BY THE COMPANY

Financial Products:

Aditya Birla Money provides various financial products like mutual fund, insurance, etc.

The range of financial products are :

TRADITIONAL PRODUCTS Mutual Funds

Insurance

Ipo

Fixed Deposits

BROKING SOLUTIONS Equity Strategies

Commodity Desk

Derivative Strategy

Currency Trading

Margin Funding

ALTERNATIVE INVESTMENTS Portfolio Management System

Private Equity

Structured Products

Offshore Products

Gold

PROPERTY SERVICES Commercial

Residential

Retail Shops

Loan Against Property

Secondary Sales

[20]

MUTUAL FUNDS

An investment vehicle that is made up of a pool of funds

collected from many investors for the purpose of investing in

securities such as stocks, bonds, money market instruments

&similar assets except hedge fund.

These are operated by money managers, who invest the fund’s capital and attempt to

produce capital gains & income for the fund’s investment. A mutual fund’s portfolio is

structured.

TYPES OF FUNDS:

Generally, mutual funds are open-ended and close- ended. These are defined as:

1. OPEN-END - The most common type, the open-end mutual fund, must be willing

to buy back its shares from its investors at the end of every business day at the

nav calculated that day.

2. CLOSE-END - Closed-end funds generally issue shares to the public only once,

when they are created through an initial public offering. Their shares are then

listed for trading on a stock exchange. Investors who no longer wish to invest in

the fund cannot sell their shares back to the fund (as they can with an open-end

fund). Instead, they must sell their shares to another investor in the market; the

price they receive may be significantly different from net asset value.

[21]

CLASSIFICATION ON THE BASIS OF INVESTMENT:

Mutual funds are classified by their principal investments. The four largest categories of

funds are money market funds, bond or fixed income funds, stock or equity funds and

hybrid funds

Money market funds

Money market funds invest in money market instruments, which are fixed income

securities with a very short time to maturity and high credit quality. Investors often use

money market funds as a substitute for bank savings accounts, though money market

funds are not government insured, unlike bank savings accounts.

Bond funds

Bond funds invest in fixed income securities. Bond funds can be sub-classified

according to the specific types of bonds owned (such as high-yield or junk bonds,

investment-grade corporate bonds, government bonds or municipal bonds) or by the

maturity of the bonds held (short-, intermediate- or long-term).

Stock or equity funds

Stock or equity funds invest in common stocks. Stock funds may invest in primarily U.S.

securities (domestic or U.S. funds), in both U.S. and foreign securities (global or world

funds), or primarily foreign securities (international funds). They may focus on a specific

industry or sector.

A stock fund may be sub-classified along two dimensions: (1) market capitalization and

(2) investment style (i.e., growth vs. blend/core vs. value).

[22]

Hybrid funds

Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced

funds, asset allocation funds, target date or target risk funds and lifecycle or lifestyle

funds are all types of hybrid funds.

WAYS OF MAKING MONEY THROUGH MUTUAL FUND:

1. Income is earned from dividend on stocks & interests on bonds. A fund pays out

nearly all of the income it receives over the year of fund owner in the form of a

distribution.

2. If the fund sells securities that have increased in price, the funds have a capital

gain. Most funds also pass on these gains to investors in a distribution.

3. If funds holding increase in price but not sold by the fund manager, the fund

share increase in price you can then sell your mutual fund for a profit.

[23]

ADVANTAGES AND LIMITATIONS

ADVANTAGES:

Increased diversification

Daily liquidity

Professional investment management

Ability to participate in investments that may be available only to larger investors

Service and convenience

Government oversight

Ease of comparison

Economies of scale

DISADVANTAGES:

Fees

Less control over timing of recognition of gains

Less predictable income

No opportunity to customize

Dilution(It is possible to have too much diversification because funds have small

holding in so many different companies, high returns from a few instruments

often don’t make much difference on the overall return.)

Taxes

[24]

Mutual Funds give you access to Indian equity and debt securities. We offer you advice on the entire universe of

mutual funds:

o equity funds – growth or capital

appreciation

o debt funds – capital preservation

Choose from an array of more than 15 fund houses with various schemes like as:

Reliance mutual fund

Sundaram mutual fund

Kotak mutual fund

Religare mutual fund

Mirae mutual fund

SBI mutual fund

HDFC mutual fund

ICICI prudential mutual fund

Birla mutual fund

TATA mutual fund

AXIS mutual fund

UTI mutual fund

Franklin mutual fund

Fidelity mutual fund

DSP mutual fund

JM mutual fund

[25]

INTRODUCTION OF INSURANCE

Insurance is a form of risk management in which the

insured transfers the cost of potential loss to another

entity in exchange for monetary compensation known as

the premium.Insurance allows individuals, businesses

and other entities to protect themselves against

significant potential losses and financial hardship at a

reasonably affordable rate.

Everyone that wants to protect themselves or someone

else against financial hardship should consider insurance. This may include:

Protecting family after one’s death from loss of insurance.

Ensuring debt repayment after death.

Covering contingent liabilities.

Protecting against the death or a key employee or person in the business.

Buying out a partner or co-shareholder after his/her death.

Protecting yourself against unforeseeable health expenses.

Protecting yourself in the event of disability.

Insurance is a form of risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation known as the premium.Insurance allows individuals, businesses and other entities to protect themselves against significant potential losses and financial hardship at a reasonably affordable rate. We say "significant" because if the potential loss is small, then it doesn't make sense to pay a premium to protect against the loss. After all, you would not pay a monthly premium to protect against a $50 loss because this would not be considered a financial hardship for most.

Insurance is appropriate when you want to protect against a significant monetary loss. Take life insurance as an example. If you are the primary breadwinner in your home, the loss of income that your family would experience as a result of our premature death is considered a significant loss and hardship that you should protect them against. It would be very difficult for your family to replace your income, so the monthly premiums ensure that if you die, your income will be replaced by the insured amount. The same principle applies to many other forms of insurance. If the potential loss will have a detrimental effect on the person or entity, insurance makes sense.

[26]

Brief history of insurance sector

The insurance sector in India has completed all the facets of competition –from being an open competitive market to being nationalized and then getting back to the form of a liberalized market once again. The history of the insurance sector in India reveals that it has witnessed complete dynamism for the past two centuries approximately.

With the establishment of the Oriental Life Insurance Company in Kolkata, the business of Indian life insurance started in the year 1818.

- Important milestones in the Indian life insurance business:

1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business.

1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses.

1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of ` 5 crore and that too from the Government of India.

The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British.

Insurance companies in India:

IRDA has till now provided registration to 12 private life insurance companies and 9 general insurance companies. If the existing public sector insurance companies are considered then there are presently 13 insurance companies in the life side and 13 companies functioning in general insurance business. General Insurance Corporation has been sanctioned as the "Indian reinsurer" for underwriting only reinsurance business.

[27]

Research STATEMENT

The research statement studied is entitled, “A comparative study of Life Insurance

Corporation of India and Private Life Insurance Companies in India”. The present study

focuses on the analysis of the performance of public 52and all private life insurance

companies in India with the help of mean, percentage, ratios, ANOVA, Data

Envelopment Analysis and linear trend.

RESEARCH DESIGN

A Research design is a plan of action to be carried out in connection with a research

project. It is the conceptual structure within which research is conducted and it

constitutes the blue print for the collection, measurement and analysis of data. It is the

specification of methods and procedures for acquiring the information needed for

solving the problem. Decisions regarding what, where, when, how much, by what

means concerning an inquiry or a research study constitute a research design.

OBJECTIVES OF THE STUDY

The objectives of the study are as follows:

- To understand the concept and mechanism of insurance.

- To compare and analyze the financial performance of private sector life insurance

companies and Life Insurance Corporation of India.

- To predict the volume of new business and total premium of life insurance companies.

- To compare the cost efficiency of life insurance companies in India.

Nature of data and sources of data

Collection of the data is essential part of research. The nature of data which is collected

and used for this research is secondary in nature. The relevant and required data has

been collected from journals, dailies, annual reports,magazines, literature and websites

of selected companies and through various search engines.

[28]

SAMPLE SELECTION

All private and public sector life insurance companies in India from 2000-01 to 2009-10

were selected for the study.The companies selected for the research work are as

follows:

List of Insurance companies in India:

LIFE INSURERS

Public Sector

Life Insurance Corporation of India

Private Sector

Allianz Bajaj Life Insurance Company Limited

Birla Sun-Life Insurance Company Limited

HDFC Standard Life Insurance Co. Limited

ICICI Prudential Life Insurance Co. Limited

ING Vysya Life Insurance Company Limited

Max New York Life Insurance Co. Limited

MetLife Insurance Company Limited

Om Kotak Mahindra Life Insurance Co. Ltd

SBI Life Insurance Company Limited

TATA AIG Life Insurance Company Limited

AMP Sanmar Assurance Company Limited

Dabur CGU Life Insurance Co. Pvt. Limited

Websites

www.licindia.com

www.allianzbajaj.co.in

www.birlasunlife.com

www.hdfcinsurance.com

www.iciciprulife.com

www.ingvysayalife.com

www.maxnewyorklife.com

www.metlife.com

www.omkotakmahnidra.com

www.sbilife.co.in

www.tata-aig.com

www.ampsanmar.com

[29]

GENERAL INSURERS

Public Sector

National Insurance Company Limited

New India Assurance Company Limited

Oriental Insurance Company Limited

United India Insurance Company Limited

Private Sector

Bajaj Allianz General Insurance Co. Limited

ICICI Lombard General Insurance Co. Ltd

IFFCO-Tokyo General Insurance Co. Ltd.

Reliance General Insurance Co. Limited

Royal Sundaram Alliance Insurance Co. Ltd

TATA AIG General Insurance Co. Limited

Cholamandalam General Insurance Co. Ltd.

Export Credit Guarantee Corporation

HDFC Chubb General Insurance Co. Ltd.

www.nationalinsuranceindia.com

www.niacl.com

www.uiic.co.in

www.bajajallianz.co.in

www.icicilombard.com

www.itgi.co.in

www.ril.com

www.royalsun.com

www.tata-aig.com

www.cholainsurance.com

www.ecgcindia.com

[30]

TYPES OF INSURANCE  

(A) LIFE INSURANCE:

                Term Life Insurance                Permanent Life Insurance

(B) GENERAL INSURANCE

                Fire Insurance                Marine Insurance                Accident Insurance

(A)Life Insurance

Life Insurance is a contract providing for payment of a sum of money to the person assured or, following him to the person entitled to receive the same, on the happening of a certain event.  It is a good method to protect your family financially, in case of death, by providing funds for the loss of income.   

 A1. TERM LIFE INSURANCE:  Under a Term Life contract, the insurance company pays a specific lump sum to the designated beneficiary in case of the death of the insured.    These policies are usually for 5, 10, 15, 20 or 30 years.

Term life insurance are the most popular in advance countries but were not so popular in India.   However, after the entry of the private operators and aggressive marketing by few players this kind of policies are becoming popular.    The premium on such type of policies is comparatively quite low when compared with other types of life insurance policies, mainly due to the fact that these policies do not carry cash value. 

PLUS OF TERM LIFE INSURANCE MINUSES OF TERM LIFE INSURANCE

- The premium payable on these policies is low as they do not carry any cash value.   

- One can afford for quite high value insurance policies

- If one survives the period of the policy, he / she do not get any money at the end of the policy.

The premium on such policies keeps on increasing with age mainly because the risk of death of older people is more. Over the page of 60, these policies become difficult to afford.

[31]

 A2. PERMANENT LIFE INSURANCE :  

    In a Permanent Life contract, a portion of the money paid as  premiums is invested in a fund that earns interest on a tax-deferred basis.  Thus, over a period of time, this policy will accumulate certain "cash value" which you will be able to get back either during the period of the policy or at the end of the policy.   

Your need for life insurance can change over a lifetime. At any age, you should consider your individual circumstances and the standard of living you wish to maintain for your dependents. In most cases, you need life insurance only if someone depends on you for support. Your life insurance premium is based on the type of insurance you buy, the amount you buy and your chance of death while the policy is in effect.  This type of policy not only provides protection for your dependents by paying a death benefit to your designated beneficiary upon your death, but it also allows you to use some part of the money  while you are alive or at the end of the policy.   Some examples of such policies are: - Whole Life, Universal Life and Variable-Universal Life.

ENDOWMENT POLICIES

These policies provide for period payment of premiums and a lump sum amount either in the event of death of the insured or on the date of expiry of the policy, whichever occurs earlier.

MONEY BACK POLICIES

These policies provide for periodic payments of partial survival benefits during the term of the policy itself.  A unique feature associated with this type of policies is that in the event of death of the insured during the policy term, the designated beneficiary will get the full sum assured without deducting any of the survival benefit amounts, which have already been paid as money-back components.  Moreover, the bonus on such policies is also calculated on the full sum assured.

ANNUITY / PENSION POLICIES / FUNDS

This policies / funds require the insured to pay the premium as a single lump sum or through installments paid over a certain number of years. The insured in return will receive back a specific sum periodically from a specified date onwards (the returns can  can be monthly, half yearly or annually), either for life or for a fixed number of years. In case of the death of the insured, or after the fixed annuity period expires for annuity payments, the invested annuity fund is refunded, usually with some additional amounts as per the terms of the policy.

[32]

Basic Elements of Insurance Insurance is a type of financial product that protects a party such as an individual or business against unforeseeable losses or damages. For instance, a homeowner might choose to purchase homeowners insurance, which would pay the homeowner for the damage done to his home by certain events like fires and storms. There are many different types of insurance policies, but all types of insurance have some basic elements in common.

Policy

A policy or insurance policy is a contract that states all the specific conditions of an insurance plan. It is important to read and understand everything written in a policy before buying the insurance so that you know what benefits you are getting and the limitations of those benefits.

Losses

A loss is the cost of damage inflicted upon a piece of property or person. For instance, if you get in a car crash where the vehicle is totally destroyed, the loss would equal the full value of the car. While "damage" describes harm to a person or object, the term "damages" can describe the amount of money a person is legally obligated to pay another party for damage she caused. For instance, if you were the cause of an auto accident, you may be obligated to pay the other driver damages for losses he suffered.

Perils and Risk

All insurance policies deal with compensating the policyholder against perils. Perils are unpredictable events that can cause damages or losses. Every peril is associated with a certain amount of risk, which is the likelihood that the peril will occur. Glico defines risk as "the chance of suffering a loss." For instance, in auto insurance, a common peril is getting into a collision with another vehicle. When an insurance company creates an auto insurance policy, they assess the risk of the drivers. Drivers with clean driving records will typically be considered less risky and therefore might pay less for insurance.

Premium

The premium is the cost of an insurance policy. Premiums are typically paid on a normal recurring schedule, such as on a monthly, quarterly, biannual or annual basis.

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Deductibles

Deductibles are costs that a person must pay toward losses and damages before an insurance company will pay. For instance, if your auto insurance has a $1,000 deductible on collisions and you get in a fender-bender that causes $1,250 worth of damage to your car, you must pay the first $1,000 to fix the car and the insurance company will pay the remaining $250. Deductibles protect insurance companies from having to pay for small losses. Choosing higher deductibles usually reduces premiums for the policyholder.

Insurance Specialists

Insurance specialists are individuals who know their specialties inside out. A specialist can be defined as “An expert who is devoted to one occupation or branch of learning.” There are insurance specialists in every area of insurance. This includes health insurance, auto insurance, and life insurance and so on. Here we take a look at what an auto insurance specialist does.

When you are preparing to purchase an auto insurance policy you will at some point in the process work with an auto insurance specialist. A specialist in this capacity can help you to find the absolute best insurance policy possible. First he will help you to determine what you need in an auto insurance plan. Your driving habits will be taken into consideration as will your lifestyle needs. This is necessary for a specialist to find a plan that the customer can afford and one that is suitable to their needs.

Insurance specialists are there to make sure that you get what you want. As the customer it is your job to provide as much information to the specialist as possible and from there he can find you the absolute best deal he can on vehicle insurance. As a specialist he is privy to information that you do not have access to on your own. That makes him an expert at what he does which is what you require.

The auto specialist will take the information you have provided to him and use that to find out what policies are out there and which ones are most suitable to your needs as you have described them to him. He will then negotiate on your behalf to find you the best deal possible. With a specialist working for you do not need to worry that you will sign up for a vehicle policy that is too expensive or will not suit your needs. Insurance specialists have the inside track on the industry and know exactly what to look for.

The number one goal of an insurance specialist is to find his or her customers the best deal possible on auto insurance. This person needs to be able to effectively communicate with you about your coverage and what you are looking for in a policy. He or she should also be the first one to let you know if changes need to be made with your insurance policy. If you have any questions then do not hesitate to ask the specialist. That is what he or she is there for – to do the best job possible to find you an auto insurance policy that will suit you in every way possible.

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Benefits associated with the policy such as:

1) Basic Insurance benefit

2) Optional Insurance benefit

3) Pre-tax Insurance benefit

Details of the insurance company issuing the concerned insurance policy:

1) Life span of the insurance policy

2) Restrictions or hindrances, if any.

In addition to the company's data source, the insurance brokers and agents may also be rich source of Insurance Information. The insurance brokers are considered to be the unbiased information sources because they are attached with all types of insurance companies. They are supposed to give correct Insurance Information on the insurance policies comprising of both positive and negative aspects.

The department of state insurance can also be the most authentic Insurance Information source. This can help a customer in seeking relevant information’s on a insurance company and its present status. In addition, the department can also give information’s on the grievances and complaints against the concerned insurance company/companies in the present and past.\

Insurance Information helps a customer to choose he right policy of the right service provider. This also helps them to gauge the benefits out of the policy before applying for the same. Hence, Insurance Information plays a very important role in the process of searching, comparing and selecting a particular insurance policy.

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Intro To Insurance: ConclusionInsurance is an integral part of any personal financial plan. The type of insurance and the amount of coverage you obtain all depends on your unique financial and family circumstances, and must be evaluated carefully. When considering purchasing coverage, you should review all the potential risks and the financial impact of these risks on your financial health. This will help you determine what options to look for and what questions to ask. What you need to keep in mind is that you do not want to be underinsured or over insured, which means you have to do your homework before you buy. And as with any type of financial product, you must read the fine print and consult with a competent advisor.

Let's review what we've learned:

Insurance is a form is risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation known as the premium.

Insurance works by pooling risks. Because the number of insured individuals is so large, insurance companies can use statistical analysis to project what their actual losses will be within the given class. This allows the insurance companies to operate profitably and at the same time pay for claims that may arise. 

The insurance contract is a legal document that spells out the coverage, features, conditions and limitations of an insurance policy.

Homeowners insurance typically covers the dwelling (the structure), personal property and contents, and some forms of personal liability. The policy may cover direct and consequential loss resulting from damage to the property itself, loss or damage to personal property, and liability for unintentional acts arising out of the non-business, non-automobile activities of the insured and members of that insured's household.

Health insurance is a type of insurance that pays for medical expenses in exchange for premiums. The way it works is that you pay your monthly or annual premium and the insurance policy contracts healthcare providers and hospitals to provide benefits to its members at a discounted rate.

PPOs are a group of healthcare providers that contract with an insurance company, third-party administrators, or others (like employers) to provide medical care services at a reduced fee.

Disability insurance can replace a portion of the salary you were making before you became disabled and unable to work after a serious injury or illness.

Disability insurance providers rate their premiums based on your job and the level of risk involved in doing that job.

The reason to buy long term care insurance is to protect your assets in case you need to pay for assisted living, home care or a nursing home stay.

Life insurance provides you with the opportunity to protect yourself and your family from personal risk exposures like repayment of debts after death, providing for a surviving spouse and children, fulfilling other economic goals (such as putting your kids through college), leaving a charitable legacy, paying for funeral expenses, etc. 

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Whole life insurance provides guaranteed insurance protection for the entire life of the insured, otherwise known as permanent coverage. These policies carry a "cash value" component that grows tax deferred at a contractually guaranteed amount (usually a low interest rate) until the contract is surrendered.

Universal life insurance, also known as flexible premium or adjustable life, is a variation of whole life insurance. Like whole life, it is also a permanent policy providing cash value benefits based on current interest rate.

Advantages of Having Life Insurance

Like whole-life insurance, joint-life-insurance, pension-life-insurance etc are essential

for family's financial security, but they are equally important for individuals. Term

Insurance policies protect your financial resources against the uncertainties of life so

you can protect your family's future.

Some it is a general belief that life insurance is meant only for those with families. It is true that Policies of the life insurance advantages are:

If an estate owner has not accumulated enough assets for his family, Insurance quote helps create an instant estate for the sake of the Family’s

security. Life Insurance provides the option to pass equal assets to the children who are

not active in the Family business at the time the family business is passed on. Life Insurance policies can help secure the future of children for

college/educational purposes as the amount of life Insurance Policy increases on a minor’s or parent’s life.

The growth of a cash-value policy is tax-deferred - you do not pay taxes on the cash value accumulation until you withdraw funds from the policy.

Life Insurance can be useful in paying estate taxes, along with other estate settlement amounts. Federal Estate Taxes are due nine months after death.

If there’s a Business Transfer, life insurance can provide ready cash to finance a transaction between business owners who are ready to buy the deceased owner’s share from his or her estate after death.

If there’s a home mortgage, one can pass the family residence to their spouse/children to free them of any mortgage if one has a Life Insurance Policy for the same. It is preferred to have a decreasing term policy that decreases in face amount as the mortgage balance is paid down.

Life Insurance helps retain your Business from the loss of a key employee. Untimely death of a key employee can pose severe financial loss to the business.

The right insurance proceeds can provide liquidity to pay off personal loans or business loans.

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Need of life insurance:-

Who will take care of my family if tomorrow something unfortunate happens to me?” If this question bothers you, then Life Insurance is the answer.

Of course, under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. A Life Insurance plan ensures that your family is financially secure even if tomorrow you are no longer around to care for them.

Today, there is no shortage of investment options for a person to choose from. Modern day investments include gold, property, fixed income instruments, mutual funds and of course, life insurance. Given the plethora of choices, it becomes imperative to make the right choice when investing your hard-earned money. Life insurance is a unique investment that helps you to meet your dual needs - saving for life's important goals, and protecting your assets.

Asset Protection:

From an investor's point of view, an investment can play two roles - asset appreciation or asset protection. While most financial instruments have the underlying benefit of asset appreciation, life insurance is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation.

The core benefit of life insurance is that the financial interests of one’s family remain protected from circumstances such as loss of income due to critical illness or death of the policyholder. Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The customer therefore benefits on two counts and life insurance occupies a unique space in the landscape of investment options available to a customer.

Goal based savings:

Each of us has some goals in life for which we need to save. For a young, newly married couple, it could be buying a house. Once, they decide to start a family, the goal changes to planning for the education or marriage of their children. As one grows older, planning for one's retirement will begin to take precedence.

Clearly, as your life stage and therefore your financial goals change, the instrument in which you invest should offer corresponding benefits pertinent to the new life stage..

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There are various insurance plans run by the company.

These are as:

BSLI Foresight Plan

USP- Foresight plan gives the advantage of entering capital markets when they

are low and locking in gains when they are high, irrespective of when investor

decides to invest.

BSLI Vision

USP- “whole life traditional life insurance plan that offers Whole life cover to age

100 plus a Guaranteed Survival Benefit payable at the end of the term selected

by investor.

Classic Life

USP- BSLI Classic Life Plan is a unit linked insurance plan that offers insurer to

conveniently save for the golden years through a wide choice of investment

options to grow and multiply their wealth.

Platinum

USP- BSLI Platinum Advantage is a short pay, medium term unit linked savings

plan which offers highest NAV of first 7 years and 3 months.

BSLI Bachat (Endowment plan)

USP- BSLI Bachat is a traditional plan that helps in build a corpus through

regular systematic savings.

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Life Stage Primary Need Life Insurance Product

Young & Single Asset creation Wealth creation plans

Young & Just married

Asset creation & protection

Wealth creation and mortgage protection plans

Married with kids

Children's education, Asset creation and protection

Education insurance, mortgage protection & wealth creation plans

Middle aged with grown up kids

Planning for retirement & asset protection

Retirement solutions & mortgage protection

Across all life-stages

Life insurance for every stage...

You're married You're married with kids You're a single parent You're a stay-at-home parent You have grown children You're retired You're a small business owner You're single

I

F someone will suffer financially when you die, chances are you need life insurance. Life insurance provides cash to your family after your death. This cash (known as the death benefit) replaces your income and can help your family meet many important financial needs like funeral costs, daily living expenses and college funding. What's more, there is no federal income tax on life insurance benefits.

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Most Americans need life insurance. To figure out if you need life insurance, you need to think through the worst-case scenario. If you died tomorrow, how would your loved ones fare financially?

The truth is, it's always a struggle when you lose someone you love. But your emotional struggles don't need to be compounded by financial difficulties. Life insurance helps make sure that the people you care about will be provided for financially, even if you're not there to care for them yourself.

To help you understand how life insurance might apply to your particular situation, we've outlined a number of different scenarios below. So whether you're young or old, married or single, have children or don't, take a moment to consider how life insurance might fit into your financial plans.

You're Married

When you're married, you share everything with your significant other, including your financial obligations. Many people mistakenly believe that they don't need to think about life insurance until they have children. Not true. What it one of you was to die tomorrow? Even with the surviving spouse's income, would that person be able to pay off debts like credit-card balances and car loans, let alone cover the monthly rent and utility bills. If you're planning to have children, you'll want to buy life insurance right away and not wait until the mom-to-be is pregnant. Some companies won't issue a policy to a woman during her pregnancy. Since health complications sometimes arise, they'll want to wait until after the baby is born to issue the policy. Buying insurance before a baby is on the way helps avoid this potential problem.

You're Married With Kids

Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain their standard of living on your spouse's income alone? Probably not. Life insurance makes sure that your plans for the future don't

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die when you do.

You're a Single Parent

As a single parent, you're the caregiver, breadwinner, cook, chauffeur, and so much more. Yet nearly four in ten single parents have no life insurance whatsoever, and many with coverage say they need more than they have. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children's financial future.

You're a Stay-At-Home Parent

Just because you don't earn a salary doesn't mean you don't make a financial contribution to your family. Childcare, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Surveys have estimated the value of these services at over $40,000 per year. Could your spouse afford to pay someone for these services? With life insurance, your family can afford to make the choice that best preserves their quality of life. 

You Have Grown Children

As the years go by, you may feel your need for life insurance has passed. But just because the kids are through college and the mortgage is paid off doesn't necessarily mean that Social Security and your savings will take care of whatever lies ahead. If you died today, your spouse will still be faced with daily living expenses. What if your spouse outlives you by 10, or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?

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You're Retired

Did you know that depending on the size of your estate, your heirs could be hit with a large estate tax payment after you die (45% of your estate). The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their true value. And life insurance proceeds are generally income tax free and can be arranged to avoid probate. Finally, if your insurance program is properly structured, the proceeds from your life insurance policy won't add to your estate tax liability.

You're a Small Business Owner

Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, died tomorrow? Life insurance can help in a number of ways. For instance, a life insurance policy can be structured to fund a "buy-sell" agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, "key person insurance," payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.

You're Single

Most single people don't need life insurance because no one depends on them financially. But there are exceptions. For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn't want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you're single. If you’re young, healthy and have a good family health history, your insurability is at its peak and you’ll be rewarded with the best rates on life insurance. If you anticipate a need

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for life insurance down the road (e.g., you’re the marrying type) and you can fit the premiums into your budget, it might make sense to lock in coverage while you're young and single.

Four Ways to Buy

1. Through an Agent or Other Financial Advisor:

Most people buy life insurance through agents or other financial advisors, and for good reason. Determining how much and what kind of insurance to buy is one of the most important financial decisions you'll ever make, but it's also one of the most complicated. A qualified insurance professional will conduct a comprehensive financial needs analysis, and walk you through the multitude of questions you need to consider to determine how much and what kind of insurance is right for you. Of course, the quality of advice you get is dependent on how good your agent is. You'll obviously want to work with someone who has the right licensing, training and experience. But don't underestimate the importance of finding someone who's a good listener.

2. At the Workplace:

Obtaining life insurance through your employer is another option to consider. Your first step should be to make sure you understand how much coverage your employer provides at no cost to you. Many employers provide, at their own expense, a "basic" life insurance benefit, often equal to one to two times your base salary. While this is a nice benefit to have, insurance experts believe that most people need somewhere in the range of 10 to 20 times their net income and sometimes even more than that. Check to see if your employer offers you the option to purchase additional coverage through its group plan. Many employers do. To qualify for additional coverage, you may have to answer a few basic questions about your health. It’s important to keep in mind that if you have group coverage and you leave your job, you generally are not able to take the coverage with you.

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3. Via the Internet:

Like most things nowadays, life insurance can be purchased online. You can get instant quotes, apply for, and even purchase policies. To make sure you get the right amount and type of insurance, the better sites won't allow you to complete the purchasing process until you've spoken with a qualified insurance professional. Some sites work like a brokerage agency. They'll have contractual relationships with, say, 10 or 20 companies and they'll broker your case with the company that offers the best product for your specific needs and circumstances. Other insurance e-commerce sites are more like insurance policy marketplaces. They promote the products of a large number of companies and function a lot like a search engine. Their main objective is to take the data you enter into their online quote engine and link you to a company that has a product that's compatible with your specifications. Some insurance company Web sites also offer the option of buying online, but most will typically try to direct you to an agent who can provide you with personalized service. Keep in mind, most Web sites only offer term insurance, not permanent. Also, if you buy online, the onus is often on you to figure out which policy is right for you. If you're about to buy a policy but you're not sure that you're making the right decision, it's never a bad idea to run the quotes by an agent in your community.

4. Over the Phone or By Mail:

An internet purchase of life insurance is one form of direct buying, but certainly not the only one. There are a number of companies that advertise and market almost exclusively via toll-free numbers and/or direct mail solicitations. How might this benefit you? If you want to buy term insurance and you have a good sense of how much coverage you need, you may be able to get the right coverage you need by buying directly. Just be aware of the possible limitations of buying direct. Most direct sellers only offer term insurance, and you generally won't have the benefit of advice from a qualified insurance professional.

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Types of life insurance:-

There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.

Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

1. Term:

Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies—level term and decreasing term.

Level term means that the death benefit stays the same throughout the duration of the policy.

Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.

In 2003, virtually all (97 percent) of the term life insurance bought was level term.

2. Whole Life/Permanent:

Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a

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premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these “overpayments” reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.

Types of term insurance policies:-

Term insurance comes in two basic varieties—level term and decreasing term. These days, almost everyone buys level term insurance. The terms “level” and “decreasing” refer to the death benefit amount during the term of the policy. A level term policy pays the same benefit amount if death occurs at any point during the term.

Common types of level term are:

yearly- (or annually-) renewable term 5-year renewable term 10-year term 15-year term 20-year term 25-year term 30-year term term to a specified age (usually 65)

Yearly renewable term, once popular, is no longer a top seller. The most popular type is now 20-year term. Most companies will not sell term insurance to an applicant for a term that ends past his or her 80th birthday.

If a policy is “renewable,” that means it continues in force for an additional term or terms, up to a specified age, even if the health of the insured (or other factors) would cause him or her to be rejected if he or she applied for a new life insurance policy.

Generally, the premium for the policy is based on the insured person’s age and health at the policy’s start, and the premium remains the same (level) for the length of the term. So, premiums for 5-year renewable term can be level for 5 years, then to a new rate reflecting the new age of the insured, and so on every five years. Some longer term policies will guarantee that the premium will not increase during the term; others don’t

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make that guarantee, enabling the insurance company to raise the rate during the policy’s term.

Some term policies are convertible. This means that the policy’s owner has the right to change it into a permanent type of life insurance without additional evidence of insurability.

“Return of Premium”

In most types of term insurance, including homeowners and auto insurance, if you haven’t had a claim under the policy by the time it expires, you get no refund of the premium. Your premium bought the protection that you had but didn’t need, and you’ve received fair value. Some term life insurance consumers have been unhappy at this outcome, so some insurers have created term life with a “return of premium” feature. The premiums for the insurance with this feature are often significantly higher than for policies without it, and they generally require that you keep the policy in force to its term or else you forfeit the return of premium benefit. Some policies will return the base premium but not the extra premium (for the return benefit), and others will return both.

Different types of permanent policies:-

Whole or ordinary life

This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.

Universal or adjustable life:

This type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments – providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.

Variable life:

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This policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.

Insurance Claims

Insurance claims are the requests of the insured policyholder to the insurer or insurance issuing company for financial reimbursement whenever s/he suffers a loss related to the insured property, life, auto or health. But the insurance claim should be done in accordance with the specifications of the insurance policy or contract.

Insurance claims vary from person to person and from policy to policy. The maximum amount of redemption in case of an insurance claim depends on the scheme under which a person has enrolled and the regular premium amount s/he is paying. At the time of repayment of the claim to the policyholder, the insurance company is only giving back the premium amount, either in entirety or in part.

Insurance Claims: Genuine Claims versus Fraudulent Ones

Some insurance claims are fraudulent in an attempt to defraud the insurance company. So it is necessary for the insurer to carefully process every insurance claim before approving it in order to avoid insurance fraud.

Insurance Industry Claims ProceduresInsurance companies evaluate each claim that is submitted to determine if the claim is eligible for payment. To determine this eligibility, each insurer, whether they are a life, health, home or auto insurer, uses the same basic process when evaluating claims.

Verify Insurance Coverage:

When an insurance company receives a claim, it will first determine whether the coverage is in force. Insurance is in force if either the person who owns the policy or the person who is insured under the policy has paid the premiums.

Verify Identity:

When a person makes a claim either as the person who is insured under a policy or on behalf of someone who is insured under a policy, such as a relative submitting a claim because a loved one has died, the insurance company will ask for detailed information to verify the identity of the insured person. This step protects the insurer from paying benefits to someone who is not insured under the policy or to prevent a beneficiary from submitting a claim when the insured person is still alive, in the case of a life insurance policy.

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Verify Event Occurred:

Whether a policy is a life, health, home or auto insurance policy, the insurance company will verify that the event occurred. In the case of a life insurance policy, the insurance company will ask for proof of death, while an insurer dealing with a health insurance claim will ask the health care provider to fill out a claim form. In the case of home or auto insurance, a claims analyst will be sent to the scene to survey the damage done.

Determine If Event Covered:

In determining whether to pay the benefit on a policy, an insurer will look at whether an event is covered. Policy exclusions detail what events are not covered, and if the event falls into one of the excluded categories, the policy benefit will not be paid.

Calculate Benefits Payable:

The insurance company starts off with the basic policy benefit and factors in any additions to the basic benefit, such as if a person paid premiums in advance. In that circumstance, If an insured person dies before the premium is due, the premium is refunded. Policies sometimes stipulate a deductible amount that the insured person must pay before the insurance company pays out any benefits.

Identify Payee of Benefits:

Once the insurer has calculated the amount of benefits that need to be paid, it determines to whom the benefits will be paid. In the case of a life insurance policy, the insurer looks at the policy's beneficiary designation and pays that beneficiary. For health, home, and auto insurance policies, the benefit is paid to the person insured under the policy.

Description of the Life Cycle of an Insurance ClaimBasic claims life cycle:

Insurance protects you against loss or injury due to accidents, acts of nature, theft and vandalism. Regardless of the kind of insurance you have or what company you use, the basic procedure for filing a claim is similar. Knowing the "life cycle" of a claim may help you get what you need from your coverage.

Basic Cycle:

Typically, you begin the insurance life cycle when you contact your insurance company and file the claim paperwork. The second step in the cycle is when you document your loss. A claims adjuster comes out to your home or business to verify your loss and assess the dollar damage. The adjuster takes this information back to the insurance company, which then adjusts and fully processes the claim. The company contacts you with an offer and you accept or reject that offer. If you reject it, you may have to go to court to get what is fair for your situation. Once your claim is settled, you can make full repairs, if needed.

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Duration:

Most insurance claims take a few weeks to process, if they are not complicated, according to the Free Advice website. However, complex claims may take longer, especially if you end up having to take your insurance company to court. You may be able to speed the process along by keeping excellent documentation of everything related to the claim, such as receipts for replacement materials or goods and letters from the insurance company.

Expert Input:

A simple insurance claim usually involves only you and your insurance company. However, depending on your circumstances, you also may need to pull in vendors or contractors for quotes or even an attorney to complete the claim cycle. With auto accidents, Police officers will need to file an accident report. Life insurance claims may involve creditors, trustees and real estate tax agents. Your doctor, clinic or hospital may need to be involved for health insurance claims.

Obligations:

Through the claim process, you and the insurance company both have obligations under the contract. This means you and the insurance company must operate under "duties of loyalty" and "duties of care," according to Tamar Frankel, author of "Fiduciary Law." As the policy holder, you have the responsibility to initiate the claim and respond cooperatively to any reasonable requests for information from the insurance company, says Corey Harris, attorney with the Merlin Law Group. The insurance company must process your claim in a timely fashion and under the same procedures as all other clients.

Complications:

Not all insurance claims proceed through the claims process smoothly. In some cases like health or disability claims, the insurance company may accuse you of malingering. As explained by the Wrong Diagnosis website, malingering is exaggeration done for non-psychological reasons; a type of fraud usually intended to garner financial gain. You may need testimony from witnesses or a physician to prove your claim is accurate or that there is a medical reason for your complaints. Conflicting testimony or reports also may hinder the claims cycle, as can lack of proficiency on the part of the insurance agent. Medical status also may prevent moving forward with a claim. For example, you may be unable to continue negotiation with your insurance company if you need a serious medical procedure.

Future growth in life insurance:-

The performance of the market is forecast to decelerate, with an anticipated CAGR of 10.4% for the five-year period 2010 - 2015, which is expected to drive the market to a value of $110,797.2 million by the end of 2015.

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Introduction

Life Insurance in India industry profile provides top-line qualitative and quantitative summary information including: market share, market size (value 2006-10, and forecast to 2015). The profile also contains.

Features:-

Save time carrying out entry-level research by identifying the size, growth, major segments, and leading players in the life insurance market in India

Use the Five Forces analysis to determine the competitive intensity and therefore attractiveness of the life insurance market in India

Leading company profiles reveal details of key life insurance market players´ global operations and financial performance

Add weight to presentations and pitches by understanding the future growth prospects of the India life insurance market with five year forecasts

Macroeconomic indicators provide insight into general trends within the India economy.

Life insurance companies are no more looking at micro-insurance segment just as obligatory business but now they are looking at it as major driver for future growth. As some life insurers have already achieved break even in this segment and they are even looking to turn it profitable in coming future.

Biggest concern of insurers to reach out to rural people is lack of product awareness among the rural people and shortage of funds.

As per insurers growth for life insurers in future will come from smaller cities and towns as these are under penetrated areas hence they have immense potential for growth.

Insurers also says that biggest problem that insurers face to reach to the rural population is high cost to reach rural areas and then after managing distribution channel

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hence life insurers can use micro-finance institutions as their distribution channel so that insurers can reach out to their customers.

Challenges in life insurance:-

From this context, life insurance undertakings are confronted with a number of challenges:

Challenge#1:- Business growth and cost efficiency

Falling profits and deteriorating market capitalisation have spawned a situation, where business growth and cost efficiency have become vital for the life insurance industry. Business growth can be achieved by enhancing innovative products / services and entering new or niche markets as well as new distribution channels. Cost efficiency can be achieved by process optimisation and by a better use of IT as outlined below.

Challenge#2: Transparency and disclosure

A continuously evolving regulatory environment and severe competition trigger the need for transparency on products for clients as well as for intermediaries. At the same time, disclosure requirements get more and more demanding. This ranges over several reporting levels: MIS for local and group dimension, regulatory, clients and intermediaries. Particularly group reporting becomes more and more complex regardless of the size of the insurance undertaking.

Challenge#3: IT alignment

IT needs to align to the business issues triggered by the first two challenges and to the business strategy. IT strategies must therefore be set up in a way that IT is not only operationally efficient but also cost-effective. For this reason, CIOs are experiencing a shift in their objectives from merely supporting the business by IT to increasing the

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value added of IT and creating a competitive advantage. In particular, growing complexity can significantly enlarge functional scope of an application and therefore strengthens the need for flexible systems. Yet many existing systems were not designed to withstand such an evolution. Rather often, data models and programme modules are insufficient to match the new prerequisites.

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Some other products are briefly described as:

PMSPortfolio Management System is a unique way to build a customized portfolio of

Indian equities. Aditya Birla Money act as authorized distributors for various PMS

providers to meet the growing needs of investors and expand a portfolio beyond

equities and bonds.

Direct EquityAditya Birla Money offers a convenient, simple and efficient trading in Indian equities. It

provides a seamless platform to invest in the Indian secondary markets. Investor’s

Wealth Management advisor will provide them valuable advice based on ABM’s in-

house research.

Structured ProductsABM brings a customized investment solutions, giving access to various asset classes.

Unlike most other structures, returns can be linked to a variety of asset types such as

equity indices, basket of stocks, and commodities.

Alternate Asset ProductsAditya Birla Money offers a wide range of Private Equity Fund (which invest in unlisted

securities) to give the opportunity of investing in the growing Indian economy. With

these products and investment strategy, one can preserve their capital, ensure risk

protection, leverage and diversify.

Real EstateIt offers niche property investment services and bring in a combination of in-depth

market knowledge and real estate industry expertise to offer a range of specialized real

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estate investment services. We provide expert advice and innovate real estate

solutions tailor made to the needs and objectives.

Loan Against Securities and Mutual FundsIt also provides loans against securities and mutual funds which makes able to

investment more, and increase the size of your overall portfolio.

GoldIt provides investment in gold to make diversified and protective portfolio.

FINANCIAL SERVICES:

Aditya Birla Money provides various financial services like financial planning, research

process etc. The range of financial services are as:

Research

Their quality research provides clients with the information they need to make informed

investment decisions. The Aditya Birla Money research team is dedicated to keeping

you updated with access to the latest publications and a wide range of industry

happenings including: market depth, breaking commentary, long-term forecasts,

detailed daily updates and the latest financial news.

Highly proactive services

It includes Daily Market Update, Weekly update on mutual Funds and Event Based

SMS to keep you completely informed on the markets.

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Online Portfolio Access

Wherever you are, our network works for you. The online portfolio ensures every detail

of your investments is at your fingertips. You can constantly monitor the composition of

your portfolio, so you always know if your long term objectives are being met.

Financial planning

We offer a comprehensive financial planning session to help devise your investment

strategy. This is followed by complimentary personalized report outlining specific

recommendations on the step-by-step actions you need to take to achieve your financial

goals.

Regular Portfolio Reviews

Your portfolio undergoes regular reviews to ensure your money is constantly working in

your best interest, keeping your personal financial goals in sight. and towards your

personal financial goal.

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FUNCTIONAL AREAS OF THE COMPANY

Aditya Birla Money works in many areas like portfolio construction, financial advisory

etc. The key functional areas of the company are as:

It functions with every stage of life of the individual.

It also functions with every occupation like business, sports etc.

It also provides financial advisory.

It also helps in portfolio construction to meet

needs and requirements.

STAGES OF LIFE:

Young and single

Helps in income protection.

Planning for future.

Helps in investment planning.

Married and no children

Helps in liability management.

Provides insurance protection.

Makes retirement planning.

Family with young children

Investment planning

Insurance protection

Planning for children

Retirement planning

Wealth protection

Estate planning

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Family with adult children

Investment planning

Retirement planning

Estate planning

Retired

Medical expenses

Lifestyle expenses

Estate planning

OCCUPATION:

Salaried and professional

Income protection

Planning for future

Investment planning

Sports and entertainment

Annuity planning

Financial security planning

Planning for future

Investment planning

Entrepreneur

Fund management across family and business

Planning for future

Investment planning

Businessmen and professionals

Income protection

Annuity planning

Financial security planning

Investment planning

ADVISORY PROCESS:

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Young family has goals related to child education/marriage, asset building, event

planning. It helps in achieving these goals.

It helps mature family in retirement planning and pension/superannuation.

It helps in businesses by maintaining their cash flows (income/expenses,

assets/liabilities), makes investment in mutual funds, direct equity, real estate and also

insures risk through insurance.

PORTFOLIO CONSTRUCTION:

Portfolio Construction is all about investing in a range of funds that work together to

create an investment solution for investors. Building a portfolio involves understanding

the way various types of investments work, and combining them to address your

personal investment objectives and factors such as attitude to risk the investment and

the expected life of the investment.

When building an investment portfolio there are two very important considerations.

The first is asset allocation, which is concerned with how an investment is spread

across different asset types and regions.

The second is fund selection, which is concerned with the choice of fund

managers and funds to represent each of the chosen asset classes and

sectors.

Both of these considerations are important, although academic studies have

consistently shown that in the medium to long term, asset allocation usually has a much

larger impact on the variability of a portfolio's return.

To help in choosing a suitable asset allocation we have created a Risk Profiler that

helps identify your attitude to risk and therefore better identify a combination of

investments to build a portfolio.

With such a vast number of investment funds to choose from, spanning the full range of

asset classes and world markets it is easy to become confused when choosing which

investments to make. It is even more difficult to choose the right combination of

investment to potentially meet your investment goals. 

STEPS OF CREATING A PORTFOLIO:

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The 4 steps to creating a portfolio

The 4 steps to creating a portfolio

Create your risk profile – Measure your perceived level of risk for an

investment (scale of 1 to 10)

Asset Allocation – Determining the right combination of assets – the most

important part of the portfolio construction process.

Fine tune your portfolio – Choose to invest in and/or review your existing

portfolio to fit in with the asset allocation most suitable to you, potentially

reducing your risk and increasing your returns.

Review your portfolio regularly – Once you have constructed your portfolio, it

is important to continue to review your asset allocation on a regular basis.

Investors failing to do this, may find they become overweight in a particular asset

class, potentially increasing the overall risk of their portfolio.

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The portfolio construction becomes successful only when it is being constructed

according to client’s need and objectives for a particular tenure.

Its analysis should be done timely as the market condition does not remain same

throughout the tenure. The following steps should be taken in consideration:

Analyse asset allocation as per client profile like debt, equity, alternate.

Analyse each asset class exposure level as per client profile on the basis

of sector exposure, market exposure, risk and maturity allocation.

Review each product on various factors like risk, returns, taxation, exit

load and other factors.

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ADVANTAGES AND LIMITATIONS

Advantages of Wealth Management:

The customer can easily know the investment strategy and analyze return and

risk with the help of wealth management professional.

The Private wealth management professional provides the good service of tax

planning like how customers can minimize save and the tax more money.

Customer can also manage their estate with the help of wealth management

professional. Estate management provides protection of customer’s overall

estate.

Those Banks which are engaged in business of wealth management professional

are earning revenues from the foreign countries that mean outsourcing for

economy.

Wealth management professional helps the customer in future planning for

estate.

Disadvantages of Wealth Management:

The big limitation of Wealth management is that they do not show their actual

position to the customers. So, there may be chances of fraud and forgery with

customers.

As we know that wealth management is now only related with the rich people

and is not having any plans and solutions for poor, middle and lower class of

people of society.

Thus wealth management reduces the scope of Management.

Mostly customers do not know the actual position of market because everything

is done by some Wealth management professional. So, that results in inflation

and also there may be chances that the customers are in risk but they are

showing the false return etc.

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STRATEGY AND OUTLOOK

Aditya Birla believe that a disciplined investment process is important for achieving

financial goals. Asset allocation is the times tested process of allocating funds across

multiple asset classes, for earning the best possible returns. Aditya Birla makes its

strategy of portfolio allocation on the basis of research done by them and on daily

market basis. It makes its strategy in the following manner:

COUNTRY RESEARCHThe company performs a research on macro level i.e. county level in which they

research on macro factors like political stability natural factors, etc. and seen

opportunities of wealth maximization in the current scenario.

They also perform SWOT analysis at country level.

ASSET CLASSThe research process is then done on the basis of asset class like equity, debt,

fixed income, real estate, commodities, etc. In this research they analyse the

performance of various assets in the current market condition and also analyse

the future opportunities in them.

PRODUCT RESEARCHThere are wide range of products in the market like equity, mutual funds,

insurance, fixed deposits, gold, real estate, commodities, government securities,

etc. So, the company performs a depth research on a variety of products. In this

research they analyse the risk and return associate with it.

In this way the company makes its strategy on the basis of depth research of the

performance of assets in the current scenario and constructs portfolio

accordingly.

It also provides financial planning to their customers.

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RESEARCHResearch process is done by Aditya Birla to make its strategies, provide financial

advisory, and to make risk diversify portfolio. To perform research they work on fund

evaluation property. They have advisory team expertise in the field of research and also

possess advanced technologies. They have direct excess to fund houses. The brief

description of these as:

FUND EVALUATION PHILOSOPHY: Identify funds that generate consistent returns.

Strike balance with amount of risk.

Keeping an eye on the expenses.

ADVISORY TEAM EXPERTISE: They have experienced of 12 members with total experience of 48 years.

Regular guidance from Group Chief Economist Mr. Ajit Ranade.

TECHNOLOGY: MFI Tracker(ICRA), ACE MF

Reuters Xtra 3000

Lipper analytics- Portfolio allocation to deliver optimal results with low risks

DIRECT ACCESS TO FUND HOUSES:

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Regular interactions with fund managers.

They publish their research report in various forms like:

Equity market report

Market update (for trader and investor)

Fundamental report (for investor)

Technical report (trader)

Monthly (investors)

Derivatives product report

Derivative reports (traders)

Portfolios (trader and investors)

Mutual fund and alternate product report

They also provide monthly Investime magazine.

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CONCLUSION AND RECOMMENDATION

CONCLUSION:

Today wealth management is necessary to a greater extent in the current scenario.

There is a need to maintain wealth along with growth. Today wealth management

service is provided by various organizations like HDFC, ADITYA BIRLA, ICICI etc. The

current market is full of risks so there is a need of better and right estimation of the

opportunity to sustain in the market. Wealth management is done on the basis of needs

and goals for a particular tenure which should be revised timely to maximize the return

and minimizes the risks.

RECOMMENDATION:

In the current scenario the market is full of risks. There is a lots of ups and downs in the

market in a second. So, to minimizes the loss the company that provides wealth

management services to investors have to analyse the market very well and take

decisions within a second as the market becomes changes in a second. The company

should provide weekly updates of the product to the investor as they can take decision

properly. There is a need of online access of such facilities. However some companies

provide such facilities but there is also some limitation like not timely updated

information, server down, etc. which should be removed.

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ANNEXURE“The systematic and objective identification, collection, analysis, dissemination and use

of information for the purposes of assisting management in decision making relating to

the identification and solution of problems ( and opportunities) in marketing.

It is a way to systematically solve the research problem. In it we study various steps that

are generally adopted by a researcher in studying his research problem along with the

logic behind them. It is important for the researcher not only to understand the research

methods and techniques but also the methodology.

DATA COLLECTION: In dealing with any real life problem it is often found that data at hand are inadequate

and hence, it becomes necessary to collect data that are appropriate. There are several

ways of collecting the appropriate data which differ considerably in context of money

costs, time and other resources at the disposal of the researcher.

“I have taken both primary and secondary data in the project”. Primary data through

questionnaire and secondary data through journals, office documents, and other

sources of published information like website of company. “I have chosen survey

method because of some advantages”.

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QUESTIONNAIREQues.1. Which of the following best describes your current stage of life?

a) Single

b) Single with dependent parents

c) Young family

d) Mature family

e) Nearing retirement

f) Retired

Ques.2. How familiar are you with financial markets?

a) I have no knowledge

b) I have basic knowledge and little experience with investment

c) I have a fair amount of knowledge and investment experience

d) I have considerable knowledge and comfortable with most investmen avenues

e) I have extensive knowledge of and experience in investing in different asset

classes

Ques.3 Which of the following best describes your purpose of investing?

a) To protect capital

b) To protect capital and earn regular income

c) To grow capital

d) To grow capital and generate regular income

e) To build long-term wealth

Ques.4 Have you planned for major life stage expenses like your child’s higher

education, marriage, purchase of house, medical/hospitalization, retirement, etc.?

a) I have no separate provision for such expenses

b) I have made some provision for such expenses

c) Yes, I have a separate provision for such expenses

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Ques.5 When do you plan to start withdrawing money from your investments for major

needs? (other than provisions made as mentioned in question 4)

a) Within 1 year

b) Between 1 and 3 years

c) Between 3 and 5 years

d) Between 5 and 10 years

Ques.6 Is your family sufficiently secured to face any unforeseen eventualities?

a) Along with life insurance coverage for self, I have insured all my major assets

(like house, vehicle etc.)

b) I have taken enough life insurance cover for self and my family

c) I have not taken enough life insurance coverage

d) I have not taken any insurance coverage

Ques.7 To meetforeseen and unforeseen circumstances you need to keep…of your

investments in liquid instruments?

a) More than 50%

b) 25%-50%

c) 10%-25%

d) Below 10%

e) None of my investments

Ques.8 If your investment turns bad due to global economic melt-down, for how long

would you be prepared to see your investment performing poorly before getting worried

and/or liquidating it?

a) Less than 3 months

b) Upto 6 months

c) Upto 12 months

d) Upto 2 years

e) Upto 3 years or more

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Ques.9 Assuming an inflation rate of 5-7%p.a. over a medium to long-term

horizon(3-5 years +) what return do you reasonably expect from your investment?

a) Inflation rate plus 2-4%p.a.

b) Inflation rate plus 5-7%p.a.

c) Inflation rate plus 8-10%p.a.

d) Inflation rate plus 11-15%p.a.

e) More than 15%p.a. over inflation rate

Ques.10 Do you leverage your investments?

a) Yes

b) No

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BIBLIOGRAPHY Refrence:-principle of r isk management and insurance 7 t h edition by

George E. Rejda

www.BirlaSunlife.com

www.irda.gov.in

Birlasunlife New Advisor Book

www.adityabirlagroup.com

www.adityabirlamoney.com

www.investopedia.com

www.wikipedia.com

www.google.com

Investime magazine of Aditya Birla

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