|
S.No
|
Important
Words
|
SUMMARY
|
|
1
|
proposer
|
A
person who requests to buy a policy for self, spouse or child.
|
|
2
|
Proposal
form
|
This
is a form to be filled by person who wishes to take a policy. (all a person
in whose name policy is taken.
|
|
3
|
Policy
holder
|
A
person in whose name policy is taken.
|
|
4
|
Premium
|
Amount
to buy a policy or installment. (Annually, semi annually, quarterly, monthly
(ECS-electronic clearing system)
|
|
5
|
agent
|
Intermediate
between company & policy holder. (one who sells policies on commission
basis)
|
|
6
|
insurer
|
Insurance
company who sells policy & also gives money (SA/maturity) at the end of
the period.
|
|
7
|
contract
|
Agreement
between company& policy holder. (one giving & one taking)
|
|
8
|
nominee
|
A
person who receives the money on death of the life insured
|
|
9
|
rider
|
It
can be taken along with normal policy for extra benefits (WOP, CI AD &D,
SC, HC)
|
|
10
|
Sum
assured
|
The
limit of the policy amount. (risk amount- sum at risk)
|
|
11
|
claim
|
Payment
of sum assured on death or maturity.
|
|
12
|
Risk/peril/hazard
|
Risk-
chance of damage of loss, peril- event which might cause a loss, hazard-
conditions that a peril would happen.
|
|
13
|
Coroner
(investigator)
|
A
person who investigates in case of death cases.
|
|
14
|
Medical
referee
|
Panel
of doctors who are appointed for medical checkups. (not company employee)
|
|
15
|
underwriter
|
He
is a company employee who decides to give the policy or not
|
Monday 16 February 2015
Important words in Insurance
Tuesday 3 February 2015
THE FACT-FIND AND FINANCIAL PLANNING
M9: THE FACT-FIND AND FINANCIAL PLANNING
Ø What is a fact- find?
o Identify a client’s financial planning needs;
o Quantity them; and
o Prioritize them based on the resources available for investment.
Ø A fact-find shows the current financial position of the person, where they stand today and their anticipated future changes
Ø A fact-find indentifies a client’s financial planning needs and points towards those needs that are the priority for the client.
Ø Objectives of a fact find are as follows:
o Identifying needs
o Gathering client data
o Analyzing client cash flows and
o Providing for anticipated changes
Ø Identifying needs: the prime objective fact-finding is to identify client needs in the areas of:’
o Protection
o Savings
o Investment
o Health insurance
Ø Gathering client data: this requires
o Knowledge of the personal details of each client, their dependants, finances and employment status.
o Existing health and life insurances and any existing pension provision.
o An understanding of the client’s personal aims, desires and objectives for the future.
o An important fact finding objective is to find out the disposable income.
IDENTIFYING CLIENT NEEDS
M8: IDENTIFYING CLIENT NEEDS
Ø Childhood: two basic needs for parents are
o Secure their children’s financial position, if they themselves die prematurely; and
o Provide for their children’s future expenses such as for higher education, marriage and living expenses.
Ø Young unmarried: young unmarried with no-dependents-
o Low protection need as there are no dependents.
o Ned to invest any surplus income and earn high returns gains priority.
Ø Young unmarried: young unmarried with dependents-
o The family will be adversely affected if the young person dies prematurely.
o Needs to protect their income.
Ø Young married: double income family-
o Financial dependency on one person is reduced.
o Such couples are also commonly known as double income no kids (dink) couples
o Loss of income due to the death of any partner needs to be compensated.
o An individual term life insurance plan for both partners is suitable at this stage.
Ø Young married: single income family-
o Savings are likely to be lower than for the double income family-
o Income protection assumes priority over other needs.
Ø Young married: young married with children: double income family-
o Effect of the loss of income due to the premature death of one of the partners will be less. Protection of income is important.
o Investments towards their children’s future can be a high priority.
Ø Children education planning:
o The insurance agent should take into consideration the cost of the education course selected by the prospect for his child.
o The agent should assume an education inflation rate and based on the date when the prospect’s child will enrol for higher education, work out the amount that will be required at that time.
o Assuming a reasonable rate of return , the agent should arrive at the monthly amount to be invested to accumulate the education fund.
o The propect should start making regular investments towards the child’s education fund in a child insurance plan.
Ø Children education planning married with older children:
o Financial responsibility is towards their children’s higher education and marriage.
Ø Pre-retirement.
OTHER KEY FINANCIAL PRODUCTS Part I
o
Insurers in case of critical illness riders
specify terms & condition along with exclusions.
o
Benefit of the rider will not be payable under
such terms condition.
o
Waiver of premium (WOP)
§
Waives future premiums of policy holder in event of disability.
§
Insurance company always specifies the product
with which this rider is
§
Available
§
WOP rider comes with the exclusions & terms
condition.
o
Some other riders offered by some insurance
companies are
§
Hospital care rider plan fixes an amount on a
daily basis in event of hospitalization
§
The rider fixes an amount at the time when the
policy is taken.
§
An insurance company may pay the actual cost for
the treatment.
§
Amount may be paid for the number of days
insured is hospitalized.
§
Amount is irrespective of actual amount spent in
hospitalization.
§
Amount is additional amount paid apart from lump
sum that maybe paid for surgery and/or critical illness.
§
The rider is similar to the individual policy
mentioned above.
o
Guaranteed insurability rider gives insured
right to increase cover in response to life events which are (a) marriage, (b)
child birth etc.
Ø
Benefits of riders
o
Additional cover
o
nominal cover
o
customization – as per preference of customer
o
flexibility
o
an per the IRDA regulations issued in april 2002
and amended in October 2002:
§
the premium on all riders relating to health or
critical illnesses, in case of term or group insurance products shall not
exceed 100% of the premium of the base policy;
§
the premium on all the other riders put together
should not exceed 30% of the premium on the base policy; and
§
the benefits arising under each of the riders
shall not exceed the sum insured under the base policy.
Ø
Annuities
o
Annuities are a reverse of life insurance.
o
In life insurance insurer starts paying on the
death of the insured whereas in annuity insurer stops paying upon death of
annuitant.
o
Annuity is a series of regular payments from an
annuity provider to an annuitant,
Ø
Annuity can either be immediate or deferred.
o
Immediate annuities become payable (vest)
immediately after they have been purchased with a lump sum,
OTHER KEYFINANCIAL PRODUCTS
M7: OTHER KEYFINANCIAL PRODUCTS
Ø Other financial needs
o Other reasons for buying insurance
§ Living too long
§ Vulnerable to illness
o Health insurance plan pays individual and their family expenses incurred in event of
§ Hospitalization,
§ Critical illness
§ Post hospitalization care
o Health insurance plans are annually renewable policies.
o The cost increase as the person gets older.
o Insurance riders bring additional benefits at nominal costs.
o Riders help in the customi9zation of an insurance policy
o Retirement plans help the individual maintain a similar lifestyle post-retirement.
Ø Features and benefits of other key products
o Health plans: four main types of health insurance plan:
§ Individual health plans
§ Family floater health plans
§ Group health insurance plans
§ Daily hospitalization cash benefit plans.
o A family floater is different from an individual health plan.
§ Individual
§ Spouse
§ Children
§ Parents
§ Insurance company can specify number of people that can be covered
The need to have a contingency/emergency fund
The need to
have a contingency/emergency fund
The need for insurance
The need to purchase assets such as a house, a
car etc.
The need to save for retirement.
o
Need to have adequate health insurance cover for
the family to meet medical emergencies.
o
Need to provide sufficient funds for
children’s higher education and
marriage- child insurance plan can address this need.
Ø
Child insurance plans come in two varieties-
risk averse investors can choose child endowment plans, whereas investors who
a=re willing to take the risk can choose child ULIPs with an equity fund.
Ø
Need to have a regular income or an annuity
after retirement. Insurance companies
provide retirement plans to address this
need. An individual can invest a lump
sum amount, or during their working life they can make regular contributions
towards them.
Ø
Purchase assets like a house, car etc
Ø
The bank offers a percentage of total value of
the asset as loan and rese amount has to be paid by the individual called down
payment, margin money or home owner’s equity
Types of savings products
Ø
Life insurance
o Many
life insurance products apart from an insurance cover have a savings
o Component,
o Ex:
participating endowment,
o Participating
whole life, where investment risk is borne by insurance company on behalf of the policyholders and
the returns earned are shared with the
policyholders in the form of bonuses.
Ø
Bank deposit
o
Bank deposits are products where an individual
has to invest a lump sum amount for a fixed tenure at a fixed rate of interest
decided at the time of making the deposit.
o
There are three types of bank deposits-
§
traditional deposits
§
Cumulative de posits
§
Recurring deposits;
Ø
Mutual fund
o Mutual
funds provide risk diversification
o Managed
by asset management companies (AMCs),
o Brings
people with a common objective together. Money collected from these people is
o Invested
on their behalf and the returns are shared back amongst them.
o Provides
regular income & capital appreciation.
o The buying and selling of shares is done through
brokerage houses on the two stock exchanges in India-
§
Bombay stock exchange (BSE) and the
§
National
stock exchange (NSE).
o
Equity shares provide three types of income to
the investor dividend income.
o
Bonus share& capital appreciation.
o
An investor can also incur a capital loss on
equity investments.
o
Investors can incur capital loses in equity, if
shares are bought at a higher price and
sold at a lower price due to poor financial performance of the company.
savings products
Ø
The amount of the regular investment also
depends upon the surplus amount or the disposable income that the individual
has, disposable income depends on
o
Individual’s income
o
Number of dependants
o
Current liabilities.
o
Current liabilities.
o
The surplus amount is the spare amount of money
left over after an individual has paid all their monthly liabilities.
o
Nobody should be encouraged to commit more to
savings and investment than they can
genuinely afford
o
Professional advisors must take account of
client’s liabilities as part of their saving and investment advise (Eg home
loan, car loan , education loan, personal loan and credit card debts)
o
Existing assets & liabilities: professional advisers must also consider the
individual’s current assets and liabilities as these affect both the client’s
needs and their ability to finance them, future accumulation of liabilities
like taking new loans impacts the need for savings.
Features and benefits of savings
products
Monday 2 February 2015
Taxation and inflation
Taxation and inflation
Ø
Taxation: the premium paid for life insurance
plans qualifies for deduction from taxable income under section 80c of the
income tax act. The act specifies certain conditions for tax benefits to be
granted. The following condition should be fulfilled:
·
As per current tax laws the premium paid should
be 20% ,or less than 20%, of the sum insured; or
·
The sum insured should be five times, or more
than five times, the premium paid
Ø
Inflation: over a period of time, inflation can
have a big impact on the insurance cover that has been taken out.
Ø
In simple words inflation is the rise in the
price of goods and services in the economy and means and increase in the cost of living.
Life insurance products
Life insurance products
v
Return of premium plan
v
Pure endowment plan
v
Endowment insurance plan
v
Whole life insurance plans
v
Convertible insurance plans
v
Joint life insurance plans
v
Annuities
v
Group insurance plans
v
Micro-insurance plans
v
unit-linked insurance plans
v
Child plans
v
Money-back policies
v
Salary saving schemes,
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