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Contents

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

Types of Insurance
Insurance

Life

Whole life

General

term

endowme
nt

Motor

Investmen
t linked

Travel

Fire

Medical
and health

Terminologies

How does insurance works


When you buy a policy you make regular
payments, known as premiums, to the
insurer. If you make a claim your insurer
will pay out for the loss that is covered
under the policy.
If you dont make a claim, you wont get
your money back
If you make a claim the money comes
from the pool of policyholders premiums.

Insurance sector in India


Regulated by IRDA
Foreign Investment caps- FDI limit was raised
from 26 per cent to 49 per cent in the sector

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

CAGR of 1215 per cent over the next five


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

MAJOR COMPANIES

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

Example
Tata AIG Life Insurance plan - PURE TERM PLAN
Insured individual: 30 years of age
Life cover:
10 lakhs
Tenure:
10 years
Annual premium: Rs.3510
Outlives
Death

Receivable Amount(Rs.)
10,00,000

Tata AIG Life Insurance plan - TERM PLAN WITH


ASSURED SUM
Insured individual: 30 years of age
Life cover:
10 Lakhs
Tenure:
10 years
Assured sum:
10 Lakhs + 10 percent + Bonus(If any)
Annual premium: Rs.151250
Outlives
Death

Receivable Amount(Rs.) 13,00,000


10,00,000

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

Suppose if insurer had invested in the Pure Term plan of the


company then
The insurer could have invested the balance amount of Rs1,47,740 Per annum
1,47,740 / 12 = Rs. 12,312 per month
Investment in recurring deposit
Period : 10 years
Interest Rate: 9% P.A (Hypothetical value)
Maturity value (Including interest): Rs. 9,59,243
Thus when coming to choosing investment between Pure Term
plan and Term plan with assured sum, it is always better to
invest in the former plan

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

Unit Linked Insurance Plan (ULIP)


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

The NAV is the value based on which the net rate of


returns on ULIPs are determined.

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