Presentation on

Unit Linked Insurance Plan

- Shri D.K.Mondal,
Asst. Secretary (Marketing)
Central Office, Mumbai
 UNIT LINKED INSURANCE PLAN
• A combination of the protection and
savings of life insurance with the attractive
prospect of investing in securities and
capital market.

• The insurer accumulates the premium

collected from policyholders and invests
them on behalf of the policyholders.
 UNIT LINKED INSURANCE PLAN (cont…..)

• An unit represents a proportionate

share in the amount of the unit fund
formed by collection of premium.

• The insurer deducts a small percentage

of the premium as charges and the
balance is applied to purchase units in
the fund.
 CASE STUDY
Age 30 yrs. , SA Rs.50,000
Yly. Premium Rs.5000

Mortality Charges - Rs.75.24 Total

Commission Charges - Rs.161.57 Charges
Admn. Charges - Rs.131.60 Rs.393.41

Accident Benefit - Rs. 25.00

 CASE STUDY
Sale Price/ Offer Price
= Rs. 11.5991

No. of Units allotted = Premium - Total Charges

Current Offer Price
= 5000 - 393.41
11.5991
= 397.15 units
 FUND MANAGEMENT

• The premiums collected under Unit Linked

Plan are kept under a separate unit fund to
adopt a more concerted and focused
investment strategy.

• The insurer uses its specialised fund

management skills.
 Fund Management (Cont….)

• The insurer regularly carries out the

valuation of unit funds in order to determine
the value of units.

• Most insurers in India are doing so on

weekly basis.
• Where the insurer invests the fund!

a) Almost the entire investment is done in

debt and other equally safe instruments.
or
b) The major portion is invested in the
more volatile equity instruments.
or
c) The insurer also offers a fund, which
balances the two by investing in a
judicious mix of debt and equity
instruments.
 Has the Policyholders a choice of
selecting the type of investments ?

• The insurer invests the fund as per the

choice of the investor.

• The unique feature is that the investor can

control the use of invested fund.
 How can the investor control the
Fund?
• Insurers normally allow a switching of funds
so that the investor can transfer his
investment from one fund to another where
he considers prospects to be better.

• A small charge may be levied for this

service but it allows him to back his own
judgement.
 Additional Funds

• The investor can also deploy additional

funds in Unit Linked Policies at any
time.

• The key advantage is that the

additional fund attract no charges
other than the commission expense
charges.
 Withdrawal of Funds

• The investor can make partial or complete

withdrawal of the units anytime after a brief lock in
period.

• Surrendering during the initial years involves

deduction of some percentage of unit value and
this percentage, unlike the surrender value of
traditional life insurance plans, is often a single
digit figure and does not substantially diminish the
cash value of units.
Table No. 140
BIMA PLUS - A PLAN THAT GIVES MORE

• Term Assurance with a fixed Term

of 10 years, having the added
advantage of reaping the fruits of
capital market.
 Features

• Minimum Age at entry : 12 Yrs. L.B.

• Maximum age at entry : 55 Yrs. N.B.

• Minimum S.A. :
• Rs.50,000 Regular
• Rs.20,000 Single

• Maximum Sum Assured : Rs.10,00,000

 FEATURES (Cont…..)
(A) Modes of Premium payment:
Annual : Rs.5000 to 1,00,000
Half-Yly. : Rs.2,500 to 50,000
Single : Rs.20,000 to Rs.10 lacs
(B) TERM : 10 Years
(C) Option for Additional premium: (In multiples of Rs.
5000/-) Provision for Additional Premium irrespective of
MODE. Total of such premiums not to exceed Sum Assured,
nor will it carry any risk cover
• A flat rate of 1.5%of Additional Premium will be deducted as
charges
• Minimum Additional Premium - Rs.5000/-
 EXAMPLE
• Age - 30 yrs., Secured Fund
S.A. - Rs.1 lac, Yly. Prem.- Rs.10000
Charges :
Mortality Charge - Rs.150.48
Comm. Expenses Charge - Rs.323.14
Admn. Expenses Charge - Rs.247.41
A.B. Premium - Rs. 50.00
Total Charges - Rs. 771.03
 EXAMPLE (CONT…..)

Date of Purchase - 12.05.2003

• Sale Price / Officer Price = Rs.13.7873

No. of Units Allowed = 10000 - 771.03

13.7873

= 669.38 Units
 Single premium policies

• In case of single premium Plan, Mortality,

Accident and Expense charges will be
recovered from Single Premium, in the first
year for subsequent years level charges will
be recovered by canceling units of EQ.
VALUE at the start of each policy year.
 Features (contd.)
• Plan is offered with DGH. upto Rs.2 lacs even at age 55 yrs.

• Standard Age proof required

• Women under Cat. I & II will be insured under this plan

• Standard Lives can be insured.

• Accident benefit not available to minor lives. However, on

attaining majority they can apply for inclusion
 BENEFITS

• Maturity : Bid Value of Units as on

DOM +5% Bonus (of S.A.)
provided premium for all years are
received in full.
 DEATH BENEFIT:

• first six months : 30% of S.A. +

• Second six months : 60% of S.A. +
 After one year : Full S.A. +

• Bid value of Units on Date of Death

• If policyholder dies in the 10th year, all premia under
the Plan being paid then maturity bonus of 5% of S.A.
will also be payable in addition to above amount.
• On accidental death an additional SA will also be
payable.
 ACCIDENT BENEFIT
- Can be availed on payment of 0.50 Ps. Per
1000 S.A. for Yearly Mode

- Payment of 0.25 Ps. Per 1000 S.A. for

Hly. Mode

- Not available for minors.

THIS PLAN ACCIDENT BENEFIT WILL NOT BE

COUNTED FOR THE OVERALL A.B. LIMIT
 LIQUIDITY
• Withdrawal of funds are allowed after one year
from D.O.C.

• Upto Four years subject to deductions as per the

table given in the next slide depending upon the
no. of years for which premium is paid.

• After four years without deduction.

• Partial surrender upto 50% of units allowed after

3 yrs.
 No. of years premium paid Deduction as % of bid value of Fund
under regular premium Units allotted
plan/No. of years elapsed
from commencement under Regular Premium Single Premium
a single premium plan.
1/2 year 16.0 -

1 year 10.0 4.0

1 1/2 years 7.0 3.5

2 years 6.0 3.0

2 1/2 years 5.0 2.5

3 years 4.5 2.0

3 1/2 years 4.0 1.5

4 years 3.0 1.0

Thereafter NIL NIL

These levels of penalties will apply at all times

 FLEXIBILITY
SWITCH OVER OF FUNDS

• Switch over of funds allowed twice during

the term, with a gap of two years.

• Cost of switch over from one fund to

another is 2% of current bid value of
existing unit fund .

• Net amount so arrived will be utilised to

allot units at the current offer price of the
new fund.
 Lapsation

• Grace Period of 30 days is allowed from the

due date

• If renewal premium is not paid within days of

grace, the policy will lapse and the insurance
over both Life and Accident will not be available
to the policyholder

• The policy shall however subsist as a paid up

policy to the extent of Bid Value
 REVIVAL

• A lapsed policy can be revived within one year

from the due date of first unpaid premium.

• Revival can be done by paying upto date arrears of

premium without any interest.

• In case of death during the year after revival,

proportionate sum assured will be payable. Bid
Value of Policyholders’ unit account on the date of
death shall also be payable.
 IMPORTANT:

AN EXPENSE CHARGE OF RS.100 P.A. WILL

BE CHARGED FROM LAPSED POLICIES ON
THE DATE OF LAPSATION AND THEREAFTR
ON EVERY POLICY ANNIVERSARY IN THE
FORM OF CANCELLATION OF UNITS OF
EQUIVALENT VALUE.
 Commission

• Half Yearly & Yearly Mode

• First, Second & Third Year : 5%
• Fourth Year to Ninth Year : 1%
• Tenth Year : 2%

• SINGLE : 2%
 FUND MANAGEMENT

• Policyholder’s can avail of LIC’s

expertise in investment field.

• Fund managed separately by

Chartered Accountants.
 TYPE OF FUNDS
NAME OF DEBT
EQUITY LIQUID
FUND INC.EQ
Not less Not
SECURED Not less
than exceeding
FUND than 10%
80% 20%
Not less Not
BALANCED Not less
than exceeding
FUND than 30%
80% 20%
Not less Not
Not less
RISK FUND than exceeding
than 50%
75% 25%
SWITCHING OVER OF FUNDS: ALLOWED TWICE DURING THE TERM
WITH A MINIMUM GAP OF TWO YEARS.
 Valuation of Funds

• Net Asset Value of Units declared every

Saturday, applicable from the following
Monday

• For the initial three months from the

launch of the Plan, the offer price was
Rs.10/-
 NET ASSET VALUE – NAV
AS ON 31.05.2003
SALE/ OFFER REPURCHASE
PRICE PRICE

SECURED FUND 14.1348 13.4281

BALANCED 13.2629 12.5998

FUND

RISK FUND 14.6899 13.9554

 STEADY GROWTH OF NAV
(SECURED FUND)
DATE SALE/ OFFER REPURCHASE
PRICE PRICE

31.05.2001 10.5632 10.0350

31.05.2002 12.1364 11.5296

31.05.2003 14.1348 13.4281

 PRESENT BID VALUE

Age : 15 yrs. DOP : 01/06/2001

Single Premium : Rs. 2 lacs
Bid Value as on 02/06/03

Fund Type Bid Value IRR (%)

Secured Fund Rs.249768 11.75

Risk Fund Rs.258489 13.68

 SURRENDER VALUE
Age : 15 yrs. DOP : 01/06/2001
Single Premium : Rs. 2 lacs

Surrender Value as on 02/06/03

Fund Type S.V. IRR (%)

Secured Fund Rs.242275 10.06

Risk Fund Rs.250734 11.97

 INVESTMENT PORTFOLIO
EQUITY SHARES
NAMES OF SOME COMPANIES

Reliance Industries ITC Ltd.

Tata Steel/ Tata Tea ACC Ltd.

Tata Engineering Larsen & Toubro Ltd.

Mahindra & Mahindra Bajaj Auto Ltd.

HDFC Bank BSES

Hindustan Lever Glaxo

Bharat Heavy Elec. Ltd. Satyam Computers

Mahanagar Telephone Gujarat Ambuja

 BIMA PLUS, IS DIFFERENT FROM
TRADITIONAL PLANS
• Insurance Plus opportunity to invest in capital
market.

• Choice of options of investment.

• Can change the options of investment

• Liquidity – Withdrawal facility after even one year.

• Partial withdrawal of 50% of units after 3 yrs.

BIMA PLUS, IS DIFFERENT FROM TRADITIONAL PLANS

Surrender Value is better than Traditional Plans

Flexibility - Can invest additional money as per choice

in multiples of Rs.5000/- anytime.

Low Accident Benefit Premium @ 50 paise per Rs.1000/-

SA

Insurance cover with no medical even at age 55 yrs.

And many more …..

 PROSPECTIVE MARKET
• Investor in Capital Market / Mutual Funds

• Employees Opting VRS

• Middle/ High Income Group

• Policyholders who receive SB & Maturity Claims

• NRIs

• Professional and Salaried Class