Introduction to

ULIP

Common myths and apprehensions

.

Insurance only provides money in the event of death

Insurance plans do not provide high returns

What if I cannot pay premium for the entire term?

What if I need my money back due to a financial emergency?

A ULIP is a Life Insurance Policy which provides a

combination of Life Insurance Protection

and Investment

*A pension plan can also be in the form of ULIP

Solution: Unit linked insurance plan

ReturnsRisk

cover

Let us talk about our…

Needs

And many more…

Classifying needs

Short term

• 1 to 5 years

Long term

• More than 10 years

Needs

Short term

Long term

• Buying a bike or car• Household assets• Going on vacation• Buying gifts for your loved ones• Upgrading lifestyle

• Planning for kids education & marriage• Protection for dependents/ Parent• Securing future of your family • Wealth creation for long term• Retirement planning• Buying a house

Non negotiable

Cannot be postponed

Cannot be modified

Can never be dropped

No alternate available

Long term goals (> 10 years)

To achieve long term goals one needs…

A solution that provides protection and beats inflation year on year…

10 years

Anything that costs 10 lakhs today would cost 22 lakhs* after 10 years

* Considering rate of Inflation @ 8% per annum

Impact of Inflation

10L 22L

Investment avenues

Gold

Real estate

Debt instruments

Equity

Equity as an asset class has the potential to outperform all other asset classes in the long run

Challenges while investing in real estate

Average ticket size for real estate investments is very high

Real estate investments attract High transaction cost (stamp duty) Regular maintenance Pre investment due diligence

Industry is not regulated Extremely non liquid asset class Tax implications on exit unlike ULIP

Ideal solution…

ULIPs provides good mix of equity and debt

Paanch ka Funda

Investments

Flexibility

ProtectionTransparency

Tax savings

ULIP : PAANCH KA FUNDA

Paanch ka Funda

Investments

Flexibility

ProtectionTransparency

Tax savings

ULIP : PAANCH KA FUNDA

The money from different policyholders are invested in a “Fund”

How is the policyholder’s money invested?

FundFund

Who takes care of investments?

Funds managed at home

Just like the head of the family

manages the home funds

Funds managed under ULIP

The fund manager manages all investments

pertaining to the fund under ULIP

Where is the money invested ?

Policyholder can choose from a basket of equity, debt and balanced funds

Investors are allotted “Units” which represent the composition of their investment

Fixed Portfolio Strategy

Investor awareness

High

High

Low

LowLife Cycle Based

Portfolio Strategy

Funds strategies

Investor involvement

Choice of portfolio strategies

Fixed portfolio strategy

• Option to allocate your savings in the funds of your choice

Life cycle based portfolio strategy

• A unique and personalize strategy to create an ideal balance between equity and debt, based on your age

Fixed Portfolio Strategy

• This portfolio strategy offers the flexibility of allocating investments as per customer’s choice

• Customers can choose their own asset allocation using any of the following available funds:

ICICI Prudential offers various Funds for investment

Performance – Maximiser

Superior Fund Performance

https://www.iciciprulife.com/public/Fund-Performance/Ensure.htmAs on Feb 28, 2015

Performance – Protector

Superior Fund Performance

* calculated with effect from 2-Apr-02, as benchmark did not exist before this dateCRISIL index excludes Fund Management Charges (FMC) effective April 01, 2013https://www.iciciprulife.com/public/Fund-Performance/Performance-Benchmark.htmAs on Feb. 28, 2015

Lifecycle based portfolio strategy

Initial allocation based on customer’s age

Rebalancing on a quarterly basis to maintain asset allocation

As age progresses, allocation changed to suit change in Life stage

In the last 10 quarters corpus shifted from equity to debt to ensure safety of your money as you approach the age of 75

Age Band Allocation

Multi Cap Growth Fund Income Fund

0 – 25 85% 15%

26 – 35 75% 25%

36 – 45 65% 35%

46 – 55 55% 45%

56 – 65 45% 55%

66 – 80 35% 65%

Age based allocation table

Flowchart for lifecycle based strategy

NAV CHANGES ALTER THE EQUITY-DEBT

RATIO

WITH CHANGE IN AGE, ALLOCATION IS

ALTERED

Customer

Policy Inception

EQUITY

75%

DEBT

25%

ALLOCATIONS BASED ON AGE

Every Quarter

PORTFOLIO REBALANCING

75%25%50% 50%

75%25%

Age = 30

Every shift in age band

DEBTEQUITY

65%35%

Age = 36

TOWARD THE END OF TERM

Last 10 quarters

65%35%100%

SAFETY

Success Mantra…

• Our solutions are meant for achieving long-term financialgoals through proper financial planning• We do not recommend opportunistic investing based on market

movement

• Recommend investing in debt and equity, rather than onlydebt or only equity

• Tools are available to manage short term volatility• Automatic Transfer Strategy

• Switching

Don’t Time the Market. Spend Time in the Market

Paanch ka Funda

Investments

Flexibility

ProtectionTransparency

Tax savings

ULIP : PAANCH KA FUNDA

Flexibilities relating

to….

Investment

Liquidity

Choice of SA, premium & term

ULIP offers numerous flexibilities to its investors

Let’s explore how will this benefit our customer

Helps in making the most even in a volatile market

FREE switches which vary from product to product with minimum Rs 2000 per switch

Subsequent switches charged Rs. 100/- per switch

Switching: Policy holder can transfer investments from one fund to another

Helps the policy holder choose as to where his future money would get invested

Policy holder can exercise this option when the Premium falls due

Allocation of previous premiums remains unaffected

Premium Redirection: This option allows the policy holder to change the allocation of future premiums

Extent of withdrawal and frequency varies from plan to plan

The life assured must be at least 18 years of age

Partial Withdrawal: Option to withdraw money from policy after the minimum lock in period of 5 years

Helps the policy holder utilize part of his funds during financial exigencies

Can be availed only after the completion of 5 policy years

Policy terminates and Fund Value is paid to the policyholder

Surrender: Policy holder has an option to discontinue his policy before the maturity

Settlement options: Policy holder has flexibility in receiving maturity benefit

Lump sum: The entire fund value in one go

Settlement option: Receive the money in installments.

The client can either receive the benefit as :

Helps the policy holder in receiving his fund value systematically over a period

Automatic Transfer Strategy: Transfer small amount every month from debt to equity

Funds get transferred every

month on a fixed date (1st or

15th) from Income Fund to the

chosen equity

Policy holder can suggest a fixed

amount which will be

automatically transferred every

month on a fixed date – minimum

amount Rs.2000

Money Market

Assists the client to optimize his return by way of Rupee-Cost averaging

You have to buy oranges over 10 days. The prices will be published

You are given Rs. 1000

Let’s take an example of rupee cost averaging

Your task is to buy maximum number of oranges at the least possible price

Day 1 - Rs. 30

Day 2 - Rs. 25

Day 3 - Rs. 20

Day 4 - Rs. 24

Day 5 - Rs. 19

Day 6 - Rs. 22

Day 7 - Rs. 26

Day 8 - Rs. 16

Day 9 - Rs. 13

Day 10 - Rs. 11

Cost of oranges per day (Activity)

Average Cost of acquisition = 994/ 53 = 18.8

Average unit price = 206/ 10 = 20. 6

Activity

Buy regularly and systematically, which will benefit you through a lower cost of acquisition. This is also called Rupee cost averaging

Day Price Amount Invested Units Acquired

1 30 90 3

2 25 100 4

3 20 100 5

4 24 96 4

5 19 95 5

6 22 110 5

7 26 104 4

8 16 96 6

9 13 104 8

10 11 99 9

Total 206 994 53

Flexibility…

Sum Assured depending on the needs of the client

Amount of premium

Term depending on his financial goal

ULIP also offers client, multi capability of choosing:

Flexibility

Paanch ka Funda

Investments

Flexibility

ProtectionTransparency

Tax savings

ULIP : PAANCH KA FUNDA

Provides security to the policyholder’s

family in the form of death benefit

ULIP offers protection

Death Benefit: Protection is provided in the form of death benefit, which varies according to the plan selected

There are 2 variants of death benefit:

Option 1

• SA + FUND VALUE

Option 2

• SA or the FUND VALUE which ever is higher is paid

Investor can choose the amount of Life cover from the multiple options provided

* Option 1 & 2 are dependent on product features available

Paanch ka Funda

Investments

Flexibility

ProtectionTransparency

Tax savings

ULIP : PAANCH KA FUNDA

ULIPS offer a high degree of transparency

All charges in the plan are made known to the customer

Premium Net invested

amount=-Mortality Charges

Other Charges

+

Charges in ULIPS

Mortality charge – Cost of life insurance cover

Other Charges Allocation charge – Policy issuance and entry load charge

Policy Admin – Deducted every year or for few years for service provided

Fund Management Charge – Deducted every year for managing the Customer’s investment through Fund management experts

Reduction in Yield

Gross Return : 10%

Impact of Charges : FMC + PAC (2.25%)

Net Return : 7.6%

Therefore RIY 2.4%

When it comes to investment products High RIY is not good

RIY of 0.7% means that on a 8 % fund return, the customer gets at least 7.3% post charges

Conceptually, this is applicable for all type of investment products

EBI Sample

Paanch ka Funda

Investments

Flexibility

ProtectionTransparency

Tax savings

ULIP : PAANCH KA FUNDA

Premium paid towards ULIPs up to 1.50 lakhs are eligible for tax benefits u/sec 80C

Maturity proceeds are tax free in the hands of the customer under sec 10 (10D) if the death benefit is minimum 10 times of premium

ULIP’s are an efficient tax saving instruments