1

CHAPTER 1

AN INTRODUCTION

"The most talked-about and popular Life Insurance product today, is

perhaps the Unit Linked Insurance Policy (ULIP). This is an attempt

to decipher one of the biggest innovations of the life insurance

sector."

Investing prudently and taking adequate life insurance is the key to

meet your financial goals. ULIPs offer an ideal avenue that allows you

to invest as well as insure.

Insurance is the equitable transfer of the risk of a loss, from one entity

to another in exchange for payment. It is a form of risk

management primarily used to hedge against the risk of a contingent,

uncertain loss.

Life insurance is a contract between an insured (insurance policy

holder) and an insurer, where the insurer promises to pay a

designated beneficiary a sum of money (the "benefits") upon the

death of the insured person.

2

A Unit Linked Insurance Plan (ULIP) is a product offered by insurance

companies that unlike a pure insurance policy gives investors the

benefits of both insurance and investment under a single integrated

plan. A Unit Linked Insurance Plan is a combination of Life Insurance

and Mutual Fund. A ULIP is basically a combination of insurance and

investment product where the investor gets to avail the benefits of

insurance as well as investment.

These are unique insurance plans which are basically a mutual fund

and term insurance plan rolled into one. The investor doesn't

participate in the profits of the plan but gets returns based on the

returns on the funds he or she had chosen. Thus ULIP combine the

safety of insurance cover with wealth creation prospects.

A Life Insurance ULIP is a special type of insurance plan which offers

both, protection for life and at the same time acts as an investment

plan. ULIPs have been gaining popularity for their dual role acting as

insurance policy and as investment plan simultaneously. Life

insurance ULIP plans are particularly useful for people who want a

financially secured future. These plans are also useful for those

people who cannot afford both investment and insurance at the same

time.

3

CHAPTER 2

PROFILE OF HDFC LIFE

HDFC Life, one of India's leading private life insurance companies,

offers a range of individual and group insurance solutions. It is a joint

venture between Housing Development Finance Corporation Limited

(HDFC), India's leading housing finance institution and Standard Life

plc, the leading provider of financial services in the United Kingdom.

HDFC Ltd. holds 72.37% and Standard Life (Mauritius Holding) Ltd.

holds 26.00% of equity in the joint venture, while the rest is held by

others.

HDFC Life's product portfolio comprises solutions, which meet

various customer needs such as Protection, Pension, Savings,

Investment and Health. Customers have the added advantage of

customizing the plans, by adding optional benefits called riders, at a

nominal price. The company currently has 25 retail and 9 group

products in its portfolio, along with 10 optional rider benefits catering

to the savings, investment, protection and retirement needs of

customers.

4

HDFC Life continues to have one of the widest reaches among new

insurance companies with about 500 branches in India touching

customers in over 900 cities and towns. The company has also

established a liaison office in Dubai. HDFC Life has a strong

presence in its existing markets with a strong base of Financial

Consultants.

HDFC Limited

HDFC Limited, India's premier housing finance institution has

assisted more than 4 million families own a home, since its inception

in 1977 across 2400 cities and towns through its network of over 311

offices. It has international offices in Dubai, London and Singapore

with service associates in Saudi Arabia, Qatar, Kuwait and Oman to

assist NRI's and PIO's to own a home back in India. As of March

2012, the total asset size has crossed more than Rs. 1.67 trillion

including the mortgage loan assets of more than Rs.1.40 trillion. It is

also the largest mobilizer of retail deposit outside the banking system.

Customer Service and satisfaction has been the mainstay of the

organization. HDFC has set benchmarks for the Indian housing

finance industry. Recognition for the service to the sector has come

from several national and international entities including the World

Bank that has lauded HDFC as a model housing finance company for

the developing countries.

5

Standard Life

Established in 1825, Standard Life is a leading long term savings and

investment company, with around six million customers worldwide. By

understanding and offering innovative products to meet its customers'

needs, Standard Life helps people with their financial planning, so

they can feel more confident about the future.

Standard Life offers a range of individual and group pensions, SIPPs,

ISAs, annuities, life assurance, offshore bonds, investment

management, wealth management, tax planning and estate

management services. Standard Life has created dedicates website

for employers, trustees and intermediaries workbenefitszone.com.

Standard Life is headquartered in Edinburgh and employs around

9,000 people across the UK, Canada, Ireland, Germany, Austria,

India, USA, Hong Kong and mainland China.

Board Members

∑ Mr. Deepak S. Parekh is the Chairman of the Company. He is

also the Chairman and Director of Housing Development

Finance Corporation Limited (HDFC Limited).

∑ Mr. Keki M. Mistry joined the Board of Directors of the

Company in December, 2000. He is currently the Vice

Chairman and Chief Executive Officer of HDFC Limited.

∑ Ms. Renu S. Karnad is the Managing Director of HDFC

Limited.

6

∑ Mr. Nathan Parnaby is appointed as the Chief Executive,

Europe & Asia of Standard Life in the year 2010.

∑ Mr. Norman K. Skeoch is currently the Chief Executive in

Standard Life Investments Limited and is responsible for

overseeing Investment Process & Chief Executive Officer

Function.

∑ Mr. Ranjan Pant is a global Management Consultant advising

CEO/Boards on Strategy and Change Management.

Awards & Accolades

∑ Golden Peacock Awards 2012

HDFC Life has emerged as the winner of the ‘Golden Peacock

Innovative Product / Service Award’ for the year 2012 (for Click 2

Buy). Golden Peacock Awards, instituted by Institute of Directors in

1991, are now regarded as Holy Grail of Corporate Excellence

Worldwide.

∑ CIO100 Symposium & Awards Ceremony 2012

Websense, in Association with CIO, hosted the CIO100 Symposium

& Awards Ceremony. We were awarded the Security Supremo

Special Awards for bridging gaps in compliance and security by

creating an effective integrated framework.

7

∑ Top 25 India's Best Companies to Work

HDFC Life was ranked amongst the Top 25 India's Best Companies

to Work. This was Among The Best Companies In Large

Organizations With More Than 10,000 Employees. The Best

Companies to Work in India is a study conducted by the Great Place

to Work Institute, India in partnership with The Economic Times.

8

CHAPTER 3

THEORETICAL VIEW

A ULIP is basically a combination of insurance and investment

product where the investor gets to avail the benefits of insurance as

well as investment. A part of the premium paid is utilized to provide

insurance cover to the policy holder while the remaining portion is

invested in various equity and debt schemes. The money collected by

the insurance provider is utilized to form a pool of fund that is used to

invest in various markets instruments (debt and equity) in varying

proportions just the way it is done for mutual funds. Policy holders

have the option of selecting the type of funds (debt or equity) or a mix

of both based on their investment need and appetite.

Life insurance ULIP plans are particularly useful for people who want

a financially secured future. These plans are also useful for those

people who cannot afford both investment and insurance at the same

time.

Investing insurance premiums in capital markets can be a good

because, the capital markets are on growth path. Every year, the

index of stock market has been increasing steadily. With Life

insurance ULIPs, one can invest in capital market in risk-free units

basis. By investing in units, ULIPs can reap the profits from capital

markets.

9

Life Insurance ULIP plans are expressed in terms of the number of

units. The value that the units will attain over time is called the Net

Asset Value. The investment made can be divided in a broad scale

as Equity or Growth Funds, Debt Funds, Balanced Funds, Secure or

Liquid Funds. Arriving at maximum Net Asset Value is important for

the success of life insurance ULIP plan. Life insurance ULIP is being

offered by many insurance companies. There are various plans and

sub-plans that are offered. Policy holders can choose different life

insurance ULIP products according to their income & risk absorbing

capacity.

Life insurance ULIP India plans has the advantage of paying premium

amounts in lump sum, annually, half-yearly and monthly. These plans

are convenient for both salaried as well for business people. Salaried

people may not be able to pay in lump sum. On the other hand,

business people can opt for half yearly, annual or lump sum amounts

depending upon their financial position.

10

¸ History

The first ULIP was launched in India in 1971 by Unit Trust of

India (UTI). With the Government of India opening up the insurance

sector to foreign investors in 2001 and the subsequent issue of major

guidelines for ULIPs by the Insurance Regulatory and Development

Authority (IRDA) in 2005 several insurance companies forayed into

the ULIP business leading to a plethora of ULIP schemes being

launched to serve the investment needs of those looking to invest in

an investment cum insurance product.

¸ Salient features of ULIP

Unit linked Insurance Plans or ULIP are popular for its triple benefits

of life cover, capital appreciation and income tax benefits.

ULIP investment proportion is structured like a mutual fund. The

prime objective of this product is insurance and capital appreciation.

Accordingly, a part of the premium paid to the company is allocated

towards life insurance cover, administrative charges and

management fees. The rest is invested in market-linked instruments

like stocks, corporate bonds and government securities, depending

on the asset allocation plan. Most ULIP offer policy holders a choice

of plans, namely equity oriented, debt oriented and balanced too.

11

Policy holders will get units for the amount invested and not on the

full premium amount paid. Investor can switch from one plan to

another as per the specified number of times.

ULIP policy holders can make use of features such as top-up

facilities, switching between various funds during the tenure of the

policy, reduce or increase the level of protection, options to

surrender, additional riders to enhance coverage and returns as well

as tax benefits.

¸ Tenure

ULIP have a minimum tenure of 5 years and the maximum term

depends on the age of the investor. These are also subject to a lock-

in period of three years before which an investor has no access to the

investment amount. Lock- in period is minimum time had to remain

invested. One can discontinue plan and stop paying premium but can

not withdraw money. In case of surrender benefits will be paid after 5

years as per the plan.

12

¸ Redemption procedure

In the case of ULIP the policy holder can redeem units under any of

the following situations:

End of the period on the maturity date of the ULIP.

Surrender: If the investor surrenders policy, the surrender value as

stated in the policy after the lock-in period of three years will be

received by him.

Death: In the event of unfortunate demise of the investor, his

nominee receives the sum assured or the value of the units,

whichever is higher.

Partial Withdrawals: Some funds allow partial withdrawal at periodic

time intervals. Units will stand reduced to that extent for the holder.

The Sum Assured and/or value of the fund units is normally payable

to the beneficiaries in the event of risk to the life assured during the

term as per the policy conditions.

One can invest additional contribution over and above the regular

premiums as per their choice subject to the feature being available in

the product. This facility is known as “TOP UP” facility.

13

“SWITCH” option provides for shifting the investments in a policy

from one fund to another provided the feature is available in the

product. While a specified number of switches are generally effected

free of cost, a fee is charged for switches made beyond the specified

number.

¸ The Risk

The risk involved here is that due to the fluctuations in the market, the

policy fund value at the end of the plan term might be less than the

sum of the premiums paid throughout the policy.

Since ULIP returns are directly linked to market performance and the

investment risk in investment portfolio is borne entirely by the policy

holder, one need to thoroughly understand the risks involved and

one’s own risk absorption capacity before deciding to invest in ULIPs.

In unit linked products/policies, the investment risk in

investment portfolio is borne by the policy holder.

14

¸ Working Principles

A ULIP is basically a combination of insurance and investment

product where the investor gets to avail the benefits of insurance as

well as investment. A part of the premium paid is utilized to provide

insurance cover to the policy holder while the remaining portion is

invested in various equity and debt schemes.

The money collected by the insurance provider is utilized to form a

pool of fund that is used to invest in various markets instruments

(debt and equity) in varying proportions just the way it is done

for mutual funds.

Policy holders have the option of selecting the type of funds (debt or

equity) or a mix of both based on their investment need and appetite.

Just the way it is for mutual funds, 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. The NAV varies from one ULIP to another based on

market conditions and the fund’s performance.

15

¸ Benefits of ULIPs

∑ Provides flexibility in investments: ULIPs offer a complete

selection of high, medium and low risk investment options

under the same policy. You can choose an appropriate policy

according to your risk taking appetite, coupled with the

opportunity to switch between fund options without any

additional expense for specified number of switches. ULIPs

provide the flexibility to choose the sum assured and

investment ratio in the annual targeted premium. It also offers

the flexibility of one time increase in investment portfolio,

through top-ups to avail investment opportunity offered by

external environment or own income flows.

∑ Transparency: The charge structure, value of investment and

expected IRR based on 6% and 10% rate of returns, for the

complete tenure of the policy are shared with you before you

buy a product. Similarly, the annual account statement,

quarterly investment portfolio and daily NAV reporting, ensures

that you are aware of the status of your investment portfolio at

all times. Most companies publish latest NAVs on their

respective websites on a daily basis.

16

∑ Liquidity: To cope with unforeseen circumstances, ULIPs offer

the benefit of partial withdrawal; wherein after 5 years you can

withdraw funds from our Unit Linked account, retaining only the

stipulated minimum amount.

∑ Disciplined and regular savings: ULIPs help you inculcate a

regular saving habit. Also, the average unit costs tend to be

lower than one time investment.

∑ Multiple benefits bundled in one product: ULIP is an

outstanding solution for risk cover, long term investments with

the benefit of various investment opportunities, coupled with tax

benefits.

∑ Spread of risk: ULIPS are ideal for those investors who wish to

avail the benefit of market linked growth without actually

participating in the stock market, with the added benefit of risk-

cover.

17

¸ Type

There are a variety of ULIP plans to choose from based on the

investment objectives of the investor, his risk appetite as well as the

investment horizon. Some ULIPs play it safe by allocating a larger

portion of the invested capital in debt instruments while others purely

invest in equity. Again, all this is totally based on the type of ULIP

chosen for investment and the investor preference and risk appetite.

∑ Life Insurance ULIPs

A Life Insurance ULIP is a special type of insurance plan which offers

both, protection for life and at the same time acts as an investment

plan. ULIPs have been gaining popularity for their dual role acting as

insurance policy and as investment plan simultaneously. Life

insurance ULIP plans are particularly useful for people who want a

financially secured future. These plans are also useful for those

people who cannot afford both investment and insurance at the same

time.

Some of the life insurance ULIP products in the present market

include:

Aviva New Life Line

Bajaj Allianz New Unit Gain II

HDFC Endowment Super Suvidha

18

∑ Pension ULIPs

Pension plans are designed to provide annuity amounts in the future

with regular payment of premiums in the present. Premiums paid

under pension plans are invested in ULIPs. These are also called

pension ULIPs. Pension ULIPs are very similar in nature and

operation to regular life insurance ULIP plans. In a pension ULIP

plan, premiums paid are invested in units. After the completion of the

stipulated time period of the pension plan, unlike insurance where the

amount is paid in lump sum, annuity is paid to the policy holder either

in lump sum, annually, half yearly or monthly for life time.

Various pension ULIP plan in India include:

o HDFC Unit Linked Pension

o ICICI LifeTime Super Pension

o Birla Sun Life Flexi SecureLife Retirement Plan

o Max New York Life Insurance SMART Invest Pension Plan

o Bajaj Allianz Life Insurance New UnitGain Easy Pension Plus

19

∑ Child ULIPs

In order that the investment will increase its value, one must invest in

child ULIP insurance. ULIP or Unit linked Insurance Policies are

increasing their popularity in the recent times. These are regarded as

high risk high return investments that are spread over long periods of

time. Each of these policies differs in their growth rate. So, one must

consider all aspects before investing in various child ULIP plans.

There is a significant amount of flexibility in child ULIP policies. A

parent can invest in lump sum or can invest annually, half-yearly or

monthly depending upon his/her financial status and permeability.

Child ULIP comparison is a must for parents who want to invest for

their children. This is because various insurance companies offer

different child ULIP plans which differ in premiums, premium waiver

and guaranteed amount after the maturity. In such condition, child

ULIP comparison can derive the best child ULIPs plan.

Some of the best child ULIPs plans in India include:

∑ Smart Steps Plan from Max New York Life Insurance

∑ Reliance Secure Child Plan from Reliance Life Insurance

∑ SmartKid New Unit Linked Regular Premium from ICICI

Prudential Life Insurance

20

∑ ULIPS For Long Term Wealth Creation

ULIPs are the right insurance solutions for you if you are looking for a

strong wealth creation proposition allied to a core insurance benefit.

Such plans are ideal for people who are in their late 20s and early

30s and by investing in such a plan get the flexibility of using it to fund

any of their long-term financial goals such as purchase of a house or

funding their children’s education. The added element of life cover

serves to make these plans a wholesome financial investment option.

Wealth Creation ULIPs can be primarily classified as:

o Single premium - Regular premium plan: Depending upon

you needs & premium paying capacity you can either opt for a

single premium plan where you need to pay premium only once

during the term of entire policy or regular premium plans where

you can premium at a frequency chosen by you depending

upon your convenience.

o Life Stage based – Non life Stage based: Life Stage based

ULIPs factor in the fact that your priorities differ at different life

stages & hence distribute your money across equity & debt.

Here the initial allocation is decided as per your age since age

is a significant indicator of risk appetite. Such a strategy

ensures that the asset allocation at all times is in sync with your

age and changing financial needs.

21

o Guarantee plans – Non-guarantee plans: Today there are

wealth creation ULIPS which also offer guaranteed benefit.

These plans are ideal insurance-cum-investment option for

customers who want to enjoy the potentially higher returns

(over the long term) of a market linked instrument, but without

taking any market risk. On the other hand non guarantee plans

comes with an in - built range of fund options to choose from –

ranging from aggressive funds (Primarily invested in equities

with the general aim of capital appreciation) to conservative

funds (invested in cash, bank deposits and money market

instruments with aim of capital preservation) so that you can

decide to invest your money in line with your market outlook,

time horizon and your investment preferences and needs.

∑ ULIPS for Heath Solution

Health ULIP is a recent innovation from the health insurance industry.

In a health ULIP part of your premiums are allocated for investment

designed specifically to build a health fund to meet future health

related expenses. It aims to create a health savings kitty by investing

in a long term flexible savings plan with multiple fund options. The

health fund thus created allows you to claim for health related

expenses of any kind and also fund your future health insurance

charges. You can also avail of tax benefit on premium paid u/s 80D.

22

¸ Unit Fund

The allocated (invested) portions of the premiums after deducting for

all the charges and premium for risk cover under all policies in a

particular fund as chosen by the policy holders are pooled together to

form a Unit fund.

Most insurers offer a wide range of funds to suit one’s investment

objectives, risk profile and time horizons. Different funds have

different risk profiles. The potential for returns also varies from fund to

fund. The following are some of the common types of funds available

along with an indication of their risk characteristics.

General

Description

Nature of Investments Risk

Category

Equity Funds Primarily invested in company

stocks with the general aim of

capital appreciation

Medium to

High

Income, Fixed

Interest and Bond

Funds

Invested in corporate bonds,

government securities and

other fixed income instruments

Medium

Cash Funds Sometimes known as Money

Market Funds — invested in

cash, bank deposits and

money market instruments

Low

Balanced Funds Combining equity investment

with fixed interest instruments

Medium

23

¸ Charges, fees and deductions in a ULIP

ULIPs offered by different insurers have varying charge

structures. Broadly, the different types of fees and charges are given

below. However it may be noted that insurers have the right to revise

fees and charges over a period of time.

o Premium Allocation Charge

This is a percentage of the premium appropriated towards charges

before allocating the units under the policy. This charge normally

includes initial and renewal expenses apart from commission

expenses.

o Mortality Charges

These are charges to provide for the cost of insurance

coverage under the plan. Mortality charges depend on number of

factors such as age, amount of coverage, state of health etc.

o Fund Management Fees

These are fees levied for management of the fund(s) and are

deducted before arriving at the Net Asset Value (NAV).

o Policy/ Administration Charges

These are the fees for administration of the plan and levied by

cancellation of units. This could be flat throughout the policy term or

vary at a pre-determined rate.

24

o Surrender Charges

A surrender charge may be deducted for premature partial or full

encashment of units wherever applicable, as mentioned in the policy

conditions.

o Fund Switching Charge

Generally a limited number of fund switches may be allowed each

year without charge, with subsequent switches, subject to a charge.

o Service Tax Deductions

Before allotment of the units the applicable service tax is deducted

from the risk portion of the premium.

¸ Premium to purchase units

The full amount of premium paid is not allocated to purchase units.

Insurers allot units on the portion of the premium remaining after

providing for various charges, fees and deductions. However the

quantum of premium used to purchase units varies from product to

product.

The total monetary value of the units allocated is invariably less than

the amount of premium paid because the charges are first deducted

from the premium collected and the remaining amount is used for

allocating units.

25

¸ NAV Calculation

Each fund’s unit has a value attached to it, which is unique to that

fund and known as the fund's NAV i.e., Net Asset Value. Investment

value is the number of units allocated to you multiplied by the fund’s

NAV. The NAV changes daily, as per the value of the fund's total

investments. The NAV movement will give you a fair idea on the

performance of fund.

The NAV is calculated in the Following Manner

Net Asset Value (NAV) = (Market Value of investment held by the

fund +/- the expenses incurred in the purchase/sale of assets + value

of Current Assets + any accrued income net of fund management

charges - value of Current Liabilities- Provisions) divided by Number

of outstanding units in the Fund. Because of the sheer benefits

associated with ULIPs, an insurance portfolio without this type of

policy is truly incomplete.

26

¸ SEBI-IRDA Conflict Regarding ULIP

Traditionally the ULIP has been under the regulation of the Insurance

Regulatory and Development Authority or IRDA. This regulatory

dominance has been challenged by the Securities and Exchange

Board of India or SEBI. SEBI contends that the ULIP should come

under its own purview.

SEBI is the securities regulator and IRDA regulates insurance

companies. The prevalent practice is that any financial scheme which

has an insurance component tends to be regulated by the insurance

regulator. ULIP happened to act as mutual funds, which are subject

to the securities regulator. ULIPs also account for 50 per cent and

more of the life insurance business and the money collected through

them are invested in equities.

The question arose as to whether IRDA or SEBI should regulate

ULIPs.

The IRDA had asked the life insurers to ignore the SEBI order. The

matter escalated to the Ministry of Finance but no conclusion could

be reached at the meeting between the Finance Ministry and

Chairman of IRDA and SEBI. The regulatory bodies were asked to

move the court as well. The RBI Act, the Insurance Act, the SEBI Act

and the Securities Contracts Regulation Act were amended on 18

June 2010 and clarity on regulation of ULIPs was brought.

27

The Indian Government on 19 June 2010 put an end to the Securities

and Exchange Board of India (SEBI)- Insurance Regulatory and

Development Authority (IRDA) conflict over unit-linked plans (ULIPs)

maintaining that ULIPS would be regulated by IRDA.

28

CHAPTER 4

ULIP- CASE STUDY

HDFC Life offers different ULIPs which can help customer to meet

their specific financial objectives. The different ULIPs offered by

HDFC Life are as follows:

∑ ULIPs for Children:

o HDFC SL YoungStar Super II

o HDFC SL YoungStar Super Premium

∑ ULIPs for Savings & Investment:

o HDFC SL ProGrowth Super II

o HDFC SL ProGrowth Flexi

o HDFC Life ProGrowth Plus

o HDFC Life Smart Woman Plan

o HDFC SL ProGrowth Maximiser

29

o HDFC Life Invest Wise Plan

o HDFC SL Crest

∑ Group ULIPs:

o Group Unit Linked Plan Gratuity

o Group Unit Linked Plan Leave Encashment

∑ Woman ULIPs:

o HDFC Life Smart Woman Plan

1) ULIPs for Children:

Features:

Regular premium: Minimum premium is Rs. 15000/- and there is no

limit on maximum premiums. Premiums are to be paid annually only.

Term limits: term is 10, 15 to 20 years.

30

Level of protection: customer can choose any sum assured multiple

between 10 times annual premium to 40 times annual premium.

Choice of fund: customer can invest in any fund i.e. Short term fund,

Income fund, balanced fund, Blue chip fund, Opportunity fund.

Age limits: for life option minimum 18 years and maximum 65 years.

¸ HDFC SL YoungStar Super II

There is no bigger joy than being able to fulfill child's dream. With

HDFC SL YoungStar Super II customer can fulfill child's immediate

and future needs. So tomorrow when child needs support parents

don't have to depend on anyone else. This is ULIP which aims to help

to achieve long term savings.

∑ In case of unfortunate demise or critical illness, HDFC Life pays the

greater of Sum Assured (less partial withdrawals) or Fund Value to

child (Beneficiary). The policy will terminate. HDFC Life will pay 100%

of all the future regular premiums to the Beneficiary as and when due,

on an annual basis.

31

∑ Customer can customize the ideal plan for their child by choosing the

premium they wish to invest along with the Sum Assured, depending

on the level of protection required.

∑ This plan can be taken by filling Short Medical Questionnaire, which

may not require going for medicals.

∑ one can change investment fund choices in two ways:

o Switching: customer can move their accumulated funds from one

fund to another anytime

o Premium Redirection: Customer can pay their future premiums into

a different selection of funds, as per customer need.

∑ Tax benefits are offered under section 80C and 10(10D) of the

Income Tax Act, 1961

¸ HDFC SL YoungStar Super Premium

With HDFC SL YoungStar Super Premium customer can fulfill their

child's immediate and future needs- all on their own. Start saving now

with this unit linked insurance plan and be assured that savings for

their child will continue, even in their absence. This ULIP plan offers

customer choice of cover options and benefit payment preferences-

all designed to suit their needs.

32

∑ The Triple Insurance Benefit helps customer secure their child's

immediate and future needs. In case of their unfortunate demise or

critical illness, we will pay the Sum Assured to their child

(Beneficiary). Their family need not pay any further premiums. With

Save -n- Gain benefit, we will pay 50% of all the original regular

premiums towards their policy and 50% of the premiums will be paid

to the Beneficiary as and when due, on an annual basis. Any Death

Benefit or Critical Illness cover terminates immediately.

Customer can customize the ideal plan for their child by choosing the

premium customer wish to invest along with the Sum Assured,

depending on the level of protection required and Benefit payment

preference.

∑ This plan can be taken by filling Short Medical Questionnaire, which

may not require customer to go for medicals. Kindly refer to the

product brochure for details.

∑ Customer can change customer investment fund choices in two

ways:

o Switching: Customer can move customer accumulated funds from

one fund to another anytime

o Premium Redirection: Customer can pay customer future

premiums into a different selection of funds, as per their need

33

∑ Tax benefits are offered under section 80C and 10(10D) of the

Income Tax Act, 1961

2) ULIPs for Savings & Investment:

¸ HDFC Life ProGrowth Plus

Customer work hard to attain their dreams. Their money should work

harder so that customer can attain their dreams and aspirations.

Investing in a unit linked insurance plan is a nice way to build wealth

and also enjoy life insurance cover. We understand that customer

would like to actively manage their own investment, and prefer to

create their own investment strategy.

We present HDFC Life ProGrowth Plus, a simple savings-cum-

insurance plan that will enable customer to enjoy life cover and

benefit from comfort of creating their own investment strategies. This

ULIP plan aims to help customer achieve long term savings while

providing insurance coverage as per option selected by customer. i.e.

Life and Extra Life.

34

Features:

Regular premium: Minimum regular premium is Rs. 24000/- for

annual, Rs. 10000/- for half yearly and 2500/- for monthly.

Term limits: choose policy term of 10 to 30 years.

Level of protection: customer can choose any sum assured multiple

between 10 times annual premium to 40 times annual premium.

Choice of fund: customer can invest in any fund i.e. Short term fund,

Income fund, balanced fund, Blue chip fund, Opportunity fund.

Age limits: for life option minimum 18 years and maximum 65 years.

∑ This plan provides valuable protection to their family in case

customers are not around. In case of their unfortunate demise during

the policy term, we will pay the greater of the Sum Assured or their

total fund value to their nominee.

∑ Customer can choose any of the following 2 plan options as per their

requirement.

o Life Option = Death Benefit

o Extra Life Option = Death Benefit + Accidental Death Benefit

35

∑ On maturity, customer can take the Fund Value at the prevailing unit

prices as lump sum or customer can opt for settlement option.

∑ Customers have flexibility of creating their own investment strategies,

as per their risk and return appetite.

∑ Customer have flexibility to make partial withdrawals to meet any

unplanned expenses

∑ Tax benefits are offered under section 80C and 10(10D) of the

Income Tax Act, 1961, as per provisions contained therein.

¸ HDFC SL ProGrowth Flexi

Nothing should hold customer back in life. Uncertainties of life can

throw best laid plans and aspiration off gear. It's prudent to be

prepared and life insurance solutions enable customer to build their

savings and enjoy life cover.

With HDFC SL ProGrowth Flexi, customer has a smart savings-cum-

insurance unit linked plan that will enable customer to simply provide

the finest for their loved ones.

36

In this plan customer also enjoy life insurance coverage so that

customer’s loved ones financial future is secured even in their

absence. This unit linked plan aims to help policy holder build his/her

savings in long term. There are no bonuses attached in this plan.

∑ This plan provides valuable protection to their family in case customer

is not around. In case of their unfortunate demise during the policy

term, we will pay the greater of the Sum Assured or their total fund

value to their nominee.

∑ Customer can choose any of the following 2 plan options as per their

requirement.

o Life Option = Death Benefit

o Extra Life Option = Death Benefit + Accidental Death Benefit

∑ On maturity, customer can take the Fund Value at the prevailing unit

prices as lump sum or customer can opt for settlement option.

∑ Customer have flexibility of

o Switching: Customer can move their accumulated funds from one

fund to another anytime

o Premium Redirection: Customer can pay their future premiums into

a different selection of funds, as per their need

37

∑ Tax benefits are offered under section 80C and 10(10D) of the

Income Tax Act, 1961.

Other ULIPs Savings and Investment plans offered by HDFC Life are:

∑ HDFC SL ProGrowth Super II

∑ HDFC SL ProGrowth Flexi

∑ HDFC Life Smart Woman Plan

∑ HDFC SL ProGrowth Maximiser

∑ HDFC Life Invest Wise Plan

∑ HDFC SL Crest

38

3) Group ULIPs

¸ Gratuity Schemes

Most employers have a statutory obligation to pay a gratuity to its

employees on termination of employment. This gratuity is in the form

of a one-off payment made on termination of employment. It depends

on salary and number of years of service, so will therefore increase

with time. The HDFC Group Unit Linked plan is a new and innovative

unit-linked plan, which offer employers and gratuity scheme trustees

a flexible and cost effective way to fund this gratuity liability.

The plan helps a corporate by:

∑ Building a fund systematically, which will be used to meet their future

gratuity liability

∑ Providing the opportunity to maximize investment returns and thus

provide the benefit in a cost-effective manner

One factor that helps customer to maximize the investment returns is

low charges. Our charges are the lowest in the industry and therefore

can improve their long-term returns.

39

¸ Leave Encashment Schemes

Many employers provide their employees with the option of

encashing their leave to their credit at the time of retirement or

resignation. Accounting Standard 15 requires that an actuarial

valuation of a company leave encashment liability be carried out and

reflected in the books of accounts.

The HDFC Group Unit Linked Plan is an innovative plan, which offers

employers a flexible and cost effective way to fund this Leave

Encashment liability.

The plan helps an organisation by:

∑ Creating a fund that can be built up to meet their future leave

encashment liability

∑ Providing the opportunity to maximise investment returns and thus

provide the benefit in a cost-effective manner

40

¸ HDFC Life Smart Woman Plan

HDFC Life Smart Woman Plan, a unique insurance cum investment

plan designed specifically for women. This plan ensures that their

savings continue, while customer adjusts to the new stages of their

life, and customer remains confident to live life their way.

This ULIP plan comes with comprehensive coverage options where

we will cover customer against pregnancy complications and

congenital conditions or for malignant female-specific cancers. During

these critical moments, we assure customer the peace of mind by

waiving and funding their premiums so that as customer overcome

and adjust to their life their investments continue to grow.

Features:

Plan option: choose from classic, premium and elite option.

Annual premium: pay premium yearly. Minimum premium of

Rs.24000. maximum premium is Rs.100000 per year.

Policy term: 10 years to 15 years

41

Choice of funds: range of 5 funds for investors with different risk

appetite.

Age limit: minimum age is 18 years and maximum age is 45 years.

Sum Assured: sum assured up to 40 times annual premium.

∑ Customer can choose plan options as per their needs i.e. Classic or

Premier or Elite

∑ Uninterrupted savings with Waiver & funding of premiums for next 3

years on the following events

o Pregnancy complications or birth of child with congenital disorder

o Diagnosis of malignant cancer of female organs

∑ Additional periodic cash payouts under Premier & Elite Options

∑ This plan provides valuable protection to their family in case customer

is not around. In case of their unfortunate demise during the policy

term, we will pay the greater of the Sum Assured or their total fund

value to their nominee.

42

∑ On maturity, customer can take the Fund Value at the prevailing unit

prices as lump sum or customer can opt for settlement option.

Customer can use the maturity benefit to fund their needs - be it for

child's education, travel, upgrading their entrepreneurship venture

etc.

∑ Customers have flexibility to make partial withdrawals to meet any

unplanned expenses.

For more details on terms and conditions, please read the Product

Brochure carefully and/or consult Financial Consultant before taking a

decision.

43

CHAPTER 5

CONCLUSION

ULIPs or Unit Linked Insurance Policies are gaining popularity in the

recent times. Importance of ULIP policies has grown in the recent

times because of the features and advantages that ULIP policies

offer. While under traditional insurance policies, the relationship

between premium and assured sum is fixed. But, under ULIPs there

is freedom of flexibility in premiums and assured sum. The reason

that is attributed to the wide spread popularity of ULIP is because of

the transparency and the flexibility which it offers to the client.

As time progressed the plans were also successfully mapped along

with life insurance needs to retirement planning. In today’s times

ULIP provides solution for all needs of a client like insurance

planning, financial planning for children’s future and retirement

planning.

If customer wants to take a low exposure to equity market and still get

tax free returns, invest in ULIP but make sure that fund customer are

invested is conservative fund. If one is not disciplined enough to

make regular investments and need a whip to make invest, invest in

ULIP.

44

ULIP investors have the option of investing across various schemes

similar to the ones found in the mutual funds domain, i.e. diversified

equity funds, balanced funds and debt funds. Generally speaking,

ULIPs can be termed as mutual fund schemes with an insurance

component.

ULIP investors also have the choice of investing in a lump sum

(single premium) or using the conventional route, i.e. making

premium payments on an annual, half-yearly, quarterly or monthly

basis. In ULIPs, determining the premium paid is often the starting

point for the investment activity.

ULIP investors also have the flexibility to alter the premium amounts

during the policy's tenure. The freedom to modify premium payments

at one's convenience clearly gives ULIP investors an edge over their

mutual fund counterparts.

One can see that insurance is a better choice while making

investment decisions because of features like tax savings, better

returns and protection from any miss happening.

45

Thus insurance industry has tremendous growth opportunities

provided that it meets the expectations of the customers. The

changing products of insurance with changing needs of the

customers can be a major cause for the growth of the insurance

industry.