Question 1

Identify and explain the type of life insurance policy needed under the following situations:

(a)  He wants both life risk cover and returns of at least 10 percent return
(b)  He wants only life risk cover for a fixed period
(c)  His focus is on life risk cover but would like to have between 5 to 6 percent return
(d)  He wants guaranteed assured sum paid to the beneficiaries upon his death.

ANSWER
A) ULIP
ULIP or Unit Linked Insurance Plan is a type of Insurance, which combines the bene
has over the traditional wealth creation tools is the benefit of a Life Cover. Unit Lin
generate through stock market and in ULIP some of the amont of yor policy investe

B) Term Insurance
Term Insurance because term life insurance plan provide life insuarnce angainst th

C) Money back Policy money back policy is ideal plan for who want a gauranteed return on their investm
insurance cover for themselve for the same money theyt are putting in as premium
like standard life insurance policy

D) Whole Life Term Insurance life insurance policy which is guaranteed to remain in force for the insured's entire
life insurance policy it represents a contract between the insured and insurer that
the policy to the policy's beneficiaries when the insured dies.
nce, which combines the benefits of protection and saving in a single plan. The major advantage that a ULIP
enefit of a Life Cover. Unit Linked Insurance Policy as per his needs because this type of return can only be
he amont of yor policy invested in the stock market.

vide life insuarnce angainst the fixed premium paid for specified term of thhe year

nteed return on their investment and are looking for regular payouts at the same time in addition to an
heyt are putting in as premium. Monay back policy offers regular income along with the maturity benifit just

n force for the insured's entire lifetime, provided required premiums are paid, or to the maturity date. As a
the insured and insurer that as long as the contract terms are met, the insurer will pay the death benefit of
ed dies.
 QUESTION - 2

A client aged 35 years wished to work till his retirement age of 60 years and thereafter will start receiving pension of
40,000 per month payable to him/spouse in the event of his death. His expected average annual income till his retire
is Rs 10 lakh. Out of this, Rs 2 lakh will be consumed by the client. The discount rate is estimated at 8 percent per a
He already owns Rs 30 lakh life insurance policy.

(a)  Using the human value approach, compute the insurance coverage amount
(b)  Mention the drawbacks of this approach.

ANSWER

Expected Average Salary ₹ 1,000,000.00

Expected Consumptions ₹ 200,000.00
Remaining Left ₹ 800,000.00

Discount Rate 8%
Existing Insurance Policy ₹ 3,000,000.00
Monthly Pension ₹ 40,000.00

If he died today
PVA of Remaining Salary for 25 years ₹ 8,539,820.95
PVA of Pension ₹ 5,182,580.90
Gross Insurance Needed ₹ 3,357,240.05
Less - Existing Inurance ₹ 3,000,000.00
Net insurance Needed ₹ 357,240.05
 art receiving pension of Rs
nual income till his retirement
mated at 8 percent per annum.
QUESTION - 3
Rohit wants to secure the future of his wife, who is 32 years old and is expected to live up to 80 years, by taking a lif
i)              Rental income Rs.2,40,000 p.a.
ii)             Living expenses Rs.12,10,000 p.a.
iii)            School fees of his daughter is Rs 50,000 p.a., expected to increase @ 3% p.a. for
iv)           Wife endowment life insurance policy premium Rs. 60,000 p.a. payable for next 10
v)            Current marriage expense is Rs.20,00,000 and will increase @ 3% p.a.. He plans
vi)           Other expense Rs.3,00,000 p.a.
vii)          Property loan outstanding Rs.12,00,000
viii)         Gratuity Rs. 1,80,000
ix)           EPF Rs.2,50,000
x)            Shares and debentures Rs.12,00,000
xi)           Property Rs.90,00,000
xii)          Existing life insurance policy Rs.20,00,000
Estimate life insurance cover for Rohit if the expected inflation for the remaining expenses is 5 percent p.a. and retu

ANSWER

REAL RATE @3% 5.8%

REAL RATE @5% 3.8%

PV of Lving Expense @5% ₹ 26,483,773.85

Other Expenses @5% ₹ 6,566,224.92
pv School fees @3% pa. for 10 years ₹ 371,070.54
PV of Marrige Expenses @ 3% for 15 years ₹ 855,442.65
PV of endownmnet fund for 10 years ₹ 385,059.46
Sum of all PV expenses ₹ 34,661,571.42
Less - Pv of rental income ₹ 2,624,058.11
₹ 32,037,513.31
Add- One time expense ₹ 1,200,000.00
₹ 33,237,513.31
Less- Existing assets
Gratutity ₹ 180,000.00
EPF ₹ 250,000.00
Property ₹ 9,000,000.00
share and Debenture ₹ 1,200,000.00
Total ₹ 10,630,000.00

Gross Insurance Needed ₹ 22,607,513.31

less- existing insurnce ₹ 2,000,000.00
Net Insurance Needed ₹ 20,607,513.31
 up to 80 years, by taking a life insurance policy. The details of his income, expenses, assets and liabilities are given below:

ed to increase @ 3% p.a. for next 10 years

0,000 p.a. payable for next 10 years
crease @ 3% p.a.. He plans to get her daughter married after 15 years.

nses is 5 percent p.a. and return on investment is 9 percent p.a.

abilities are given below: