Unit Linked Insurance Plan ULIP

& Met Easy

Unit Linked Insurance Plan

ULIP is life insurance solution that provides for the benefits of protection and flexibility in investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV).

How ULIP Works

As we know Premium money collected from the client has the following components

Expenses Mortality Investment

ULIP- A transparent product

In traditional products the client does not know the amount that goes in to each component. In ULIP the components are clearly expressed to the clients as follows Expenses- The admin and management charges Investment- The amount available to invest in a fund of clients choice Mortality- The mortality charges

Example- Step 1

Client pays annual premium of Rs.20,000 Deduct 40% as Premium Allocation Charge - Rs.8,000 Deduct Rs.200 per month as fixed monthly administration expense Deduct Rs.100 on the first month as mortality charge Balance Rs.11,700 is used to purchase units as per investment choice of the customer

Step 2

Investment Fund (Rs.11,700) is used to buy units based upon NAV Values of the fund on that Day

If NAV is Rs.10 on that day then Rs.11,700/10 = 1170 units are purchased

Step 3

For the first month the units are cancelled up- front and amount deducted to pay for the risk cover and expenses, this is 1/12 th of the annual amount so calculated Every month the required no. of units are cancelled to cover mortality charges and fixed monthly administration expenses Suppose in the second month the NAV is 12, 16.6666 units cancelled at Rs.12/-, to generate Rs.200/- so 963.3334 Units Remain

This is repeated every month till end of the year

Step 4- Second year

Client pays renewal annual premium of Rs.20,000 Deduct 20% as 2nd year Premium Allocation Charge Rs.4,000 Deduct Rs.200 per month as fixed monthly administration expenses
Deduct Rs.80 on the first month of the second yr. as mortality charge

Suppose in the second year beginning the NAV is Rs.14 Per Unit, so Rs.13,720/14 = 980 Units are purchased So total units= units at end of first year + 980 units

Recap
Mortality Charge

More units are purchased

With balance amount

Premium Related Charge Less 2nd year Premium

Admin Charge

NAV moves up so as the Fund Value

Units are purchased

With balance amount

Mortality Charge

Premium Related Charge Less 1st year Premium

Admin Charge

Traditional Products V/s Unit Linked

Traditional Products Guaranteed benefits Par policies benefits are based on bonus Premium invested by insurance company Premium components are bundled

Unit Linked Products Benefits are not guaranteed Depend on investment performance linked to market Premium invested on direction of policy holder Premium components transparent

Benefits-In case insured dies

Option 1 Face Amount or Account Value (Number Of Units X Prevailing NAV) Which ever is higher Option 2 Face Amount + Account Value (Number Of Units X Prevailing NAV)

Level Death Benefit

Increasing Death Benefit

Maturity Benefits

How Much will policy holder Get?

Account Value
(Number Of Units X Prevailing NAV)

MET EASY ULIP

Life mein kuch to hai easy

Why are they called as multipurpose plans

Met Easy can be customized to meet a) Protection b) Accumulation and c) Retirement Needs
Multi purpose
Met Easy Met Smart Plus Met Smart Premier

Features Summary
Coverage Term
10 years 15 years 20 years

Minimum Age at entry (lbd) Maximum Age at entry (lbd) Minimum Premium Maximum Premium Sum Assured 5

8 55 20,000 600,000

3 50 15,000 400,000

0 (3 months to be completed) 50 12,000 300,000 10 times the annualized regular premium Yearly, Half-yearly, Quarterly, Monthly

times the annualized7.5 times the annualized regular premium regular premium Yearly, Half-yearly, Quarterly, Monthly

Premium Payment modes

Yearly, Half-yearly, Quarterly, Monthly

Age at entry ( age as on lbd) Up to 40 years 41-50 years 51-55 years

Maximum sum assured 30 lacs 15 lacs 2 lacs

4 Simple steps to Met Easy

Step 1: Choose your financial planning horizon, by choosing from the three available coverage terms of 10 years, 15 years and 20 years. Step 2: Decide the amount of premium that you would want to save regularly for the coverage term. Your Sum Assured would be automatically decided, depending on the coverage term chosen by you. Step 3: Choose the Unit-Linked Funds that you want your premiums to be invested in. You have the choice of 4 different market linked funds. Step 4: Just fill in the simple application form, and get ready to enjoy the unmatched benefits of Met Easy.

Features, Advantages and Benefits

Protection Wealth Creation Flexibility Ease of Purchase

Benefit: Protection
Advantage Protection in case of unfortunate demise

Feature

Lump sum amount paid in case

Money to take care of hospital fees and other requirements in case of disability

Lump sum amount paid in case of Total and Permanent Disabi (TPD) caused due to an accident

Death Benefit

P o lic y Y d e a th

TPD
In case of Total and Permanent Disability (TPD) caused due to an accident, higher of 100% of Sum Assured or Fund Value is immediately paid to the policy holder and the policy is terminated.
How do these options help? The lump sum TPD benefit could be used to take care of certain needs namely a) Avail hospitalization expenses b) immediate cash flow requirements

Benefit: Wealth Creation

Advantage

Growth and preservation of wealth

4 Fund options that range from a fund with high equity allocation to a mix of equity and debt that helps your client to potentially maximize wealth creation

Feature

Lower charges

Charges competitive leading to better value of money

Diverse Fund Options

1 2

Money to potentially appreciate

Money to potentially Appreciate and generate income Fund Options that would match your needs

Multiplier Fund Balancer Fund

Money to earn you Lower but regular income

Money and wealth to be preserved

Protector
Preserver
Met Easy offers you 4
different fund options to invest your clients premium. Match the Clients objective with his money.

YOU would desire that your clients investments grow either as per options 1,2,3,4 or as a combination of the above

Preserver

ASSET ALLOCATION G-Secs-80%-100% Money Market investments 0%-20%

FUND OBJECTIVE To generate income at a level Consistent with preservation of Capital, through investments in Securities issued or guaranteed By Central and State Govts.
CLIENTS NEED Wants to protect investments Wants to lock-in returns View of the market suggests, that security is paramount Reaching towards the end maturity of their investment period

Protector

ASSET ALLOCATION G Secs - 25%-90% Long term bonds 10%-60% Short term bonds-0%-45% Money Market investments-0%-20% Infrastructure/Social sector Secs-0%-60% FUND OBJECTIVE To earn regular income by investing in high quality Fixed Income securities
CLIENTS NEED To earn steadily, like interest income Long-term objective of accumulation of wealth for retirement etc Cant or dont want to take risks & wealth protection is a priority

Balancer

ASSET ALLOCATION Listed Equities- 35%-65% Long term Bonds- 0%-60% Short term Bonds-0%-35% Money Market Investments 0%-20% Government securities 10%- 60% Infrastructure/Social Sector Securities0%-60%

FUND OBJECTIVE To generate capital appreciation and current income through a judicious mix of investments in Equities and fixed income securities
CLIENTs NEED Want to take a balanced View Want investments to be diversified across risk classes Risk taking ability is slightly reduced either due to age or clients view on financial markets.

Multiplier

ASSET ALOCATION Listed equities 80% 100% Money Market Investments 0% - 20%

FUND OBJECTIVE To generate long term capital appreciation by investing in diversified equities
CLIENTs NEED When your client has long-term objective like creating wealth for retirement, childs future, more likely when they are younger (30-40 years), when they can afford to take higher risks, etc.

4 FUNDS & RETURNS

Preserver Protector Balancer Multiplier

5.4%

5.04%

28.39%

61.82%

# Date of inception 7th Feb 05Returns Since Inception as on 31st October 200 *

Key Formulas
Annualized Return : Total Return x 365 days No. of Days Since date of Inception Example : Assume client buys policy on 24th Oct06 and we want to calculate return on 31st Oct07
NAV on 24/10/06 is NAV on 31/10/07 is 17.0427 26.8366

Difference

= 9.7939 = 9.7939 / 10 x 100 =97.939 % = 97.939 x 365 372 = 96.09

Total Return Total Return Annualized Return Annualized return

Charges
Premium Allocation Charge: This is the charge deducted from regular/limited premium paid for Met Easy and is based on the annualized premium.
For CT = 10 years
Policy Year Annualized Premiums upto Rupees 199,999 Annualized Premiums greater than or equal to 200,000 Year 1 30.00% 27.00% Year 2 10.00% 10.00% Year 3 6.00% 6.00% Year 4-5 5.00% 5.00% Year 6-10 2.50% 2.50%

For CT = 15 years
Policy Year Annualized Premiums upto Rupees 199,999 Annualized Premiums greater than or equal to 200,000 Year 1 40.00% Year 2 10.00% Year 3 9.00% Year 4-5 5.00% Year 6-10 4.00% Year 11-15 2.50%

35.00%

10.00%

9.00%

5.00%

4.00%

2.50%

For CT = 20 years
Policy Year Annualized Premiums upto Rupees 199,999 Annualized Premiums greater than or equal to 200,000 Year 1 40.00% 35.00% Year 2 10.00% 10.00% Year 3 9.00% 9.00% Year 4-5 5.00% 5.00% Year 6-10 4.00% 4.00% Year 11-15 2.50% 2.50% Year 16-20 2.00% 2.00%

Policy administration charges: This is deducted by cancellation of units every month.

Fixed Administration Charges Year 1 (each month) Year 2+(each month) Current Rs.150 Rs.60 Maximum Rs.300 Rs.200

Mortality Charges: This is the cost of life insurance and is charged on the difference between Sum Assured and Fund Value. It is deducted by the cancellation of units on a monthly basis. Rider Charges: This is the cost of rider coverage and will depend on age of PI, cost of rider and applicable Sum assured. Rider charges will be deducted by the cancellation of units on a monthly basis. Fund management charges: This is adjusted in the NAV. The charges for the respective funds are as follows;
Fund Option Charge

Protector Preserver Balancer Multiplier

1.25% 1.25% 1.50% 1.75%

Benefit: Flexibility

Advantage Flexibility to choose coverage term based on need Ability to change premiums based on the financial circumstances Ability of the plan to let me alter asset allocations depending on my requirement Ability to customize my maturity proceeds so that the investments dont mature on a bad day

Feature Different coverage terms based on need an

Flexibility to increase / decrease the amount of premium Smart switching options that can potentially help conserve / grow clients investments

Smart control with partial withdrawal facility from the policy to meet requirements. Smart maturity options- Clients can receive maturity proceeds either as lump sum or in installments, or a combination.

Coverage Term
Met Easy is a Simple and Effective Insurance Plan which offers three Coverage Terms to choose from.

20 years 15 years & 10 years So, be it your retirement needs or your childs education planning or any other need we offer the flexibility to fit your requirement in Met Easy

Flexibility to change premium amount

How does this serve your customer? This option allows client to fit the policy to their financial circumstances and preferences, throughout the premium payment term. In case they want to increase savings to create higher wealth or reduce the premium.
Premium Payment

500,000

200,000 100,000 50,000 24,000

So, if client started with a premium of Rs.200,000, they can make it Rs.5,00,000 or any amount after first two years, if they so desire.

While, if client wants they can also reduce premium (to say Rs.50,000), if they desire so.

1st year

2nd year

3rd year

4th year

5th year

Premium payment term

Flexibility to change investment fund-Switch

.

This can help clients in situations when their investment objectives change and they seek differing results from their investments. Their investment objective may change as a result of their view of the financial markets, or their changing risk profile depending on their life-stage and age, etc. Every year 12 switches are absolutely free of charge

Flexibility for partial withdrawal

How does this serve your customer? This can help in situations when your client might require some cash; like- paying a part for an asset purchase, down payment for a asset loan, etc.

Smart Maturity Options

After the completion of Coverage Term of 10 years), client has the following options to take the Maturity Value. Maturity Value is the Fund Value at maturity.

Total withdrawal of the Fund Value at maturity, as a lump sum payment. Take the Fund Value at maturity in installments within 5 years from maturity. Take a part lump sum of the Fund Value and the remaining as installments within 5 years from maturity. Client can choose the option at Maturity depending on their requirements at that time.

Benefit: Ease of Purchase

Advantage

Feature

A two page application form only Simple application form with simplified questions leading to faster turnaround of issuance Stand alone Financial SUC for this product, would not be considering the previous policies with MetLife for Financial SUC

Less hassle for the customer due to lesser documentation requirements

All the enhanced NM cases accepted in the last 6 months from Met life would be taken together and Maximum NM of 30 Lacs would be offered. Non Standard age proof acceptable up to maximum of 10 Lacs SA Over the counter product. No Medical requirements and a maximum of 30Lacs without Medical examinations

Less time consuming to buy as no medical check ups

Additional Features

Flexibility to make additional investments-top ups

When can client avail this benefit and how many times? Client can avail this benefit anytime during the term of the policy. They can avail this benefit as many times they want during the term of Met Easy.

How does this serve your customer?

This can help you in situations when your future financial objectives require you to save more, or you get a windfall gain, which you would like to invest for better returns, etc

Loyalty Additions benefit

When your client invest their money, the financial plan should be loyal to them! Met Easy shows its loyalty by Loyalty Additions to the policy. This is a guaranteed benefit provided the policy is in force.
Coverage Term
10 years 15 years 20 years

Policy Anniversary Date

10th Policy Anniversary Date 15th Policy Anniversary Date 20th Policy Anniversary Date

Loyalty Additions
25% of the Net Average Regular Premium 100% of the Net Average Regular Premium 150% of the Net Average Regular Premium

What is the benefit? Clients get the benefit of potentially enhancing their wealth creation with loyalty additions, which are added to the policy at regular intervals during the CT.

Loyalty Additions Example

An example of how Loyalty additions can increase your wealth
Regular Premiums = 20,000 p.a
5th Year Top-up = Rs.100,000 1st 2nd 4rd 6th 8th 10th

The illustrations below are for CT = 20 years. Loyalty additions 150% of Net Average Regular Premium
16th 18th 20th

12th Year Top-up = Rs.50,000 12th 14th

Loyalty additions

9th Year Withdrawal = Rs.25,000

19th Year Withdrawal = Rs.50,000

At Maturity: 20th Policy Anniversary Date

Net Average Regular Premium = [Rs.20,000*20 - Rs. 50,000]/20 = Rs.17,500 Note: As per the definition, for the above calculation, top-ups are excluded. Since there is a withdrawal in the previous 2 years, the withdrawals are debited. Number of units corresponding to the value of 150% of Rs.17,500 i.e. Rs.26,250 is added to the unit account

Surrender facility
Client can terminate the policy completely by using the facility of Surrender. The Surrender Value payable to you, would depend upon the Fund Value less the surrender charge at the time of surrendering the policy, as per the following table.
Policy Year
1st policy year 2nd policy year 3rd policy year 4th policy year 5th policy year 6th policy year 7th Policy year +

Surrender Charge as a % of Fund Value

20% of the Fund Value 10% of the Fund Value 5% of the Fund Value NIL

Note: If you surrender the policy before the completion of three policy years, the surrender value applicable at the time of surrender shall be paid only after completion of 3rd policy year or reinstatement period, whichever is later.

Example 1: The Fund Value is Rs. 80,000 in the fourth policy year. Now the policyholder wants to surrender the policy in the 4th policy year. What is the surrender value and when it should be payable? Solution: The surrender charge is 20%* Rs80,000= Rs16,000. This Rs 16,000 shall be deducted from Rs.80,000 and hence Rs.64,000 is payable immediately Example 2: The Fund Value is Rs30,000 in the second policy year. Now the policyholder wants to surrender the policy in the 2nd policy year. What is the surrender value and when it should be payable? Solution: The surrender value is payable only at the end of the 4th policy after levying the surrender charge of the 4th policy year. So 20%* Rs30,000= Rs15,000. This Rs.15,000 would be deducted from the fund value in the 4th policy year and paid in the 4th policy year only.

Discontinuance within the first three years

Suppose you pay Rs.50,000 annual premium
First premium= Rs.50,000 Second premium= Rs.50,000

Third premium= Rs.50,000

Grace Period (30 days)

Policy is lapsed

Paid

End of Year 1

End of Year 2

End of Year 3

Paid

Not Paid

The sum assured of Met Easy ceases to exist. The policy will remain invested in the chosen unit linked funds and would be affected by the unit price and the fund management charges of the funds. AND In case of death during this Lapsed period, the Fund Value (at the time of death) at that time shall be paid.

Discontinuance after the first three years :

Suppose you pay Rs.50,000 annual premium

Reinstatement Period= First premium= Rs.50,000 Second premium= Rs.50,000 End of Year 1 Third premium= Rs.50,000 End of Year 2 Fourth premium= Rs.50,000 End of Year 3 Not Paid TWO years

Paid An Example:

Paid

Paid

Now when the premiums remain unpaid in the 4th year, you get a a period of two years to reinstate the policy. You can Reinstate the policy by paying all the unpaid premiums till date. During the period allowed for reinstatement, Your policy shall continue by deducting the relevant charges (fixed admin + mortality) from your fund value. If you do not Reinstate the policy within TWO years of the discontinuance, the surrender value shall be payable, and the policy is terminated.

Reinstatement of Lapsed Policy

Lapsed policy can be Reinstated within two years from the date of unpaid premium. The reinstatement shall besubject to

Satisfactory evidence of the insurability of the Person Insured Payment in full equal to the all the Regular Premiums due but unpaid, till the date of reinstatement.

What if you do not Reinstate

The Fund Value (net of surrender charges applicable as on the date of lapse) shall be payable after the expiry of the third policy year or period of reinstatement whichever is later, and the policy is terminated.
Continuance of the Policy You can choose to continue your policy, even after the Reinstatement Period, in which case the relevant charges shall be deducted from the fund.

However, at any time if the Fund Value = Sum of (one years Premium+ applicable surrender charges) or is inadequate to for the deduction of the charges, the policy shall be terminated and the surrender value is paid.

Comparison
Features Loyalty additions Met Easy Available BSLI Simply Life Not Available Aviva Saveguard Not Available

Inbuilt TPD Increase/Decrease in Premiums Non Medical Limits

Available Allowed

Not Available Not Allowed

Not Available Not Allowed

Upto 30 lakhs

Upto 5 lakhs

Upto 18 lakhs

Commissions
10 year term

??

18,2,2

20, 6,6

Role Play
Advisor to meet the customer to discuss the benefits of buying a Met Easy product!

Quiz
10 question quiz!

Thank you Sharad Bhatia Branch head,Bajaj Capital