all about life protection:

an introduction to life protection strategies

overview
The role of life insurance What life insurance provides that no other financial product is able to deliver by itself How much life insurance do you need or want? Understanding different types of life insurance

what is life insurance?

A life insurance policy is a contractual agreement in which premiums are paid to an insurance company in return for a benefit to be paid to a beneficiary if the policy remains in force until the insureds death

the role of life insurance

Life insurance can potentially: CREATE an estate to help provide financial dignity and independence for loved ones, or to create a legacy for heirs or for a charity PRESERVE an estate or the vitality of a business by helping to settle financial obligations that arise at death, such as estate and state death taxes, and to fund the transition of a business interest to a successor owner PROTECT from income taxation (permanent policies only) the potential accumulation of cash value within the policy

the role of life insurance

What life insurance cannot do: NOT an investment First and foremost, it is primarily a protection product NOT a tax shelter Life insurance is accorded certain tax advantages, but there are restrictions NOT a speculation or a gamble The risk is certain: everyone will eventually die, but no one can be sure of when. Life insurance transfers the economic risks associated with death to the insurance carrier, which in turn spreads the risk among all insureds

no other financial product delivers all these benefits

Prudent and economical assurance of a cash estate at death Federal- and state-income-tax-free death benefits (if paid lumpsum) Estate-tax-free death benefits (if owned by a named party other than the estate of the insured and payable to a beneficiary other than the estate) Not subject to probate (if paid to a beneficiary other than the estate) Generally not subject to the lien of creditors of the insured or beneficiary (subject to state variation) Fast payment (usually within days of receipt of notice and death certificate if death occurs after two years)

beneficial tax treatment of cash value

If premiums and transactions keep within certain IRS guidelines... Tax deferral of policy cash value Tax-free withdrawals until basis (cumulative premiums) is recovered, if not a modified endowment contract Tax-deferred loans of policy cash value even if total policy loans exceed basis

beneficial tax treatment of cash value

Tax-free stream of retirement income using withdrawals up to basis, and then switching to loans this assumes the policy remains in effect until the insureds death, with any loan balance being repaid from the policys death proceeds. No set IRS limit on premiums (unlike qualified plan retirement savings vehicles) or cash value limits as long as minimum death benefit amounts are met in order to satisfy IRS prescribed ratio of premiums to death benefit.
1 2

Under current federal tax rules, you generally may take income-tax-free withdrawals up to your basis (total premiums paid) in the policy or loans for a life insurance policy. If the policy is a modified endowment contract (MEC), all distributions (withdrawals or loans) are taxed as ordinary income to the extent of gain in the policy, and may also be subject to an additional 10% premature distribution penalty, prior to age 59 1/2, unless certain exceptions are applicable. Withdrawals reduce the policys cash value and death benefit and increase the chance that the policy may lapse.

types of life insurance

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types of life insurance products

TERM: Level Term Annual Renewable Term PERMANENT: Universal Life Variable Universal Life Survivorship Life

the role of term insurance

For temporary protection needs Temporary does NOT mean how long you can keep policy in effect, but how long is it economically efficient to keep Typical examples of temporary needs
To cover specific debts Until the youngest child reaches age 21 Additional coverage while dependent parent is still alive

Alternative role: When the budget simply will not allow consideration of an adequate amount of permanent life insurance

level term
Premiums remain level and are guaranteed for a period of time, usually 10, 15 or 20 years depending on choice of plan; thereafter, premiums increase dramatically every year Generally, 10- and 15- year plans are best suited to temporary protection needs that will last between 7 and 14 years Generally, 15- and 20- year plans are best suited to situations when it is unlikely that the policy holder can ever afford an adequate amount of permanent life insurance Many insurance companies allow policy holders to convert Term policies to other plans

annual renewable term

Initial premium is generally the lowest Premiums increase every year and will become very expensive over time Most offer conversion to Permanent Life within limited time
Evidence of insurability may be required depending on policy terms and amounts of insurance, and the addition of optional benefits

Best used
For the shortest-term needs (57 years) and/or IF conversion to permanent is likely in 57 years

the role of permanent life insurance

For people who need or want Long-term death protection usually 15 or more years; AND A guaranteed level premium for guaranteed level protection for a longer period than is practical or economical using term insurance; AND/OR To accumulate cash value, tax deferred, over a period of 15 or more years; AND Who are currently in at least a 15% income tax bracket and expect to remain there or in a higher bracket over the long * Guarantees are based on the claims-paying ability of the individual insurance carrier. term.

survivorship life insurance

For two co-insureds on one policy who want long-term death protection to meet those financial liabilities or special needs that arise only upon the death of both co-insureds.
Estate Preservation Business Insurance Needs Special Needs

optional riders and benefits

Availabilities of optional riders and benefits vary from company to company at additional cost. The most common ones are:
Long-Term Care Benefit Enables insured to receive a portion of death benefit during lifetime in the event insured is unable to perform 2 or more Activities of Daily Living (ADLs)* Disability Premium Waiver Waives the monthly deduction charges if the insured meets the definition of disability and other conditions stated in the policy Accidental Death Benefit Pays mostly twice the death benefit if death occurs by accident Childrens Term Rider Provides convertible term life insurance protection on juvenile (017) children of the insured

There are conditions and limitations that apply. All should be carefully reviewed before purchase.

* ADLs include bathing, dressing, eating, continence, toileting, and transferring.

Classification of Life Insurance

Term Insurance Whole-life Insurance Universal life Insurance Variable life Insurance

Term Insurance
Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. If the insured dies during the term, the death benefit will be paid to the beneficiary.

HDFC Standard Life Term Insurance Policies

HDFC Term Assurance Plan HDFC Childrens Plan*

Note: * Childrens Plan is also categorized under Variable Insurance Policies

Whole-life Insurance
A whole life insurance policy covers you for your entire life, not just for a specific period such as term insurance. Your death benefit and premium in most cases will remain the same. It does not allows the policyholder to use the interest from his or her accumulated savings to help pay premiums. Beneficiary receives only face valuebut no cash value.

HDFC Standard Whole-life Insurance Policies

HDFC Personal Pension Plan HDFC Immediate Annuity HDFC Single Premium Whole of Life Insurance Plan HDFC Saving assurance plan HDFC Premium Guarantee Plan HDFC Children plan*

Note: * Childrens Plan is also categorized under Term Insurance Policies

SN.

Name of policy

Age limit

Term limit

Benefits

Products of life insurance

HDFC childrens plan 18-60

10-25

Accelerated, maturity, choose seven target

Flexibility , protection, no medicals, Choose

Whole life

HDFC saving Assurance plan HDFC personal plan

18-50

10-30

Whole life

35-60

1040(R) 5-15(S) 15yr.

Whole life

HDFC immediate annuity

Life time or over a period 18-70 18-55

Death benefit

Whole life

5 6

HDFC single premium HDFC Premium Guarantee Plan

Death benefit 10-30 Maturity benefit (Waiver of premium)

Whole life Whole life

Universal life Insurance

Universal Life is a type of permanent life insurance based on a cash value. Unlike whole life insurance, universal life allows the cash value of investments to grow at a variable rate that is adjusted periodically. Features:
1. premium flexibility (maximum- minimum range, skipped payment permitted, cash value also changes) 2. cash value accumulationvaries with interest rates used by the insurer

HDFC Standard Universal Life Insurance Policies

HDFC SL Crest HDFC ProGrowth Super II HDFC SL YoungStar Super II HDFC Unit Linked Pension HDFC Unit Linked Endowment HDFC Unit Linked Young Star HDFC Unit Linked Pension II

Variable life Insurance

A form of whole life insurance, variable life insurance provides permanent protection to the beneficiary upon the death of the policy holder. It builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds

HDFC Standard Variable Life Insurance Policies

HDFC Endowment Assurance Plan HDFC SL New Money Back Plan HDFC Money Back Plan

S Name of the Product N . 1 HDFC Money Back Plan

Age Limit 12-60

Term Limit 10-30

Benifits

i)Critical Illness ii)Addn. term benefit iii)Accdntl. Benefit iv)Waiver of premium i)Money Back ii)Maturity+Death benefit

2 HDFC SL New Money Back 14-53 Plan

12,16, 20 and 24

3 HDFC Endowment Assurance Plan

12-60

10-30

Same as above

*EPI:

Earned Premium Income

Fund Allocation of the Company

where do you go from here?

Do it yourself Work with others Work with us Dont procrastinate; timing is important

workshop evaluation
Please complete evaluation form and hand it in before you leave Schedule time to meet for a personal consultation

thank you

GE-53218 (01/10)