Professional Documents
Culture Documents
EXECUTIVE SUMMARY
Money Investment is 10% inspiration and 90% perspiration
The project includes what are life insurance and its various benefits available to
policy holders. In short the project conveys that buying a life insurance is an
investment and the benefits obtained in these investments are not comparable
with those of others.
Life is uncertain and it is not possible to predict the different events that
can occur. However, there is always a need to earn income to support
yourself and your dependents.
Financial planning is required to understand the impact of different events
on our lives and on the quality of life for our families. It is like scenario
building and understanding what financial requirements we would have at
various stages in our lives and hence trying to reduce the financial risks
that we are exposed to by proactively taking steps to guard against at least
some of these risks. These could include buying insurance cover,
investing in mutual funds, fixed deposits or government bond etc
A good investment is one which earns a decent return after providing for
taxes and inflation. The three critical factors effecting investment
decisions are safety, liquidity and expected rate of return.
Just as buying life insurance is a necessity and more important to buy it
early. With proper financial planning one can work out as to how much
money an individual is entitled to get after the end of a particular term.
So if you start saving early, you accumulate more even with lesser
investment.
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Life insurance and related annuity products are frequently used to provide
the funding for retirement plans and other types of plans. Planning for
retirement is an important exercise for any individual. A retirement plan
from a life insurance company helps an individual insure his life for a
specific sum assured. At the same time, it helps him in accumulating a
corpus, which he receives at the time of retirement.
Life insurance is bought for several reasons. Tax benefits, of course, are a
key driver for taking life insurance.
The saving component of life insurance pits the insurer in direct
competition with other financial institution and saving instruments, such
as bank deposit, equities and mutual fund.
Insurance may not be most beneficial to invest your hard earned money,
but there are sufficient reasons for one to believe that it can be a highly
lucrative avenue to facilitate savings.
Life Insurance Policy can be a valuable asset, both as an investment as
well as indirect future benefits accrued.
The objective of the project is to find out whether Life Insurance can be
considered as an investment alternative by the common people or not.
The main reason behind preparing this project is to make people aware that
life insurance is one of the most important investment avenues and it
provides number of benefits to the insured person.
The objective of doing this project is to understand how investments will be
beneficial for future.
RESEARCH METHODOLOGY
Data for the project is obtained in two ways primary source and
secondary source.
PRIMARY SOURCE:-
SECONDARY SOURCE:Secondary data for the project has been gathered from various sites on internet.
INTRODUCTION
Marine Insurance
Fire Insurance
Life Insurance
Miscellaneous Insurance
Life insurance is a policy that you can enter with your insurance company,
which promises a certain amount to your beneficiary in the event of your death,
in exchange for your premium payments.
Human beings lives are insured under life insurance. A life insurance is a
combination of savings as well as security element. The insured is assured that
the insurance company will pay his family the insured amount in case of his
premature death. If he is alive and the policy matures for payment, the saving so
made will be helpful in his old age.
It also involves insuring the life to safeguard ones future as well as to make
future family needs secured even in case of death of earning members.
1. Life insurance is not only the best possible way for family protection.
There is no other way.
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WHAT IS INVESTMENT?
SAFETY:
Safety refers to financial soundness of the investment. Whether the
principal and returns on investment are received back.
LIQUIDITY:
Liquidity refers to the quickness with which the assets can be converted
to cash whenever it is required. E.g. saving account in bank is highly
liquid while investment in bank is less liquid. It may be noted that it is
important to consider the penalties that apply when an investment is
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turned into cash. Many investments can readily be turned into cash, but
the cost when it is done can be significant.
DIFFERENT TYPES OF
INVESTMENT AVENUES
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There are various avenues for investing of our hard-earned money. Each
avenue may yield different rate of return. While understanding these avenues
and evaluating the rate of return, we must always keep in mind that there is
relationship between the expected return on an investment and the risk that this
return is not achieved (which may include loss of the original investment).
Greater the risk, higher is the expected return.
For example, investments in shares may yield a higher return because
there is a risk of the amount invested being wiped out. However debt
instruments yield only a fixed lower yield but return of capital and interest are
safer.
Each one of us can study the advantages and disadvantages of each
investment-opportunity and take decision accordingly.
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Pr
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PP
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IN S U
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IN V E S
TM EN
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B
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Mu
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Fun
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1. Life insurance:
In a broad sense, life insurance can be viewed as an investment. Insurance
premiums represent the sacrifice and the assured sum the benefit.
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A debt instrument which has a maturity of less than one year at the time of
issue are called money market instruments and is also an important avenues
of investment. The important money market instruments are Treasury bill,
Commercial paper, Certificate of deposits.
3. Precious Objects:
Precious objects are the item that is generally small in size but highly
valuable in monetary terms. Some important precious objects are gold,
silver, stones.
4. Shares/ Debentures:
Companies in public and private sectors also take fixed deposits on which a
fixed rate of interest is offered. These debentures are less secure than bank
deposits; hence the interest rate would be slightly higher.
Investment in shares implies investment in ownership of companies. These
provide both earnings and appreciation. The dividend yield on shares may
be lower than interest on deposits, but shareholders hope to get higher
return in the form of higher market value when they sell the shares. The
returns in shares depend on the company performance.
5. Bonds:
Bonds are also known as debentures are secured borrowings by corporate,
which give a fixed rate of return, known as interest to the holder. A
debenture holder is legally entitled to payment of interest, whether or not
the company makes profits.
6. Mutual Funds:
Mutual funds pool resources and invest in shares/ debentures on behalf of
the investors. They collect a fee and give the money earned back to the
investors. It is comparatively less risky than investing in shares.
7. PPF/EPF:
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Public Provident Fund (PPF) provides tax free returns and hence is a very
good form of investment. Employer Provident Fund (EPF) is compulsory
saving, which get deducted from the salary.
8. Real Estate:
For the bulk of investors the most important assets in their portfolio is
residential house. In addition to the residential house, the more affluent
investors are likely to be interested in the following types of real estate:
Agricultural land, Semi-urban land, Time shares in a holiday resort.
9. Post Office:
A popular scheme of the post office provides regular monthly income to the
depositors. The minimum amount invested is Rs 1000. The interest rate is
9%. Interest income is tax exempt within certain limits as per section 80L
of the income tax act. There is no tax deduction at source.
Sr. No.
Types of
Safety
Liquidity
Investment
1
2
Shares
Bonds of Financial
Expected
Return
Low
High
High
Moderate
High
Moderate
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Institution
Fixed deposits
High
Low
Low
with banks
Mutual fund units
Low
High
High
(equity schemes)
Mutual fund unit
Moderate
High
Moderate
(debt scheme)
Government PSU
High
Moderate
Moderate
7
8
10
bonds
PPF
Post office
Company deposits
High
High
Low
Low
Low
Low
Moderate
Moderate
High
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12
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and debentures
Life Insurance
Real estate
Gold and silver
High
Moderate
Moderate
Low
Low
High
Moderate
Moderate
Low
LIFE INSURANCE
Life
Insurance companies help us to ensure that our familys future is not just
secure but also prosperous.
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Life Insurance is particularly important if you are the sole breadwinner for
your family. The loss of you and your income could devastate your family.
Life insurance will ensure that if anything happens to you, your loved ones
will be able to manage financially.
DEFINITION OF INSURANCE
Insurance has been defined to be that in, which a sum of money as a
premium is paid by the insured in consideration of the insurers bearings the
risk of paying a large sum upon a given contingency. The insurance thus is a
contract whereby:
IMPORTANCE OF INSURANCE
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Employers buy
insurance
to
cover
their
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1. The need for life insurance comes from the need to safeguard our family.
If you care for your familys need you will definitely consider insurance.
2. How you will be able to satisfy all those needs? Better lifestyle, good
education, desired house. But again you just cannot fritter away all your
earnings. You need to save a part of it for the future too a wise decision.
This is where insurance helps you.
3. Factors such as fewer number of earning members, stress, pollution,
increased competition, higher ambitions etc are some of the reasons why
insurance has gained importance and where insurance plays a successful
role.
4. Insurance provides a sense of security to the income earner as also to the
family. Buying insurance frees the individual from unnecessary financial
burden that can otherwise make him spend sleepless nights.
5. The most common reason for buying life insurance is to replace the
income lost when you die. For example, say that you work, and your
income is used to support yourself and your family. When you die, and
your pay checks stops, the life insurance proceeds can be used to continue
to support the family members youve left behind.
2. Regular savings:
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Providing for ones family and oneself, as a medium to long term exercise
through a series of regular payment of premiums. This has become more
relevant in recent times as people seek financial independence from their
family.
3. Investment:
Put simply, the building up of savings while safeguarding it from the
ravages of inflation. Unlike regular saving products, investment products
are traditionally lump sum investments, where the individual makes a
onetime payment.
4. Retirement:
Provision for ones owns later years became increasingly necessary,
especially in a changing cultural and social environment. One can buy a
suitable insurance policy, which will provide periodical payments in ones
old age.
Example to understand the need for insurance:Mr. Atul is 45 and self-employed. His wife Anita, who is a housewife,
looks after their two children aged 3 and 7 years. They stay in a rented
accommodation, where the rent is 15,000 rupees per month. Mr. Atul has
taken up a loan of Rs.2lakh. His monthly earnings on average are 40,000
rupees Mr. Atul passes away in an unfortunate road accident.
Following are the some financial implications of his death on his family:The income, previously provided by Mr. Atul would stop.
His wife and children may have to seek financial assistance from other
relatives.
His wife may not have enough money to pay back the loan of Rs. 2lakhs.
The family may have to move into a cheaper accommodation.
His widow may have to take up work to earn money.
The education of his children may suffer.
The simple example illustrates the impact premature death can have on a
family, where the main earner has no life cover.
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For the person who buys an insurance policy, it offers absolute and
complete peace of mind. He or she knows that the decision made
by him will provide sound benefits in the future, whether or not the
individual may live to see it. The life insurance policy will
subsequently prove this in the future if and when funds are needed.
This is the guarantee of the insurance contract.
3. Multiple Application:
The future is uncertain for each and every one. No one knows how
long he or she will live. The investment benefit is paid to the
insureds beneficiaries after his death or it can be used during the
life as well. Life insurance policy owners can turn to the cash value
of the policy in case of a financial emergency when all avenues are
either blocked or denied. They know that they can avail of loans
based on their insurance policies. Insurance policy owners can use
the cash value of their policies to meet their long term financial
needs as well. They may have purposefully invested in insurance to
use the cash in the policy for their childrens future marriage
expenses or higher education fees.
4. Enduring Elasticity:
Since life insurance is flexible enough to serve several needs, the
insured can keep several long term goals in mind once he or she
invests in the insurance plan. The cash value of the policy can be
allocated towards augmenting the monthly income during the
retirement years. Leisure years should be turned into pleasure
years. Permanent life insurance is designed on the concepts of long
term flexibility.
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5. Financial Security:
The insurance policy offers contractual guarantees to people
looking for peace of mind when they buy life insurance. Life
insurance offers complete financial security. The purchase of life
insurance demonstrates concern for a familys future financial well
being.
6. Insurance is Safer:
No financial institution can do what life insurance does. No
industry can back its products with reserves and surplus as sound as
those of the insurance industry. The proof of strength and safety
that insurance companies have ensured even under the most
adverse of conditions is a matter of pride for the entire insurance
industry. For generation after generation, life insurance has been
acclaimed as the very benchmark of security against which the
other industries are measured.
Rs. 1200. If the insurance amount were to be put in the bank by the
family, the family would get a comfortable Rs. 96 p.a. which would
at least let the family maintain the current lifestyle.
ENDOWMENT POLICY
An endowment policy is a combination of an insurance cover
and an investment vehicle. It covers the risk for a specified period, at
the end of which the sum assured is given back to the policyholder,
along with the bonus accumulated during the term of the policy. In
case of death during the term of the policy, the sum assured is paid to
the beneficiary of the policy. The major advantage of this policy is that
the insured gets a consolidated sum at the end of the predetermined
period. He can use this sum the way he likes, to buy an annuity to
generate a monthly pension for himself and spouse, or on his
childrens education or marriage, or to make any other investment of
his choice. In addition, it provides a limited life cover, thus being a
judicious mix of insurance and investment.
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TERM POLICY
A term policy is structured like a general insurance policy,
whereby the life of the person is insured for a specific short period,
and payment is made only if the person dies during that period. There
is no payment if the person is alive at the end of the period. As the
insured person is not entitled to any money at the end of the period if
he is alive, the cost of such policy is one of the least among the cost of
all other policy.
There are many Life Insurance Companies like:
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INVESTMENT PLANS
There are various types of life insurance policies which provide
investment benefit and are as follows:
shall be returned along with Loyalty Addition, if any. This plan also takes care
of liquidity needs through its loan facility.
BENEFITS:
Death benefit:
On death during the first five policy years: Sum Assured.
On death after completion of five policy years: Sum Assured along with Loyalty
Addition, if any.
b)Survival Benefits:
Payable as given below in case of Life Assured surviving to the end of the
specified durations:
For policy term 9 years: 15% of the Sum Assured at the end of each of 3rd &
6th policy year
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For policy term 12 years: 15% of the Sum Assured at the end of each of 3rd,
6th & 9th policy year
For policy term 15 years: 15% of the Sum Assured at the end of each of 3rd,
6th, 9th & 12th policy year
c) Maturity Benefit:
Payment of Single Premium (excluding taxes and extra premium, if any) along
with Loyalty Addition, if any, in case of Life Assured surviving to the end of the
policy term.
There are various avenues for investing of our hard-earned money. Each avenue
may yield different rate of return. No financial institution can do what life
insurance does. No industry can back its products with reserves and surplus as
sound as those of the insurance industry. The proof of strength and safety that
insurance companies have ensured even under the most adverse of conditions is
a matter of pride for the entire insurance industry. For generation after
generation, life insurance has been acclaimed as the very benchmark of security
against which the other industries are measured.
The difference between the life insurance and other investment alternatives are
as follows:
1. Contract of Insurance:
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in the
proposal
form are
correctly
answered. Any
2. Protection:
Savings through life insurance guarantee full protection against risk of
death of the saver. Also, in case of termination, life insurance assures
payment of the entire amount assured (with bonuses wherever applicable)
whereas in other savings schemes, only the amount saved (with interest)
is payable.
3. Aid to Thrift:
Life insurance encourages thrift. It allows long term savings since
payments can be made effortlessly because of the easy instalment
facility built into the scheme. Premium payment for insurance is monthly,
quarterly, half yearly or yearly.
For example: The Salary Saving Scheme popularly known as SSS
provides a convenient method of paying premium each month by
deduction from ones salary.
In this case the employer directly pays the deducted premium to LIC. The
Salary Saving Scheme is ideal for any institution or establishment subject
to specified terms and conditions.
4. Liquidity:
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5. Tax Relief:
Life insurance is the best way to enjoy tax deductions on income tax and
wealth tax. This is available for amounts paid by way of premium for life
insurance subject to income tax rate in force. Assesses can also avail of
provisions in the law for tax relief. In such cases the assured in effect
pays a lower premium for insurance than otherwise.
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4. People tend to think that insurance is not needed after retirement. They
would willingly drop or change their permanent plans in order to provide
extra sources of income during their retirement.
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4. Flexibility to transfer the funds and the beneficiary named since during
the later years, the death of a spouse and a change in health or tax
considerations may make it useful for the owner of an insurance policy
to change ownership as well as beneficiary rights.
3. If the insured lived beyond that date, payments would continue for
lifetime. Prospects that were not aware of this will be pleased to learn
the important role life insurance can have in their retirement plans.
1. Lifetime Income:
If outliving your savings is a concern, an annuity could be the
solution. You can arrange to receive a steady stream of periodic
payments, for the rest of your life. Only annuities provide the
retirement income options that can protect you from outliving your
assets.
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1.
Where the assessee or his nominee surrenders the Annuity before its
maturity, then the surrender value shall be taxable in the hands of the
assessee or his nominee in the year of receipt.
2. The amount of pension received will be taxable in the hands of the assessee
or nominee
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The proceeds from any insurance policy are completely exempt from
income tax except in case of maturity value of policies where the annual
premium is in excess of 20% of the sum assured.
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4. Cash value life insurance provides both death benefits and a savings
feature. When you buy a permanent or cash value policy, part of your
premium pays for the life insurance protection and part goes towards
the savings component.
5. As you pay your premiums the savings portion is invested, and the
principal and earnings accumulate as your cash value.
6. You are not required to leave the funds in the policy, however you can
sometimes withdraw from or borrow against the accumulated cash
value.
7. You can then use the withdrawn or borrowed funds to finance your
retirement, pay a childs college tuition, or assist a child with a down
payment on a house, among other things.
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You can borrow from the cash value at a relatively low interest
(the amount you can borrow will vary by policy type).
ANALYSIS:
1. Number of people who make investment for their
future
A survey was conducted for the people who has invested in
future plan. Thus the count for this question is 100%.
45
investing
21%
13%
13%
9%
8%
12%
8%
8%
8%
Instruments
46
60%
50%
40%
30%
20%
10%
0%
47
50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
48
49
Tax Saving
50
60%
50%
40%
30%
20%
10%
0%
20-30
30-40
40-50
51
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
0-10%
10-20%
20-30%
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11.
company?
Yes
No
17%
83%
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12.
insurance company?
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Excellent
Very Good
Good
Average
It is observed that 40% of the people rate the service good as offered by the
insurance company. 24% rate it as very good.
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13.
No; 20%
Yes; 80%
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OBSERVATION
1. The majority of respondents belonged to the age group of
20 to 30 years which followed by age group of 30 to 40
years.
2. LIC has a major market share.
3.
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LIMITATIONS
It is difficult to know if all the respondents gave accurate information; some
respondents tend to give misleading information.
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CONCLUSION
From this study it reveals that the consumers attitude towards Insurance Policy
and Insurance Company changed a lot. 5 years before the consumers and the
general public were not interested to take an Insurance Policy but now days
there are many options and choices in front of the customers.
They are interested to take high return policies in order to secure their lives.
People are aware of all the benefits and returns of insurance policies. As a result
of this new international and domestic companies are coming to the Indian
Market.
Since there are many players in the Indian Insurance Market the competition
level is very high. So the companies are introducing new schemes.
From this it is found that The LIC is the major market share holder in the
insurance field. Even if there are many players in this field still it is an untapped
market.
Insurance may not be the best place to invest your hard-earned money. But there
are sufficient reasons for one to believe that it can be a highly lucrative avenue
to facilitate savings.
It is extremely unfair to compare the performance of insurance against other
investments without considering the core features of insurance. The very
essence of insurance is to protect your family from the uncertainty of your life.
Now, let us compare insurance as an investment options. If you invest Rs.
10,000 in PPF, your money grows to Rs.10, 950 at 9.5% interest over a year.
But in this case, the access to your funds will be limited. One can withdraw few
percent of the initial deposit after a particular period of time. The same amount
of Rs. 10,000 can give you an insurance cover of up to approximately Rs 5-12
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lakhs (depending upon the plan, age and medical condition of the life insured
etc) and this amount can become immediately available to the nominee of the
policyholder on death. Thus insurance is not 100% but 1000% more better
investment option as compared to other investment avenues.
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APPENDIX
Questionnaire
No
No
Real Estate
Bonds
Bank Deposit
Precious Objects
Mutual Funds
Life Insurance
4. What influence you to take up insurance policy?
Tax Saving
Security Purpose
Retirement Benefits
Investment
Endowment Policy
Money Back Policy
Friends
Advertisements
Family
Others
No
30-40
40-50
50-60
10-20%
20-30%
10. Name the insurance company in which you are having life insurance
policy?
Yes
No
12.How do you rate the service offered by your Life Insurance Company?
Excellent
Very Good
Average
Poor
Good
13. Whether life insurance policy is important investment avenue from other
investment avenues?
Yes
No
BIBLIOGRAPHY
www.licindia.in
www.wikipedia.com
www.google.com
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