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LIFE INSURANCE

Supercharge Your Financial Wealth with High Protection Unit Linked Plans: Secure Growth, Maximize Protection

WHAT ARE HIGH PROTECTION UNIT LINKED INSURANCE PLANS ?

These plans offer policyholders the dual benefit of financial protection and the potential for wealth creation by investing a portion of the premium in various market-linked instruments. The “high protection” aspect emphasizes robust life insurance coverage, while the unit linked component allows for dynamic investment growth based on market performance.

Q. WHAT ARE THE REASONS FOR INVESTING IN HIGH PROTECTION UNIT LINKED INSURANCE PLANS?

Ans. Investing in High Protection Unit Linked Insurance Plans can be a strategic decision for several reasons:

THE INDIA GROWTH STORY

According to the Morgan Stanley Research, India is only beginning to start a decade of tremendous development. The economy will overtake Germany and Japan to become the third largest in the world by 2027. Simultaneously, the stock market is expected to finish this decade ranked third globally.

Indian stock market surges post-elections despite concerns over inflation and Interest rates. Sensex hits record high, Nifty 50 also peaks. Mid and Smallcap segments outperform driven by economic growth and government policies.

• The “Make in India” campaign encourages domestic and multinational companies to design and produce products in the country, increasing production capacity, job creation, and FDI.
• The Government is spearheading initiatives under Ease of Doing Business and Reducing Compliance Burden.
• India tops remittance flows at USD 125 bn in 2023: World Bank

GLOBAL EQUITY MARKET PERFORMANCE VS INDIA

MORE REASONS TO GO FOR HIGH PROTECTION UNIT LINKED INSURANCE PLANS

• High Coverage upto 100x with market linked returns
• Capital Guarantee Option available
• Inbuilt Comprehensive Protection Riders such as -

Permanent & Total disability, Critical Illness, Accidental Death, etc. available.

• Liquidity

i. Partial Withdrawal allowed after 5 year lock in period

ii. Systematic withdrawals are also allowed in a structured manner

Let’s understand the systematic withdrawals option with an example

Naman at the age of 35 decided to invest Rs. 2 lacs/annum for 10 years in ICICI Pru Protect N Gain. For a policy with term of 40 years, he wants income from the 11th year itself.

HUGE LUMPSUM FOR THE LEGACY

The lumpum option is a flexibility to withdraw and end the plan with ROP+ at any time post completion of PPT tenure.

• Income and Maturity returns can increase as Indian equity markets continue to grow
• Customer can choose to take a lumpsum at any point after completion of 5 years and end the policy

COST EFFICIENCY

GET BACK MORE THAN ALL YOUR CHARGES

• 2X or 3X return of Mortality charges.
• Return of Total of Fund Management Charges.
• 2X return of Premium Allocation Charges.
• Loyalty additions and Fund Boosters.
• Return of Investment Guarantee Charge.

EASE OF BUYING WITH NO PHYSICAL MEDICAL & INCOME PROOF*

High Protection Unit Linked Insurance Plans available

1. TATA AIA Param rakshak PRO
2. HDFC Life Smart Protect Plan
3. Bajaj Allianz Invest Protect Goal
4. Kotak T.U.L.I.P
5. ICICI Prudential Protect N Gain

LET’S REVIEW THE HISTORICAL FUND PERFORMANCE OF ABOVE PLANS

Fund Performance

“Secure your future with High Protection Unit Linked Life Plans, where investment potential meets comprehensive protection.”

FIXED INCOME

HERE’S A DETAILED EXPLANATION BASED ON THE BELOW KEY POINTS:

1. EASING BOND YIELDS

• Understanding Bond Yields: Bond yields are inversely related to bond prices. When bond prices rise, yields fall, and vice versa. A variety of factors have contributed to the recent easing of bond yields in India, which is favorable for both the government and investors. These factors include:

i. Inclusion in Bond Indices: The inclusion of Indian government bonds in global bond indices as led to increased demand from international investors, as these indices are widely followed by global funds. This increased demand pushes up bond prices, thus lowering yields.

ii. FPI Inflows: Foreign Portfolio Investors (FPIs) have been increasingly buying Indian bonds, driven by the prospects of stable returns in a comparatively high-interest rate environment. This inflow of foreign capital into the bond market also supports higher bond prices and lower yields.

iii. Global Interest Rate Trends: Globally, central banks have been easing interest rates, especially in developed economies, to combat economic slowdowns. This easing creates a favorable environment for emerging markets like India, where the interest rate differential becomes attractive to investors.

iv. Domestic Inflation: India’s inflation rate has been lower than anticipated, which means the real returns on bonds (interest rate minus inflation) remain attractive, further supporting bond prices.

• Impact of Lower Government Borrowing: A critical, though sometimes understated, factor in the easing of bond yields is the reduced supply of new government bonds. As the government borrows less from the market, the supply of bonds decreases, which helps keep bond prices stable or rising, leading to lower yields.

2. IMPROVEMENT IN FISCAL DEFICIT

• Fiscal Deficit Explained: The fiscal deficit is the gap between the government’s revenue and expenditure. It represents the amount the government needs to borrow to meet its spending requirements. A higher deficit typically requires more borrowing, which can lead to higher bond yields.

i. Easing of Fiscal Deficit: Over recent years, India’s fiscal deficit has been gradually easing, both as a percentage of GDP and in absolute terms. For FY25, the fiscal deficit is projected at ?16.1 trillion, which marks a 2.4% reduction from the previous year. This easing is indicative of better fiscal discipline and effective management of government finances.

ii. As a Percentage of GDP: The fiscal deficit as a percentage of GDP is a critical indicator for assessing the country’s economic health. A decreasing fiscal deficit signals that the government is either increasing its revenues (through taxes or other means) or controlling its spending—or both. This reduction is viewed positively by investors and credit rating agencies, as it suggests a lower risk of government debt becoming unsustainable.

iii. Absolute Terms: The fiscal deficit in absolute terms—?16.1 trillion in FY25—is also lower than in previous years, which reflects an actual decrease in the need for borrowing, not just relative to the size of the economy but in real monetary terms.

3. REDUCTION IN GOVERNMENT BORROWING

• Gross vs. Net Borrowing: Government borrowing is often discussed in two ways—gross borrowing and net borrowing.

i. Gross Borrowing: This refers to the total amount the government borrows in a fiscal year without accounting for the repayment of existing debt. In FY24, gross borrowing was ?15.4 trillion, but it has been reduced to ?14 trillion in FY25. A reduction in gross borrowing suggests that the government needs less new capital to meet its obligations.

ii. Net Borrowing: Net borrowing is the amount the government needs to borrow after accounting for the repayment of maturing debt (redemptions). In FY24, net borrowing was ?11.8 trillion, and it has slightly eased to ?11.6 trillion in FY25. This reduction indicates that the government is not only reducing its new debt issuance but is also managing to meet more of its obligations without increasing its debt burden significantly.

• Impact on Bond Market: Lower government borrowing means fewer new bonds are issued, which reduces the supply of bonds in the market. When the supply is constrained, but demand remains stable or increases (as seen with FPI inflows), bond prices tend to rise, leading to lower yields. This is beneficial for existing bondholders and can help reduce the overall cost of borrowing for the government in the future.

4. REALISTIC FISCAL PROJECTIONS

• Tax Revenue Growth: A crucial factor in the fiscal health of a country is its ability to generate revenue, primarily through taxes. India has seen strong tax revenue growth in recent years, as indicated by the tax buoyancy figures.

i. Tax Buoyancy: This is a measure of how tax revenue grows relative to GDP growth. A buoyancy of 1.8 in FY22 meant that tax revenues grew 1.8 times faster than GDP, indicating a robust tax collection mechanism. The figures of 0.9 in FY23 and 1.4 in FY24 show consistent strength in revenue generation.

ii. Conservative Estimates for FY25: For FY25, the government has projected a tax buoyancy of 1, which is conservative compared to recent years. This cautious estimate suggests that the government is not overly optimistic and is planning its finances with a margin for economic uncertainties. This approach helps in setting realistic fiscal deficit targets, which are likely to be met without requiring additional borrowing or drastic spending cuts.

• Implication for Fiscal Deficit: These conservative and realistic projections indicate that the fiscal deficit for FY25 is likely to stay within the projected limits, contributing to overall financial stability.

5. IMPROVEMENT IN STATE FINANCES

• Outstanding Liabilities of States: Similar to the central government, state governments also manage their finances, and their debt levels contribute to the overall fiscal health of the country. Outstanding liabilities represent the total debt obligations of the states.

i. Reduction in Liabilities: The outstanding liabilities of states have decreased from 30.2% of GDP in FY21 to 27.5% of GDP in FY24. This reduction is significant as it shows that states are either paying down their debt or are borrowing less relative to the size of their economies.

• Interest Service Cost: Another important metric is the cost of servicing this debt, which is the interest payments that states need to make.

i. Reduction in Interest Service Cost: In FY21, interest payments consumed approximately 15% of the states’ revenue receipts. By FY25BE, this has been reduced to about 13%. Lower interest service costs free up more state resources for development spending or other essential services, which can further stimulate economic growth at the state level.

6. POSITIVE OUTLOOK ON COMBINED GOVERNMENT DEBT

• Combined Center-State Fiscal Deficit: When considering the fiscal health of a country, it’s essential to look at the combined fiscal deficit of both the central and state governments. The baseline projections indicate a positive trend where the combined Center State fiscal deficit is expected to ease from nearly 90% of GDP in FY21 to 77.4% by FY31.

i. Significance of the Improvement: This reduction suggests a significant improvement in the country’s overall debt sustainability. A lower combined fiscal deficit relative to GDP indicates that both the central and state governments are on a path to reducing their reliance on debt, which is crucial for long-term economic stability.

• Economic and Market Implications: As the combined government debt decreases, it reduces the risk premium associated with Indian government bonds, potentially leading to further easing of bond yields. This can have a positive ripple effect on the broader economy by lowering borrowing costs for businesses and consumers, thereby fostering economic growth.

SUMMARY

The detailed analysis shows a positive trajectory in government finances, both at the central and state levels. The reduction in the fiscal deficit, prudent borrowing strategies, and realistic revenue projections all contribute to an improved fiscal outlook. These improvements not only support lower bond yields, which are beneficial for the bond market, but also create a more stable and sustainable economic environment. The long-term projection of combined government debt easing significantly by FY31 further reinforces this optimistic outlook, suggesting a stronger foundation for future economic growth.

There would be opportunities for capturing capital gains as the market starts pricing in the expected policy rate easing. Hence, it is advisable to lock in to higher yields available currently to capture the emerging capital gains potential.

MUTUAL FUNDS

Financial experts always recommend portfolio diversification by investing across various asset classes and securities. Diversification aids in mitigating risk, however, investing heavily in low-yield or risky instruments is not advisable. Balanced funds aim to invest in the most suitable instruments without increasing the risk too much. Though equity funds are popular among investors, it is important that the financial goals and risk appetite are carefully considered before investing.

What are Balanced Funds?

Balanced funds are also known as hybrid funds. These financial instruments invest in both debt and equity segments in specific ratios. Investors can therefore diversify their mutual fund-based portfolios through these funds. As these funds maintain a balance between both debt and equity segments, they aim to offer a risk-reward balance and optimize the returns for the investor. Equity takes up about 40-60% of a balanced fund’s portfolio. Balanced Funds aim at assured capital appreciation and safety against potential risks. These funds are appropriate for investors seeking a mixture of capital appreciation as well as low-risk investment options.

What are Equity Funds?

Equity mutual funds invest largely in the shares of various companies to generate returns. An Equity Fund Manager spreads his investment across companies from different sectors to offer great returns. Investments may also be done in companies with varying market capitalizations. Typically, equity funds generate better returns than term deposits or debt-based funds. However, they are prone to higher risk in comparison to other types of mutual funds. The performance of these funds depends on various market conditions.

Moreover, equity funds are not recommended for all types of investors. There are no ‘one size fits all’ type of equity funds. Instead, they are based on the investment objective. Selection of the most appropriate equity funds must be based on the investor’s risk profile.

Following is the comparison between Balanced Fund and Equity Fund.

Following are some of Equity Schemes:

1. HDFC Top 100 Fund
2. TATA Large cap Fund
3. Canara Robeco Emerging Equities Fund
4. Nippon India Growth Fund

Following are some of the Balanced Schemes:

1. HDFC Balanced Advantage Fund
2. ICICI Prudential Balanced Advantage Fund
3. Kotak Balanced Advantage Fund
4. TATA Balanced Advantage Fund

GENERAL INSURANCE

Have you ever thought about a health insurance plan that locks in your premium basis your entry age? Or doesn’t let you run out of sum insured, ever? Or even helps you carry forward your leftover sum insured to the next year? Sounds impossible? Not anymore. Introducing ReAssure 2.0, a first-of-its kind health insurance policy that allows you to turn the impossible into possible. The plan is packed with many industry-first features so that you can truly get complete peace of mind.

1. SAVE WHILE YOU STAY PROTECTED AS YOU AGE

Pay the premium which is applicable as per the age at which you purchase the policy and not your current age. This will continue until a claim is made. This means that if you purchase the policy at 25 years old, and you do not make any claim until you are 55 years old, then, you will only be paying the premium which applies to a 25-year old every year, until you claim at 55 years old age. The premiums will return to the normal premium cycle only after the first claim is made.

2. NEVER RUN OUT OF YOUR SUM INSURED

The first claim will trigger the ReAssure+ benefit forever. It is unlimited. Each claim will be up to the base sum insured. It can be used by the same person for the same illness. After you claim, you get the double sum insured from day 1 of the next year. This means that if you have purchased a policy with 10 lakhs of base sum insured and you make a claim of lakhs that year, then the ReAssure+ benefit will be triggered and you will get up to 10 lakhs of the sum insured, which will be over and above the balance of 8 lakhs of base sum insured. This ReAssure+ benefit will remain forever, as many times as you claim. And next year, you will get 20 lakhs of the sum insured from day 1.

3. DON’T LOSE WHAT YOU DON’T USE

Don’t let go of the sum insured for which you have already paid for. Our first-in-industry benefit enables you to carry forward the leftover sum insured to the next policy year upon renewal. This way, your sum insured will keep accumulating with each renewal up to 10x of your base sum insured.

This means that if you have purchased a policy with 10 lakhs of base sum insured and you do not make any claim that year, then your sum insured is not wasted. It is carried forward to the next year and you get 20 lakhs of the sum insured from day 1 itself. This sum insured will continue to carry forward up to 10x of the base sum insured i.e. until it becomes 1.1 crores in this case. Even if you make a claim, the leftover sum insured is carried forward.

WIN-WIN FOR YOU IN ALL SITUATIONS

Designed to help you benefit beyond hospitalisation

• Up to 30% renewal discount on premium, basis the health points collected on Niva Bupa Health App.
• Unlimited e-consultations with our partners- video and telephonic
• Annual Health Check-Up starting from day 1

Designed to help you benefit at the time of hospitalisation

• Inpatient Care with coverage for hospitalisation of 2 hours and no capping on room rent coverage up to the sum insured.
• Truly Cashless Experience with optional add-ons:

Safeguard+: Coverage for Non-payable items as per the list I, II, III, IV of Annexure I and no impact on Booster+ for less than INR 1,00,000 claim.

Safeguard: Coverage for Non-payable items as per the list I of Annexure I and no impact on Booster+ for less than INR 50,000 claim.

PRODUCT BENEFIT TABLE

(All Limit In INR unless defined as Percentage)

HOW MUCH DOES IT COSTS?

Note: All premiums shown are for Titanium+ 1 year policy with SI 20 Lacs. These are inclusive of GST & in INR.

Annual & Monthly Premium Mode Available

Disclaimer: Bajaj Capital Limited (‘BCL’) has taken due care and caution in presenting factually correct data contained herein above. While BCL has made every effort to ensure that the information/data being provided is accurate. BCL does not guarantee the accuracy, adequacy or completeness of any data/information in the publication and the same is meant for the use of the recipient and not for circulation. Readers are advised to satisfy themselves about the merits and details of each investment scheme, before taking any investment decision. BCL shall not be held liable for any consequences, legal or otherwise, arising out of use of any such information/ data and further states that it has no financial liability whatsoever to the recipient/ readers of this publication. Neither BCL nor any of its directors/ employees/ representatives accept any liability for any direct or consequential loss arising from the use of data/ information contained in the publication or any information/ data generated from the publication. Nothing contained in this publication shall constitute or be deemed to constitute a recommendation or an invitation or solicitation for any product or services. Any dispute arising in future shall be, subject to the Court(S) at Delhi. Views given in the articles are the personal views of the contributors and not that of the company. Readers are advised to go through the respective product brochure/ offer documents before making any investment decisions. Disclaimer: The rates of interest are applicable as on the data mentioned herein above. The rate may be revised at the sole discretion of the respective companies inviting the Fixed Deposits without further notice. Printed by, Rajiv Wadehra, Published By, Raji Wadehra on behalf of Bajaj Capital Investment Centre Limited, Bajaj House, 97 Nehru Place, New Delhi - 110019, and Printed at Sundeep press C-105/2, Naraina, Industrial Area Phase - New Delhi - 110028, and Published at Bajaj House,97 Nehru Place, New Delhi - 110019, Editor-Rajiv Wadehra (CIN: U0000DL1988PLC039417))