Wealth Management - TYBMS - UNIT II

UNIT II
(A) Meaning of Insurance:
(B) Characteristics:
1) Sharing of risk
2) Co-operative Device
3) Value of risk
4) Payment at Contingency
5) Amount of Payment
6) Large number of insured persons
7) Insurance is not gambling
8) Insurance is not a charity
(C) Primary and Secondary Functions of Insurance:

(i) Primary Function
a) Insurance provide certainty
b) Insurance provide protection
c) Risk-Sharing
(ii) Secondary Function
a) Prevention of loss
b) It provides capital
c) It helps economic progress
(D) Principle of Insurance/reinsurance:
Principle of Insurance:
(i) Principle of Co-operation
(ii) Principle theory and probability
Principle of Re-Insurance:
(E) Principle of Life Insurance:

Basic principle of Life Insurance:
(i) Principle of Indemnity
(ii) Principle of Contribution
(iii) Principle of Subrogation
(iv) Principle of mitigation of loss
(v) Causa Proxima
(F) Rights and responsibility of Insurer and Insured:
(i) Rights of insured:
(ii) Responsibility of insured:
(iii) Rights and responsibility of insurer:

a) Duty to defend
b) Insurance Contract
c) Claim adjustment
d) General duties
e) Fair Deal
f) Payment
(G) Different kinds of life insurance products:
(i) Term insurance plan
(ii) Endowment policy
(iii) Unit linked insurance plan
(iv) Money back policy
(v) Whole life policy
(vi) Annuity/pension plan
(H) Principle of life insurance:
(i) Insurable interest
(ii) Law of large number
(iii) Good faith
(iv) Risk and minimal loss
(I) Points to consider for life insurance:
(i) Research
(ii) Read terms and conditions
(iii) Remember lock in period
(iv) Consider premium payment option
(v) Don’t mask information
(J) Life insurance companies in India:
(i) LIC : Life Insurance Corporation of India
(ii) SBI Life Insurance
(iii) ICICI Prudential Life Insurance
(iv) HDFC Standard Life Insurance
(v) Bajaj Allianz Life Insurance
(vi) Max Life Insurance
(vii) Birla Sun Life Insurance
(viii) Kotak Life Insurance
(K) Health Insurance:
(i) Meaning
(ii) Benefits:
(a) Cashless treatment
(b) Pre and post hospitalization cost coverage
(c) Transport Charges
(d) No claim bonus
(e) Medical checkup
(f) Room rent
(g) Tax Benefit
(L) Mediclaim:
1) Meaning
2) Benefit:
3) Features:
4) Different Mediclaim Policies:

(a) Individual Mediclaim
(b) Family floater Mediclaim Cover
(c) Critical illness Mediclaim
(d) Senior Citizen Mediclaim Policy
(e) Heart Mediclaim
(f) Cancer Mediclaim
5) Mediclaim Covers
(a) Day care treatment
(b) In – Patient Hospitalization
(c) ICU Charges
(d) Ambulance Covers
(e) Pre and Post Hospitalization
(f) Recharge of Sum Insured
(g) Annual Health Check ups
(M) Investment/Financial Planning
(a) Meaning:
(b)How to create a Investment/financial plan:

1) Find out current financial situation
2) Time frame and budgeting
3) Set goals- Short term, Mid-term and Long-term
4) Assess your risk
5) Asset Allocation
(N)Types of Investment / Financial risk:
1) Liquidity risk
2) Market risk
(a) Equity risk
(b) Interest rate risk
(c) Currency risk
3) Concentration risk
4) Reinvestment risk
5) Horizon risk
6) Foreign investment risk
7) Liquidity risk
8) Credit risk
9) Inflation risk
10) Longevity risk
(O) Risk profiling of investors asset-allocation (life-cycle-model):
Meaning:
(P) Asset allocation strategies:
1) Meaning:
2) Strategies Asset Allocation
(a) Age based asset allocation
(b) Risk profile-based asset allocation
 Conservative
 Income
 Balanced
 Growth
 Aggressive
3) Tactical Asset Allocation
4) Dynamic Asset Allocation
Factor affecting
1) Risk Tolerance
2) Goal Factors
3) Time Horizon
(Q) Goal based financial planning:
1) Meaning:
2) Life Goals:
(a) Buying a house
(b) Buying a Car
(c) Children’s Education
(d) Children’s Marriage
(e) Retirement Planning
(f) Aiming for early retirement
(g) International holiday
(h) Purchasing other high-value items like diamond ring for your wife
(i) Putting an emergency fund in place
(j) Modifying your house
(k) Starting a business
3) Goal based financial/Investment Planning (Six step process)
(a) Expensive goal
(b) Expense budgeting
(c) Assessing your risk appetite
(d) Asset allocation according to goals and risk appetite
(e) Prepare an investment plan
4) Advantages of having goals while investing:
(a) Disciplined investing
(b) Help you reduce debt/debt free
(c) Save and invest more for your goals
(d) Save taxes
(e) Improve life style in a suitable way
(R) Active & passive investment strategies:
1) Active investing:
(a) Pros of actively managed funds
i) Flexibility
ii) Hedging
iii) Tax Management
(b) Cons of actively managed funds
i) Expensive
ii) Risk
2) Passive investing:
(a) Pros of Passive managed funds

(b) Cons of Passive managed funds

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UNIT II

(A) Meaning of Insurance:

7) Insurance is not gambling

8) Insurance is not a charity

(C) Primary and Secondary Functions of Insurance:

(E) Principle of Life Insurance:

(iii) Rights and responsibility of insurer:

4) Different Mediclaim Policies:

(b)How to create a Investment/financial plan:

2) Strategies Asset Allocation

(a) Age based asset allocation

(b) Risk profile-based asset allocation

4) Dynamic Asset Allocation

(a) Pros of actively managed funds

(a) Pros of Passive managed funds

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