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Note On Life Sanchay Par Advantage
Note On Life Sanchay Par Advantage
Participating products
The benefits of participating policies are a sum of guaranteed* benefits and discretionary (non-guaranteed) benefits, the latter depending
on the bonuses declared.
The ‘bonus’ declared is based on the actual experience of the portfolio, the most important being the investment returns earned. As the
policy ‘participate’ in the experience of the portfolio, this product is called as participating product.
The bonuses are of two types:
Regular bonuses which are declared during the tenure of the policy. These bonuses can either accrue under the policy and are
paid in the event of a claim by death, surrender or maturity or be paid as cash bonuses immediately on declaration
Terminal (final) bonus which may be paid when a policy results in claim by maturity/death/surrender
In the Par portfolio, the bonuses are ‘smoothed’ over years and between different policies in the same portfolio to minimize
volatility of returns. Over the term of the policies, the total policyholder returns is expected to reflect the total asset returns on the
invested portion of the premiums over the period.
How bonus rates are declared
HDFC Life’s philosophy is to base a) the regular bonuses on the regular investment income earned in the portfolio like the coupons,
dividends and b) the terminal bonus would be based on capital gains, equity returns etc. The bonuses would be ‘smoothed’ over the years
implying that in years of very good returns, some of the surplus would be held back in the portfolio to be used in years when the returns
are not good. This is to ensure that the bonus rates and hence the returns are not very volatile year-on-year.
As the investment in equities is expected to generate higher (as compared to risk free returns) returns over the medium to long term, the
insurance company intends to distribute the higher expected returns on equity as well as any undistributed surplus from past years in the
form of ‘terminal bonus’ which would be payable in the event of the policy resulting in a claim by maturity or early surrender/death.
Investment Management
Debt Investments
The debt investments are structured based on the regulatory requirements of specified allocation in government securities and high-
quality corporate bonds, including exposures in housing and infrastructure companies. The maturity structure of the debt portfolio
is matched to the maturity profile of the liabilities, to reduce the interest rate risk in the portfolio. Since the maturities of the debt
investments are matched to the liabilities, the securities are usually held till their respective maturities. The portfolio objective is to
achieve a close matching of the assets and liabilities’ cash flows. There are no interest rate calls / duration calls in the Par fund.
The Par portfolios invest in corporate bonds as well. Since the debt portfolio is used to ensure the ability to meet the guaranteed*
liabilities as well as the regular bonus declarations, the credit risk in the portfolio is kept low. Moreover, the policy terms in the Par
funds are long dated. Hence, the corporate exposures in the Par funds are maintained only in the blue chip, ‘AAA’ rated PSU
entities.
The returns from the debt investments reflect the yield levels prevailing during the term of the policies.
Equities
The equity allocation in the Participating fund is expected to generate higher investment returns, which can then be used for
declaring the discretionary benefits in the form of additional bonuses and terminal bonuses. The current equity allocation for the in-
force participating policies is around 25% and it has been increasing over the last few years. The allocation was about 13%, 5 years
ago.
Indicative Exposure to Debt & Equity Investments. (as provided by HDFC Life Insurance Company Limited)
Proposed
Asset Category
Allocation
Money Market Instruments
~3%
Public Deposits
Govt. Securities ~50%
Corporate Bonds ~20%-25%
Equity ~25%-30%
Key Features
Survival Benefit:
Guaranteed* Income payable for 25 years as
Guaranteed* Income = Guaranteed* Income Rate x Annualized Premium
Cash Bonus payable at chosen frequency every policy year
Maturity Benefit:
Sum Assured on Maturity plus Accrued Survival Benefit (if not paid earlier) plus Interim Survival Benefit plus Terminal Bonus
Where, Sum Assured on Maturity is equal to sum of Annualized premiums payable under the policy
Death Benefit:
Sum Assured on Death plus Accrued Survival Benefit (if not paid earlier) plus Interim Survival Benefit plus Terminal Bonus
The minimum Death Benefit shall be 105% of Total Premiums Paid as on date of death.
Premium excluding UW extra premiums, modal loadings, taxes and rider premiums, if any
Survival Benefit: Cash Bonus payable at chosen frequency every policy year
Maturity Benefit:
Sum Assured on Maturity plus Accrued Cash Bonuses (if not paid earlier) plus Interim Survival Benefit plus Terminal Bonus
Where, Sum Assured on Maturity is equal to sum of Annualized premiums payable under the policy
Death Benefit: Sum Assured on Death plus Accrued Cash Bonuses (if not paid earlier) plus Interim Survival Benefit plus Terminal Bonus
The minimum Death Benefit shall be 105% of Total Premiums Paid as on date of death.
Premium excluding UW extra premiums, modal loadings, taxes and rider premiums, if any
Plan Eligibility
Disclaimer:
HDFC Bank Limited ("HDFC Bank") is registered with Insurance Regulatory & Development Authority of India (IRDAI) as a Composite Corporate Agent, IRDAI Registration No. CA0010 for distribution of
Insurance Products. HDFC Bank currently has arrangement with HDFC Life Insurance Co. Ltd, Tata AIA Life Insurance Co. Ltd., and Aditya Birla Sun Life Insurance Co. Ltd for distribution of Life
Insurance products. The contract of insurance is between the Insurance Company and the insured only, and not between HDFC Bank and the insured. HDFC Bank is not responsible or liable for performance
of any obligations under the contract of insurance. Insurance is sold as a stand-alone product and not linked to any of the Banking products. Participation in Insurance is purely on a voluntary basis. Purchase of
Insurance is not a pre-condition of availing any of the banking products / services. Details related to product features and fund performance are based on the input received from insurance companies. HDFC
Bank is not responsible or liable for any omission or commission in the information shared. For more details on risk factors, product details, terms and conditions and exclusions please read the relevant
product brochure carefully before conclusion of sale.