Insurance Premium Funding PDF

Insurance Premium Funding Housing Finance CONTENTS 01 Credit Linked Life Insurance 05 Advantages of Credit Linked Insurance Plan 02 Home Loan Protection Plan 06 Life Insurance Tie up Companies 03 Insurance Premium Funding Product 07 Process Flow: EBI...

Insurance Premium Funding Housing Finance CONTENTS 01 Credit Linked Life Insurance 05 Advantages of Credit Linked Insurance Plan 02 Home Loan Protection Plan 06 Life Insurance Tie up Companies 03 Insurance Premium Funding Product 07 Process Flow: EBIX LOS 04 Case Study  Credit Linked Life Insurance What is Credit Linked Insurance Credit Linked Life Insurance (CLI) is a type of life insurance that pays off a loan if the borrower dies Plan before the loan is fully repaid. It is an optional coverage that can be added to the principal amount of loan, such as mortgage, personal loan or credit card CLI is a form of risk management for the lender, protecting them from potential loss from unpaid Why CLI is useful debts. Its is also good option for loans with coborrowers , as it protects them from making loan repayments after the borrowers’ death Premiums are calculated Credit Underwriting is simple Pay out happens as insured event Property is debt free and based on outstanding Group Policy offers higher takes place. Saving time and family is relieved from paying amount coverage money for borrowers and lender outstanding amount Reduces over time  Home Loan Protection Plan A Home Loan Protection Plan offered by Insurance Companied usually cover Characteristics of HLPP  Death Benefit- If the insured dies during the policy term, the outstanding loan amount is repaid and loan is closed  Terminal Illness- If the insured is diagnosed with a terminal illness, they receive a lump sum to cover the immediate expenses  Disability- If the insured becomes totally or permanently disabled, Premium Coverage for Riders & Add the insurance may cover the outstanding loan or waive future EMI Integration Payment Joint Borrowers Ons premiums Lump Sum Premiums can Insurance HLPP covers  Tax Benefit- Policyholders may be eligible for tax benefits under Premium be added to covers co- against death Section 80C and 80D of the Income Tax. payment home loan borrowers. If Riders on covering amount and any protection entire policy paid in coborrower against critical upfront monthly dies, the plan illness, Significance of HLPP installments will cover permanent their share of disability can  Protects Family- Ensures family is safe guarded against any financial loan be added outstanding liability in case of un timely death of borrower. Outstanding loan is settled from Insurance Coverage  Safeguards Lender- Risk of default due to non repayment arising from death or disability of borrowers is minimized.  Avoids Financial Burden- Family or Co- Borrower Insurance Premium Funding Product Bandhan Bank solicits borrowers to cover their loan liability with adequate life insurance covers. Borrowers may opt for term or Group HLPP products. Bank customers can agree to take life cover as security for the loan under the group insurance tie ups of the Bank. This scheme can be opted to fund the insurance premium for any of the insurance companies with whom the Bank is having a Tie Up.  All Categories of Home Income Proof – As per SUVIDHA Loan Customers may apply / SURAKSHA profile of customer  Min Loan Amount – 1 lac FOIR- As per permissible limit  Max Loan Amount – 15 lacs in CAAM Policy  Maximum Loan Tenure- 30 Value – Proportionate Value as years per system calculation Insurance Premium Funding Eligibility Parameters Sl No. Type Details 1 Interest Type FIXED 2 Minimum Income in Rs Rs. 2500/- p.m. 3 Maximum Loan Amount in Rs Rs. 15 lacs 4 Minimum Loan Amount in Rs Rs. 1 lac 5 Maximum Loan Tenure 30 years 6 Minimum Loan Tenure 1 year 7 Maximum FOIR and LTV As per DOP grid mentioned in CAAM Minim age: 18 years (Non-Financial Co-applicant) and 21 years (Financial Co-applicant) 8 Age of applicant in Years Maximum Age at loan maturity: 75 years (Financial Co-applicant) and 90 years (Non-Financial Co- applicant) Minimum credit bureau score >=600. 9 Credit bureau score No hit/No matches/ New to Bureau/ No history available with Bureau etc. can be considered. 10 Income proof Depending on the Suraksha/ Suvidha Profile of the customer  Home Loan Case Study: Mr. Mehta and Mr. Kumar Let us try and understand about Insurance Premium Funding (IPF) with the help of a case study. Introduction to the Case Study Mr. Mehta Mr. Kumar IT Professional IT Professional Mr. Kumar, also a 40-year-old IT professional, purchased his dream home Mr. Mehta, a 40-year-old IT professional, purchased his dream home with with a ₹50 lakh home loan. a ₹50 lakh home loan. Monthly Financial Commitments ₹ 42,000 Monthly EMI Commitment The monthly EMI commitment stands at ₹42,000. Mr. Mehta's Insurance Premium ₹ 40,000 Mr. Mehta's insurance premium is ₹40,000, amounting to INR 506 monthly for 15 years ₹ 45 lakhs Remaining Loan Amount The remaining loan amount is ₹45 lakhs.  Mr. Kumar's Perspective on Savings ₹ 506 ₹ 6,000 ₹1,20,000 ₹2,10,000 Total Savings Over 20 Years Total Savings Over 20 Years Monthly Savings Yearly Savings Mr. Kumar saves ₹506 each month by This amounts to a total of ₹6000 saved Over 20 years, these savings accumulate to Over 20 years, the money can annually. ₹1,20,000 if the money is kept as it is. accumulate to ₹2,10,000 if the money avoiding insurance. was kept in a RD.  The Tragic Incident A Dark Morning came into their life. Both met with a tragic accident on their office bus. Unfortunately both Mr Mehta & Mr Kumar did not survive the accident. They passed away and left their families to manage their liabilities !! Financial Impact on Mrs. Mehta 45 days ₹15 lakhs saved There were no costs associated The family's savings of ₹12 The entire loan amount has with legal proceedings. lakhs have been maintained been successfully settled. Insurance payout Children's education fund without any withdrawals. processed efficiently remains intact ₹ 45 lakhs ₹12 lakhs None cleared The insurance claim was A total of ₹15 lakhs which had preserved processed and paid within a been kept as children’s 45-day timeframe. No legal expenses education fund has been Full loan settlement Family savings remain incurred preserved. achieved untouched Mrs. Mehta's Experience: The Impact of Financial Planning Wise Financial Decisions Support for Education "Your husband was wise, madam," said the bank Her 12-year-old daughter could continue manager, highlighting the importance of prudent education with the other savings Mr Mehta had financial planning. invested Insurance Coverage The insurance cleared the entire loan of ₹45 lakhs, providing significant relief. Grieving Without Financial Stress Continuity in Coaching Mrs. Mehta could grieve without the burden of Her 15-year-old son remained in his coaching financial stress, thanks to her husband's planning. classes, maintaining his educational path. A Secure Future "Papa made sure we wouldn't lose our home," her son expressed during graduation, emphasizing the security provided. Mrs. Kumar's Story: A Journey Through Emotional Struggles Bank's Ultimatum 1 Mrs. Kumar faces a harsh choice: either pay a ₹42,000 EMI or vacate their home. Memories of Home Impact on Family As she sells their home, Mrs. Kumar expresses 5 2 Her daughter, confused and upset, asks why they sorrow, reflecting on her husband's efforts in are shifting schools, highlighting the emotional building it. turmoil. Sacrifices Made Sleepless Nights 4 3 Mrs. Kumar regrets having to cancel her daughter's piano She endures sleepless nights, consumed by the stress of classes, indicating the sacrifices due to financial strain. counting expenses and managing finances. Financial Impact on Mrs. Kumar Forced to sell house Continued EMI burden 15% loss: ₹8 lakhs ₹ 42,000 monthly Mrs. Kumar faces a monthly EMI payment of She was compelled to sell her house, resulting ₹42,000. lost in a loss of ₹8 lakhs, which is a 15% depreciation. New rental expense Children's school change cost ₹ 25,000 monthly Her new rental expense is ₹25,000 per month. ₹ 2 lakhs Transitioning her children to a new school incurred a cost of ₹2 lakhs. Depleted all savings New job travel cost ₹ 12 lakhs Mrs. Kumar has depleted her savings, ₹ 8,000 monthly She now has a new monthly travel cost of amounting to ₹12 lakhs. ₹8,000 for her job. The Real Cost of Saving ₹500 Monthly A lost home 1 The potential risk of losing one's home as a consequence of inadequate financial planning. Family's mental peace Broken dreams The strain on family relationships and overall 5 2 The impact on personal aspirations and goals due mental well-being caused by financial stress. to ongoing financial difficulties. Children's compromised future Lifetime of financial struggle The adverse effects on children's opportunities and 4 3 The long-term effects of persistent financial issues that quality of life due to financial instability. can lead to a lifetime of hardship. Moral of the Case Study "The smallest financial decision today can create the biggest impact on your family's tomorrow.“ Advantages of Credit Linked Insurance Plan Effects of Credit Linked Insurance Plan Borrower 1 Low Premium Cost No Additional Paperwork Insurance Premium funded by Bank Family Protected against financial loss Lender 2 Credit Risk Reduced Low cost of insurance processing Group Policy utilization Customer Satisfaction Quick Death Settlement Insurance company 2 Faster processing Verified customer Faster Processing Branding Life Insurance Tie-up companies: Product details & Process Flow Life Insurance Introduction  Bank has tie up with Life insurance partners such as Kotak Life and HDFC life for obtaining Credit Life Insurance.  Credit Life Policy is single premium policy and the policy can be obtained for the sum assured and tenure equivalent to Loan amount and Loan tenure.  Customer can choose the Insurance company by comparing Insurance Premium and Features.  It is not a mandatory policy and depends only on customer consent. Product and Features Kotak Life Insurance HDFC Life Insurance Product Complete Cover Group Plan Group Credit Protect Plus Cover Type Reducing Cover Reducing Cover Sum Assured Maximum SA: 2 Cr Maximum SA: 10 Cr Premium Online & Offline available Online & Offline available Collection Claim Settlement Loan Outstanding settled to bank balance credited Loan Outstanding settled to bank balance credited to nominee to nominee Non-Medical Limit Till 40 Years -1 Cr, Till 40 Years -1.5 Cr, Till 55 Years- 30 Lakh Till 55 Years- 50 Lakh Process Flow- Online Payment Creation of Application - Decides for Online Journey of Online Customer will receive SMQ – Short Medical Customer Selects the Payment and Deduction platform of Insurance OTP consent on the Questionnaire will be Insurance Company of Payment from company (Kotak/HDFC SMS/EMAIL trigger to the customer Customer Acct. LIFE) Bank can download data Customer will receive Payment option will be from portal or Insurance If SMQ is Positive then Life insurance Policy will confirmation SMS/EMAIL trigger like Debit Company shares payment Link will be be receive on Email/SMS of Premium remittance Card/Credit Card/ UPI premium and issuance generated. to Insurance company and Net Banking etc. data with Bank. ONLINE PAYMENT MODE- NEFT/RTGS/FT/QR CODE LIFE INSURANCE POLICY Process Flow- Ofline Payment Cheque/DD in Favor of Bandhan Bank Cheque/DD in Favor of Kotak Life or HDFC Life Customer Selects the Application Creation Decides for Offline Customer Issue Insurance Company through Online Platform Payment and Submit the DD/Cheque in Favor of of Insurance Co. Cheque or DD at Branch Bandhan Bank Cheque/DD in Cheque/DD in Favor of HDFC Favor of Kotak Life LIFE submitted by submitted by customer in Branch customer in Branch F& A team provides Credit F&A Team deposited the RO Ahmedabad Team Branches dispatch the confirmation details to Cheque/DD in Handed over the Cheque/DD to RO- Ahmedabad Insurance Team HDFC/Kotak Account Cheque/DD to F&A Team Ahmedabad RO Branches Deposits Branches Deposits Cheque/DD in Kotak Cheque/DD in HDFC Bank Acct. Bank Acct. Clear funds Life Insurance Clear funds Life Insurance Policy will be received on Policy will be received on Email/Bitly Link SMA and Email/Bitly Link SMA and physical copy in cases physical copy in cases RO- Ahmedabad Team checks the Credit and F&A Team Remits the RO Ahmadabad team failure of SMS/EMAIL by failure of SMS/EMAIL by fund to Insurance provides Customer and verify the customer details. Provide details company and confirms to Remittance details to Life Insurance Policy will be received on Email/Bitly Link customer. customer. RO Ahmedabad team Insurance company SMA and physical copy in with F&A for Remittance cases failure of SMS/EMAIL. Process Flow- Policy Issuance  Insurance company issues the insurance certificate stating the hypothecation in favor of Bandhan bank limited within 7 working days from the receipt of payment.  Insurance company issues policy copy through digitally on customer email address or though bitly link SMS. In case of failure in both mode of Email/SMS then Insurance company dispatches the Insurance certificate (Policy) to Customer Communication address.  Insurance company provides the soft copy to RO operation team as well.  RO operation team put insurance certificate in the operation server folder for access to all the branches. The branches can access, download and take print of the insurance certificate. Loan Application Journey - INSPF (Life Insurance) in EBIX-LOS Process Flow- EBIX LOS The EBIX LOS process flow is useful to process Life Insurance loan application when parent application disbursed within 90 days. The steps required in EBIX-LOS to process loan application of Life Insurance are explained below: In QDE activity, update Product Code as ‘OTHERS - INSPF’, Loan Purpose as ‘Life Insurance’ and update parent application number under Proposal summary section. You need to update required details in ‘Insurance Summary’ section in QDE activity. In QDE under Applicant section, enter existing customer id number and click on ‘Fetch Customer Details’, update required mandatory missing details. In QDE under Asset summary section, click on ‘Fetch Asset Details’. Process Flow- EBIX LOS 1. Go to QDE Screen and then to Proposal Summary: In Proposal Summary section of QDE, update Product Code as ‘OTHERS – INSPF’, Loan Purpose as ‘Life Insurance’ and enter parent application number in ‘Parent Application No’ field. Process Flow- EBIX LOS 2. In QDE screen move to insurance summary and add and update mandatory fields in ‘Insurance Summary’ section in QDE activity as highlighted in below screenshots. Process Flow- EBIX LOS 3. In the insurance summary screen go to sub product details and insurance details Process Flow- EBIX LOS 4. Next go to application details in QDE Screen: Enter existing Customer ID and click on ‘Fetch Customer Details’ in Applicant details section of QDE. Update missing mandatory fields in Applicant summary. Process Flow- EBIX LOS 5. Then go to asset details: The Primary asset details of the Parent application will be auto-fetched on selection of Parent application number in Proposal Summary and branch has to fetch the latest collateral details from FC by clicking on “fetch asset details” & fill in other mandatory fields. 6. Perform Bureau, FCU, Perfios Document upload, BSA Entry, Technical and Legal activities, Asset Verification, Office Verification, Current address Verification, Hunter, CERSAI Search will be skipped in Life Insurance process. Thank you