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“The Policy Exchange” brings a transformative approach to alternative investments by enabling investments in pre-owned life insurance policies. This innovative product offers assured returns and capital security, backed by AAA-rated securities and a transparent, regulated process.
Key Features of The Policy Exchange’s Investment Product
Distinct from Conventional Investments
Unlike traditional investment options like fixed deposits or mutual funds, our product provides an assured IRR of approximately 9-12%. This return is secured through AAA-rated instruments, combining the benefits of high yield and lower risk in the alternative investment space.
Primary Stakeholders in the Investment Process
- Original Policy holders: Individuals who hold lapsed policies they no longer wish to continue.
- Insurance Companies: Policies remain active under new investors, offering a way to sustain business from previously lapsed policies.
- Investors: New investors purchase these policies at a discounted rate, assuming the premiums and gaining rights to policy benefits.
Leveraging Section 38 of the Insurance Act, ‘The Policy Exchange’ facilitates legal, beneficial transfers of policies, giving investors full rights upon assignment.
Investment Security and The Policy Exchange’s Role
Policies are governed by IRDAI regulations, ensuring compliance with industry standards. As a platform, ‘The Policy Exchange’ identifies lapsed policies, handles their assignment to new investors, and serves as an intermediary. Once transferred, investors hold an irrevocable claim to policy benefits, with ‘The Policy Exchange’ supporting the transition digitally.
Mitigating Market Risk
To protect against market fluctuations, all policy funds are transferred to a secure fixed-return investment, typically yielding around 7–8% at the time of assignment. This stabilizes returns and contributes to the expected IRR of 9-12%, providing investors with security from market volatility.
Tax and Investment Efficiency
The tax implications depend on the original issuance date of the policy. For ULIP policies issued before February 2021, gains are tax-exempt, whereas later issues are subject to LTCG tax at 12.5%.
For traditional policies issued before 1st Apr 2023, gains are tax-exempt, whereas later issues are subject to the income (maturity/surrender amount) is added to your total taxable income.
For example:
- If you fall in the 30% slab, proceeds are taxed at 30% + surcharge + cess.
- If you are in the 10% or 20% slab, taxed accordingly.
Secure, Independent Ownership
As a platform, ‘The Policy Exchange’ facilitates policy assignments but does not retain ownership, ensuring investor security even if operations cease. The investor, as the new policy owner, retains all policy benefits directly with the insurance company.
Transparent Exits Investors enjoy a transparent exit process with no hidden charges, receiving the full fund value at liquidation
Frequently Asked Questions:
1. What rights do investors hold post-assignment?
Investors gain full rights to policy benefits, excluding only the death benefit, which remains tied to the original insured party.
2. How does 'The Policy Exchange' secure returns for market-dependent policies?
To stabilize returns, 'The Policy Exchange' moves funds into fixed-income options upon assignment, yielding around 7–8%, independent of market fluctuations.
3. Can all policies be assigned through 'The Policy Exchange'?
Yes, The Policy Exchange standardizes policy assignments, applying them across insurers to maximize investor benefits.
4. Are gains on assigned policies taxed?
Tax treatment depends on the issuance date: pre-February 2021 policies are typically tax-exempt, while later issues may incur LTCG tax.
5. Does an assigned policy provide life coverage?
This investment focuses solely on capital growth. Life coverage remains with the original policy holder.
6. How do investors liquidate their policies?
Upon maturity or the end of the lock-in period, investors may contact 'The Policy Exchange' or the insurance company directly for fund transfer.
7. Will IRR change if markets fluctuate during policy assignment?
Only for premium-paying policies, minor IRR variations may occur, but fixed-income options stabilize returns, minimizing market impact.
8. Could returns exceed the guaranteed rate?
Yes, if secure fund performance is strong, returns could exceed initial projections.
9. Are there any deductions at liquidation?
No deductions apply at liquidation; investors receive the full fund value, underscoring The Policy Exchange’s commitment to transparency.
