BUSINESS INSURANCE-BY.P.T.PATIL

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BUSINESS INSURANCE-BY.P.T.PATIL

  1. 1. PRESENTED BY:-P.T.PATIL DOLIC HUBLI III Training Materials for Agents & Not for Private CirculationPLAN TODAY FOR BETTER TOMORROW
  2. 2. Planning to Insure Your BusinessYour business is unique.Your business needs a businessinsurance plan that fits your business.Here we look at the preparations andconsiderations necessary to properlyinsure your business.When considering what types of policies yourbusiness needs, it can quickly become veryconfusing to keep the terms straight. An easyway around this dilemma is to keep in mind thatall business insurance and all policy types coverone of four things: property, liability, people orincome.PLAN TODAY FOR BETTER TOMORROW
  3. 3. Planning to Insure Your BusinessProperty: The property used in your businesssuch as the structure you do business in or thevehicles used in your business need to beprotected.Liability: No one is perfect, your business maymake a mistake and, especially if your businessis open to the public, there is always the chanceyour business will be held liable for an injury orerror.People: At the heart of every business are itspeople. You and your officers, managers andemployees are the companys greatest assetsand must be protected.Income: Without income the business does notsurvivePLAN TODAY FOR BETTER TOMORROW
  4. 4. Planning to Insure Your BusinessMost home-based businesses will be soleproprietorships or partnerships. As such, the lawsees you and your business as inseparable. If aliability claim is successfully made against youand your insurance isnt adequate, then you facelosing your personal assets, including yourhome. Its one thing to lose money when abusiness fails — its quite another to lose yourfamily home because you failed to insureyourself adequately.PLAN TODAY FOR BETTER TOMORROW
  5. 5. Planning to Insure Your BusinessTo Get‘MILLION DOLLER’ Advice ? &To Protect Your BusinessContact Our LIC Advisor Buy your tomorrows todayPLAN TODAY FOR BETTER TOMORROW
  6. 6. Planning to Insure Your Business Want to Achieve your Financial Goals? Select an Advisor, not a productPLAN TODAY FOR BETTER TOMORROW
  7. 7. Planning to Insure Your BusinessMaking money is easy. Keeping it is the hard part TIME VALUE FOR MONEY
  8. 8. Planning to Insure Your Business When it comes to financial planning, Life Insurance is your Life Jacket.PLAN TODAY FOR BETTER TOMORROW
  9. 9. Planning to Insure Your Business SAFETY 3 “S” SECURITY STABILITY MARRIED WOMEN PROPERTY ACTPLAN TODAY FOR BETTER TOMORROW
  10. 10. Planning to Insure Your Business CREATION OF IRREVOCABLE TRUST THROUGH LIFE INSURANCE CALLED MARRIED WOMEN PROPERTY ACT INSURANCEPLAN TODAY FOR BETTER TOMORROW
  11. 11. PLAN TODAY FOR BETTER TOMORROW Financial Protection Flexibility to start Flexibility to start at any stage at any stage Solution Disputes settlement Disputes settlement Estate Protection Estate Protection Estate building MWP Policy Professional Provides Tax Advantage Tax Advantage IndemnityIncome Protection Protection against Protection againstIncome Protection Creditors Creditors No changes No changes in Lifestyle in Lifestyle
  12. 12. SECTION 6 OF M.W.P.ACT 1874 PROVIDES,Any Married can take a Life Insurance Policy on his ownlife expressed on the face of it for the benefit his wife,(his wife & children or any of them. Such a policy shallENSURE deemed to be trust for the beneficiaries soexpressed & shall Not ,so long as the object of the trustremains, be subject to the control of the husband or hiscreditors or form part oh his ESTATEUnder MWP, there will be 3 separate bodies namely1) life assured 2) trustees 3) BeneficiariesPLAN TODAY FOR BETTER TOMORROW
  13. 13. WHO CAN TAKE M.W.P.POLICY• Any Married Man (including widower or Divorce(Not a Bachalor or Women) what is important that tobecome eligible for taking this policy male membershould have once married and subsequent to thishis wife may have expired or divorced. It is notnecessary that wife should be alive as on taking thepolicy.• Male married proposers who are Non-resident ofIndia.PLAN TODAY FOR BETTER TOMORROW
  14. 14. WHO CAN TAKE M.W.P.POLICYWomen, even if married and having herindependent income and estate can noteffect a policy on her own life. And alsomale member who is unmarried or aboutto be married through shortly after issue ofthe policy can not take the policy under thisactPLAN TODAY FOR BETTER TOMORROW
  15. 15. WHO CAN BE THE BENEFICIARY1)Wife alone,2)Any one or more children alone or the wife and3)Any one or more children together. In above definition, the word children means children by blood only of the proponent. However, if the proposer is Hindu alone, then even adopted children are also included in the definition of the word of children.4)Can provide with equal or unequal shares in policy monies. If the proposer has more than one legally married wives,All of them will take jointly as wife as a class.5)It is not necessary he should have a child in existence on the date of proposal.PLAN TODAY FOR BETTER TOMORROW
  16. 16. WHO CAN BE THE BENEFICIARY Hence, Mohamedan Proposer have toappoint beneficiaries by name only who areliving and existing at the time of proposal andalso must mention respective shares of thedifferent beneficiaries which may be equal orspecified unequal shares. Provision of contingent or alternatebeneficiaries is available. But it is not availablefor Mohamedan proposer.PLAN TODAY FOR BETTER TOMORROW
  17. 17. WHO CAN BE THE BENEFICIARY The position in case of Muslim (Mohamedan)Proposer is as follows:- • Under the Mohamedan law, a gift by wayof trust subject to any condition can not be madein favoure of an unborn person. • Similarly no provision can be made for thebenefit of wife as a class or children as a class.Mohamedan Proposer can not providebeneficiaries jointly or survivor or survivor ofthem i.e joint tenancy. • Hence, Mohamedan Proposer have toappoint beneficiaries by name only who areliving and existing at the time of proposaland also must mention respective shares ofthe different beneficiaries which may be equal orspecified unequal shares.PLAN TODAY FOR BETTER TOMORROW
  18. 18. WHO CAN BE THE BENEFICIARYWhere appointment of more than one beneficiaryis made under the policy, it may be made eitheras Joint tenant or tenants-in -common. On thedeath of last surviving beneficiary, the entirepolicy money will be payable to the legalheirs of such last survivor but not to all legalheirs of all deceased beneficiaries.PLAN TODAY FOR BETTER TOMORROW
  19. 19. Benefits: • When you purchase your Policy under MWP act, you are making sure that the claim amount be distributed among the mentioned beneficiary equally or unequally as specified by you. • Please understand that you cannot appoint a nominee under this policy, since nominee is the person who is just authorized to receive the amount but not use it. • You can appoint Specific beneficiary in the form of your wife or Children or Joint beneficiary with specific amounts.PLAN TODAY FOR BETTER TOMORROW
  20. 20. Benefits:• The Claim amount will be held as trust andthis will not be added in your estate. So YourCreditors will not have any right on it.• You can appoint Specific Trustees for claimproceeds which they will held for the benefitof beneficiaries and if permitted by the trustdeed use it as per instructions.• You can appoint any corporate or bank asspecific trustees.Thus if you want your claim proceeds to beused for the benefit of your wife and children,then you can use this act for your benefit.PLAN TODAY FOR BETTER TOMORROW
  21. 21. PLANS UNDER WHICH MWP ACT POLICIES CAN BE ISSUEDAll plans where life assured and Proposer are same.Joint Life Endowment Assurance Plans like Plan 89can not be allowed.Policies financed through provident fund orDSOP fund can not be allowed, since thesepolices will be required to be assigned to providentfund and DSOP.Children Deferred Assurance Plans and Policies onthe life of another can not be taken under this Act.All types of annuities plans are allowed provided lifeassured and Proposer are same one.PLAN TODAY FOR BETTER TOMORROW
  22. 22. APPOINTMENT OF TRUSTEESThe function of the trustee or trustees underMWP act policy is to receive policy money onclaim arising and carry out the objects of thetrust. Where the beneficiaries are all majors,the trustees will pay to the beneficiariesthe claim amount received from the LICunless they have been given specificdirections to the contrary by the personcreating the trust.PLAN TODAY FOR BETTER TOMORROW
  23. 23. APPOINTMENT OF TRUSTEESProposer may even appoint a corporatespecial trustee i.e a bank or an executorand trustee co; instead of appointingindividual as a trustee.Where the beneficiaries are all minors, thetrustees will hold the amount for thebenefit of the minorsLife assured can not be work as trustee,since sec 6 of MWP act provides thatpolicy shall not be subject to the control ofthe husband.PLAN TODAY FOR BETTER TOMORROW
  24. 24. APPOINTMENT OF TRUSTEESSpecial trustees appointed under MWP actpolicies would be in the position of trusteesgenerally and would have all powers and besubject to all the liabilities and duties oftrustees as defined under the Indian trust act.Where special trustees have not beenappointed, the policy money at the time ofclaim is payable strictly to the official trusteeof the state where the policy is issued.PLAN TODAY FOR BETTER TOMORROW
  25. 25. CANCELLATION OF APPOINTMENT OF EXISTING TRUSTEE OR APPOINTMENT OF NEW TRUSTEESA trustee once appointed in the addendum toproposal or by way of the deed poll can notbe removed by the life assured, unless thereis a specific power reserved to him therein.Where revocation of the appointment of existingtrustees and appointment of new trustees in theirplaces is desired , the assured will be required toexecute a deed poll of revocation of old trusteesand appointment of new trustees. The deed pollwill have to be stamped as per requisite stampvalue of the state.If original trustee have availed any loanunder the policy and life assured seeks forcancellation of existing trustees and appointmentof new trustee, then alternate trustee or newtrustee may have to accept the old liability.PLAN TODAY FOR BETTER TOMORROW
  26. 26. SETTLEMENT OF MATURITY / DEATH CLAIMIf payment is being made in favor ofbeneficiaries and there are one or more thanone minor beneficiaries, or all of them areminor, payment may be made to the naturalguardian/s OR Legal guardian by the court ofLaw, of the beneficiaries.Maturity claim and Death claim directly tobeneficiaries if the same are named major.If the sole beneficiary dies, clearly their legal .heirs will not have any interest in the trust.PLAN TODAY FOR BETTER TOMORROW
  27. 27. ALTERATIONS IN POLICY AND EXERCISE OF OPTIONS UNDER THE POLICYWhere the alterations are beneficial tothe beneficiaries as a whole withconsent of life assured alone ifbeneficiaries are minor trustees mayapply for alteration.If beneficiaries are major then life assuredand beneficiaries can apply jointly foralteration.PLAN TODAY FOR BETTER TOMORROW
  28. 28. ASSIGNMENT AND NOMINATIONAssignment or Nomination by the assured isnot permissible.A nomination by the beneficiary is also notpermissible.The special trustees can assign the policybut only by way of a mortgage with theright of redemption reserved.The special trustees can not assign the policyabsolutely.The trustees can not nominate anyone toreceive the policy money.PLAN TODAY FOR BETTER TOMORROW
  29. 29. LOAN UNDER THE POLICYIf life assured has given the powers totrustees to raise loan from LIC only for thebenefit of beneficiaries by filling the requisiteaddendum at the time of submitting theproposal, then only loan can be raised.Life assured can give wider powers to trusteesto raise loan from LIC during the minority of thebeneficiaries or even if the beneficiariesIf loan was granted to the beneficiarieswhere no special trustees are appointed, thereassignment on repayment of loan would be infavour of the beneficiaries.PLAN TODAY FOR BETTER TOMORROW
  30. 30. SURRENDER OF THE POLICYSurrender of the policy would be the fourparty agreements between LIC, the lifeassured, the trustees, and all thebeneficiaries who must be major andcompetent to contract.Application of surrender of policy, surrenderdischarge form must be signed by theassured, beneficiaries, trustees jointly. Thesurrender value in such case must be paidover to trustees only.when the beneficiary is minor, it can bedone only with the permission of the competentcourt.PLAN TODAY FOR BETTER TOMORROW
  31. 31. REVOCATION OR CANCELLATION OF TRUSTA trust under 6 of MWP act is irrevocable inthe sense that life assured alone can notrevoke the trust under the policy.Where all beneficiaries are named, major,competent to contract and are of one mind, thenwith the consent of all beneficiaries, life assuredcan revoke the trust.The consent of alternative/ contingentbeneficiaries is required to be taken.PLAN TODAY FOR BETTER TOMORROW
  32. 32. ISSUE OF DUPLICATE POLICY / LOSS OF POLICY DOCUMENT Where the policy is lost at hands of trustees, Or by the Life Assured or by the Beneficiary the indemnity bond may be executed by the respective parties.PLAN TODAY FOR BETTER TOMORROW
  33. 33. DIVORCE OF WIFE AFTER ISSUE OF POLICY If the wife is the beneficiary named in the policy document the policy would continue as a trust in favour of the divorced wife and would not belong to the assured in spite of divorce. Hence, for entertaining any such request, the divorce decree must be called.PLAN TODAY FOR BETTER TOMORROW
  34. 34. DEATH OF BENEFICIARYOn death of the one of the beneficiaries,the trust will work for the survivingbeneficiary/ beneficiaries.( but not for legalheirs of deceased beneficiaries )The assured can not replace a beneficiary inplace of the deceased one.The heirs can obtain legal evidence of titlefrom court of law. Thereafter, he can executea deed poll of release from the MWP TRUSTPLAN TODAY FOR BETTER TOMORROW
  35. 35. CHANGE OF BENEFICIARIES It is not open to life assured to make any changes in the trust by deleting any beneficiaries or by adding any new beneficiaries. In case a beneficiaries is a minor (applicable for alternate beneficiaries), no change of beneficiaries is allowed.PLAN TODAY FOR BETTER TOMORROW
  36. 36. DEATH OF TRUSTTES If the appointment of trustees was jointly or survivors or survivors of them or as one trustee and an alternative trustee are there, then there is no need to take any action. The other or alternative trustees will come into operation. If the trustee was sole trustees has died, the assured may be suggested to have a fresh trustee appointed.PLAN TODAY FOR BETTER TOMORROW
  37. 37. CANCELLATION OF A PREVIOUS POLICY & CONVERTING THE SAME INTO MWP ACT POLICY IN LIEU OF FORMER ONEIt is possible to cancel the existing policy notissued under the provisions of the act and inits place issue a fresh policy under the MWPact.PLAN TODAY FOR BETTER TOMORROW
  38. 38. Eg:- TELGI - Took a policy under MWPA and nowthough he is arrested and property attatched, hisfamily enjoys same life style by surrender cashvalue of the policyPLAN TODAY FOR BETTER TOMORROW
  39. 39. HUF InsuranceA Hindu Undivided Family (HUF) is the creation ofthe Hindu Law; an HUF consists of all personslineally descended from a common ancestorincluding their wives & unmarried daughters.Sometimes HNI clients opine that in their absence ahuge amount of wealth going to Their wife and/orson may not be the best arrangement and may spoilthem, so on and so forth. Another provision ofincome tax that can come handy is the HinduUndivided Family clause. An HUF created by theclient or of which the HUF is a co-parecener (male)/member (female) can propose life insurance on thelife of any of its coparecener / members. The effectis that the maturity/death proceeds do not go to anyone individual but become a part of the HUF corpusthus benefiting the entire family and used for suchpurposes as may be desired by the client, ratherthan being squandered away by 1or 2“black sheep”PLAN TODAY FOR BETTER TOMORROW
  40. 40. Key Person Insurance (KPI)Under KPI, a business can protect itself againsteconomic setback in the event of death of its keypersonnel; the business by having such riskmanagement practices in place can attract bettertalent, have the trust of creditors, bankers, vendors,clients etc. and can have a business continuation/succession plan in place. Under KPI, thecompany/firm proposes insurance, pays premiumwhile the life insured is the KP. Premiums paidunder KPI are allowed as expenditure under section37(1) thereby helping the firm reduce its profits forthe year and thereby lowering taxes.Claim, if any, is payable to the firm as compensation/corpus to undertake necessary expenditure inhiring and training a replacement of the KP, therebyallowing business continuity and free fromdisruptions.PLAN TODAY FOR BETTER TOMORROW
  41. 41. Partnership Insurance (PSI)A firm has insurable interest in the life of itspartners and can buy insurance on the lives ofpartners. Like KPI, a partnership firm can protectitself against interruptions to business,interference from family members and costlylitigation in the event of unfortunate deathof a business partner. Again, premium paid by afirm for keeping a policy on the life of a partner inforce, is deductible as business expenditure undersection 37(1) and claim, if any is payable tothe firm. HNI clients who are in business and inarrangements such as partnerships can securetheir business, built with sweat and intellect;ensure that the business continues to exist Forfuture generations and carries their dream forward.Note: Only Term Insurance is permitted under KPIand PSI.PLAN TODAY FOR BETTER TOMORROW
  42. 42. Employer-Employee Insurance (EEI)HNI clients, who are in business or in high ranking positionswith organizations can consider arrangements to increaseloyalty of their employees and in turn improve motivationand reduce turnover in this era of high aspirations ofemployees. Employer-Employee insurance arrangementpermits a business to pay premiums for life insurance on thelife of their employees (not necessarily KP) and allow thebenefits to accrue to the employees. Unlike KPI or PSIabove, EEI claim proceeds are payable to employee/theirbeneficiaries only and no benefit accrue to the employer.Due to this, the premiums paid on behalf of employees aretreated as perquisite in the hands of the employees undersection 17(2) and can in turn be claimed as deduction fromincome under section 80(c). Arrangements can be madewhere the employer is the Proposer (scheme A) or theemployee (scheme B) itself is Proposer and Life Insuredwhile the Employer is only the premium payor.Note:All type of insurance plans can be pitched under EEI,including pension plans. PLAN TODAY FOR BETTER TOMORROW
  43. 43. PLAN TODAY FOR BETTER TOMORROW Living for the Moment, without a thought forTomorrow, is a foolish investment in the Future
  44. 44. PLAN TODAY FOR BETTER TOMORROWPRESENTED BY:-P.T.PATIL DOLIC HUBLI III CELL NO.9448133179 E-MAIL- patil179@yahoo.co.in Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The authors do not claim it to be accurate nor accept any responsibility for the same

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