Life insurance


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Life insurance

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Life insurance

  1. 1. Life insurance<br />
  2. 2. Nature of life insurance<br />Peculiar nature – event bound to happen<br />Covers death due to natural causes and accidents<br />It’s a long term contract<br />A contract of assurance <br />Can’t be indemnified (subrogation and contribution doesn’t apply)<br />It is an a long term investment<br />
  3. 3. Features and principles <br />Nature of a general contract<br />agreement<br />Competency (eligibility) of parties<br />Free consent of parties<br />Legal consideration -valid from 1st premium<br />Legal objective - support the family<br />
  4. 4. Insurable interest (Pecuniary interest)<br />
  5. 5. Utmost good faith (indisputable clause) <br />Warranties <br />Informative warranty<br />Promissory warranty<br />Breach of warranty <br />
  6. 6. Proximate cause<br />Assignment and nomination<br />Return of premium<br />Alaeatory<br />Indemnity/subrogation (N/A)<br />
  7. 7. Aleatory <br />Insurance contracts are aleatory<br />There is no equal value exchanged<br />Either insurer collects premium and if there is no loss doesn’t pay back <br /> (or)<br />The insured pays small premium and collects huge amounts as compensation.<br />
  8. 8. Types of life insurance<br />Duration of the policy payments<br />Method of premium payments<br />Participation in profits<br />Number of lives covered<br />Method of payment of claim<br />Unit linked insurance<br />
  9. 9. Classification of policies<br />Duration of policy<br /> - whole life policy<br /> - limited payment whole life policy<br /> - convertible whole life policy<br />
  10. 10. contd<br />On the basis of Term Insurance policies<br /> - Temporary Assurance Policy<br /> - Renewable Term Policies <br /> - Convertible Term Policies<br />
  11. 11. contd<br />On the basis of Endowment Policies<br /> -pure endowment policy<br /> - ordinary endowment<br /> - joint endowment<br /> - double endowment<br /> - fixed term (marriage)<br /> - educational annuity policy<br />
  12. 12. contd<br /> - triple benefit policy<br /> - anticipated endowment<br /> - multi purpose policy<br /> - children’s deferred endowment assurance<br />
  13. 13. On the basis of premium payment<br />Single premium<br />Level premium<br />
  14. 14. On basis of participation of profits<br /> Participating policy<br />Non participating policy<br />
  15. 15. On the basis of number of persons insured<br />Single life <br />Multiple life<br />
  16. 16. On methods of payment<br />Lump sum policies<br />Annuity policy<br /> - immediate annuity<br /> - deferred annuity<br /> - fixed and variable annuity<br />
  17. 17. Money back policies<br />Money back policy<br />Sinking fund policy<br />
  18. 18. (Contd)<br />Unit linked policies<br />Group insurance schemes<br />
  19. 19. Actuaries <br /><ul><li>A business professional who deals with financial impact of risk and uncertainty
  20. 20. Deals in financial security systems like,</li></ul> Asset management<br /> Liability management<br /> Analytical skills<br /> Business knowledge, etc.,<br />
  21. 21. Types of actuaries<br />Life , health and pension actuaries<br /><ul><li>Deal in mortality risk, consumer choice, morbidity,…</li></ul>Products – deal with life insurance, annuities, pension, mortgage and credit insurance, long and short term disability, medical, dental and health care.<br />
  22. 22. Casualty actuaries<br /><ul><li>Non-life/general insurance act.
  23. 23. Deal with catastrophic, unnatural risks</li></ul>Products – auto, home owners, communal property, workers compensation, title insurance, malpractice, environment/marine, terrorism,..<br />
  24. 24. Appointment:<br />An insurer registered to carry on business in India shall appoint an actuary – APPOINTED ACTUARY for IRDA act.<br />A resident of India <br />Fellow member of actuarial society of India and possess certificate of practices issued by the society.<br />Not above 70 years<br />
  25. 25. Duties<br />Render actuarial service to insurer.<br />Product design and pricing/wording of contract investments and re-insurance.<br />Ensuring the solvency of insurer firms.<br />
  26. 26. contd<br />To comply with provisions of act to,<br /><ul><li>Fix premium
  27. 27. Give interim bonus</li></ul>To ensure policy holders responsible expectations been considered.<br />To ensure premium charged are fair<br />
  28. 28. Cover notes/Binders<br />Temporary document sent to the insured, till permanent certificate of policy issued <br />In life insurance cover notes are not issued, but letter of acceptance is issued <br />after the first premium received as binders.<br />
  29. 29. Process of Assignment <br />Procedure<br />Notice<br />Priority<br />Acknowledgement<br />Recognition<br />Conditional assignment<br />
  30. 30. <ul><li>Surrender value</li></ul>Amount the insurer decides to pay on surrendering the policy<br />Paid up value<br />If assured discontinues premium payment after 2 years <br />
  31. 31. <ul><li>Days of grace </li></ul>15 days from due date (monthly premium)<br />30 days (quarterly, half yearly, annual)<br /><ul><li>Revival of discontinued policies
  32. 32. During life time, within 5 years before date of maturity</li></li></ul><li><ul><li>Loans</li></ul>When policy has surrender value it has a loan value<br />95% of surrender value given as loan<br />5% kept as interest reserve<br />Repayment as per convenience of assured – instalments or maturity value<br />Best form of investment for insurance company<br />
  33. 33. <ul><li>Age proof and death proof</li></ul>Certificate of birth and death<br />7 years of disappearance – (dead)<br /><ul><li>Suicide – intentional / willful act</li></ul>If there is a clause insurer can avoid payment<br />Assignee given some consideration<br /><ul><li>Payment of claim</li></ul>With proof as owner or nominee or assignee<br />