Insurance Shivani V1.1

8/9/2019 Insurance Shivani V1.1

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Insurance


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Defining Insurance

Insurance in broad terms may be described as a methodof sharing financial losses of few from a common

.fund who are equally exposed to the same loss Insurance is defined as the equitable transfer of the

, ,risk of a loss from one entity to another in,exchange for a premium and can be thought of a,guaranteed small loss to prevent a large possibly

.devastating loss An insurer .is a company selling the insurance The

insurance rate is a factor used to determine the

,amount called the premium, to be charged for a.certain amount of insurance coverage


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Concept of risk


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assive risk with high magnitude

ay to day risk of lesser magnitude


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Defining Risk

A variation in the possible outcome The degree of uncertainty associated with a particular

loss

Greater the accuracy with which the outcome can be

.predicted the lower is the risk Risk is the possibility of an unfortunate occurrence Risk is the possibility of loss The combination of hazards Uncertainty of loss The tendency that actual results may differ from

predicted results


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Basic terminology

eril : . . . ,Cause of a risk and losses E g Earthquake, , .flood fire criminal activities etc


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Basic terminology

:azard Condition that increases the frequency or. . .severity of loss E g absence of proper security or

, .fencing poorly maintained fire alarm system etc


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Basic terminology

:oral Hazard It refers to the dishonesty of theinsured person leading to increase probability of

. . .loss from given risk exposure E g setting fire to.your own house

:orale Hazard This refers to attitude ofindifference to losses that results out of a known.fact that the said losses were insured

:atastrophic loss It is a potential loss that is,unpredictable such as flood but is capable of

producing an extra ordinary large amount of damage

.related to assets held in insurance pool These aregenerally natural disasters like earthquake flood.etc


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Types of risk

:R isk ca n b e ca te g o rized u n d e r d iffe re n t h e a d s su ch a s &S ta tic d yn a m ic risk

& -Financial non financial risk &Pure speculative risk &Fundamental particular risk

&Business personal risk


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Static & Dynamic risk

tatic risk Static risk is a result of

. . ,human mistakes Ex flood.fire etc

Static risk causes loss to.assets It may or may not occur

due to economical.environment

It does not benefit the

.society as such .Static risk can be covered

ynamic risk Dynamic risk is due to

.economic environment ,In dynamic risk loss is

.not certain There may be.gain also .It benefits the society Dynamic risk cannot be

.covered


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Financial & Non-financialrisk

inancialrisk

It is a risk that can

be measured in monetary.terms . .. ,E g machinery breakdown

a company may not haveadequate cash flow to

meet financial

.obligations

-on financialrisk It cannot be measured

.in monetary terms

. ..E g Choice of wrong,career emotional loss

.etc


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Pure & Speculative risk

ure risk Pure risk is similar to

.static risk It is a category of risk

in which loss is the;only possible outcomethere is no beneficial

.result It is further classified

:as.1 Property risk.2 Personal risk.3

Liability risk

. ..E g the possibility that aperson's house will bedestroyed due to a

natural disaster is a,pure risk premature.death etc

peculative risk Speculative risk is

.similar to dynamic risk It is a category of risk

, ,that when undertaken

results in an uncertain.degree of gain or loss It affects the community

.as a whole . .. .E g investing in govt

,bonds providing goods.on credit etc


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Fundamental & Particularrisk

undamental risk

It is a type of riskaffecting a large group of

.people or firms ( )It is caused by a natural

phenomenon such as, ;( )earthquake flood b

social phenomenon such as,inflation unemployment

.etc It may or may not be

.insurable

articular risk A type of risk that only

.affects individuals

It is caused due tospecific individual events- , ,such as a break in fire

.or robbery Particular risk are

.usually insurable


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Business & Personal risk

usiness risk

Probability of lossinherent in a firm's

operations and environmentthat may impair its

ability to provide returns.on investment

It is further classified:as

:Price risk The riskthat the value of asecurity or portfolio of

securities will decline in.the future

:Credit risk The risk

of loss due to a debtor's-non payment of a loan or a

ersonal risk Personal risk is a risk

borne by individuals and.families


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Requirements of InsurableRisk

S h o u ld b e a Pu re risk In vo lv e s a ch a n ce o f lo ss or n o lo ss

Large number of exposure units

to predict average loss

Accidental and unintentional loss to control moral hazard to assure randomness

Determinable and measurable loss to facilitate loss adjustment


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Requirements of InsurableRisk

N o ca ta stro p h ic lo ss to a llo w th e p o o lin g te ch n iq u e to w o rk

Probability of loss must not be very high to determine the premium need

Economically feasible premium so people can afford to buy


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Risk Management

W id e r sco p e in clu d in g b o th risk p u re a n d sp e cu la tiv e Risk manager uses insurance as one of the method to

manage risk

Cost of insurance is high so insurance is only taken upwhen all other options are exhausted


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Insurance Management

. .N a rro w sco p e lim ite d o n ly to p u re i e in su ra b le risks Insurance manager underwrites policies to cover

underlying risks

Savings are used for reducing the insurance costs

Insurance manager retains the risk


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Concept of insurance


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Basic characteristics ofinsurance

Po o lin g o f lo sses S p re a d in g lo sse s in cu rre d b y th e fe w o v e r th e

e n tire g ro u p R isk re d u ctio n b a se d o n th e La w o f Larg e

N u m b ers Pa y m e n t o f fo rtu ito u s lo sses

,In su ra n ce p a ys fo r lo sses th a t a re u n fo re se e n,u n exp ected an d occur as a result of cha n ce

R isk tra n sfe r

A p u re risk is tra n sfe rre d fro m th e in su re d to th e,in su re r w h o typ ica lly is in a stro n g e r fin a n cia lp o sitio n

In d e m n ifica tio n T h e in su re d is re sto re d to h is o r h e r a p p rox im a te

fin a n cia l p o sitio n p rio r to th e o ccu rre n ce o f th elo ss


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Example

/-S a y 1 0 0 0 m o to r ca rs v a lu e d @ 3 0 0 0 0 0 a re o b se rv e d.ove r a pe riod of five yea rs O n an ave rag e say p er

.ye a r tw o a re to tal lo ss b y a ccid e n t T h e n th e tota l. .an n u al loss w ou ld b e R s 6 00 0 0 0 If the loss is to

sha re d b y a llth e th o u sa n d o w n e rs th e n th e y h a ve to. /-co n trib u te R s 6 0 0

T h e lo ss e x p e rie n ce w ill b e e sta b lish e d b y ta kin g th e,p ast e xp erien ce g eo g rap h ical area in w h ich th e

.ve h icle s a re u se d a n d d e n sity o f tra ffic


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Basic terms

Insurer : The party to an insurance arrangement who.undertakes to indemnify for losses

Insured: A person whose interests are protected by an.insurance policy

Premium: Financial cost of obtaining an insurance,cover paid as a lump sum or in installments during.the duration of the policy

Policy: Written contract or certificate of insurance xposure to Loss : ,In insurance areas in which the

. : ( )risk of loss exists Four loss risk areas are 1

; ( ) ; ( ) ; ( )property 2 income 3 legal vulnerability and 4key personnel in an organization


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Basic terms

ife annuity: A life annuity is a financial contractin the form of an insurance product according to

( ) which a seller issuer typically a financialinstitution such as a life insurance company makes

( )a series of future payments to a buyer annuitant inexchange for the immediate payment of a lump sum

( - )single payment annuity or a series of regular( - ),payments regular payment annuity prior to the onset

.of the annuity :omination It is the right of the policy holder on

/his her own life to designate a living person toreceive the policy proceeds in the event of him

predeceasing the nominee before the maturity of the.policy

:ominee Nominee should not be a stranger becauseits against the objective of insurance which in most

.cases is family protection


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Basic terms

Assignment: An agreement under which one party theassignor transfers some or all of his ownership

,rights in a particular property such as a life,insurance policy or an annuity contract to another

.party the assignee :ssignor A property owner who transfers some or all

of the ownership rights in a particular property to.another party by means of an assignment

:ssignee A person or party to whom a property ownertransfers some or all of the property owner's rights.in a particular property by means of an assignment


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Types of premium

-evel premium The same premium is chargedthroughout term of the policy although the risk is

.increasing with the age

iscounted premium . .e g Modal discounts and Sum.Assured discounts xtra premium . .e g For higher risks


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Level of premium

Pr

em

iu

m

Le ve lP re m iu m

R iskPre m iu m

( .)A g e y rs


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Insurance documents

:roposal form .Standardized application form , , .Own handwriting Signed in presence of a witness

:irst premium receipt .Only if FPR is their along with apps Risk can be

.assumed

:olicy contract .Policy document is an evidence of contract


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Proposals and other forms

Pro sp e cts to g e t th e ir life in su re d n e e d s to fillu p ap ro p o sal fo rm w h ich is m a d e a va ila b le th ro u g h th e

a g e n t a n d is p rin te d b y th e in su re r

:The different forms available are For insuring self and others For annuities and pension type policies


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Proposals and other forms

:In fo rm a tio n a ske d in a fo rmN a m e D a te o f b irthAddress O ccu p a tion of th e p ro p o se rP la n Te rm d e sire d M o d e o f p re m iu m p a y m e n t , .N o m in e e e tc


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IRDA

T h e In su ra n ce R e g u la to ry a n d D e ve lo p m e n t A u th o rity( )IRDA is a

,n ation al ag en cy o f th e G ov ern m e n t of In d ia b ased in.H yd e rab ad It

w as fo rm e d b y a n a ct o f In d ia n Pa rlia m e n t kn o w n a s,IR D A A ct 1 9 9 9

w hich w as a m e n d e d in 2 0 0 2 to in corp o ra te som ee m e rg in g

.re q u ire m e n ts

Mission" ,to protect the interests of the policyholders to

,regulate promote and ensure orderly growth of the insurance industry and

for matters "


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Benefits of insurance to anindividual

Pea ce of m in d A ve rsio n o f risk Pro te cts m o rtg a g e d p ro p e rtie s

Pro vid e s se lf d e p e n d e n cy

Too lo f sa vin g s Too lo f in ve stm e n t S a tisfie s va rio u s n e e d s


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Benefits of insurance tobusiness

R e d u ce d re serve re q u ire m e n ts C a p ita lfre e d fo r in v e stm e n tIn d e m n ifica tio n

R e d u ctio n o f u n ce rta in ty R ed u ced cost of cap ita l R e d u ce d cre d it risk Lo ss co n tro la ctivitie s B u sin e ss a n d so cia l sta b ility


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Benefits of insurance tosociety

Pro te cts w e a lth o f th e co u n try

Helps in economic growth

Control inflation


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Economics of insurance

S h a rin g risk D e v ice o f co o p e ra tio n Pa ym e n t in co n tin g e n cy

R isk va lu a tio n Pa y m e n t o f C la im Law of larg e n u m b ers Prin cip le o f p ro b a b ility


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Cost of insurance

O p e ra tin g E xp e n se D istrib u tio n co st U n d e rw ritin g co st

Po licy A d m in istra tio n C o st Reserve cost M o ra l H a za rd re su ltin g in e x tra co st Exaggerated Losses -B e n e fit co st Tra d e o ff


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Principles of insurance

.1 In su rab ility

.2

.3 Legal

.4.5 Indemnification


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Insurability R isk w h ich ca n b e in su re d b y p riv a te co m p a n ie s

ty p ica lly sh a reseven .common characteristics.1 .Large number of similar exposure units

.2 .Definite Loss

.3 .Accidental Loss

.4 .Large Loss

.5 .Affordable Premium

.6 .Calculable Loss

.7 .Limited risk of catastrophically large losses


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Legal , W h e n a co m p a n y in su re s an in d iv id u a le n tity th e re a re

b a sic .le g a lre q u ire m e n ts S e v e ra lco m m o n ly cite d le g a l

p rin cip le s o f

:.In su ra n ce in clu d e.1 In d e m n ity

.2 In su ra b le in te re st

.3 U tm o st g o o d fa ith

.4 C o n trib u tio n

.5 S u b ro g a tio n

.6 C a u sa Prox im a o r Prox im a te C a u se


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Indemnification

" " ,To in d em n ify m ea n s to m ake w h ole a g ain or to b e p u tin th e

, ,p o sitio n th a t o n e w as in to th e e x te n t p o ssib le p rio r toth e

. ,h a p p e n in g o f a sp e cifie d e ve n t o r p e ril A cco rd in g ly life in su ra n ce is g e n e ra lly n o t co n sid e re d to b e in d e m n ity , " " ( . .,in su ra n c e b u t ra th e r co n tin g e n t in su ra n c e i e a

cla im ).a rises o n th e o ccu rre n ce o f a sp e cifie d e ve n t T h e re a re g e n e ra lly wo types of insurance contracts

that seek :to indemnify an insured.1 " "an indemnity policy and.2 " " " .a pay on behalf or on behalf of policy

.3


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Principles of insurancecontract

ssentials of ContractDefinition: It is an agreement between two or more

&parties to do or to abstain from doing an actwhich is intended to create a legally binding

.relationship

:ssentials Intention to create legal relationship Offer and acceptanceConsideration Capacity to contract Certainty of terms

Consensus as idem Legality of purpose Possibility of performance


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Principles of insurancecontract

tmost Good Faith Uberrima FidesDefinition: ,A positive duty voluntarily to disclose

& ,accurately fully ,all facts material to the risk being proposed whether

requested or .not :The breach of duty may be of two types Misrepresentation either innocent or fraudulent - Non disclosure either innocent or fraudulentInsurable Interest

Legal right to insure arising out of financialrelationship recognized , &under law between the insured the subject matter of

.insuranceEssentials , , , .Some property life limb potential liability etc

capable of being insured


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Which must be subject matter of insurance & The relationship of subject matter insured

recognized by law &Insured must benefit from safety of subject matter

.prejudices by its loss ubject matter is in fact the name given to the

,financial interest

.which the insured has in the subject matter

Indemnity A financial compensation sufficient to place the

insured in the same financial position after a loss as he was before the.lossProximate clause The active efficient cause that sets in motion a train

of events which ,bring about a result without intervention of any force

&started & .working actively from a new independent source


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Insurers business model T h e b u sin e ss m o d e l ca n b e re d u ce d to a sim p le

:e q u a tio n = + -Pro fit e a rn e d p re m iu m in v estm e n t in co m e

in cu rre d lo ss

u n d e rw ritin g e xp e n se s

:There are two types of business model used by insurer.1 &Underwriting Investing.2 Claims

.3

.4


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Underwriting

In s u ra n ce u n d e rw rite rs e v a lu a te th e risk a n d.e x p o su re s of p o te n tia l clie n ts

,D e cid e s h o w m u ch cov e ra g e th e clie n t sho u ld re ce ive,h ow m u ch th ey sh ou ld p ay for it or w he th er ev e n to.a cce p t th e risk a n d in su re th e m

U n d e rw ritin g in v o lv e s m e a su rin g risk e xp o su re a n dd e te rm in in g th e p re m iu m th at n e e d s to b e ch a rg e d

.to in su re th a t risk T h e fu n ctio n o f th e u n d e rw rite r is to a cq u ire o r to

" "write business that will make the insurance

,com p an y m on ey an d to p rotect th e com p an y's b oo k

.o f b u sin e ss fro m risks th a t th e y fe e l w ill m a ke a lo ss ,In sim p le te rm s it is th e p ro ce ss o f issu in g in su ra n ce

.p o licie s

.1

.2


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Investing

In su re rs m a ke m o n e y b y in v e stin g the premiums.th e y co lle ct fro m in su re d p a rtie s

In su ra n ce co m p a n ie s e a rn in v e stm e n t p ro fits o n . float Float or available reserve isthe amount

, ,o f m o n e y a t h a n d a t a n y g iv e n m o m e n t th a t a nin su re r h a s co lle cte d in in su ra n ce p re m iu m s b u t

.h a s n o t p a id o u t in cla im s In su re rs sta rt in ve stin g in su ra n ce p re m iu m s a s so o n

a s th e y a re co lle cte d a n d co n tin u e to e a rn in te re st.o r o th e r in co m e o n th e m u n til cla im s are p a id o u t


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Claims A fo rm a lre q u e st to a n in sura n ce co m p a n y a skin g fo r a p ay m en t b ased on th e term s of th e in su ran ce

.p o licy In su ra n ce cla im s a re re vie w e d b y th e co m p a n y fo r th e ir va lid ity

an d th en (p a id o u t to th e in su re d o r re q u e stin g p a rty o n b e h a lf o f

th e ) .in su red on ce ap p rove d


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Types of insurance

A u to in su ra n ce H o m e in sura n ceH e a lth

,A ccid e n t sickn e ss an d u n e m p lo ym e n t in su ra n ceC a su a ltyLife

Pro p e rty

Lia b ility

C re d it O th e r typ e s In su ra n ce fu n d in g v e h icle s -C lo se d co m m u n ity se lf in su ra n ce


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Auto insurance

A u to in su ra n ce p ro te cts y o u a g a in st fin a n cia llo ss if y o uh a v e

.a n a ccid e n t It is a co n tra ct b e tw e e n th e in su re d a n d th e .in su ra n ce com p a n y Larg e n u m b e r of sim ila r ex p osu re

.u n its ,A u to in su ra n ce p ro v id e s p ro p e rty lia b ility a n d m e d ica l :coverage

.1 Pro p e rty co ve ra g e p a ys fo r d a m a g e to o r th e ft o f th e.ca r

.2 Lia b ility co ve ra g e p a y s fo r th e le g a lre sp o n sib ility to.o th e rs fo r b o d ily in ju ry o r p ro p e rty d a m a g e

.3 ,M e d ica lco v e ra g e p a y s fo r th e co st o f tre a tin g in ju rie sre h a b ilita tio n a n d so m e tim e s lo st w a g e s a n d

fu n e ral ex p en ses


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Home insurance H o m e in su ran ce p rov id e s com p e n sa tion fo r d a m a g e o r .d e stru ctio n o f a h o m e fro m d isaste rs In som e

g e o g ra p h ical ,a re a s th e sta n d a rd in su ra n ce s ex clu d e ce rta in typ e s of , ,d isaste rs su ch a s flo o d a n d e a rth q u a ke s th a t re q u ire .a d d itio n a lco v e ra g e


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Health insurance

H e a lth in su ra n ce in a n a rro w sen se w ou ld b e a nin d ivid u a l o r

g rou p p u rch asin g h e alth care cov e ra g e in a d va n ce b yp a yin g a

.fe e c a lle d p re m iu m T h e h e a lth in su ra n ce m a rke t inIn d ia is % .ve ry lim ite d co ve rin g a b o u t 1 0 o f th e to ta lp o p u la tio n

T h e :ex istin g sch e m e s can b e ca te g o rized a s

.1 - -V o lu n ta ry h e a lth in su ra n ce sch e m e s o r p riv a te fo r;p ro fit sch e m e s

.2 - ;E m p loye r b ased sche m es

.3 /In sura n ce o ffe re d b y N G O s co m m u n ity b a sed h e a lth,in su ran ce an d

.4 M an d atory h e a lth in su ra n ce sch e m e s or g o ve rn m e n t( , ).ru n sche m es n am ely E S IS C G H S


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Accident, sickness &unemployment

D isa b ility in su ra n ce

Disability overhead insurance

Total permanent disability insurance

Worker s compensation insurance


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Casualty insurance

Crime insurance

Political risk insurance


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Life insurance Life in su ra n ce p ro vid e s a m o n e ta ry b e n e fit to a

d e ce d e n t's ,fa m ily o r o th e r d e sig n a te d b e n e ficia ry a n d m a y

sp e cifica lly

, ,p ro v id e fo r in co m e to a n in su re d p e rso n 's fa m ily b u ria l .fu n e ra la n d o th e r fin a le xp e n se s Life in su ra n ce p o licie s

o fte n a llo w th e o p tio n o f h a vin g th e p ro ce e d s p a id to th e

b e n e ficia ry

.e ith e r in a lu m p su m cash p a ym e n t o r a n an n u ity


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Property insurance Property insurance provides protection against risks to

, ,property such as fire .theft or weather damage This includes specialized forms of

insurance such :as Automobile insurance

Driving school insurance Aviation insurance Boiler insurance Builder s risk insurance Crop insurance Earthquake insurance

Fidelity bond Home insurance Landlord insurance Marine insurance Surety bond Terrorism insurance Volcano insurance


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Liability insurance

Lia b ility in su ra n ce is a v e ry b ro a d su p e rse t th a t co ve rsle g a l

.cla im s a g a in st th e in su re d M a n y typ e s o f in su ra n cein clu d e a n

.a sp e ct o f lia b ility co v e ra g e Pu b lic lia b ility in su ra n ce &D ire cto rs o ffice rs lia b ility in su ra n ce E n v iro n m e n ta l lia b ility in su ra n ce &E rro rs o m issio n s in su ra n ce Prize in d e m n ity in su ra n ce Pro fe ssio n a l lia b ility in su ra n ce


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Other types insurance

-All risk insurance Collateral protection insurance Defense Base Act insurance Expatriate insurance

&Financial loss insurance business interruption

insurance Kidnap and ransom insurance Legal expenses insurance Locked funds insurance Media insurance Nuclear incident insurance Pet insurance Pollution insurance Purchase insurance Title insurance Travel insurance


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Insuring financing vehicles

Fra te rn a lin su ra n ce -N o fa u lt in su ra n ce -Pro te cte d se lf in su ra n ce

R e tro sp e ctive ly R a te d in su ra n ce

S e lf in su ra n ceR e in sura n ce

S o cia lin su ra n ce N a tio n a lin su ra n ce

S o cia lse cu rity


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Closed community self-insurance

S o m e co m m u n itie s p re fe r to cre a te virtu a l in sura n cea m o n g st

th e m se lv e s b y o th e r m e a n s th a n c o n tra c tu a l risk,tra n sfe r

.w h ich a ssig n s ex p licit n u m e rical va lu e s to risk An u m b e r o f re lig io u s g ro u p s d e p e n d o n su p p o rt p ro vid e d b y th e ir .C o m m u n itie s w h e n d isaste rs strike T h e risk p re se n te d

b y a n y

g ive n p e rson is a ssu m e d co lle ctive ly b y th e co m m u n ity

w h o a ll b e a r th e co st o f re b u ild in g lo st p ro p e rty a n d su p p o rtin g p e o p le w h o se n e e d s a re su d d e n ly g re a te r a fte r a loss o f

som e .kin d


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Types of insurance policies

In su ra n ce p ro vid e s co m p e n satio n to a p e rson fo r a n , .a n ticip a te d lo ss to h is life b u sin e ss o r a n a sse t

In su ra n ce is B ro a d ly cla ssifie d in to tw o p a rts co ve rin g d iffe re n t typ e s

o f :risks

.1 - ( )Lo n g te rm Life In su ra n ce

.2 ( - )G e n e ra l In su ra n ce N o n life In su ra n ce


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Long-term insurance Lo n g te rm in su ra n ce is so ca lle d b e ca u se it is m e a n t fo r

-a lo n g te rm -p e rio d w h ich m a y stre tch to se ve ra l ye a rs o r w h o le life

tim e o f th e

. -in su re d Lo n g te rm in su ra n ce co v e rs a ll life in su ra n ce.p o licie s


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General insurance - ,A lso kn o w n a s n o n life in su ra n ce g e n e ra l in su ra n ce is

n o rm a lly - .m e a n t fo r sh o rt te rm p e rio d o f tw elv e m o n th s o r le ss

G en eral

:in su ra n ce ca n b e cla ssifie d a s fo llo w s


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Fire

insurance

Fire insurance provides protection against damage to,property caused by accidents due to fire lightening or

,explosion whereby the explosion is caused by boilers not.being used for industrial purposes

arineinsurance ,arine insurance basically covers three risk areas, , .amely hull cargo and freight The risks whichhese areas are exposed to are collectively known" ". ,s Perils of the Sea These perils include theft, .ire collision etc:arine Cargo Marine cargo policy providesrotection to the goods loaded on a ship againstll perils between the departure and arrival.arehouse :arine Hull Marine hull policy provides protectiongainst damage to ship caused due to the perils of. -he sea Marine hull policy covers three fourth of( )he liability of the hull owner ship owner.gainst loss due to collisions at sea

Miscellaneous,s per the Insurance Act all types of generalnsurance other than fire and marine insurance are.overed under miscellaneous insurance Some of the,xamples of general insurance are motor insurance, ,heft insurance health insurance personal accident, ,nsurance money insurance engineering insurance.tc


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Concept of life insurance


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Defining Life Insurance

Life insurance or life assurance is a contract betweenthe policy

,owner and the insurer where the insurer agrees to pay adesignated

beneficiary a sum of money upon the occurrence of the

insured ,individual's or individuals' death or other event such

as terminal .illness or critical illness


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Insured Events

To be a life policy the insured event must be based uponthe lives of

.the people named in the policy

n su re d e v e nt s :that may be covered include Serious illness Protection policies Investment policies


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.1

.2


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Types of life insurance

.1 Term Insurance

.2 Permanent Life Insurance


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Term Insurance

Provides life insurance coverage for a specified term.of years in exchange for a specified premium

.Does not accumulate cash value .Considered as pure insurance

hree key factors :to be considered in term insurance.1 ( ),Face amount protection or death benefit.2 ( ),Premium to be paid cost to the insured and.3 ( ).Length of coverage term

.4


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Permanent life insurance Permanent life insurance is life insurance that remains

( -in force in ) ( ),line until the policy matures pays out unless the

owner fails to pay (the premium when due the policy expires OR policies

).lapse

The four basic types :of permanent insurance are.1 Whole life coverage.2 Universal life coverage

.3 -Limited pay

.4 Endowments

.5 Accidental death


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Whole life coverage

, ( Whole Life Insurance or Whole of Life Assurance in the ),Commonwealth is a life insurance policy that remains in

force for ( )the insured's whole life and requires in most cases

premiums to be .paid every year into the policy


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Universal life Coverage

( )Universal life insurance UL is a relatively newinsurance product

intended to provide permanent insurance coverage withgreater

flexibility in premium payment and the potential for ahigher

.internal rate of return


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Limited-pay

- ,In Limited pay life insurance all the premiums are paidover a

specified period after which no additional premiums aredue to

.keep the policy in force Common limited pay periods-include 10

, - , - .year 20 year and paid up at age 65


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Endowments

An endowment policy is a life insurance contractdesigned to pay a

( )lump sum after a specified term on its 'maturity' or onearlier

. ,death Typical maturities are ten fifteen or twentyyears up to a

.certain age limit


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Accidental death

Accidental death is a limited life insurance that isdesigned to cover

.the insured when they pass away due to an accidentAccidents

,include anything from an injury but do not typicallycover any deaths

.resulting from health problems or suicide


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Lapsation

Lapsation of a life insurance policy is discontinuationof premium payment by the policy holder during the

,period of operation of the policy due to any reason.other than the death of the policy holder

The length of life of a lapsed policy can be defined as

the period between the month when the last premiuminstallment was paid and the month the policy was

.issued


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Lapsation criteria :und Value Fund Value is the nett value that has been transferred into fund account which is basically the net earnings of the policy .holder through investments :TP Monthly targeted premium

;Policy accounts for lapsation for different reasons the basic criteria :to announce the lapsation can be discussed as follows RITERIA 1 =MTP required Tolerance Amount MTP received Lapsation

,here

TP required = / *till date for the current year ATP 12 no of completed.months

olerance Amount = / *(total single amount flat amount no of completed+ )months 1


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Lapse & Revival :n the first 3 policy years If Policyholder does not pay any due premium within grace

, . ,period of due date his insurance cover will lapse However,the policy will continue and all charges will be deducted

except risk charges If Policyholder does not revive his cover within 3 years of

,such lapse his policy will be terminated and surrender

, , .value if any will be paid to him :fter the first 3 policy years ,If Policyholder does not pay any due premiums his policy will

go into revival mode and he must revive his policy by.paying all due premiums within 3 years If Policyholder

,does not revive his policy within this period it will be.terminated and the fund value will be paid to him

,During these 3 years his insurance cover will continue with.all charges being deducted as usual ,At the end of such revival period the Policyholder may opt to

;continue his policy in that case MNYL will continue hispolicy with full risk cover till his fund value reduces to.one ATP

, When his fund value reduces to one ATP we will terminate his.policy and pay him one ATP


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Concept of ULIP


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ULIP

( )Unit Linked Insurance Plan ULIP provides for lifeinsurance where

the policy value at any time varies according to thevalue of the

.underlying assets at the time ULIP is life insurancesolution that

provides for the benefits of protection and flexibility.in investment

The investment is denoted as units and is represented bythe value

( ).that it has attained called as Net Asset Value NAV


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Basic terminologies

Fund ( . .Is a pool of assets i e comprising debt and

)equity securities invested in by fund managerof the life insurance company

Normally life insurance companies offer multipleinvestment funds for policyholders to invest

their premiums in Unit

Represents a proportion of the portfolio of thefund

Charges

The expenses deducted by life insurer from thepolicy value to provide the life insurance,cover to the life insured as well as to

maintain the investments Monthiversary

A fixed date in every month when the charges arerecovered


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Basic terminologies

( )AV Net Asset Value Market value of securities = -----------------------------------NAV

Number of units issued ccount Value

Value of units in the policy Equal to Number of Units multiplied by NAV

( )um At Risk SAR

Means the net amount of risk borne by the

insurance company

Equal to Sum Assured minus Account Value ( )Also called Net Amount at Risk NAR


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ULIP Benefits

Death benefits

Maturity benefits


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Riders

Riders are modifications to the insurance policy addedat the same

.time the policy is issued These riders change the basicpolicy to

.provide some feature desired by the policy owner

The most important types :of riders are.1 The waiver of premium rider.2 The accidental death rider.3 The guaranteed insurability rider


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Insurance Shivani V1.1

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Transcript of Insurance Shivani V1.1