introduction to life insurance v 1.2 jan 10
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Types of Life Insurance Plans
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Types Of Insurance Plans
The Three Types Of Plans Popular in India are:
Term Plan
Endowment Plan
Annuities
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Term Plan
In Term Plan, Claim is payable if death occurs during the
term of the policy
In simple words, in Term plans claim is payable only ondeath- no Maturity Claims, only Death Claims
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Endowment Plan
In Endowment Plans, Claim is payable on death or at maturity,whichever comes first
In simple words, in Endowment plans either Maturity ORDeath claim is payable
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Contract under which insurer makes series of periodic payments
in exchange for annuity consideration
Annuity Contract
Insurer
Annuity Benefit Payments
Periodic Payments
Premiums
Insured
Annuities
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Vesting Age
Accumulation Period
Annuity Period
Corpus
Purchase Price Commuted Value
2/3 Of Corpus 1/3 Of Corpus
Taxable
Tax Benefits
Under 80ccc
Tax Free
Annuities
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Deferred Annuity
PurchaseDate
Deferrment period
Period between purchase
and beginning of benefit
payments
Payout Period
Period during which insurer
makes benefit payments
Vesting AgePremiums/Consideration Annuity payments
Builds Up Phase
Withdrawal Phase
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Immediate Annuity
Immediate AnnuityBenefit payments begin one annuity
period after purchasePurchase Date 2001 2002 Payments Begin
Purchase price
in Lump sum
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Riders
Riders are extra benefit available at very low cost.
Riders are of Two Types:
Accelerated Riders
Standalone Riders
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Constituents of Premium
Premium: M + I + C + E
Where M = Mortality
I = Investment ( Interest or Saving)
C = Contingency
E = Expenses
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Mortality
Mortality is the possibility of Death.
Mortality Depends upon:
Age
Gender
Health
Family History
Living conditions
Habits & hobbies
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Expenses Or Charges
Charges are the expenses that a company deduct from thepremium for the issuance of the policy
Charges vary from policy to policy
Charges include distribution cost, servicing cost, and fundmanagement cost
Charges will NOT be known in case of traditional policies- Nottransparent
ULIP policies are transparent- Charges are made known
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Various Charges in ULIP
Allocation Charge: Charges deducted at the issuance of the policy.Basically covers the distribution cost of the product.
Fund Management Charge: Charge levied to compensate theexpenses involved in managing the funds including fund managersfees.
Mortality Charge: Expense deducted towards cost of insurance.
Administration Charges: Expenses deducted for policy servicing
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Investment
Investment = Premium charges
Investment is made in various funds which a company offers
Funds is a combination of Debt and equities
Different products have different fund options where theproportion of debt and equity varies
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Contingency
A very small portion of the premium goes towardscontingency fund
This is to meet any unforeseen expenses or any
extraordinary situations
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Ombudsman
Ombudsman are arbitrators appointed to resolve complaints in respectof disputes between policy holders and Insurers
It is not a judicial authority
An ombudsman can arbitrate cases up to Rs.20 lakh SA.
A complaint can be made within 1 year after the insurer has rejectedthe representation
Ombudsman is expected to make a recommendation within one monthfrom the receipt of the complaint
If the complainant accepts this recommendation, the insurer has tocomply within 15 days and inform the Ombudsman accordingly
An Ombudsman has to pass an award within 3 months
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Nomination
Nomination is the easy way to ensure payment of death claim
Section 39 of Insurance Act 1938 states that a policy holder can nominate a
person or persons to whom the money secured by the policy shall be paid inthe event of death
A nomination only gives the nominee a right to receive the death claim on
behalf of all the heirs of the deceased
In case of a minor Nominee, an Appointee is essential to discharge the claim
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Assignment
Assignment is governed by Section 38 of insurance Act of1938
Assignment is process by which the policy holder can transfer the rights,title
and interest of a policy to another individual subject to condition
Assignment is an endorsement on the policy or can be effected through a
separate deed
The policy may be reassigned by the assignee at a later date whereby the
rights, title and interest would be transferred back to the original holder of thepolicy
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Assignment
Assignment can be made on account of:
-Love and affection amongst family members.
-Out of financial consideration with any one.
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Assignment
Assignment are of two type:
-Absolute assignment
- Conditional Assignment.
Absolute Assignment: Under this assignment the policy once assignedcannot be reverted back.
Conditional Assignment:Under this assignment the policy once assignedreverts back once the condition gets fulfilled. (eg: Assignment to cover loan
amount)
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Thank You
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