introduction to life insurance v 1.2 jan 10

7/29/2019 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

introduction to life insurance v 1.2 jan 10

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