CHAPTER 1

INTRODUCTION

Every asset has a value for its owner and also for those who are benefited with the
existence of that asset. Insurance is concerned with the protection of economics value of asset

All of us interested in the creation of asset because:

 All assets have value.
 They yield income to the owner.
 They meet some other needs of the owner.
 They may provide satisfaction of some needs and also yield income of the owner.

Under the life insurance, the insurance company guarantees to pay, inconsideration
of a regular premium, a certain sum of money to the policy holder on his attaining a certain age
or to his nominee on his death, whichever is earlier. Life insurance is also known as Assurance
because sooner or later the amount of the policy must be paid.

The beginning of insurance business is traced to the city London. It started with the
marine business. Marine traders, who used to gather at Lloyd’s coffee house in London, agreed
to share losses to goods during transportation by ship.

 Assets are likely to be destroyed or made non-functional due to accidental occurrences

called perils. Asset can, therefore, be insured.
 Possibility of damage to asset caused by peril is the risk that an asset is exposed to.
 Risk means uncertainty about future loss or damage, which may or may not happens.
This refers to the losses, which may happens suddenly and unexpectedly.
 This is because of uncertainty about the risk that insurance plays a role.
 Insurance becomes relevant only if there are uncertainties of occurrence of event leading
to losses. Insurance is done against the contingency of the happening of such events.

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WHAT IS INSURANCE?
 Insurance is a contract in writing between two parties whereby one party
called insurer undertakers in exchange for a fixed sum called premium, to pay the other
party called insurer a fixed amount of money on the happening of certain event Insurance
indemnifies assets and Insurance and general insurance (Non-life insurance) But the
article focuses on the life insurance.

Insurance is a means of protection from financial loss. It is a form of risk

management primarily used to hedge against the risk of a continent, uncertain loss.

DEFINITIONS

In the words of D.S. Hansel, “Insurance accumulated contribution of all

parties participating in the scheme.”

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An entity which provides insurance is known as an insurer, insurance company,
or insurance carrier. A person or entity who buys insurance is known as an insured or
policyholder. The insurance transaction involves the insured assuming a guaranteed and known
relatively small loss in the form of payment to the insurer in exchange for the insurer’s to
promise to compensate the insured in the event of a covered loss. The loss may or may not be
financial, but it must be reducible to financial terms, and must involve something in which the
insured has an insurable interest established by ownership, possession, or pre-existing
relationship.

The insured receives a contract, called the insurance policy, which details the
conditions and circumstances under which the insured will be financially compensated.

The amount of money charged by the insurer to the insured for the coverage set
forth in the insurance policy is called the prem8ium. If the insured experiences a loss which is
potentially covered by the insurance policy, the insured submits a claim to the insurer for
processing by a claims adjust.

Life insurance is a contract for payment a sum of money to the person assumed
(or failing him/her, to the person entitled to receive the same) on the happening of the event
insured against. Usually the contract provides for the payment of and amount on the date of
maturity or specified dates at periodic intervals or on unfortunate depth, if it occurs earlier.
Among the other things the contract also provides for the pay6ment of premium periodically, to
the corporation by the assured. Life insurance is universally acknowledged to be an institution,
which eliminates ‘Risk ‘, substituting certainty for uncertainty and comes to the timely aid of the
family in the unfortunate event of the death or of total permanent disability of the breadwinner.

Broadly speaking, life insurance can be further categorized as a pure risk

coverage plan – purely insurance and the other, which is a combination of insurance and
investment component.

Different types of Life Insurance Policies in India

1. Term plan – Pure risk cover
2. United linked insurance plan (ULIP) – Insurance + Investment Opportunity
3. Endowment plan – Insurance + Savings
4. Money Back – Periodic Returns with insurance cover

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5. Whole Life Insurance – Life coverage to the life assured for whole life
6. Child’s Plan – For fulfilling your child’s life goals like education, marriage, etc.
7. Retirement Plan – Plan your retirement and retire gracefully
1. Term life Insurance
Term insurance is the simplest form of life insurance plan. Easy to understand and
affordable to buy.

A term plan provides death risk cover for a specified period. In case the life assured
passes away during the policy period, the life insurance company pays the death benefit
to the nominee. It is a pure risk cover plan that offers high coverage at low premiums.

There’s an option to add riders to widen up the coverage.

The death benefit is payable as lump sum, monthly payouts, or a combination of both.

There’s no payout if the life assured outlives the policy term. However, these days there
are companies offering Term Plans with Return of Premiums (TROPS), where insurance
companies payback all the paid premium amount in case the life assured outlives the term
period. But, such plans are costlier than the vanilla term insurance plan.

Benefit of Term Plan: In case of an untimely death of the breadwinner, family is

supported with an enormous amount of money – sum assured, which helps them to
replace the loss of the income caused due to the breadwinner’s death. Moreover, the
money could be utilized to pay off loan, monthly household expenses, child’s education,
child’s marriage, etc.

2. Unit linked plans (ULIPs)

A unit linked plan is a comprehensive combination of insurance and investment. The
premium paid towards ULIP is partly used as a risk cover (insurance) and partly is
invested in funds. One can invest in different funds offered by the insurance company
depending on his risk appetite. The insurance company then invests the accumulated
amount in the capital market i.e. in bonds, equities, debts, market funds, or a hybrid
funds...
Benefit of ULIP: Invest money as per your risk appetite. You have the option to invest
either in equity, debt or in hybrid funds through the life insurance company with
complete transparency.

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3. Endowment Plans
Endowment plan is another type of life insurance plan, which is a combination of
insurance and saving.
A certain amount is kept for life cover – insurance, while the rest is invested by the life
insurance company. In an endowment plan, if the life assured outlives the policy term, the
insurance company offers him the maturity benefit. Moreover, Endowment Plans may
offer bonuses periodically, which are paid either on maturity or to the nominee under
death claim. On death, the death benefit is payable to the nominee.
Endowment plans are also commonly known as traditional life insurance, although, there
is an investment component but the risk is lower than the other investment products and
so are the returns.
Benefit of Endowment Plan: Long-term financial planning and an opportunity to earn
returns on maturity.

4. Money Back Life Insurance

Money back plan is a unique type of life insurance policy, wherein a percentage of the
sum assured is paid back to the insured on periodic intervals as survival benefit.
Money back plans are also eligible to receive the bonuses declared by the company from
time to time. This way, policyholder can meet short-term financial goals.
Benefit of Money Back Plan: Short-term financial planning and an opportunity to earn
returns on maturity.

5. Whole Life Insurance

A whole life insurance policy covers the life assured for whole life, or in some cases, up
to the age of 100 years. Unlike, term plans, which are for a specified term.
The sum assured or the coverage is decided at the time of policy purchase and is paid to
the nominee at the time of death claim of the life assured along with bonuses if any.
However, if the life assured outlives the age of 100 years, the insurance company pays
the matured endowment coverage to the life insured.
The premiums are higher as compared to term plans. Whole life insurance plans also
offer partial withdrawals after completion of premium payment term.
Benefit of Whole Life Plan: Lifelong protection to the insured and an opportunity to
leave behind a legacy for heirs.
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6. Child Plan
Child plan helps to build corpus for child’s future growth. Child plans help to build funds
for child’s education and marriage. Most of the Child Plan provides annual installments
or one time payout after the age of 18 years.
In case of an unfortunate event, the insured parent passes away during the policy term -
immediate payment is payable by the insurance company. Some child plans waive off the
future premiums on death of the life insured and the policy continues till maturity.
Benefit of Child Plan: Helps in fulfilling your child’s dream.

7. Retirement Plan
Retirement plan helps to build corpus for your retirement. Helping you to live
independently financially and without worries. Most of the child plans provide annual
installments or one time payout after the age of 60 years.
In case of an unfortunate event, life assured passes away during the policy term -
immediate payment is payable to the nominee by the insurance company. Death benefit
will be higher of coverage or fund value or 105% of premiums paid. Vesting Benefit will
be payable if the life assured survives the maturity age. In which case, payout will be
fund value which has to be utilized for buying an annuity.
Benefit of Retirement Plan: Helps in building corpus for retirement.

Insurance is one of the instruments designed to deal with risk through

sharing. In its simple aspect it is imbued with two fundamental characteristics, viz.,
transfer of risk from one group to another group, and facilities sharing o0f losses, on
some equitable basic, all members of the group. The importance of insurance is twofold:
(1) from individual’s point of view. Insurance is an economic device whereby the
individual substituted a small certain cost of a large uncertain financial loss that would
exist if it were not for the insurance, and (11) from social point of view – insurance may
be perceived to be an economic instrument that reduces eliminates risk through the
process of combining a sufficient number of homogeneous exposers into a group and
makes the losses predictable for a group as a whole.

Advantages to buying life insurance

Financial protection for your family
The most obvious advantage of life insurance is also its functional purpose. Life
insurance is essentially the exchange of a relatively small payment each month for a very
large amount of money if you die. The death benefit should be so high as to cover living
expenses such as a mortgage, your kids’ college tuition, and provide a favorable financial
cushion, and you can get all that covered for the cost of about six lattes a month.
This is especially advantageous the more your loved ones rely on your income for their
expenses. You want to make sure they don’t have to suffer financially if you die, and life
insurance is the cheapest way to do that.

Life insurance is cheap enough to fit any budget

Depending on how much coverage you need, you may be paying as little as $30 per
month in life insurance premiums. If you don’t have a lot of dependents or your
beneficiaries won’t need that much financial protection if you die, then you can easily
benefit from less coverage and even lower premiums.
That’s especially true for term life insurance, which is meant to cover you while you have
the most expenses (mortgage payments, children, business partnerships, etc.) and to
expire when you have fewer ones. During that time, if you purchased life insurance
coverage early enough, you could save hundreds of dollars each year compared to buying
coverage later in life.
In that sense, you pay only for what coverage you and your family require. Our life
insurance calculator can give you a tailored recommendation for how much coverage you
need.

Peace of mind
If you don’t die while the policy is in effect, it may seem like all those premium
payments were for nothing. But they weren’t for nothing – you were paying for
protection in the event that you die, something which could happen even this very second
if you have a family history of brain aneurysms or live in a war zone. You’re paying for
the peace of mind that comes with knowing that you can help your family from beyond
the grave in the same way you helped them while alive. You can’t put a price on that.

It’s easier than ever to apply for life insurance

Policy genius makes it easy to compare life insurance online. In just about 10 minutes,
you can get free quotes from many different life insurance carriers, and choose the one
that fits your needs from there. The days of having to meet with an agent and hear a spiel
are over.
You can even apply online. Get your documentation together and fill out the application;
you can do the whole thing during over a couple commercial breaks while you’re
watching “The Good Place.” If you need help, you can reach out to one of our experts.

Complete your financial plan

A lot of people save for their retirement: buy an asset you can sell for a profit later; invest
in an individual retirement account or a 401(k) plan; sock some money in away in an
interest-bearing savings account. You want to protect yourself financially when you reach
old age, and the best way to do that is to start saving yesterday.
Buying life insurance should be part of that financial plan. That’s because a lot of those
tactics won’t bear fruit until you’re much older. If you die before then, but you have
people who rely on you financially, your retirement accounts are not going to be of much
use to them.
Think of life insurance as a financial bridge to your retirement. If you outlive the term,
then great! – cash out the money you’ve been saving and enjoy your retirement. If you
die before then, at least your loved ones won’t suffer.

Cash-value life insurance can help you save, too

Some types of life insurance have a cash-value component that let you save for retirement
while enjoying coverage. Among the most popular is whole life insurance, which lasts
your whole life. With whole life insurance, your premiums are split to pay for a death
benefit and an interest-bearing savings account.

Over time, the cash-value component gradually replaces the death benefit until only the
cash-value component remains; if you die while the policy is in force, your beneficiaries
will receive the cash. However, if you decide you want the money while alive, you can
redeem the cash just like a traditional retirement plan. There may be fees attached, but at
least you had the peace of mind that comes with purchasing life insurance coverage.

Disadvantages to buying life insurance

Life insurance can be expensive if you’re unhealthy or old
Let’s be honest: Life insurance is most affordable if you’re young and healthy. That’s
because your premiums are determined by your medical profile, family medical history,
and age. The sicker you are and the sicker you could potentially become both increase
your risk of dying early, so in order to hedge against that risk the life insurance company
will charge you more. If you’re so unhealthy that your medical bills are already a
significant burden on your finances, life insurance might be helpful to your loved ones
but terrible for your wallet.
All things being equal, a $500,000 life insurance policy would cost approximately $20
more per month if you got it in your 40s than if you’d gotten it in your 20s. Of course,
most people earn more income as they get older than they did when they were younger,
so that extra cost may not be such a financial problem for you. And you’ll probably have
more expenses anyway, so life insurance coverage will be much more necessary.

Whole life insurance is expensive no matter what age you get it

Term life insurance is a great deal. Unless you’re older or sick, you’ll probably pay less
than $50 per month for coverage. But whole life insurance is much more expensive, often
clocking in at hundreds of dollars per month. For the vast majority of Americans, that’s
simply too much money, even if you do get coverage out of it. A solid 45% of people
cancel their whole life insurance policy within 10 years.
Whole life insurance is so much more expensive because it lasts your whole life; you’re
guaranteed to die while it’s in effect as long as you’ve been paying your premiums, so
unlike term insurance your risk level is not a matter of if you die but when. But most
people don’t need as much life insurance after they retire, when they don’t have any
dependents, their home is paid for, and they don’t have any outstanding loans. That
means the extra years you spend paying whole life insurance premiums past retirement
age don’t return as much bang for your buck.

The cash-value component is a weak investment vehicle

The cash-value component of whole life insurance is a great way to force yourself to save
money for retirement while providing life insurance coverage in the event that you
become deceased. But the rate of return is lower on average than simply investing the
money in an IRA, and the fees involved in redeeming the cash – called surrendering the
policy – make it less than ideal.
You’ll probably come out ahead financially if you just stick to term life insurance and
invest your extra cash in a traditional retirement account or increase your 401(k)
contributions.

It’s easy to be misled if you’re not well informed

Luckily, Policy genius is here to help you navigate the complex world of life insurance.
But if not for us, you could easily be sold a policy by a less-than-scrupulous life
insurance agent for more coverage than you need.

INTRODUCTION TO BIRLA SUN LIFE INSURANCE

COMPANY
Aditya Birla Sun Life Insurance Company Limited (ABSLI), is a subsidiary
of Aditya Birla Capital Ltd (ABCL). is one of the leading private sector life insurance
companies in India. ABSLI was incorporated on August 4th, 2000 and commenced
operations on January 17th, 2001. ABSLI is ABSLI is a 51:49 a joint venture between the
Aditya Birla Group and Sun Life Financial Inc., a leading international financial services
organization in Canada.
Formerly known as Birla Sun Life Insurance Company Limited, ABSLI is
one of India's leading life insurance companies offering a range of products across the
customer's life cycle, including children future plans, wealth protection plans, retirement
and pension solutions, health plans, traditional term plans and Unit Linked Insurance
Plans ("ULIPs").
As of December 31st, 2018, total AUM of ABSLI stood at Rs. 389,548
million. ABSLI recorded a gross premium income of Rs. 18,599 million in Q3 FY 2018-
19 and registering a y-o-y growth of 68% in Individual First Year Premium and currently
ranked 7th in Individual Business (Individual FYP adjusted for 10% single premium).

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ABSLI has a nation-wide distribution presence through 425 branches, 9
bancassurance partners, 6 distribution channels, over 83,000 direct selling agents, other
Corporate Agents and Brokers and through its website. The company has over 10,000
employees and more than 16 lac active customers.

INTRODUCTION TO RELIANCE LIFE INSURANCE

COMPANY

Few men in history have made as dramatic a contribution to their country’s

economic fortunes as did the founder of Reliance, Shri. Dhirubhai H Ambani. Fewer still
have left behind a legacy that is more enduring and timeless. As with all great pioneers,
there is more than one unique way of describing the true genius of Dhirubhai. The
corporate visionary, the unmatched strategist, the proud patriot, the leader of men, the
architect of India’s capital markets, the champion of shareholder interest. But the role
Dhirubhai cherished most was perhaps that of India’s greatest wealth creator. In one
lifetime, he built, starting from the proverbial scratch, India’s largest private sector
enterprise.
Reliance Life Insurance offers you products that fulfill your savings and protection needs.
Our aim is to emerge as a transnational Life Insurer of global scale and standard.
Reliance Life Insurance is a Reliance Capital Company and is part of Reliance Group.
Reliance Capital is one of India’s leading private sector financial services companies, and
ranks among the top 3 private sector financial services and banking companies, in terms
of net worth. Reliance Capital has interests in asset management and mutual funds, stock
broking, life and general insurance, proprietary investments, private equity and other
activities in financial services.
Reliance Group also has presence in Communications, Energy, Natural Resources,
Media, Entertainment, Healthcare and Infrastructure.

Reliance Nippon Life Insurance Company is amongst the leading private

sector life insurance companies in India in terms of individual WRP (weighted received
premium) and new business WRP. The company is one of the largest non-bank supported
private life insurers with over 10 million policyholders, a strong distribution network of
over 700 branches and more than 65,000 advisors as on March 31, 2018. The company
holds Claim Settlement Ratio of 95.17% as on March 31, 2018.

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Rated amongst the Top 3 Most Trusted Life Insurance Service Brands by Brand Equity’s
Most Trusted Brands. Survey 2018, the company’s vision is “to be a company people are
proud of, trust in and grow with; providing financial independence to every life we
touch.” With this in mind, Reliance Nippon Life caters to five distinct segments, namely
Protection, Child, Retirement, Saving & Investment, and Health; for individuals as well
as Groups/Corporate entities.
Reliance Nippon Life Insurance Company is a part of Reliance Capital,
one of India's leading private sector financial services companies, which ranks among the
top private sector financial services and non-banking companies, in terms of net worth.
Reliance Capital has interests in asset management and mutual funds, stock broking, life
& general insurance, proprietary investments, private equity and other activities in
financial services. In FY'16, post the enabling regulations, Nippon Life increased its
stake in Reliance Life from 26% to 49%, subsequent to the receipt of all regulatory
approval. Nippon Life Insurance, also called Nissay, with 20.5% market share is Japan's
largest private life insurer with revenues of Rs. 4,12,809 crore (US$ 65 Billion) and
profits of over Rs. 29,849 crores (US$ 4.7 billion) as of Mar 31, 2017. The Company,
with over 31 million policies in Japan, offers a wide range of products, including
individual and group life and annuity policies through various distribution channels and
mainly uses face-to-face sales channel for its traditional insurance products. The
company primarily operates in Japan, North America, Europe and Asia and is
headquartered in Osaka, Japan. It is ranked 111th among the global Fortune 500 firms in
2017.

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CHAPTER 2
REVIEW OF LITERATURE