DETAILED STUDY OF EDELWEISS TOKIO LIFE INSURANCE. A Project Submitted to University Of Mumbai for partial completion of the degree of Bachelor in Commerce (Banking and Insurance) Under the Faculty of Commerce By Patel Akshita Bhavan Under the Guidance of Prof. Adv. Khushboo. $. Wadhawan Malini Kishor Sanghvi College of Commerce And Economies Nirmaladevi Arunkumar Abuja Marg, J.V.P.D. Scheme, Vileparle (W), Mumbai-49 March 2019DETAILED STUDY OF EDELWEISS TOKIO LIFE INSURANCE. A Project Submitted to University Of Mumbai for partial completion of the degree of Bachelor in Commerce (Banking and Insurance) Under the Faculty of Commerce By Patel Akshita Bhavan Under the Guidance of Prof. Adv. Khushboo, S. Wadhawan Malini Kishor Sanghvi College of Commerce and Economics Nirmaladevi Arunkumar Ahuja Marg, J.V.P.D. Scheme, Vileparle (W), Mumbai-49 March 2019INDEX Serial No. | Topic Page No. 1 Introduction 1 TT | What is Insurance? 1 1.2 | Principles of Insurance 1 4 1.4 | Functions of Insurance 6 1,5 | Socio-Economic significance of Insurance @ 1.6 | What is Life Insurance? 8 1.7 | India and Life Insurance 9 1.8 | Insurance Policy 10 1.9 | History of Insurance Policy 16 1.10 | Insurance vs. Assurance 7 1.11 | Different types of Life Insurance Policies 7 1.12 | How Life Insurance works 2 1.13 | Benefits of Life Insurance 22 1.14 | Claim Settlement Process 23 1.15 | Life Insurance Corporation Act, 1956 23 1.16 | Points to consider for Life Insurance 24 1.17 | Life Insurance companies in India 28 1.18 | Life Insurance companies brief detail 26 1.19 | Taxation ~ India 26 1.20 | Criticism 27 1.21 | Edelweiss Tokio Life Insurance 32 1,22 | Edelweiss Tokio Life Insurance Plans 32 1.23 | Importance of Edelweiss Tokio Life 39 1.24 | FAQ's 4 1.25 | Estimate Planning benefits of life insurance 42 1.26 | Selecting your beneficiaries a 2 Research Methodology a2.1 | Introduction 4 2.2 | Research statement 44 2.3 | What is primary data? 44 2.4 | What is secondary data? 45 2.5 | Data collection 45 2.6 | Objectives of the study 45 2.7| Hypothesis 45 2.8 | Scope of study 45 2.9 | Limitations of the study 46 2.10 | Selection of the study 46 2.11 | Sample size 46 2.12 | Methods and tools used 46 3 Literature Review a7 4 Data analysis, Interpretation and Presentation ED) 3 ‘Conclusion and Suggestions 62 List of tables ad ‘Age 9 42 Gender 50 43 ‘Occupation st 44 Qualification 52 45 ‘Annual income 33 46 For which item below would you take insurance coverage for? 34 a7 ‘Are you aware of Edelweiss Tokio Life Insurance Policy? 35 48 ‘Are you aware of all the terms and conditions of the policy? 56 49 What made you choose this policy? 37 410 How would you like to pay premium? 38 411 How satisfied are you with your insurance company? 39 412, Liberalization has affected the life insurance business. 60 413 Would you recommend others to take a policy under Edelweiss o Tokio Life Insurance?List of graphs an ‘Age 49 42 Gender 50 43 Occupation 31 a4 Qualification 52 a5 ‘Annual income 53 46 For which item below would you take insurance coverage for? 34 a7 ‘Are you aware of Edelweiss Tokio Life Insurance Policy? 35 a8 ‘Are you aware of all the terms and conditions of the policy? 56 49 What made you choose th 57 410 How would you like to pay premium? 58 ain How satisfied are you with your insurance company? 59 a2 Liberalization has affected the life insurance business. 60 413 Would you recommend others to take a policy under Edelweiss 6 Tokio Life Insurance?Malini Kishor Sanghvi College of Commerce and Economics Nirmaladevi Arunkumar Ahuja Marg, J.V.P.D. Scheme, Vileparle (W) Mumbai-49 Certificate This to certify that Ms. Patel Akshita Bhavan has worked and duly completed her Project Work for the degree of Bachelor Of Commerce (Banking and Insurance) under the Faculty of Commerce in the Project Work in Banking endurance and her project is entitled, “DETAILED STUDY OF EDELWEISS TOKIO LIFE INSURANCE” under my Supervision | further certify the entire work has been done by the learner under my guidance and that no part of it has been submitted previously in any Degree or Diploma of any University. Iti her own work and facts reported by her personal findings and investigations. Name and Signature of Guiding Teacher Date of Submission:Declaration by Letter I the undersigned Ms. Patel Akshita Bhavan hereby, declares that work embodied in this project work titled “DETAILED STUDY OF EDELWEISS TOKIO LIFE INSURANCE” forms my own contribution to the research work carried out under the guidance of Prof. Adv. Khushboo. S. Wadhawan is the result of my own research work and has not been previously submitted to any other University for any other Degree/Diploma to this or any other University. ‘Whenever reference has been made to previous works of others, it has been clearly inducted as such ‘and included in the bibliography. I, here by further declare that all information of this document of this has been obtained and presented in accordance with academic rules and ethical conduct. Name and Signature of the learner Certified by ‘Name and Signature of the guiding teacher viAcknowledgement To list who all have helped me is difficult because they are so numerous and the depth is so enormous. 1 would like to acknowledge the following as being idealistic channels and fresh dimension in the completion of this project. take this opportunity to thank the University of Mumbai for giving me the chance to do this project. I would thank my Principal. Dr. (Mrs). Krushna Gandhi for providing the necessary facilities required for completion of this project. 1 take this opportunity to thank the Coordinator Prof, Adv, Khushboo, S. Wadhawan, for her moral support and guidance. I would also like to express my sincere gratitude towards my project guide Prof, Adv. Khushboo. S. Wadhawan whose guidance and care made the project successful. I would like to thank my College Library, for having provided various reference books and magazine related to my project. Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of the project especially my Parents and Peers who supported me throughout my project. vilCHAPTER 1 INTRODUCTION 1.1 What is Insurance? Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured. Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party. There are a multitude of different types of insurance policies available, and virtually any individual or business can find an insurance company willing to insure them, for a price. The most common types of personal insurance policies are auto, health, homeowners, and life Businesses require special types of insurance policies that insure against specific types of risks faced by the particular business. For example, a fast food restaurant needs a policy that covers damage or injury that occurs as a result of cooking with a deep fryer. An auto dealer is not subject to this type of risk but does require coverage for damage or injury that could occur during test drives. There are also insurance policies available for very specific needs, such as kidnap and ransom, medical malpractice, and professional liability insurance, also known as errors and omissions insurance. Insurance is also means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. ‘An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a 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 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 usually involves 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 insurer will compensate the insured. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. 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 adjuster. The insurer may hedge its own risk by taking ut reinsurance, whereby another insurance company agrees to carry some of the risk, especially if the primary insurer deems the risk too large for it to carry. Insurance is defined as,” a contract whereby one person, called the insurer, undertakes to make good for the loss of another, called the insured, on payment of a specific sum of money, called premium, to him on the happening of a specified event” Different authors have defined the term insurance differently. ‘Some of the important definitions of insurance are as follows: Prof. D.S. Hansell: “A social device providing financial compensation for the effects of misfortune, the payments being made from the accumulated contributions of all parties participating in the scheme”. Dr. W.A. Dinsdale: “Insurance is a device for the transfer of risks of individual entities to an insurer, who agree (or a consideration, to assume to a specified extent losses suffered by the insured” Prof. John H. Magee: “Insurance is a plan by which large number of people associate themselves and transfer, to the shoulders of all, risks that attach to individuals” A.H. Willett: “Insurance is a social device for making accumulations to meet uncertain losses of capital which is carried out through the transfer of risks of many individuals to one person or to a group of persons Justice Lawrence: “Insurance is a contract by which the one party, in consideration of a price paid to him adequate to the risk, becomes security to the other that he shall not suffer loss, damage, or prejudice by the happening of the perils specified to certain things which may be exposed to them” Prof. Allan L. Mayerson: “Insurance is a device for the transfer to an insurer of certain risks of economic loss that would otherwise be borne by the insured”.Professor Robert Mehr: “Insurance is a special device for reducing risk by combining a sufficient number of exposure units to make their individual losses collectively predictable. The predictable loss is then shared proportionately by all those in the combination” JLB, Maclean: “Insurance is a method of spreading over large number of persons a possible financial loss too serious to be conveniently borne by an individual” Riegel R and Miller J.S.: “Insurance is a social device whereby uncertain risks of individuals may be combined in a group and thus made more certain; small periodic contributions by the individuals providing a fund out of which those who suffer losses may be reimbursed”. E.R. Hardy Iwamy: "Insurance is a contract whereby one person, called the “insurer” undertakes, in return for the agreed consideration, called the premium, to pay to another person called the assured a sum of money or its equivalent, on the happening of a specified event”. Dictionary of Business and Finance: “A form of contract or agreement under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make good for a loss, damage, or injury to something of value in which the insured has a pecuniary interest as a result ‘of some uncertain event” Dictionary of Commerce: “The payment of a sum of money by one person to another on the understanding that in specified circumstances the second person will make good any loss suffered by the first”, Advanced Learner's Dictionary: “An undertaking by a company, society or the State, to provide safeguard against loss, provision against sickness, death, etc., in return of regular payments.” In the light of the above definitions, we may, therefore, define insurance, as a cooperative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against that risk. The loss is shared willingly by contributing a small amount towards a common fund. 1.2, PRINCIPLES OF INSURANCE ‘There are two main principles of insurance: 1. Principle of co-operation -Insurance is based on the principle of cooperation. Co-operation ‘was prevailing from the very beginning up to the era of Christ. Now it is the duty of insurer to obtain adequate funds from the members of society to pay them at the happening of the insured tisk. The share of loss takes the form of premium, All the insured give a premium to join the 3scheme of insurance. In this way the insured are cooperating to share the loss of an individual by payment of a premium in advance. Insurance is pre-eminently social in nature. It represents, in the highest degree cooperation for mutual benefit. 2. Principle of probability: ‘The whole building of insurance science is based on the theory of probability, if we toss a coin we are certain that it will come head upwards or head downwards our common sense tell us that the probability of its coming up is half and of the tail coming upward is half the number of tosses. This probability increases with the number of tosses. The chances of Joss are estimated in advance to affix the amount of premium. The loss in the shape of premium can be distributed only on the basis of the theory of probability with the help of this principle the uncertainty of loss is minimized. The insurer charges only so much of amount which is adequate to meet the losses. Pooling of a large number of risks is very necessary for the successful operation of the theory of probability. The law of large numbers is a sub principle of the principle of probability. According to the law of large numbers the greater the number of exposures, the more nearly will the actual results obtained approach the probable result expected with an infinite number of exposures. 1.3. NATURE AND CHARACTRISTIC OF INSURANCE Insurance follows important characteristics — These are follows, 1) SHARING OF RISK- Insurance is a co-operative device to share the burden of risk, which may fall on happening of some unforeseen events, such as the death of head of family or on happening of marine perils or loss of by fire. 2) CO-OPERATIVE DEVICE Insurance is a co-operative form of distributing a certain risk over a group of persons who are exposed to it. A large number of persons share the losses arising from a particular risk. 3) LARGE NUMBER OF INSURED PERSONS- The success of insurance business depends on the large number of persons insured against similar risk. This will enable the insurer to spread the losses of risk among large number of persons, thus keeping the premium rate at the minimum, 4) EVALUATION OF RISK -For the purpose of ascertaining the insurance premium, the volume of risk is evaluated, which forms the basis of insurance contract. 5) AMOUNT OF PAYMENT -The amount of payment in indemnity insurance depends on the nature of losses occurred, subject to a maximum of the sum insured. In life insurance, however, a fixed ‘amount is paid on the happening of some uncertain event or on the maturity of the policy.6) PAYMENT OF HAPPENING OF SPECIFIED EVENT- On happening of specified event, the insurance company is bound to make payment to the insured. Happening of specified event is certain in life insurance, but in the case of fire, marine of accidental insurance, it is not necessary. In such cases, the insurer is not liable for payment of indemnity. 7) TRANSFER OF RISK- Insurance is a plan in which the insured transfers his risk on the insurer. This may be the reason that may arson observes, that insurance is a device to transfer some economic losses would have been borne by the insured themselves. 8) SPEADING OF RISK- Insurance large number of people. John Magee writes, “Insurance is a plan by which large number of people plan which spread the risk & losses of few people among a associates themselves and transfers to the shoulders of all, risk attached to individuals” 9) PROTECTION AGAINST RISKS- Insurance provides protection against risk involved in life, materials and property. It is a device to avoid or reduce risks, 10) INSURANCE IS NOT CHARITY- Charity pays without consideration but in the case of insurance, premium is paid by the insured to the insurer in consideration of future payment. 11) INSURANCE IS NOT A GAMBLING- Insurance is not a gambling. Gambling is illegal, which gives gain to one party and loss to other. Insurance is a valid contact to indemnity against losses. Moreover, insurable interest is present in insurance contracts it has the element of investment also. 12) A CONTRACT -Insurance is a legal contract between the insurer and insured under which the insurer promises to compensate the insured financially within the scope of insurance policy, the insured promises to pay a fixed rate of premium to the insurer. 13) SOCIAL DEVICE- Insurance is a plan of social welfare and protection of interest of the people. Rieged and Miller observe “Insurance is of social nature”. 14) BASED UPON CERTAIN PRINCIPLE: Insurance is a contract based upon certain fundamental principles of insurance, which includes utmost good faith, insurable interest, contribution, indemnity, cause proxima, subrogation etc, which are operating in the various fields of insurance. 15) REGULATION UNDER THE LAW- The government of every country enacts the law ‘governing insurance business so as to regulate, and control its activities for the interest of the people. In India General Insurance Act 1972 and the Life Insurance Act 1956 are the major enactment in this direction, 16) WIDE SCOPE- The scope insurance is much wider and extensive various types of policies have been developed in the country against risk of fire, marine, accident, theft, burglary, life, etc.17) INSTITUTIONAL SETUP- After nationalisation, the insurance business in the country is operation under statutory organization setup. In India, the General Insurance Companies and the Insurance Corporation and subsidiary companies of General Insurance Corporation are operating the various fields of insurance. 18) INSURANCE FOR PURE RISK ONLY- Pure ris profits. Examples of pure risks are accident, misfortune, death, fire, injury, etc., which are all the sided s give only losses to the insured, and no risks and the ultimate results in loss, Insurance Companies issue policies against pure risk only, not against speculative risks. Speculative risks have chances of profit of losses. 19) BASED ON MUTUAL GOODWILL. Insurance is a contract based on good faith between the parties. Therefore, both the parties are bound to disclose the important facts affecting to the contract before each other. Utmost good faith is one of the important principles of insurance. 1.4, FUNCTIONS OF INSURANCE: Following are the main functions of insurance: *The main function of insurance is to provide certainty of payment against the occurrence of sudden loss arising due to happening of uncertain event. Thus insurance removes uncertainty. The function of insurance is primarily to decrease the uncertainty of event3. sInsurance also provides protection against the probable chances of loss. The time and amount of loss are uncertain and at the happening of risk, the person will suffer loss in absence of insurance. The insurance guarantees the payment of loss and thus protects the assured from sufferings. Although insurance cannot check the happening of risk but can provide for losses at the happening of risk and thereby creates security to the insured. “Insurance involves sharing of risk which implies that insurance spreads the financial losses of insured members over the entire community by compensating the unfortunate few from the funds built up from the contribution of all members. “The insurance provides capital to the business houses and industrialists by way of lending the funds to them or making contribution to their share capital. In other words, the funds accumulated by insurance companies by Way of premiums are invested in productive channels. *The insurance minimizes the worries and miseries of losses arising due to death of insured or destruction of property. The carefree person can devote himself in a better manner towards the achievement of objectives which results in enhancing his efficiency and rapid economic growth.1,5. SOCIO-ECONOMIC SIGNIFICANCE OF INSURANCE Socio-economic benefits of insurance are incalculable. Some of its benefits are as follows: 1, Insurance policy is a suitable way for providing for the future of most of the people who find it difficult to save and accumulate funds for the evening of their lives. 2. Insurance plays an important role in the expansion and promotion of foreign trade. 3, Insurance helps in spreading education. 4, Insurance companies accumulate large funds which they held as custodians and out of which claims and losses are met a large portion of such resources are invested in various securities and social welfare purposes. 5. Confidence building and removal of fears from the minds of businessmen and individuals against sudden losses, is a job done by the insurance. 6. The spreading of the financial losses of insured members over the entire community in an equitable ‘manner by compensation of the unfortunate few from the funds built up from the contributions of all members is done by the insurance. 7. Ithelps businessman in facing the competition and in expanding the size of business units. 8. Insurance has considerable effect on the reduction of losses due to the loss-prevention measures of the insurers. 9, Insurance is an item of invisible exports and contributes significantly to the balance of trade. 10. Insurance also increases the credit of a man as money can be easily borrowed on the security of ‘goods and property insured against fire or sea perils or on the basis of a life policy. 11 Insurance takes care of some of the social problems which beset a modern civilized society. 12. Insurance accelerates the process of economic growth in various ways. By providing for events which may be anticipated, the insurance acts as a stabilizer of economic growth. 13. In the course of their business, insurance by the way of premiums collect vast sums. Especially in life business much of it can be invested profitably over long periods. This benefits the nation as a whole because insurers are required by law to invest the major portion in government securities and other approved investment, out of which nation-building activities are undertaken, 14, Income earned by investment of accumulated funds further increases the fund and goes to reduce the cost of insurance for otherwise the premiums would have to be higher to next extent. 15. Manufacturers pass on the consumer, the cost of insurance along with other production cost. Still it is beneficial to the consumers because without insurance the cost would have been much more. 16. Providing insurance service overseas is our invisible export, like export of material goods and the profit brought in is contribution to the favorable balance of trade.17. No vietim or heirs of a deceased victim of motor accidents nowadays goes without compensation from insurance funds built out of compulsory insurance of motor vehicles and this is no small benefit social relief. 1.6. WHAT IS LIFE INSURANCE? Life insurance (or life assurance) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included in the benefits. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion. Life insurance is the most popular insurance whereby the Insurance Company agrees to pay a specified sum of money to the insured, on the expiry of a certain period of time or on the death of the insured person, whichever is earlier. Thus life insurance relieves the widow, children and other dependents from the hardships of utter poverty, in case death of the bread-winner takes place. Life insurance combines two elements simultaneously element of protection and element of investment. Element of protection provides the safeguard against the risk of early death by replacing the income of the deceased. Thus, if a person dies before the policy matures for payment, Life Insurance Company undertakes to pay the assured sum to the representatives and dependents of the deceased. It, therefore, extends the hand of protection to those who are left without support and help due to the sudden and premature death of their breadwinning. Element of investment implies that the small sums paid to the insurance company by way of premium over a long period of 10 to 20 years grow into a large sum and are paid back to the policyholder after the expiry of the term. In other words, if an insured person live up to the maturity of the policy, the insurance company undertakes to replace income to him and to his dependents in the evening of one’s life, when he is unable and unfit for physical hard work. Though, the protection aspect is present in other forms of insurance like fire and marine, the investment aspect is lacking in these forms. Thus life insurance is the only avenue that offers both the protection and investment benefitsLife Insurance made its first appearance in England in 16th century. The first recorded life policy was issued in June 18, 1583 on the life of William Gibbons for “12 months”. Besides, in the sixteenth and seventeenth centuries evidences of the exis fence of short term policies are available, which covered the risk of death within a limited period only. These policies were particularly used for merchant and others on voyages or on the lives of debtors as security against loan. In seventeenth and eighteenth centuries Mutual Assurance Association were formed in order to subscribe to a fund out of which payments were made at the death of a member, based on the amount available in the fund. The amount payable on death varied according to the number of members and number of deaths in that year. In later years, with the compilation of mortality tables (in 1693 and 1755) and the introduction of an actuarial science revolutionary changes took place in the whole practice of life insurance. Modern life insurance bears some similarity to the asset management industry and life diversified their products into retirement products such as annuities. Life-based contracts tend to fall into two major categories: + Protection policies — designed to provide a benefit, typically a lump sum payment, in the event of a specified occurrence. A common form—more common in years past—of a protection policy design is term insurance. + Investment policies ~ the main objective of these policies is to facilitate the growth of capital by regular or single premiums. Common forms (in the U.S.) are whole life, universal life, and variable life policies. 1,7. INDIA AND LIFE INSURANCE Life insurance in its modern form came to India from England way back in 1818. Oriental Life Insurance Company was the first insurance company on Indian soil, which was started in Kolkata by Europeans to help widows of their community. In the year 1870, the first Indian Insurance Company in the name of Bombay Mutual Life Assurance Society came into existence. The basic objective of the Company was to insure Indian lives at normal rates since in the earlier period Indian lives were treated as subnormal and loaded with an extra premium of 15 to 20 per cent9. However, right up to the end of the 19th century, foreign insurance companies in India had an upper hand in matters of Insurance business. Insuring Indian lives with 10 per cent of extra premium was a common practice prevalent during this period of time. The Life Insurance Companies Act, 1912 was the first legislation for regulating insurance business in India, However, the Insurance Act, 1912 was replaced by a comprehensive insurance act of 1938. This act was again amended in 1950. Finally, the Government of India nationalized the entire life insurance business in the year 1956 by passing the Life Insurance Corporation Act, 1956 and as such Life Insurance Corporation was set up on Ist September, 1956. The 9LIC took over the assets and liabilities of 245 insurers which were operating at the time of nationalization. LIC thus gained monopoly power of transacting life insurance business in India. After the economic crisis of 1991, the Narsimha Rao Jed government adopted the policy of deregulating all the sectors including the insurance sector from the clutches of the government and thereby promote the private players to prove their worth, In this sequence in April 1993, the Government of India appointed the Malhotra Committee to recommend on the reforms of Insurance sector under the chairmanship of Sri RN. Malhotra, the former Governor of RBI. The Malhotra Committee submitted its report to the Government on 7th January, 1994 and made recommendations for the establishment of an effective Insurance Regulatory Authority (IRA) in the form of a statutory autonomous board. With reference to its recommendations for entry of private sector in insurance business, the committee viewed that allowing some foreign insurance companies could be usefull0. In December 1996, Government tabled the IRA Bill in the parliament as per the recommendations of Malhotra Committee, but due to strong ‘oppos in the year 1998, in order to provide better insurance coverage to our citizens and also to augment the n from the left parties the Government was forced to withdraw IRA Bill in parliament. Again flow of long-term resources for financing infrastructure, it was proposed by the Government to open the insurance sector and to permit the entry of private Indian companies into the insurance sector. This time the legislature enacted the Insurance Regulatory and Development Authority Act, 1999 to provide for the establishment of an authority to protect the interest of insurance policyholders and to regulate, promote the insure orderly growth of insurance industry. This Act was assented by President of India ‘on 29th December, 1999. 1,8. INSURANCE POLICY In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they feature boilerplate language which is similar across a wide variety of different types of insurance policies The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer. In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract. ‘One insurance textbook states that generally “courts consider all prior negotiations or agreements. every contractual term in the policy at the time of delivery, as well as those written afterward as policy 10riders and endorsements ... with both parties’ consent, are part of the written policy*, The textbook also states that the policy must refer to all papers which are part of the policy. Oral agreements are subject to the parole evidence rule, and may not be considered part of the policy if the contract appears to be whole. Advertising materials and circulars are typically not part of a policy. Oral contracts pending the issuance of a written policy can occur. 1.8.1. General features: ‘The insurance contract or agreement is a contract whereby the insurer promises to pay benefits to the insured or on their behalf to a third party if certain defined events occur. Subject to the "fortuity principle”, the event must be uncertain. The uncertainty can be either as to when the event will happen (c.g. ina life insurance policy, the time of the insured’s death is uncertain) or as to if it will happen at all (e.g. ina fire insurance poli -y, whether or not a fire will occur at all) + Insurance contracts are generally considered contracts of adhesion because the insurer draws up the contract and the insured has little or no ability to make material changes to it. This is interpreted to mean that the insurer bears the burden if there is any ambiguity in any terms of the contract. Insurance policies are sold without the policyholder even seeing a copy of the contract. In 1970 Robert Keeton suggested that many courts were actually applying ‘reasonable expectations’ rather than interpreting ambiguities, which he called the ‘reasonable expectations doctrine’. This doctrine has been controversial, with some courts adopting it and others explicitly rejecting it. In several jurisdictions, including California, Wyoming, and Pennsylvania, the insured is bound by clear and conspicuous terms in the contract even if the evidence suggests that the insured did not read or understand them. «Insurance contracts are aleatory in that the amounts exchanged by the insured and insurer are unequal and depend upon uncertain future events. In contrast, ordinary non-insurance contracts ‘are commutative in that the amounts (or values) exchanged is usually intended by the parties to be roughly equal. This distinction is particularly important in the context of exotic products like finite risk insurance which contain "commutation" provisions. + Insurance contracts are unilateral, meaning that only the insurer makes legally enforceable promises in the contract. The insured is not required to pay the premiums, but the insurer is required to pay the benefit under the contract if the insured has paid the premiums and met certain other basic provisions. + Insurance contracts are governed by the principle of utmost good faith which requires both parties of the insurance contract to deal in good faith and in particular it imparts on the insured a duty to disclose all material facts which relate to the risk to be covered. This contrasts with athe legal doctrine that covers most other types of contracts, caveat emptor (let the buyer beware). In the United States, the insured can sue an insurer in tort for acting in bad faith. 1.8.2. Structure Insurance contracts were traditionally written on the basis of every single type of risk (where risks were defined extremely narrowly), and a separate premium was calculated and charged for each. Only those individual risks expressly described or "scheduled" in the policy were covered; hence, those policies are now described as “individual” or "schedule" policies. This system of "named perils” or "specific perils” coverage proved to be unsustainable in the context of the Second Industrial Revolution, in that a typical large conglomerate might have dozens of types of risks to insure against. For example, in 1926, an insurance industry spokesman noted that a bakery would have to buy a separate policy for each of the following risks: manufacturing operations, elevators, teamsters, product liability, contractual liability (for a spur track connecting the bakery to a nearby railroad), premises liability (for a retail store), and owners’ protective liability (for negligence of contractors hired to make any building modifications), In 1941, the insurance industry began to shift to the current system where covered risks are initially defined broadly in an "all risk” or "all sums" insuring agreement on a general policy form (e.g., "We will pay all sums that the insured becomes legally obligated to pay as damages..."), then narrowed down by subsequent exclusion clauses (e.g., "This insurance does not apply to..."). If the insured desires coverage for a risk taken out by exclusion on the standard form, the insured can sometimes pay an additional premium for an endorsement to the policy that overrides the exclusion. Insurers have been criticized in some quarters for the development of complex policies with layers of interactions between coverage clauses, conditions, exclusions, and exceptions to exclusions. 1.8.3. Parts of an insurance contract «Declarations - identifies who is an insured, the insured’s address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount, These are usually provided on a form that is filled out by the insurer based on the insured’s application and attached on top of or inserted within the first few pages of the policy. + Definitions - Defines important terms used in the rest of the policy. «+ Insuring agreement - Describes the covered perils, or risks assumed, or nature of coverage. This is where the insurance company makes one or more express promises to indemnify the insured. 2Exclusions - Takes coverage away from the insuring agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy. Con jons - These are specific provisions, rules of conduct, duties, and obligations which the insured must comply with in order for coverage to incept, or must remain in compliance with in order to keep coverage in effect. If policy conditions are not met, the insurer can deny the claim, Policy form - The definitions, insuring agreement, exclusions, and conditions are typically combined into a single integrated document called a policy form, coverage form, or coverage part. When multiple coverage forms are packaged into a single policy, the declarations will state as much, and then there may be additional declarations specific to each coverage form. Traditionally, policy forms have been so rigidly standardized that they have no blank spaces to be filled in, Instead, they always expressly refer to terms or amounts stated in the declarations. If the policy needs to be customized beyond what is possible with the declarations, then the underwriter attaches endorsements or riders. Endorsements - Additional forms attached to the policy that modify it in some way, either unconditionally or upon the existence of some condition, Endorsements can make policies difficult to read for no lawyers; they may revise, expand, or delete clauses located many pages earlier in one or more coverage forms, or even modifies each other. Because it is very risky to allow no lawyer underwriters to directly rewrite policy forms with word processors, insurers usually direct underwriters to modify them by attaching endorsements preapproved by counsel for various common modifications. Riders - A rider is used to convey the terms of a policy amendment and the amendment thereby becomes part of the policy. Riders are dated and numbered so that both insurer and policyholder can determine provisions and the benefit level. Common riders to group medical plans involve name changes, change to eligible classes of employees, change in level of benefits, or the addition of a managed care arrangement such as a Health Maintenance Organization or Preferred Provider Organization (PPO). Jackets - The term has several distinct and confusing meanings. In general, it refers to some set of standard boilerplate provisions which accompany all policies at the time of delivery. Some insurers refer to a package of standard documents shared across an entire family of policies as a jacket.” Some insurers extend this to include policy forms, so that the only parts of the policy not part of the jacket are the declarations, endorsements, and riders. Other insurers use the term "jacket" in a manner closer to its ordinary meaning: a binder, envelope, or presentation folder pockets are stapled or which is stapled on top of the policy. The standard boilerplate provisions are then in which the policy may be delivered, or a cover sheet to which the policy forms printed on the jacket itself, B1.8.4, Principles of Insurance Contract: + Insurable Interest ~ Insurable interest implies that the assured must have an actual interest in the subject matter of insurance that he would benefit from its continued existence and suffer loss from its destruction. In life insurance, insurable interest must exist at the time of taking of policy. It may or may not exist at the time of death of the insured. In the case of the fire insurance, insurable interest is necessary to exist both at the time of taking the fire insurance policy as well as at the time when the loss is incurred and a claim is filed with the insurance company. In case of marine insurance the insured must have insurable interest in the insured object only at the time of loss i.e. on the happening of the event insured against. This principle pertains to the level of interest an individual is expected to have in a particular policy. The interest could be a family bond, a personal relationship and so on. Based on the interest level, an insurance company can choose to accept or reject an application in order to protect the misuse of a policy. * Good faith — Insurance contracts are based upon mutual trust and confidence between the insurer and the insured1 1. The doctrine of disclosing all material facts is embodied in the important principle “utmost good faith” which applies to all forms of insurance. Both the parties to the insurance contract must disclose all the material facts which are likely to affect the judgment of the other party. In case of insurance contract the legal maximum ‘Caveat Emplor’ does not prevail, where it is regarded the duty of the buyer to satisfy himself of the genuineness of the subject matter and the seller is under no obligation to supply information about it. But, in insurance contract, the seller ie. the insurer will also have to disclose all the material facts. Utmost good faith thus requires each party to tell the other “the truth, the whole truth and nothing but the truth” about the proposed contract. Bad faith or failure to reveal vital information, even if not asked about it, gives the aggrieved party the right to regard the contract as void. As such it is said that the insurance contract is a contract of ‘uberrimae fidai’ ie. of absolute good faith. In life insurance policies where an acceptance or rejection of risk depends upon the state of health of the proposed insured a clear-cut distinction must be drawn between illness and simple disorder. Thus, in a case, non disclosure by the assured of having suffered from indigestion was held to be of suppression of a material fact which should affect the validity of the policy. However, the policy cannot be called into question after it has run for two years except on the ground of false date of birth or fraudulent concealment of facts. Purchasing insurance is entering into a contract between company and individual. This should be done in good faith by providing all relevant details with honesty. Covering any information from the insurance company may result in serious consequences for the individual in the future. This being said, the insurer must explain all aspects of a policy and 14ensure that there are no unexplained or hidden clauses and that the applicant is made aware of all terms and conditions. + Indemnity- The principles of Indemnity implies that the insurer undertakes to put the insured, in the event of occurring of insured risk resulting in loss to the insured, in the same position that he occupied immediately before the happening of the event insured against. However, there are some exceptions such as life insurance, personal accident and sickness insurance where the principle of indemnity does not apply. All the other insurance contracts are the contract of indemnity where indemnity is the controlling principle of insurance law. This implies that the assured in the case of loss against which the policy has been viewed shall be paid the actual amount of loss not exceeding the policy value. The insured is thus not allowed to make any profit out of his loss but will only be compensated. The assured will be fully indemnified but shall never be more than fully indemnified. + Causa proxima- Causa proxima means the nearest cause or the proximate cause or the most effective, dominant and efficient cause. It is the real or actual cause of loss. If the cause of loss is insured, the insurer will pay; otherwise the insurer will not pay. Insurer will not be liable for the losses caused by the expected perils or by the misconduct of the assured or where the insured peril is a distant cause of loss. + Subrogation- The doctrine of subrogation, which is the outcome of the principle of indemnity and applies only to fire and marine insurance, states that after the insurer has made good of the loss to the insured, he is entitled to succeed to all the ways and means by which the assured might have protected himself against the loss. Thus the insurer for his own benefit comes to possess all the rights of the insured against third persons as regards the subject matter once the claim is paid by the underwriter. + Risk & Minimal loss — Insurance is a risky and companies have to do business and make profits keeping in mind the risk factor. The principle of minimal risk states that the insured individual is expected to take necessary action to limit him/her self from any hazards. This includes following a healthy lifestyle, getting a regular health check-up and more. The principle of Mitigation of loss places ‘a duty on the insured to make every effort and take all such steps, in the event of some mishap to the insured property, to mitigate or minimize the loss, as would has been taken by an uninsured person. The principle is included so as to check the insured to become careless and inactive in the event of the mishap merely because the property which is getting damaged is already insured. If the insured fails to take the reasonable steps to mitigate the loss, the insurer can avoid the payment of loss as it occurred due to the negligence of the insured. * Contribution- When the subject matter has been insured with different insurers, the principle of contribution applies between different insurers. The main aim is to distribute losses equitably among 15different insurers, who are liable under various policies of the same subject matter. This doctrine applies only to contract of indemnity. 1.9. HISTORY OF LIFE INSURANCE An early form of life insurance dates to Ancient Rome; "burial clubs" covered the cost of members’ funeral expenses and assisted survivors financially. The first company to offer life insurance in modern times was the Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas Allen, Each member made an annual payment per share on one to three shares with consideration to age of the members being twelve to fifty-five. At the end of the year a portion of the "amicable contribution" was divided among the wives and children of deceased members, in proportion to the number of shares the heirs owned. The Amicable Society started with 2000 members. ‘The first life table was written by Edmund Halley in 1693, but it was only in the 1750s that the necessary mathematical and statistical tools were in place for the development of modern life insurance. James Dodson, a mathematician and actuary, tried to establish a new company aimed at correctly offsetting the risks of long term life assurance policies, after being refused admission to the Amicable Life Assurance Society because of his advanced age. He was unsuccessful in his attempts at procuring a charter from the government. His disciple, Edward Rowe Mores, was able to establish the Society for Equitable assurances on Lives and Survivorship in 1762. It was the world’s first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based”, Mores also gave the name actuary to the chief official—the earliest known reference to the position as a business concern. The first modern actuary was William Morgan, who served from 1775 to 1830. In 1776 the Society carried out the first actuarial valuation of liabilities and subsequently distributed the first reversionary bonus (1781) and interim bonus (1809) among its members. Tt also used regular itably and the Directors tried to ensure that policyholders received a fair return on their investments. Premiums were valuations to balance competing interests. The Society sought to treat its members eqi regulated according to age, and anybody could be admitted regardless of their state of health and other circumstances. The sale of life insurance in the U.S. began in the 1760s. The Presbyterian Synods in Philadelphia and New York City created the Corporation for Relief of Poor and Distressed Widows and Children of ilar fund in 1769. Between 1787 ters in 175} Presbyterian Mi ;piscopalian priests organized a 16and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. In the 1870s, military officers banded together to found both the Army (AAFMAA) and the Navy Mutual Aid Association(Navy Mutual), inspired by the plight of widows and orphans left stranded in the West after the Battle of the Little Big Horn and of the families of U.S. sailors who died at sea, 1,10. Insurance ys. assurance The specific uses of the terms "insurance" and "assurance" are sometimes confused. In general, in jurisdictions where both terms are used, "insurance" refers to providing coverage for an event that might happen (fire, theft, flood, etc.), while “assurance” is the provision of coverage for an event that is certain to happen. In the United States, both forms of coverage are called "insurance" for reasons of simplicity in companies selling both products.-By some definitions, “insurance” is any coverage that determines benefits based on actual losses whereas “assurance” is coverage with predetermined benefits irrespective of the losses incurred, 1,11. DIFFERENT TYPES OF LIFE INSURANCE POLICIES IN INDIA 1. Term Life Insurance ‘Term insurance is the simplest form of life insurance plan. It is easy to understand and affordable. 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, Term insurance is the most basic, and ofien least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically 1 to 10 years, and may be renewable at the end of each term, Also, the premiums will likely increase at the end of each term and can become prohibitively expensive for older individuals. ‘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, v7Best known for: High sum assured (coverage) at a low premium. 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, ete 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... It is Best known for: Long-term investment option with much more flexibility to invest. 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. 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 in ssted 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. It is Best known for: Long-term saving option for people with much lower risk appetite for investment. Benefit of Endowment Plan: Long-term financial planning and an opportunity to earn returns on maturity. 18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, It is Best known for: Short-term investment product to 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, Whole Life insurance combines permanent protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow a portion of your policy's cash value tax free, although loans accrue interest and reduce the policy's death benefit and cash value, and may trigger a taxable event if the policy lapses. 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. It is Best known for: Life coverage for whole life. Benefit of Whole Life Plan: Lifelong protection to the insured and an opportunity to leave behind a legacy for heirs. 6. Child Plan 19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 instalments 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. It is Best known for: Building funds for your child’s future Benefit of Child Plan: Helps in fulfilling your child’s dream 7. Retirement Plan Retirement plan helps to build corpus for your retirement. It helps you to live independently financially and without worries. Most of the child plans provide annual instalments 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. It is Best known for Long-term savings and retirement planning. Benefit of Retirement Plan: Helps in building corpus for retirement. 8. Universal life insurance: Universal life insurance is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also more flexible in regard to premiums and face value. Premiums may be increased, decreased, or deferred, and cash values can be withdrawn. You may also have the option to change the amount you are insured for, known as the face amount. Universal life policies typically offer a guaranteed return on cash value. Premiums may be increased, decreased, or deferred, and cash values can be withdrawn. 9. Variable life insurance: 20Generally offers fixed premiums and the ability to invest your cash value in a choice of stock, bond, or money market-based investment options offered by your insurer. Cash values and death benefits can rise and fall based on the performance of your investment choices. Although death benefits usually have a floor, there is no guarantee on cash values, Fees for these policies may be higher than for universal life, and investment options may be volatile. These investment options are subject to market risk including loss of principal On the plus side, capital gains and other investment earnings accrue tax-deferred as long as the funds remain invested in the insurance contract. 10. Declining Balance Term insurance, a variation on this theme, is often used as mortgage insurance since it can be written to match the amortization of your mortgage principal. While the premium stays constant over the term, the face value steadily declines. Once the mortgage is paid off, the insurance is no longer needed and the policy expires. Unlike many other policies, term insurance has no cash value. In this sense it is “pure” insurance without any cash value component. Benefits are paid only if you die during the policy's term. After the term ends, your coverage expires unless you choose to renew. When buying term insurance, you might look for a policy that is renewable up to an age when you think you will no longer need insurance and convertible to permanent insurance without a medical exam, 11. Return of Premium Term insurance will repay you the amount you spent in premiums in the event you outlive the term of the policy. Whether you die while the policy is in effect or outlive the policy, the money you put in will be distributed to your beneficiaries or to you Key Terms and Definitions Face Value Alife insurance policy's original death benefit amount. Convertibility — Option to convert from one type of policy (e.g., term) to another (e.g., whole life), usually without a physical examination. Cash Value —- The accumulated cash value portion of a policy that can be borrowed against or withdrawn by partial/full surrender. Outstanding loans accrue interest, and loans/partial withdrawals will reduce the policy's death benefit Premiums -- Monthly, quarterly, or yearly payments required to maintain coverage. If you pay your premium other than annually, you will generally pay a higher premium than you would have if you paid your premium annually. Beneficiary -- The individual(s) or entity (e.g., trust) that is designated to receive a policy's death 2benefit upon the death of the insured. 1,12. How Life Insurance Works There are three major components of a life insurance policy. 1. Death benefit is the amount of money the insurance company guarantees to the beneficiaries identified in the policy upon the death of the insured. The insured will choose their desired death benefit amount based on estimated future needs of surviving heirs. The insurance company will determine whether there is an insurable interest and if the insured qualifies for the coverage based on the company's underwriting requirements. 2. Premium payments are set using actuarially based statistics. The insurer will determine the cost of insurance (COI), or the amount required to cover mortality costs, administrative fees, and other policy maintenance fees Other factors that influence the premium are the insured’s age, medical history, occupational hazards, and personal risk propensity. The insurer will remain obligated to pay the death benefit if premiums are submitted as required. With term policies, the premium amount includes the cost of insurance (COI). For permanent or universal policies, the premium amount consists of the COL and a cash value amount. 3. Cash value of permanent or universal life insurance is a component which serves two purposes. It is a savings account, which can be used by the policyholder, during the life of the insured, with cash accumulated on a tax-deferred basis, Some policies may have restrictions on withdrawals depending on the use of the money withdrawn. The second purpose of the cash value is to offset the rising cost or to provide insurance as the insured ages 1.13. Benefits of Life Insurance 1, Risk Coverage: Insurance provides risk coverage to the insured family in form of monetary compensation in lieu of premium paid. 2, Difference plans for different uses: Insurance companies offer a different type of plan to the insured depending on his need for insurance. More benefits come with the more premium. 3. Cover for Health Expenses: These policies also cover hospitalization expenses and critical illness treatment. Promotes Savings/ Helps in Wealth creation: Insurance policies also come with the saving plan ie. they invest your money in profitable ventures. 25. Guaranteed Income: Insurance policies come with the guaranteed sum assured amount which is payable on happening of the event. 6. Loan Facility: Insurance companies provide the option to the insured that they can borrow a certain sum of amount. This option is available on selected policies only. 7. Tax Benefits: Insurance premium is tax deductible under section 80C of the income tax Act, 1961. 1.14, Claim Settlement Process On the happening of the event, the beneficiary is required to send claim intimation form to the insurance company as soon as possible. Claim intimation should contain details such as Date, Place, and Cause of Death. On successful submission of claim intimation form, an insurance company can ask for additional information about 1, Certificate of Death 2. Copy of Insurance Policy 3. Legal Evidence of ttle in case insured has not appointed a beneficiary 4, Deeds of assignment On successful submission of the entire document, the insurance company shall verify the claim and settle the same. 1,15. LIFE INSURANCE CORPORATION ACT, 1956 Life Insurance Business in India was nationalized with effect from January 19, 1956. On the date, the Indian business of 16 non-Indian insurers operating in India and 75 Provident Societies were taken over by Government of India. Life Insurance Corporation of India, Act was passed by the Parliament fon June 18, 1956 and came into effect from July 1, 1956. Life Insurance Corporation of India commenced its functioning as a corporate body from September 1, 1956. Its working is governed by the LIC Act. The LIC is a corporate having perpetual succession and a common seal with a power to acquire hold and dispose of property and can by its name sue and be sued. Certain important provisions of the Act (as amended by IRDA Act, 1999) are discussed as follows Important Provisions of Life Insurance Corporation Act, 1956, 1, Constitution 2B2. Capital 3. Functions of the Corporation 4, Transfer of Services 5, Set-up of the Corporation 6. Committee of the Corporation 7.Authorities 8. Finance, Accounts and Audit 9, Miscellaneous 1,16. Points to Consider for Life Insurance Research: As an applicant for life insurance, there are numerous policy options at your fingertips to choose from. It is essential that you do your research before making an informed decision on purchasing a life insurance policy, as it can help you save money and receive maximum benefits Read terms and conditions: The terms and conditions of an insurance plan contain all relevant information regarding the particular policy. Make sure that you read the fine print in detail and completely understand it before purchasing an insurance policy of your choice. Remember lock-in period: There are instances when individuals purchase insurance policies jout making an informed decision and later realize that they are unhappy with the insurance policy. In such scenarios, some insurance companies offer a lock-in time frame, which is a short time usually 15 days where a policyholder can return the policy to the insurer and purchase another in case they were unsatisfied with the initial purchase. Consider premium payment options: Almost all insurance providers offer premium payment options consisting of annual, semi-annual, quarterly or on monthly basis. It is essential that you opt for Electronic Check System (ECS) payment that will periodically debit your bank account with the required insurance amount. Also, you can choose ftom a schedule that will allow you to make a premium payment with the convenience of interval payments. 24+ Don’t Mask Information: There are times where individuals try to hide information when filling out the insurance application form. All personal credentials and medical history must be accurately presented to the insurance company. Misinformation can cause serious issues when trying to make claims later on. 1.17. Life Insurance Companies in India Some of the prominent life insurance companies in India are: [list of JAEGON Life Insurance Tnsurance Companies [Aviva Life Insurance [Bajaj Allianz Life Insurance [Bharti AXA Life Insurance [Birla Sun Life Insurance Sanara HSBC OBC Life Insurance HEL Pramerica Life Insurance |Edelweiss Tokio Life Insurance ide Life irance ‘uture Generali India Life Insurance JHDEC Standard Life Insurance ICICI Prudential Life Insurance |IDBI Federal Life Insurance 90.33% india First Life Insurance Company Ltd - India First 82.65% otak Life Insurance 91.24% [Life Insurance Corporation of India 98.31% JMax New York Life Insurance 97.81% PNB MetLife Insurance 87.14% Reliance Life Insurance 94.53% Bahara Life Insurance 90.21% BI Life Insurance 96.69% Shriram Life Insurance 63.53% Biar Union Dai-ichi Life Insurance 84.05% [Tata ATA Life Insurance 96.01% 251,18. Life Insurance Companies Brief Det There are currently, a total of 24 life insurance companies in India. Of these, Life Insurance Corporation of India (LIC) is the only public sector insurance company. All others are private insurance companies. Many of these are joint ventures between public/private sector banks and nationaVinternational insurance-financial companies. Private life insurance companies in India got access to the life insurance sector in the year 2000. Most private players have tied up with international insurance giants for their life insurance foray. 1.19. Taxation - India According to the section 80C of the Income Tax Act, 1961 (of Indian penal code) premiums paid towards valid life insurance policy can be exempted from the taxable income, Along with life insurance premium, section 80C allows exemption for other financial instruments such as Employee Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), health insurance premium are some of them, The total amount that can be exempted from the taxable income for section 80C is capped at a maximum of INR. 150,000, The exemptions are eligible for individuals (Indian citizens) or Hindu Undivided Family (HUF). + Any earnings accumulated in your insurance policy’s cash value grow free from taxes. Please note that in a variable life insurance policy, cash value growth is not guaranteed. + The death benefit of your permanent life insurance is generally passed on to your beneficiaries free from federal income tax. + Premium withdrawals may be tax free, depending on the type of coverage you have. + Transfers among the underlying investment options of a variable life insurance policy are generally not subject to current income or capital gains taxes. + Should your need for the policy's death benefit decrease, you can take loans or withdrawals froma life insurance policy prior to age 59¥ without the 10% early withdrawal penalty 261.20. CRITICISM. Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used to facilitate exploitation and fraud. In the case of life insurance, there is a possible motive to purchase a life insurance policy, particularly if the face value is substantial, and then murder the insured. Usually, when the claim is larger, more serious is the incident, more intense the ensuing investigation consisting of police and insurer investigators. ‘The television series Forensic Files has included episodes that feature this scenario. There was also a documented case in 2006, where two elderly women were accused of taking in homeless men and assisting them. As part of their assistance, they took out life insurance for the men. After the contestability period ended on the policies, the women are alleged to have had the men killed via hit- and-run car crashes. Recently, viatical settlements have created problems for life insurance providers. A viatical settlement involves the purchase of a life insurance policy from an elderly or terminally ill policy holder. The policy holder sells the policy (including the right to name the beneficiary) to a purchaser for a price discounted from the policy value. The seller has cash in hand, and the purchaser will realize a profit when the seller dies and the proceeds are delivered to the purchaser. In the meantime, the purchaser continues to pay the premiums. Although both parties have reached an agreeable settlement, insurers are troubled by this trend. Insurers calculate their rates with the assumption that a certain portion of before death, They also policy holders will seek to redeem the cash value of their insurance poli expect that a certain portion will stop paying premiums and forfeit their policies. However, viatical settlements ensure that such policies will with absolute certainty be paid out. Some purchasers, in order to take advantage of the potentially large profits, have even actively sought to collude with uninsured elderly and terminally ill patients, and created policies that would have not otherwise been purchased. These policies are guaranteed losses from the insurers’ perspective. Senior and pre-need products Insurance companies have in recent years developed products for niche markets, most notably targeting seniors in an aging population. These are often low to moderate face value whole life insurance policies, allowing senior citizens to purchase affordable insurance later in life. This may also be marketed as final expense insurance and usually have death benefits between $2,000 and $40,000. One reason for their popularity is that they only require answers to simple “yes” or “no” questions, while most policies require a medical exam to qua ify. As with other policy types, the range of 7premiums can vary widely and should be scrutinized prior to purchase, as should the reliability of the companies Health questions can vary substantially between exam and no-exam policies. It may be possible for individuals with certain conditions to qualify for one type of coverage and not another. Because seniors sometimes are not fully aware of the policy provisions it is important to make sure that policies last for a lifetime and those premiums do not increase every 5 years as is common in some circumstances. Pre-need life insurance policies are limited premium payment, whole life policies that are usually purchased by older applicants, though they are available to everyone. This type of insurance is designed to cover specific funeral expenses that the applicant has designated in a contract with a funeral home. The policy's death benefit is initially based on the funeral cost at the time of preatrangement, and it then typically grows as interest is credited. In exchange for the policy owner's designation, the funeral home typically guarantees that the proceeds will cover the cost of the funeral, no matter when death occurs. Excess proceeds may go either to the insured’s estate, a designated beneficiary, or the funeral home as set forth in the contract. Purchasers of these policies usually make a single premium payment at the time of rearrangement, but some companies also allow premiums to be paid over as much as ten years Parties to contract The person responsible for making payments for a policy is the policy owner, while the insured is the person whose death will trigger payment of the death benefit. The owner and insured may or may not be the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantor and he will be the person to pay for the policy. The insured is a participant in the contract, but not necessarily a party to it The beneficiary receives policy proceeds upon the insured person's death. The owner designates the benefic ‘ary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. If policy has an irrevocable beneficiary, any beneficiary changes, policy assignments, or cash value borrowing would require the agreement of the original beneficiary. In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an insurable interest in the CQV. For life insurance policies, close family members and business partners will usually be found to 28