Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay

a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the "premium") at regular intervals or in lump sums. In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured's demise. The value for the policy owner is the 'peace of mind' in knowing that the death of the insured person will not result in financial hardship. 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-based contracts tend to fall into two major categories:
y y

Protection policies designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. Investment policies where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life and variable life policies.

Parties to contract

There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often 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 guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it. However, "insurable interest" is required to limit an unrelated party from taking life insurance on, for example, Jane or Joe. Also, most companies allow the Payer and Owner to be different, e. g., a grand parent paying premiums for a policy on a child, owned by a grandchild [or vice versa]. The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing. 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 have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).
[edit] Contract terms

Special provisions may apply, such as suicide clauses wherein the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the application is also grounds for nullification. Most US states specify that the contestability period cannot be longer than two years; only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding to pay or deny the claim. The face amount on the policy is the initial amount that the policy will pay at the death of the insured or when the policy matures, although the actual death benefit can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old).

[edit] Costs, insurability, and underwriting

The insurer (the life insurance company) calculates the policy prices with intent to fund claims to be paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically-based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.[2][3] The three main variables in a mortality table have been age, gender, and use of tobacco. More recently in the US, preferred class specific tables were introduced. The mortality tables provide a baseline for the cost of insurance. In practice, these mortality tables are used in conjunction with the health and family history of the individual applying for a policy in order to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company using pooled industry experience studies as a starting point. In the 1980s and 90's the SOA 197580 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and nonsmokers and the CSO tables include separate tables for preferred classes.[4] Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of coverage after underwriting.[5] Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten nonsmoking men is about 2.5 in 1,000 people at age 65.[6] Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status).[1] The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35 per policy). Administrative and sales commissions need to be accounted for in order for this to make business sense. A 10 year policy for a 25 year old non-smoking male person with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market. The insurance company receives the premiums from the policy owner and invests them to create a pool of money from which it can pay claims and finance the insurance company's operations. The majority of the money that insurance companies make comes directly from premiums paid, as money gained through investment of premiums can never, in even the most ideal market conditions, vest enough money per year to pay out claims.[citation needed] Rates charged for life insurance increase with the insurer's age because, statistically, people are more likely to die as they get older.

Given that adverse selection can have a negative impact on the insurer's financial situation, the insurer investigates each proposed insured individual unless the policy is below a companyestablished minimum amount, beginning with the application process. Group Insurance policies are an exception. This investigation and resulting evaluation of the risk is termed underwriting. Health and lifestyle questions are asked. Certain responses or information received may merit further investigation. Life insurance companies in the United States support the Medical Information Bureau (MIB),[7] which is a clearinghouse of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer receives permission to obtain information from the proposed insured's physicians.[8] Underwriters will determine the purpose of insurance. The most common is to protect the owner's family or financial interests in the event of the insured's demise. Other purposes include estate planning or, in the case of cash-value contracts, investment for retirement planning. Bank loans or buy-sell provisions of business agreements are another acceptable purpose. Life insurance companies are never required by law to underwrite or to provide coverage to anyone, with the exception of Civil Rights Act compliance requirements. Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable. The policy can be declined (turned down) or rated.[citation needed] Rating increases the premiums to provide for additional risks relative to the particular insured.[citation
needed]

Many companies use four general health categories for those evaluated for a life insurance policy. These categories are Preferred Best, Preferred, Standard, and Tobacco.[citation needed] Preferred Best is reserved only for the healthiest individuals in the general population. This means, for instance, that the proposed insured has no adverse medical history, is not under medication for any condition, and his family (immediate and extended) have no history of early cancer, diabetes, or other conditions.[2] Preferred means that the proposed insured is currently under medication for a medical condition and has a family history of particular illnesses.[citation needed] Most people are in the Standard category.[citation needed] Profession, travel, and lifestyle factor into whether the proposed insured will be granted a policy, and which category the insured falls. For example, a person who would otherwise be classified as Preferred Best may be denied a policy if he or she travels to a high risk country.[citation needed] Underwriting practices can vary from insurer to insurer which provide for more competitive offers in certain circumstances.
[edit] Death proceeds

Upon the insured's death, the insurer requires acceptable proof of death before it pays the claim. The normal minimum proof required is a death certificate and the insurer's claim form completed, signed (and typically notarized).[citation needed] If the insured's death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.

Proceeds from the policy may be paid as a lump sum or as an annuity, which is paid over time in regular recurring payments for either a specified period or for a beneficiary's lifetime.[citation needed]
[edit] Insurance vs 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 cover for an event that might happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that is certain to happen. In the United States both forms of coverage are called "insurance", principally due to many companies offering both types of policy, and rather than refer to themselves using both insurance and assurance titles, they instead use just one.[citation needed]

[edit] Types of life insurance

Life insurance may be divided into two basic classes temporary and permanent or following subclasses term, universal, whole life and endowment life insurance.
[edit] Term Insurance

Term assurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else. There are three key factors to be considered in term insurance:
1. Face amount (protection or death benefit), 2. Premium to be paid (cost to the insured), and 3. Length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. Common types of term insurance include Level, Annual Renewable and Mortgage insurance."

Level Term policy has the premium fixed for a period of time longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long term planning and asset management because premiums remain consistent year to year and can be budgeted long term. At the end of the term, some policies contain a renewal or conversion option. Guaranteed Renewal, the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Some companies however do not guarantee renewal, and require proof of insurability to mitigate their risk and decline renewing higher risk clients (for instance those that may be terminal). Renewal that requires proof of insurability often includes a conversion options that allows the insured to convert the term program to a permanent one that the insurance company makes available. This can force clients into a more expensive permanent program

because of anti selection if they need to continue coverage. Renewal and conversion options can be very important when selecting a program. Annual renewable term is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owners residence so the mortgage will be paid if the insured dies. A policy holder insures his life for a specified term. If he dies before that specified term is up (with the exception of suicide see below), his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. However, in some European countries (notably Serbia), insurance policy is such that the policy holder receives the amount he has insured himself to, or the amount he has paid to the insurance company in the past years. Suicide used to be excluded from ALL insurance policies[when?], however, after a number of court judgments against the industry, payouts do occur on death by suicide (presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if the suicide occurs after the two year period.
[edit] Permanent Life Insurance

Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value. The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.
[edit] - Whole life coverage

Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Also, the cash values are generally kept by the insurance company at

the time of death, the death benefit only to the beneficiaries. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates over time. Premiums are much higher than term insurance in the short term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy. Cash value can be accessed at any time through policy "loans" and are received "income-tax free". Since these loans decrease the death benefit if not paid back, payback is optional. Cash values support the death benefit so only the death benefit is paid out. Dividends can be utilized in many ways. First, if Paid up additions is elected, dividend cash values will purchase additional death benefit which will increase the death benefit of the policy to the named beneficiary. Another alternative is to opt in for 'reduced premiums' on some policies. This reduces the owed premiums by the unguaranteed dividends amount. A third option allows the owner to take the dividends as they are paid out. (Although some policies provide other/different/less options than these - it depends on the company for some cases)
[edit] - Universal life coverage

Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for greater growth of cash values. There are several types of universal life insurance policies which include "interest sensitive" (also known as "traditional fixed universal life insurance"), variable universal life (VUL), guaranteed death benefit, and equity indexed universal life insurance. A universal life insurance policy includes a cash value. Premiums increase the cash values, but the cost of insurance (along with any other charges assessed by the insurance company) reduces cash values. However, with the exception of VUL, interest is credited on cash values at a rate specified by the company and may also increase cash values. With VUL, cash values will ebb and flow relative to the performance of the investment subaccounts the policy owner has chosen. The surrender value of the policy is the amount payable to the policyowner after applicable surrender charges, if any. Universal life insurance addresses the perceived disadvantages of whole life namely that premiums and death benefit are fixed. With universal life, both the premiums and death benefit are flexible. Except with regards to guaranteed death benefit universal life, this flexibility comes at a price: reduced guarantees. Depending on how interest is credited, the internal rate of return can be higher because it moves with prevailing interest rates (interest-sensitive) or the financial markets (Equity Indexed Universal Life and Variable Universal Life). Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it.

Flexible death benefit means the policy owner can choose to decrease the death benefit. The death benefit could also be increased by the policy owner but that would (typically) require that the insured go through new underwriting. Another example of flexible death benefit is the ability to choose option A or option B death benefits - and to be able to change those options during the life of the insured. Option A is often referred to as a level death benefit. Generally speaking, the death benefit will remain level for the life of the insured and premiums are expected to be lower than policies with an Option B death benefit. Option B pays the face amount plus the cash value. If cash values grow over time, so would the death benefit which is payable to the insured's beneficiaries. If cash values decline, the death benefit would also decline. Presumably option B death benefit policies require greater premium than option A policies.
[edit] - Limited-pay

Another type of permanent insurance is Limited-pay life insurance, in which all the premiums are paid over a specified period after which no additional premiums are due to keep the policy in force. Common limited pay periods include 10-year, 20-year, and paid-up at age 65.
[edit] - Endowments Main article: Endowment policy

Endowments are policies in which the cash value built up inside the policy, equals the death benefit (face amount) at a certain age. The age this commences is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life or universal life because the premium paying period is shortened and the endowment date is earlier. In the United States, the Technical Corrections Act of 1988 tightened the rules on tax shelters (creating modified endowments). These follow tax rules as annuities and IRAs do. Endowment Insurance is paid out whether the insured lives or dies, after a specific period (e.g. 15 years) or a specific age (e.g. 65).
[edit] - Accidental Death

Accidental death is a limited life insurance that is designed to cover the insured when they pass away due to an accident. Accidents include anything from an injury, but do not typically cover any deaths resulting from health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurances. It is also very commonly offered as "accidental death and dismemberment insurance", also known as an AD&D policy. In an AD&D policy, benefits are available not only for accidental death, but also for loss of limbs or bodily functions such as sight and hearing, etc.

Accidental death and AD&D policies very rarely pay a benefit; either the cause of death is not covered, or the coverage is not maintained after the accident until death occurs. To be aware of what coverage they have, an insured should always review their policy for what it covers and what it excludes. Often, it does not cover an insured who puts themselves at risk in activities such as: parachuting, flying an airplane, professional sports, or involvement in a war (military or not). Also, some insurers will exclude death and injury caused by proximate causes due to (but not limited to) racing on wheels and mountaineering. Accidental death benefits can also be added to a standard life insurance policy as a rider. If this rider is purchased, the policy will generally pay double the face amount if the insured dies due to an accident. This used to be commonly referred to as a double indemnity coverage. In some cases, some companies may even offer a triple indemnity cover.

[edit] Related Life Insurance Products

Riders are modifications to the insurance policy added at the same time the policy is issued. These riders change the basic policy to provide some feature desired by the policy owner. A common rider is accidental death, which used to be commonly referred to as "double indemnity", which pays twice the amount of the policy face value if death results from accidental causes, as if both a full coverage policy and an accidental death policy were in effect on the insured. Another common rider is premium waiver, which waives future premiums if the insured becomes disabled. Joint life insurance is either a term or permanent policy insuring two or more lives with the proceeds payable on the first death or second death. Survivorship life: is a whole life policy insuring two lives with the proceeds payable on the second (later) death. Single premium whole life: is a policy with only one premium which is payable at the time the policy is issued. Modified whole life: is a whole life policy that charges smaller premiums for a specified period of time after which the premiums increase for the remainder of the policy. Group life insurance: is term insurance covering a group of people, usually employees of a company or members of a union or association. Individual proof of insurability is not normally a consideration in the underwriting. Rather, the underwriter considers the size and turnover of the group, and the financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection. Group life insurance often has a provision that a member exiting the group has the right to buy individual insurance coverage. Senior and preneed products: Insurance companies have in recent years developed products to offer to niche markets, most notably targeting the senior market to address needs of an aging population. Many companies offer policies tailored to the needs of senior applicants. These are often low to moderate face value whole life insurance policies, to allow a senior citizen

purchasing insurance at an older issue age an opportunity to buy affordable insurance. This may also be marketed as final expense insurance, and an agent or company may suggest (but not require) that the policy proceeds could be used for end-of-life expenses. Preneed (or prepaid) insurance policies: are whole life policies that, although available at any age, are usually offered to older applicants as well. This type of insurance is designed specifically to cover funeral expenses when the insured person dies. In many cases, the applicant signs a prefunded funeral arrangement with a funeral home at the time the policy is applied for. The death proceeds are then guaranteed to be directed first to the funeral services provider for payment of services rendered. Most contracts dictate that any excess proceeds will go either to the insured's estate or a designated beneficiary.

[edit] Investment policies

With-profits policies:
Main article: With-profits policy

Some policies allow the policyholder to participate in the profits of the insurance company these are with-profits policies. Other policies have no rights to participate in the profits of the company, these are non-profit policies. With-profits policies are used as a form of collective investment to achieve capital growth. Other policies offer a guaranteed return not dependent on the company's underlying investment performance; these are often referred to as without-profit policies which may be construed as a misnomer. Investment Bonds
Main article: Insurance bond

Pensions: Pensions are a form of life assurance. However, whilst basic life assurance, permanent health insurance and non-pensions annuity business includes an amount of mortality or morbidity risk for the insurer, for pensions there is a longevity risk. A pension fund will be built up throughout a person's working life. When the person retires, the pension will become in payment, and at some stage the pensioner will buy an annuity contract, which will guarantee a certain pay-out each month until death.

[edit] Annuities
Main article: Life annuity

An annuity is a contract with an insurance company whereby the insured pays an initial premium or premiums into a tax-deferred account, which pays out a sum at pre-determined intervals.

There are two periods: the accumulation (when payments are paid into the account) and the annuitization (when the insurance company pays out). IRS rules restrict how you take money out of an annuity. Distributions may be taxable and/or penalized.

[edit] Tax and life insurance

[edit] Taxation of life insurance in the United States

Premiums paid by the policy owner are normally not deductible for federal and state income tax purposes. Proceeds paid by the insurer upon death of the insured are not included in gross income for federal and state income tax purposes;[9] however, if the proceeds are included in the "estate" of the deceased, it is likely they will be subject to federal and state estate and inheritance tax. Cash value increases within the policy are not subject to income taxes unless certain events occur. For this reason, insurance policies can be a legal and legitimate tax shelter wherein savings can increase without taxation until the owner withdraws the money from the policy. On flexible-premium policies, large deposits of premium could cause the contract to be considered a "Modified Endowment Contract" by the Internal Revenue Service (IRS), which negates many of the tax advantages associated with life insurance. The insurance company, in most cases, will inform the policy owner of this danger before applying their premium. The tax ramifications of life insurance are complex. The policy owner would be well advised to carefully consider them. As always, the United States Congress or the state legislatures can change the tax laws at any time.
[edit] Taxation of life assurance in the United Kingdom

Premiums are not usually allowable against income tax or corporation tax, however qualifying policies issued prior to 14 March 1984 do still attract LAPR (Life Assurance Premium Relief) at 15% (with the net premium being collected from the policyholder). Non-investment life policies do not normally attract either income tax or capital gains tax on claim. If the policy has as investment element such as an endowment policy, whole of life policy or an investment bond then the tax treatment is determined by the qualifying status of the policy. Qualifying status is determined at the outset of the policy if the contract meets certain criteria. Essentially, long term contracts (10 years plus) tend to be qualifying policies and the proceeds are free from income tax and capital gains tax. Single premium contracts and those run for a short term are subject to income tax depending upon your marginal rate in the year you make a gain. All (UK) insurers pay a special rate of corporation tax on the profits from their life book; this is deemed as meeting the lower rate (20% in 200506) liability for policyholders. Therefore a policyholder who is a higher rate taxpayer (40% in 2005-06), or becomes one through the transaction, must pay tax on the gain at the difference between the higher and the lower rate. This gain is reduced by applying a calculation called top-slicing based on the number of years

the policy has been held. Although this is complicated, the taxation of life assurance based investment contracts may be beneficial compared to alternative equity-based collective investment schemes (unit trusts, investment trusts and OEICs). One feature which especially favors investment bonds is the '5% cumulative allowance' the ability to draw 5% of the original investment amount each policy year without being subject to any taxation on the amount withdrawn. If not used in one year, the 5% allowance can roll over into future years, subject to a maximum tax deferred withdrawal of 100% of the premiums payable. The withdrawal is deemed by the HMRC (Her Majesty's Revenue and Customs) to be a payment of capital and therefore the tax liability is deferred until maturity or surrender of the policy. This is an especially useful tax planning tool for higher rate taxpayers who expect to become basic rate taxpayers at some predictable point in the future (e.g. retirement), as at this point the deferred tax liability will not result in tax being due. The proceeds of a life policy will be included in the estate for death duty (in the UK, inheritance tax (IHT)) purposes, except that policies written in trust may fall outside the estate. Trust law and taxation of trusts can be complicated, so any individual intending to use trusts for tax planning would usually seek professional advice from an Independent Financial Adviser (IFA) and/or a solicitor.
[edit] Pension Term Assurance

Although available before April 2006, from this date pension term assurance became widely available in the UK. Most UK product providers adopted the name "life insurance with tax relief" for the product. Pension term assurance is effectively normal term life assurance with tax relief on the premiums. All premiums are paid net of basic rate tax at 22%, and higher rate tax payers can gain an extra 18% tax relief via their tax return. Although not suitable for all, PTA briefly became one of the most common forms of life assurance sold in the UK until the Chancellor, Gordon Brown, announced the withdrawal of the scheme in his pre-budget announcement on 6 December 2006. The tax relief ceased to be available to new policies transacted after 6 December 2006, however, existing policies have been allowed to enjoy tax relief so far.

[edit] History
Main article: History of insurance

Insurance began as a way of reducing the risk of traders, as early as 2000 BC in China and 1750 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in 17th century England, originally as insurance for traders:[10] merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London. The first society to sell life insurance was the Amicable Society for a Perpetual Assurance Office. The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late

1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation.
[edit] Market trends

Life insurance premiums written in 2005

According to a study by Swiss Re, the EU was the largest market for life insurance premiums written in 2005 followed by the USA and Japan.

[edit] Stranger Originated Life Insurance

Stranger Originated Life Insurance or STOLI is a life insurance policy that is held or financed by a person who has no relationship to the insured person. Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be lessened or eliminated in the event of the insured person's death. STOLI has often been used as an investment technique whereby investors will encourage someone (usually an elderly person) to purchase life insurance and name the investors as the beneficiary of the policy. This undermines the primary purpose of life insurance as the investors have no financial loss that would occur if the insured person were to die. In some jurisdictions, there are laws to discourage or prevent STOLI.

[edit] Criticism
Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used in cases of exploitation and fraud. In the case of life insurance, there is a motivation to purchase a life insurance policy, particularly if the face value is substantial, and then kill the insured. Usually, the larger the claim, and/or the more serious the incident, the larger and more intense will be the number of

investigative lawyers, consisting in police and insurer investigation, eventually also loss adjusters hired by the insurers to work independently.[11] The television series Forensic Files has included episodes that feature this scenario. There was also a documented case in 2006, where two elderly women are accused of taking in homeless men and assisting them. As part of their assistance, they took out life insurance on the men. After the contestability period ended on the policies (most life contracts have a standard contestability period of two years), the women are alleged to have had the men killed via hit-and-run car crashes.[12] Recently, viatical settlements have created problems for life insurance carriers. 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 policy holders will seek to redeem the cash value of their insurance policies before death. They also 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. Likewise, these policies are guaranteed losses from the insurers' perspective.

Max India Limited is a multi-business corporate, driven by the spirit of enterprise and focused on people and service oriented businesses. The Companys vision is to be one of Indias most admired corporates for Service Excellence. It Protects Life through its Life Insurance subsidiary Max New York Life, a joint venture between Max India and New York Life, a Fortune 100 company; Cares for Life through its Healthcare company, Max Healthcare, a subsidiary of Max India Limited; Enhances Life through its Health Insurance company, Max Bupa Health Insurance, a joint venture between Max India and Bupa Finance Plc., UK which is set to launch after statutory approvals; and Improves Life through its Clinical Research business, Max Neeman, a fully owned subsidiary of Max India. From its past, Max India continues its interest in manufacture of Speciality Products for the packaging industry. Max India Groups consolidated turnover for half year ended Sept 09 was Rs. 4166 crore. The consolidated operating revenue was Rs. 2543 Crore, a growth of 23% over the same period last year. The Group is on a high growth path, with over 700 offices across around 400 locations in the Country and with people strength of 100,000+ persons as on 30 th Sept 2009. Key Subsidiaries Max New York Life is a joint venture between Max India Ltd. and New York Life, a Fortune 100 company. MNYL, incorporated in 2000, is one of Indias leading private life insurance

companies. The Company offers both individual and group life insurance solutions. It has established a wide distribution network across India. Through its wide network of highly competent life insurance agent advisors and flexible product solutions, MNYL is creating a partnership for life with its customers in India to help them meet their life stage needs. Max Healthcare is the country's first comprehensive provider of standardized, seamless and world-class healthcare services. It is committed to the highest standards of medical and service excellence, patient care, scientific and medical education. MHC operates eight centers in Delhi & NCR, offering services in over 30 medical disciplines. MHC has state of the art tertiary care facilities at Saket in South Delhi, secondary care hospitals at Pitampura, Patparganj, Gurgaon and Noida and an out patient facility, the Max Medcentre and a Speciality centre focused on Eye and Dental care at Panchsheel Park. The tertiary care hospitals at Saket include Max Devki Devi Heart & Vascular Institute, a Centre of Excellence in cardiac services and the Max Super Speciality Hospital, a super speciality facility in Orthopaedics & Joint Replacement, Neurosciences, Paediatrics, Obstetrics & Gynaecology, Aesthetic & Reconstructive Plastic Surgery and Internal Medicine. In addition, it has an Institute of Allied Medical Services where it provides General and Laparoscopic surgery, Urology, Eye & ENT, Nephrology, Dermatology, Department of Mental Health & Behavioural Sciences amongst others. MHC has collaboration with Singapore General Hospital in the areas of medical practices, nursing, paramedical, research and training. Max Bupa Health Insurance Limited is a joint venture between Max India Limited, a $1.5 billion multi-business corporate in the business of life and the Bupa Group, a leading international healthcare company with a legacy of providing specialized healthcare services for over 60 years. The companys vision is to become the most admired health insurance company in India with customer first culture as the key. With a mission to help families live healthier, more successful lives and be a healthcare partner providing expertise for life, Max Bupa aims to deliver high quality health insurance and ensure consistent customer experience. Max Neeman Medical International is a Clinical Research services provider offering services across the value chain of new drug development to a growing list of Pharmaceutical, Biotech and Clinical Research clients, in India and abroad. MNMI continues to focus on developing alliances with mid sized pharma and biotech companies to transition their drug development work to India. It has an employee base of 200 and five Regional offices in India & one business development office in USA. Max Speciality Products specializes in manufacturing of wide range of sophisticated barrier and packaging films. The BOPP division of MSP has an installed capacity of 29,000 tons per annum. MSPs leather finishing foil business division manufactures a range of leather finishing and laminating foils. New York Life Insurance Company,(www.newyorklife.com) a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States and one of the largest life

insurers in the world. Headquartered in New York City, New York Lifes family of companies offer life insurance, annuities and long-term care insurance. New York Life Investment Management LLC provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds. The mission of New York Life is to maintain its superior 'financial strength', adhere to the highest standards of 'integrity' and demonstrate 'humanity' by treating its customers, agents and employees with compassion, consideration and respect. New York Life is one of the largest and strongest life insurance companies in the world with more than USD$215 billion assets under management and has received among the highest ratings for financial strength from the life insurance industry's principal rating agencies: A.M. Best (AA+), Standard & Poor's (AA+), Moody's (Aa1), Fitch (AAA). According to Moody's, "New York Life's rating reflects the company's good quality investment portfolio, ample liquidity, and sound capitalization, as well as the good growth potential of its international business. As a leader in the insurance industry, New York Life continues to bring to its operations new management concepts, advanced technologies, new distribution and training systems and innovative insurance products.

Achievements and Awards

Some of the Industry Firsts
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First company to provide Freelook period of 15 days to the customer. This was later made mandatory by the regulator First company to start toll free line for agent services First and the only life insurance company in India to implement Lean methodology of service excellence in service industry First life insurance company in India to provide various services to the agents and customers over phone First Indian life insurance company to start service center at the regional level

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First life insurance company in India to receive ISO 9001:2000 certification First life insurance company to be awarded CII-EXIM Bank commendation certificate for Strong Commitment to Excel.

Awards
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Outlook Money survey ranked MNYL No.1 in Slow, Medium and Quick fund categories BT Mercer Ranked No7 in the Best companies to Work For Awarded the Gallup Great Work Place Award 2009 CII Exim Bank Commendation Certificate for Business Excellence 2008 & 2009 Received Best Six Sigma Project award at 6th CII National Six Sigma conventions 2009. Recognized as a Superbrand, 2009 - 2010. Recipient of 2008 CIO 100 Award for technology implementation Golden Peacock Award for Innovation 2008 Among the top 25 companies to work for in India, according to Businessworld 2003 Great Workplaces of India Among the top five most respected insurance companies in India as per Businessworld 2004 & 2006 survey Won Indo-American Corporate Excellence Award for Best Indo-US company in Financial Services Category in 2006 Received Best Six Sigma Project award at Sakal Six Sigma Excellence Awards 2006 Among top 3 in Asia Life Insurance Company of the Year Award 2007 instituted by Asia Insurance Review Received the Amity Corporate Excellence Award 2007 Received the Outlook Money Award for being among the best new insurers in the country. Max New York Life bags the Asia Insurance Industry Innovation of the Year Award 2009.

Board Of Directors
Mr. Analjit Singh Chairman, Mr. Analjit Singh

Max New York Life Insurance Mr. Anuroop (Tony) Singh Vice Chairman, Max New York Life Insurance Mr. Rajesh Sud CEO & Managing Director, Max New York Life Insurance Mr. Rajit Mehta Executive Director and Chief Operating Officer, Max New York Life Insurance Mr. William Beaty Director, Max New York Life Insurance Mr. Richard L. Mucci Director, Max New York Life Insurance Dr. Omkar Goswami Director, Max New York Life Insurance Ms. Marielle Theron Director, Max New York Life Insurance Mr. Leo Puri Director, Max New York Life Insurance

Mr. Analjit Singh is the Founder & Chairman of Max India Limited, Chairman of Max New York Life Insurance Company Limited; Max Healthcare Institute Limited and Max Bupa Health Insurance Company Chairman, Max New York Limited. He has been the driving force Life Insurance behind the Max India Groups sustained growth and success since the mid 80s. A self made entrepreneur, Mr. Analjit Singh has been leading the charge of reinventing and restructuring the Max India Group with a vision to be amongst Indias most admired companies for Service Excellence. Today, Max India Limited is a multi-business corporate, focused on People and Service-oriented Businesses of Life. Max India Group is present in the areas of Life Insurance (Protecting Life) through Max New York Life Insurance, a Joint Venture with a Fortune 100 company New York Life; Healthcare (Caring for Life) through Max Healthcare; Health Insurance (Enhancing Life) through Max Bupa Health Insurance; a Joint Venture with Bupa Finance Plc U.K. Clinical Research (Improving Life) through Max Neeman Medical International; BoPP & Speciality Foils manufacturing through its division Max Speciality Films. Max India Groups turnover for Calendar Year 2010 was over INR 78,360 million with a customer base of 4.4 million. The total investment in various businesses at the end of Year 2010 stood at INR 22,500 million. The Group has over 400 offices across India; with people strength of over 73,000. Recognizing Mr. Analjit Singhs contribution towards building India Inc., the Indian Government has recently conferred him with the prestigious Padma Bhushan Award, one of Indias highest civilian honors. As one of Indias leading business-persons, Mr. Analjit Singh is a Member of the Prime Ministers Joint Indo-US CEOs Forum. He is the non-executive Chairman of Indus Towers, Indias leading Shared Telecom Infrastructure Services Company. He is a Director on the board of several leading Indian companies such as Industrial Development Bank of India (IDBI Ltd.), Vodafone Essar, Tata Tea and Hero Honda Motors. He is also the Vice Chairman of one of

Indias leading industry Associations, Assocham. Mr. Analjit Singh has always taken keen interest in enhancing Indias academic excellence. He is currently an Executive Board Member of the Board of Governors, Indian School of Business, Hyderabad, where he is jointly funding a new campus at Mohali, Punjab and actively facilitating it as the Chairman, Mohali Campus Advisory Board, ISB. In addition he is the Chairman, Board of Governors, The Doon School, Dehradun. Mr. Analjit Singh is actively involved in social service, through his role as the Chairman and Chief Patron of Max India Foundation (MIF), the Social Service arm of Max India Group. Committed to fostering an inclusive society, MIF spearheads the CSR initiatives of the various Max India Group companies and also partners with several reputable NGOs such as SOS Childrens Village, Manav Seva Sannidhi, CanSupport and Chinmaya Mission. The Foundations main focus areas are:
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Providing improved access to quality healthcare for underprivileged, particularly children. Creating awareness on health-related issues such as womens health, cancer, cardiovascular diseases and immunisation of children. Improving awareness of environmental issues with a view to supporting a sustainable and eco-friendly environment.

He is also the Life Chairman, Bhai Mohan Singh Foundation and Member, Governing Board of Bharti Foundation. Mr. Analjit Singh the Consul General (Honorary) of the Republic of San Marino in India. Senator Hillary Clinton, on behalf of The Indian American Center for Political Awareness (IACPA), awarded Mr. Analjit Singh for his outstanding achievement in presenting the international community with an understanding of a modern and vibrant India. The IACPA has particularly lauded his efforts in forging several successful Joint Ventures with leading American

companies and promoting business ties with the US. Mr. Analjit Singh is an alumnus of Doon School, Dehradun; Shriram College of Commerce, University of Delhi; School of Management and the Graduate School of Management, Boston University, Boston, USA. He is married and has three children.

What We Do

We make a living by what we get, but we make a life by what we give. Winston Churchill Corporate Social Responsibility is largely defined as a commitment to behave ethically and contribute to economic development while improving the quality of life of our workforce and their families as well as the local community at large. Max New York Life Insurance believes that as a corporate it has a responsibility to engage with the society it operates in. This engagement should go beyond providing right products for their needs and being ethical and honest in our business practices. Max New York Life Insurance believes in caring for the society and has decided to focus on providing a safe and secure future to the children in the age group 0-12 years. The company works closely with Max India Foundation, an independent social service organization of Max India Group. The company has taken up immunization as its societal agenda to ensure protection against major ailments for the next generation of the country. The companys immunization program has provides immunization shots to children through immunization camps across the country. The Immunization Program covers vaccines like BCG, Hepatitis B vaccine, Polio drops, DPT, D Tap, Measles vaccine, MMR, Typhoid, dT and TT. Since July 2008, when the immunization program was initiated, Max New York Life Insurance has provided vaccines to over 10,000 children in around 60 locations. In 2009, the first full year of immunization program, Max New York Life provided 13,486 immunization shots to 5,155 children through

109 camps. Max New York Life Insurance and Max India Foundation along with Manav Sewa Sanidhi also organizes artificial limbs and polio caliper camps. Through each camp beneficiaries are provided artificial limbs or polio calipers. Volunteers from Max New York Life help in creating awareness, manage registration and provide help during the week long camp where the patients stay till the time they could independently move. In each such camp more than 350 beneficiaries are provided artificial limbs. The company volunteers also actively participate in health camps organized by Max India Foundation where patients are provided health advise by a team of doctors from Max Healthcare. During 2009, Max India Foundation organized 15 health check up and awareness camps benefiting 10,196 people. "The opportunity to serve... is grace. To make a difference in someone's life... a humble duty."- Analjit Singh, Chairman, Max India Group

Financial Highlights for the year ended March 31, 2011 are as under:
Particulars(Rs Crores)

Current Year (2010-2011)

Previous Year (2009-2010)

Financial Performance New Business Premium(First Year Premium and Single Premium) Adjusted First Year Premium Renewal Premium Commision Expenses Operating Expenses Shareholder Profit/(Loss) After Tax Key Business Parameter Solvency Capital Ratio Share Capital Assets Under Management No. Of Policies In-Force('000s) Sum Assured In-Force

2,061 1,803 3,751 540 1,653 194 365% 1,841 13,836 3,368 154,687

1,849 1,668 3,011 421 1,615 (21) 322% 1,839 10,116 2,985 123,288

Max New York life Insurance Company Limited (MNYL)

Max New York Life Insurance Company, established in 2000, is one of the most admired private insurance company. Max New York is a joint venture between Max India India s multi business corporate and New York Life International New York Life, US based Insurance Company. Max New York Life is the first life insurance company to be awarded 9001:2000 ISO certification. Product Portfolio:

Max New York has variety of products covering Child Plans, Retirement Plans, Health Plans and savings & investment plans. Retirement Plan: The cost of living is experiencing fast steady rise which makes retirement plan an important financial decision. Better known as Pension plan, this plan takes care of financial needs after retirement by investing a part of your savings for limited period. Pension plan provides steady income after retirement and takes care of daily needs. The pension plan offered by Max New York Life is Life Partner Plus. Child Plan: Parenthood brings happy times as well as responsibilities. Child Plan is a plan specifically designed to take care of financial needs of your child. Child plan provides with necessary funds that will take care of child s education, marriage etc. By investing small portion of your savings you secure the financial end of your child. Child plans of Max New York Life are called Life Shiksha Plus II and Life Smart Bond. Term Plan: A risk plan which provides comprehensive cover for your family in the unfortunate event of untimely demise. A term life insurance plan provides good cover at relatively nominal cost and has no survival benefits. Max New York Life term plans are Platinum Protect and Lifeline Safety Net. Investment Plan: Popularly known as ULIP, an investment plan invests part of your savings in equity or debt market as per your preference. The objective of investment plan is to give you returns which easily beat the rising costs since the usual returns in a bank are extremely low. ULIP s offered by Max New York Life are Max New York Life Shubh Invest, Whole Life (Par), 20 year Endowment (Par), Endowment to Age 60 (Par), Life Gain Plus25 (Par), Life Pay Money Back, Life Gain Endowment, Max New York Life Smart Bond, Max Mangal, Max Vriksha and Bonus Builder. Max recently launched Flexi Fortune which offers more flexibility in choosing Sum Assured and premium payment term.

Health Plan: Slightly different from health insurance, health plan provides cover for surgery costs, critical illness. A lump sum is paid irrespective of actual hospital bill. Lifeline Medi Cash Plus, Lifeline Safety Net, Max New York Lifeline Healthy Family and Lifeline Wellness Plus are Max New York s health plan. Distribution Network:

Max New York Life has multi-level distribution network with over 650 branches and 70,000 agents. Financial Information:

The total premium earned for the half year ended September 30, 2010 was Rs 26,653 million. The profit after tax for the same period is Rs 654 million. Marketing Campaigns:

Max New York Life launched its initial campaigns focusing on the aspect of Max heritage, quality advice and the expertise offered by Max financial consultants. The recent campaign of Max New York Life revolved on the theme of Karo zyaada ka iraada encouraging youngsters to be more ambitious with Max New York being their partner. Max New York also was exclusive life insurance sponsor with Indian Premier League (IPL) - biggest domestic cricket event for shorter format of the game. Max New York also initiated long term parent-child nurturing program (igenius.org) which has many events for children to participate in. Distinctions:

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Outlook Money survey ranked MNYL No.1 in Slow, Medium and Quick fund categories BT Mercer Ranked No7 in the Best companies to Work For Awarded the Gallup Great Work Place Award 2009 CII Exim Bank Commendation Certificate for Business Excellence 2008 & 2009 Received Best Six Sigma Project award at 6th CII National Six Sigma conventions 2009. Recipient of 2008 CIO 100 Award for technology implementation Golden Peacock Award for Innovation 2008

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Among the top 25 companies to work for in India, according to Business world 2003 Great Workplaces of India Among the top five most respected insurance companies in India as per Business world 2004 & 2006 survey Won Indo-American Corporate Excellence Award for Best Indo-US company in Financial Services Category in 2006

Management:

Rajesh Sud is the MD & CEO of Max New York Life.

Sunil Kakar is the CFO of Max New York Life. John Poole is the Appointed Actuary of Max New York Life. Reach Max New York Life:

Email: service.helpdesk@maxnewyorklife.com

Telephone: 1800 200 5577 SMS LIFE to 54242 Max New York Life Product Table:

Retirement/Pension Plan Child Plan Child Plan Term Plan Term Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan

Life Partner Plus Max New York Life Shiksha Plus II Max New York Life Smart Bond Max New York Platinum Protect Lifeline Safety Net Max Flexi Fortune Max New York Life Shubh Invest Whole Life (Par)

Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Health Plan Health Plan Health Plan Health Plan

20 year Endowment (Par) Endowment to Age 60 (Par) Life Gain Plus25 (Par) Life Pay Money Back Life Gain Endowment Max New York Life SMART Bond Max Mangal Max Vriksha Bonus Builder Lifeline Medi Cash Plus Lifeline Safety Net Max New York Lifeline Healthy Family Lifeline Wellness Plus