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DEFINING INSURANCE “A Contract (Agreement as per LAW) between the INSURER (The Insurance Company) and the INSURED (Customer), wherein the Insurer Promises to pay a Lump sum on the happening of an Event”. The consideration for payment is only of the insurer.
Types of Insurance
• Insurance in India can be classified into two broad categories: • LIFE INSURANCE • NON-LIFE OR GENERAL INSURANCE
• Every possible adverse consequence which constitutes a life risk that requires to be taken care of. constitutes a need for Life Insurance.What is Life Insurance? • LIFE INSURANCE – Life Insurance is intended to mitigate the adverse financial consequences that may follow because a person does not live long enough or because he lives long enough. .
Only Survival Benefit.No death Benefit » If the Insured dies within the specified period no benefit is paid. namely Pure Term Insurance & Pure Endowment. fall in between these two. – PURE ENDOWMENT PLAN. . • All the insurance plans like Money Back or Children's Plans you might have heard of.Only Death Benefit-No Survival Benefit » If the Insured does not die within the plan period no benefit is paid to the insured.Basis of Insurance Plans • LIFE INSURANCE plans can be broadly divided into 2 types : – PURE TERM INSURANCE PLAN.
Natural Perils. Cashless Hospitalization policy Vehicle Insurance-Against Accidental Damage. Liability Insurance Marine Insurance Ornamental Insurance.General Insurance or Non Life Insurance Health Insurance-Mediclaim. Act of Terrorism. Third Part Injury Fire Insurance-Commercial Shop Insurance-Against Fire. Robbery. Floods. Floods. etc. Natural Perils. Theft. Robbery. Vandalism. Vandalism. Home /Property Insurance-Against Fire. etc. etc Rural Insurance-Crop Insurance Social Insurance Projects and Engineering Insurance Cow or cattle insurance . Act of Terrorism.
Major Players in India Today LIFE INSURANCE COMPANIES Life Insurance Corporation ICICI Prudential Life Insurance Bajaj Allianz Metlife Insurance Max New York Life Aviva OM Kotak Mahindra TATA AIG HDFC Standard Birla Sunlife Bharti-Axa Life Insurance GENERAL INSURANCE COMPANIES New India Assurance National Insurance Company Ltd Oriental Life Insurance United India Insurance Tata AIG IFFKO-Tokio Bajaj Allianz General Insurance ICICI Lombard General Insurance Cholamandalam .
DISMEMEBERMENT THRU AN ACCIDENT OR PERMANENT TOTAL DISABILITY BECAUSE OF AN ACCIDENT OR DISEASE. Typically A PERSON CANNOT AMASS THE AMOUNT REQUIRED THRU HIS LIFE’S EARNINGS! IT TAKES CARE OF CRITICAL ILLNESSES DURING ONE’s LIFETIME. ◦ CHILDRENS MARRIAGE. ETC IN THE EVENT OF HIS UNTIMELY DEATH. ◦ A PERSON CAN PROVIDE FOR HIS FAMILY’s daily needs ◦ CHILDRENS EDUCATION. . LI CAN HELP IN BUILDING A TIDY ANNUITY AFTER RETIREMENT.WHAT ARE THE ADVANTAGES OF LIFE INSURANCE? FOR A SMALL PREMIUM.
15K PM Total HHE=Rs.X MEETS WITH AN ACCIDENT AND DIES ON THE SPOT…….50K PM.833/.5K PM Total=Rs. 415 Rent for 3BHK=Rs.X would get an insurance of Rs.10K or monthly premium of Rs.10K PM Expenses=Rs35K.0.15K PM HH Expenses=Rs. Not Bad! Huh! Then why doesn’t everyone buy it? • • • • • • • MR. X live in in a 3 BHK apartment in BBSR with their 2 kids Master Y and Miss Z. MR. Mr. Savings=Rs.35.daily Mr.40K PM. Mrs.PA SUM ASSURED: RS.10.10K PM Kids SE=Rs.X’S AGE: 30 YEARS TERM: 40 YEARS • For an annual premium of Rs.415 /-PM or <6 K PA • DO YOU GET THE PICTURE NOW!!! .000/.50 LAKHS MR.X’s salary or monthly income is Rs.X is a home maker. Savings=Rs..5 crores.10K PM Other miscellaneous=Rs.10K PM or Rs.50Lakhs or Rs.LIFE Insurance Real Life EXAMPLE • • • • • • • • • • • • Mr & Mrs.GULP! Widow X get Rs. Family’ s income =Rs.10K PM School Expenses=Rs.X BUYS A TERM PLAN PREMIUM: RS.27/.or Rs.50Lakhs and puts it in a FD at the current rate of 8. Rent=Rs.5% PA.120K PA.
Qualification for selling insurance in Metros is 12th Class Pass.Why Life Insurance is so TOUGH to sell? Personal Opinion • • People in India are ignorant. Rural areas is 10th Pass. Most insurance policies require medical check which is done free of cost……yet people are not inclined to the right thing. • • • • • • • • . so customers do not take them seriously and play around with them.25000 crores from unclaimed insurance. to is rupiyon ka kya faida”. They go into begging mode rather than solemn advice while speaking to customers. LIC has secret reserves of Rs. 95% People in India are superstitious fools-Justice Katju. People in India are v. the agent will get a commission (which incidentally is the agent’s income)!!! Indian customers are convinced that the agent selling LI is cheating by earning a commission!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! And Indians (the most virtuous race under sun will not stoop to buy insurance from cheats!!!!! Other Indian’s philosophize ”jab jaan hi na rahi.concerned that if they purchase insurance from an agent. Its reasonable to expect ignorant people not to buy a life saver or a family saver (at a nominal cost )and save their loved ones from utter ruin or destruction!!! Insurance sales persons do not know how to sell insurance. You selfish pig think about your widow and children!!! Do you expect your wife to become a whore and kids beggars on the mean streets!!! LIC screwed up the scene for 40 years by making widows and others run around for justifiable claims.
How much Insurance do you have or need? • As per a thumb rule. if your age is between: • 0-35 20 times annual income • 36-50 15 times annual Income • Above 50 years 10 times annual income • This question can also be answered with the help of the following 2 approaches – Human Life Value Concept – Capital Needs Analysis .
16.000 WHAT IS THE PERSONS HLV AND WHAT AMT OF LIFE INSURANCE SHOULD HE TAKE? ANS = 26.000-Amount of Insurance.84. DISABILITY AND SERVICE ARE UNCERTAIN. FOR PRACTICAL PURPOSES: THUMB RULE FOR LIFE INSURANCE: LIFE INSURANCE COVER: UPTO 35 YEARS – 20 TIMES ANNUAL INCOME 36-50 YEARS .HUMAN LIFE VALUE CONCEPT WHAT IS HUMAN LIFE WORTH? UNLIMITED. SERVICE LEFT 20 YEARS HLV = 84. . 80. Problem: Age = 25 Retirement age = 60 years PI = 100000 PE=25.000 X 20 years =Rs.000 BALANCE IS THE PERSONS CONTRIBUTION TO HIS FAMILY ASSUMING THE PERSONS AGE AS 40 YEARS.25. 120.000 PERSONAL ANNUAL EXPENSES =Rs.000 THIS CONCEPT WAS NOT ACCEPTED AS DEATH. 36000 PI – PE =Rs.15 TIMES ANNUAL INCOME ABOVE 50 YEARS .10 TIMES AI EXAMPLE PRESENT ANNUAL INCOME = Rs.
000 Sons education fund =4 LAKHS Daughters Marriage Expenses =4 lakhs Savings /Assets ◦ ◦ ◦ ◦ FD in Bank-2 lakhs Jewelry-1 lakh One 2 wheeler One single storey house Interest rate on FD 6% for 2 lakhs=12000 pa Annual expenses=60.000 – 12. SON=10 YEARS.DREAMS PROSPECTS BACKGROUND AGE=44 YEARS.5000 ANNUAL EXP =Rs.000 Capital Needs= Annual Expenses times service left+ Sons Edun+ Daughters Marriage=Rs.48.48.000 X 16 years=8 lakhs+ 4 lakhs+4 Lakhs = 16 Lakhs Insurance required = 16 Lakhs . WIFE=40.000 =Rs. DAUGHTER=8 YEARS MONTHLY HOUSEHOLD EXPENSES –Rs.CAPITAL NEEDS ANALYSIS INCOME – FAMILY .60.
TYPES OF L. INSURANCE POLICIES • TERM LI • WHOLE LIFE LI • MONEY BACK LI • PENSION PLANS • CHILDREN PLANS • ENDOWMENT PLANS .
2 MODES OF LIFE INSURANCE AVAILABLE IN INDIA • TRADITIONAL Sold more in rural areas – SUM ASSURED + BONUS MODEL – BONUS IS DECLARED BY A COMPANY – DIFFERS FROM COMPANY TO COMPANY – SOLD THRU AGENTS • UNIT LINKED LIFE INSURANCE PLANS Sold more in Urban areas – DIRECT AGENT/ADVISOR/CONSULTANT SALES/BROKERAGE – BANCASSSURANCE – INTERNET .
3 MUST BUY INSURANCE PLANS for every intelligent & productive individuals in India…in the world!!! • TERM LIFE PLAN PROVIDING SAFETY N SECURITY TO A FAMILY IN THE EVENT OF DEATH OF THE SOLE EARNING MEMBER • PENSION PLAN – PROVIDING INCOME FOR LIVING TOO LONG. – A STEADY INCOME WHEN A PERSON RETIRES. – TAKES CARE OF INFLATION • WHOLE LIFE PLAN WITH ALL RIDER BENEFITS AND SAVINGS .
Riders are additional benefits which any individual can opt for. The Riders in a whole life plan are: Accidental Death & Dismemberment(AD&D) Critical Illness and Permanent Total Disability(CI&PTD) Hospital Cash Benefit . at a marginal extra cost.Whole Life Plan-ULIP This is an endowment Life Insurance plan which comes with Rider Benefits which are optional. These riders can be chosen at the time of submitting the proposal or at the beginning.
Accidental Death & Dismemberment (ADD) ADD is coverage from risk of death or dismemberment due to an ACCIDENT Amount payable is Twice the Sum assured in case death results from an accident. losing both hands. The complete Sum Assured shall be paid in case of DISMEMEBERMENT Dismemberment means partial disability resulting from an accident. i. etc.50 Lakhs . losing eyesight. Maximum Payable Under this Rider is Rs. losing one hand.e. losing legs.
Advantage is that a person does not need to be hospitalized in order to claim the SA. Can be claimed at the time of diagnosis of any of the categorized critical illnesses as mentioned in the brochure by the insurance company.e. when he becomes Permanently unable to carry out his normal duties. Maximum amount payable under this RIDER is 20 Lakhs . SA shall also be paid if the persons capability to work is impaired i.Critical Illness and Permanent Total Disability (CIPTD) Coverage against contracting a critical illness or becoming totally or permanently disabled due to a disease or accident. rather a diagnosis by a professional medical examiner certifying the existence of an illness is required.
540.Hospital Cash Benefit • The company will make fixed cash payments for each day of hospitalization. • Claim paid on production of bills of number of days stay in the hospital.3000 for ICU per day. • Cash of Rs.1000 for General Ward and Rs.000/-. • Maximum claim entertained is Rs. .
No survival benefit.TERM Insurance Plan • Only death benefit. • For a relatively small amount you can take a large insurance coverage. • You can take a term of 40 years or upto age of 70 whichever is earlier .
• The earlier you take a pension plan the less shall be the amount of premium you pay. • AP: Rs. no death benefit.2 crores .4lakhs • Fund Value:Rs.10.000 • Term 40 Years • Total premium paid=Rs.1.Pension Insurance Plan • Only survival benefit.
vision.ASSIGNMENT-2 • 1 Page write-up on History of Insurance in India • 1 page write-up on All types of Life Insurance Plans • 1 page write-up on All types of General Insurance Plans • 1 page write-up on IRDA. responsibilities. actions • .
15PM.Assignment-2 Output • Every student shall submit the write-ups to the PGP coordinator by 31st of January 2013 by 5. • No assignments shall be accepted after the deadline. .
More will be revealed…in Feb 2013 .Danke…………………………………………..
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