LIFE INSURANCE &

PRODUCTS

PRESENTED BY:
Pratik Modi
1

 Insurance

and Life Insurance in

different perspectives
Legal aspects of Life Insurance
business in India
Principles of insurance and their
applications to Life Insurance
Important types of Life Insurance
2

What Is Insurance ?
It

is a tool in the management of

risks a device through which the
risks faced by the individuals are
pooled together and thereby all
the members of pool will share the
losses suffered by a few
individuals.
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 Transferring

the risks from the individuals

to the pool reduction of the overall risk
faced by the pool
Social tool as a social safeguard against
the losses expected to be suffered due to
unexpected events by a few members of
the society
Commercial or legal tool where a third
party does this activity of pooling of risks
and sharing of losses with a commercial
interest
4

Kenneth Black (Jr.) and Harold Skipper (Jr.)

have defined insurance under two
different perspectives :
Economic Perspective Insurance is a
financial intermediation function by
which individuals exposed to a specified
contingency each contribute to a pool
from which covered events suffered by
participating individuals are paid.
Individuals purchase the right to collect
from the pool if the insured contingency
occurs. Insurance then is a contingent
claim contract on the pools assets.
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Legal Perspective
Insurance

is an agreement (the insurance

policy or insurance contracts), by which one
party, called the policy owner, pays a
stipulated consideration, called premium, to
the other party called Insurer in return for
which the insurer agrees to pay a defined
amount of money or provide a defined
service if a covered event occurs during the
policy term.
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What Is Life Insurance ?

It

is a contract in which the Insurer, in

consideration of a certain premium, either in
a lump sum or in any other periodical
payments, in return agrees to pay to the
assured, or to the person for whose benefit
the policy is taken, a stated sum of money
on the happening of a particular event
contingent on the duration of human life.

Essential Features :
It

is a contract relating to human life

The contract provides for payment of
lump sum money
The amount is paid at the expiration of
a certain period or on death of a
person.

In India, Life Insurance business is

defined under Section 2 (11) of
Insurance Act, 1938, which reads :

Life Insurance business means the

business of effecting contracts of
insurance upon human life, including any
contract whereby the payment of money
is assured on death (except death by
accident only) or the happening of any
contingency dependent upon human life
and any contract which is subject to
payment of premium for a term
dependent on human life and shall be
deemed to include the granting of :
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Disability and double or triple indemnity

accident benefits, if so provided in the
contract of insurance;
Annuities upon human life; and
Superannuation allowances and annuities
payable out of any fund applicable solely
to the relief and maintenance of persons
engaged or who have been engaged in any
particular profession, trade or employment
or of the dependents of such persons.
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The insurance contracts, which deal with

disability, accidental death alone, sickness
etc. are excluded from the purview of life
insurance.
However, life insurance contracts can have
benefits payable on the accidental death or
disability of the persons insured as
additional benefits on the basic life
insurance contracts.
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Essentials of a Valid Contract

Offer

and acceptance
Consensus ad idem
(meeting of the minds)
Parties competent to contract
Consideration
Legality of purpose
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Principles of Life Insurance

Special Features of Life Insurance Contracts
Insurable

Interest :

The object of insurance should be lawful.

The person proposing for insurance must
have interest in the continued life of the
insured and would suffer pecuniary loss if
the insured person dies. This is known as
Insurable Interest.

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 In Life Insurance the presence of insurable

interest is essential at the time of effecting
the Contract of Insurance.
If there is no insurable interest, the
contract becomes wagering and hence
illegal.
Every individual has unlimited insurable
interest on his/her life.
Husband has insurable interest on the life
of his wife and vice versa
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 The creditors have insurable interest on

the lives of debtors to the extent of
indebtedness.
Business partners have insurable interest
in the lives of other partners to the extent
of their financial interest in the
partnership
Employers have insurable interest in the
lives of employees who are key to the
profitability of the business.
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 Doctrine

of utmost good faith

In Life Insurance contracts, a very high

degree of good faith is required to exist
between the parties to the contract,
viz., the insurer and the insured. This is
called the principle of utmost good faith
(Uberrima fides)
It is the duty of the proposer to disclose
the material information for proper
assessment of risk by the insurer
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 All the required information for the

assessment of risk is known only to the
proposer and the insurer has no
knowledge of the risk
The proposer may not be having
technical knowledge about the insurance
products, the benefits, pricing aspects
etc. and hence will have to rely upon the
insurer to ensure that the terms of the
contract are fair and equitable.
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Doctrine of Adhesion
The

terms of the contract are

most of the times fixed by one
party (the insurer) and with
minor exceptions, must be
accepted or rejected in total by
the other party (the proposer).
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Principle of Indemnity
Insurance

contracts other than life

insurance contract are contracts of
indemnity in the sense that the amount
payable by the insurer in case of the
contingency stated in the policy occurring
is limited to the loss that the insured will
suffer.
The insurance contract promises to keep
the insured indemnified against the
financial loss that he would suffer on
account of the happening of the event.
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Main Types Of Life Insurance

Whole

Life Insurance

Intended to provide Life Insurance

protection over ones lifetime
provides for payment of the assured
amount upon the insureds death
regardless of when it occurs.

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 The

payment of assured sum is a

certainty; only the time of the payment
of the assured sum is an uncertainty
Ordinary Whole Life Insurance
Limited Payment Whole Life Insurance
Convertible Whole Life Insurance

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Endowment Insurance
Benefits

under the policy paid on the

death of the life insured during the
selected term or on his survival to the
end of the term.
Normal durations ranging from 10 to 30
years or more; shorter term policies
ranging from 3 to 10 years
Single premium endowment insurance
policies
Money Back or Cash Back or Anticipated
Endowment Insurance Policies
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Term Insurance
Insurance

protection for selected term only

in case the insured person dies during the
term, the benefits are payable.
In case of his survival till the end of selected
term, the policy normally expires without
any benefit becoming payable
May be regarded as temporary insurance
premium for term insurance is relatively low.

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Annuities
Series

of periodic payments

Annuity

provider (insurer) agrees to

pay the purchaser of annuity
(annuitant) a series of regular
periodical payments for a fixed period
or during someones life time.
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Group Life Insurance

There are groups of people who share

something in common and are
connected by some underlying
similarity like occupation, profession,
employment, social purposes or even
entertainment can have a similar
need for life insurance which can be
met by a single insurance contract.

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 These

categories of products
that cover the risk of a
contingency dependent on the
life of a group of persons,
come under the group life
insurance.
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Conventional Groups
Employer
Creditor

Employee Groups

Debtor Groups

Associations

of Self-employed
Professionals
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Non-conventional Groups
Co-operative

Societies

Trade

Unions
Welfare Associations
Non-government Organisations
Voluntary Associations
Charitable Trusts, etc.
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Life Insurance Products

Two groups viz.
Packaged Products
benefits under such products are predefined and customer has to choose the
plan that is closest to this requirement
Ability of the agent to explain the different
plans is important factor
Most of LICs products fall under this
category
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Non-packaged

Products

products with certain basic

features like Endowmnet or
Money-back. the customer to
choose as per his needs and
then expand it by rider benefits
accident cover, critical illness
cover, disability benefits,
hospitalisation cover etc.
cater to niche market and have
profit potential.
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(a)

(b)

Basic Elements :
Risk coverage to provide lump
sum amount to the family in the
event of untimely death of the
breadwinner Term Insurance or
Temporary Insurance.
Savings lump sum amount is
payable only if the insured
survives till the end of the selected
period; if death occurs during the
period of insurance, nothing is
payable Pure Endowment.
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Term

Insurance :

a contract for limited number of years

payment only if death occurs during
the term
low cost / high risk coverage
stricter underwriting rules and
restrictions
renewable feature and convertible
feature
increasing or decreasing Term
Insurance
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 Whole

Life Insurance

Risk coverage for the death of the insuredwhenever it may happen

No fixed term
Variations Pure Whole Life Premium payable
throughout the life of the insured till death. Risk
coverage for duration of life amount payable
on death
Limited Payment Whole life Premium payable
for limited / shorter period or till death if earlier
risk coverage throughout life
Premium rate is low than Term Insurance
Provide permanent protection at moderate cost
Convertible Whole Life Plan

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 Endowment

agrees

Assurance The insurer

to

pay the insurance money in the event of

death of the insured during endowment term
to pay the insurance money in the event of the
insured surviving till the end of the endowment
term

Economic concept decreasing term

assurance and increasing investment
Reserve value supplemented by Term
Insurance
Premium rates usually higher than Whole
Life Plan
Sound plan for various types of customers.
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Life Insurance Products In

India
Term

Insurance

Two-year temporary insurance

Convertible term insurance for 5-7 years option
to convert into limited payment whole life or
endowment assurance
Bima Sandesh Return of premium on survival
Bima Kiran Term insurance; Return of premium
on survival free insurance cover for 10 years to
the extent of 30% - 60% of the face value of
policy
Mortgage Redemption Assurance to cover
outstanding loan under house mortgage.

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Whole

Life Plans

Whole Life Policy premiums

payable for 35 years or age 80
years, whichever is later;
insurance money payable on death
Limited Payment Whole Life Policy
Convertible Whole Life Policy
Premiums payable upto age 70 of
the insured limited payment
option to covert at the end of 5
years into Endowment Plan
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Endowment Plans
Endowment

Assurance (with or without

profits)
Bhavishya Jeevan Policy (with profits) first 5
years premium are quite high from 6th year
scaled down to almost 1/3rd.
Jeevan Mitra (Double Cover or Triple Cover)
Jeevan Griha (Double Cover or Triple Cover)
Low cost without profit endowment
assurance face value paid on maturity
New Jan Raksha (with profits)
Jeevan Shree (without profits but with
guaranteed addition) limited premium
paying period keyman insurance
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Jeevan Pramukh
Asha Deep II (with profits) Endowment Plan with
riders to cover four serious illnesses viz. cancer,
paralytic stroke leading to permanent disability,
kidney failure (both kidneys), and cardiac bye-pass
surgery except 1st year 50% of S.A. premium
waiver annuity of 10% of S.A. till maturity
Balance 50% of S.A. on death or maturity with
bonus
Marriage Endowment or Education Annuity (with
profits) no immediate payment on death
payment in lumpsum in case of marriage
payment in half yearly instalments over 5 years in
Education Annuity from date of maturity only.
Money back plans

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Special Plans
For

Children Deferred Assurance Plans

New Children Deferred Assurance Plan
Jeevan Balya
Jeevan Kishore
Childrens Money Back Plan
Jeevan Anurag

For

Children

Disabled Children

Jeevan Adhar
Jeevan Vishwas
IT exemption upto Rs. 20,000/- on premium

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 Jeevan

Asha II

Endowment Assurance with medical benefit

rider
2% of face value paid every 2 year for
medical checkup
Reimbursement of expenses upto 20% to
50% of face value of policy for minor / major
surgeries
On death full S.A.
Joint

Life Policies

Jeevan Saathi
Jeevan Saritha benefit of joint life and last
survivorship annuity apart from lump sum
payment on death or maturity
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Unit Linked Insurance Plan

Bima

Plus Capital Market Linked

Insurance Plan
Premium has two parts
Risk

premium
Investment premium

Investment at the choice of policyholder

from three combinations viz.
Secured

fund (complete security)

Balanced fund (moderate risk)
Risk fund (high risk investments)
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 Investment

Pattern
Equity

Debt

Liquid

Secured

Not less than 10%

80 %

20 %

Balanced

Not less than 30%

80 %

20 %

Risk

Not less than 50%

75 %

25 %

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Policy

holder to select a

fund
Switch over twice during
the term subject to
minimum gap of 2 years
Cost of switching over 2%
of the current bid value of
the fund
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Life Insurance Products of

Private Companies
HDFC

Standard Life

Endowment Assurance Plan

Money Back Plan payment of cash lump sum
at 5 yearly intervals
Group Insurance Policy specified group for a
term of one year
Endowment

Assurance Plans

ICICI Pru Single Premium Bond savings with

life cover fixed term plan of 5 or 10 years
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 ICICI

Pru Save n Protect

Fixed term policy

Policyholder can accumulate funds for future
requirements on a regular basis i.e. Childrens
education, marriage etc.
Extended Term Assurance cover for 5 years for 50%
of S.A. without payment of premium

Add-Ons

or Riders

Option for additional benefits

accident

and disability benefit

critical illness benefit
major surgical assistance
level term assurance

During tenure of extended life cover, no rider benefit

available

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ICICI Pru Forever Life

Regular

income for life after prescribed

date
Life cover during the deferment period
Options
life time annuity
life annuity certain for 5, 10, 15 years
life annuity with return of purchase price
joint life, last survivor annuity

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 Add-Ons

chosen

or Riders one can be

Accident and Disability benefit

Major surgical assistance
Level Term Insurance

ICICI

Pru Cash Bank

Three-in-one combining savings,

liquidity and protection
Term of 15 or 20 years
Survival benefit at regular intervals
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 Add-ons or Riders
Accident

and Disability benefit

Critical illness benefit
Major surgical assistance
Level Term Insurance

Protection

Plans

The Pru Life Guard or Term Level

Assurance
Death

Risk Coverage
No maturity benefits in case of single
premium level term policy

Add-ons or Riders as in ICICI Pru Cash

Bank
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Birla Sun Life Insurance

Company Ltd.
Flexi

Save Plus Endowment Plan

Premium for a fixed duration or in a single

lump sum
Benefit of insurance cover as also investment
to help savings grow bonds / securities
Loan facility upto 90% of the total policy
value on payment of interest at fixed rate
Facility of withdrawal from 3rd policy
anniversary can close the plan earlier no
surrender charges after 4th year.
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Flexi

Plan

Cash Flow Money Back

fixed term policy with periodic

payback at fixed intervals
offers flexibility to choose
between the investment option,
automatic premium payment,
duration of the plan etc.
Other

benefits as in Flexi Save

Plus Endowment Plan
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Flexi

Life Line-Whole Life Plan

Higher return and security to

family
Members to keep paying
premium and enjoy the benefit
of savings and life insurance
Offers the flexibility to choose
the premium payment
investment option, duration etc.
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Bajaj Allianz Life Insurance Co.

Ltd.
Group Credit Care Plan (Employer Employee)
Group Term Insurance Scheme providing basic
life insurance protection to employees who have
taken loan from employer
Covering risk of outstanding loan in case of
premature death
One policy document to the employer
Accidental death benefit additional amount
equal to life cover granted total accident cover
limit 10 lacs
Accidental Permanent Total Disability Benefit
Payment of an amount equal to life cover granted
total accidental disability cover limit 10 lacs

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Group

Risk Care Plan

(Employer Employee)
Risk coverage
Life Insurance Benefit for all
members
One policy document to the
employer
Accidental Death Benefit
Accidental Permanent Total
Disability Benefits
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 Group

Credit Care Plan (Non

Employer Employee)
Group Term Insurance Scheme to
people having availed a loan from an
institution or co-operative
Covers risk of outstanding loan
One policy document to the institution
or co-operative
Facility of enhancement of cover by
adding accidental death benefit /
accidental permanent total disability
benefit.
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Group

Risk Care Plan (Non

Employer Employee)
Basic life insurance protection to
group members
Covers risk of death all members
of the scheme
One policy document to the group
policyholder
Facility of enhancement of cover
Accidental death benefit /
accidental permanent total
disability benefit.
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Term

Care Plan

Term Insurance Plan life

cover with return of premium
on maturity
Life insurance cover at low
cost
Two premium payment options
regular

premium payment
throughout the selected term
single premium payment
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 Option

to choose upto 5 additional

benefits
economy
Protect 3 in-built additional benefits
Accidental

death benefit
Accidental permanent total / partial disability
benefit
Waiver of premium benefit

Health
Critical

illness benefit
Hospital cash benefit

Total providing 5 in-built benefits of

Protect & Health.
57

Risk

Care Plan

a pure term insurance plan very

economical
offers cover at the lowest possible
cost
no survival benefit
Life

time Care Plan

a life time endowment plan with

profits
4 different plan type economy,
protect health and total plan
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Save

Care Plan

Endowment plan with profits

for a specified period to meet
planned expenditures like
education / wedding of
children
Comes in 4 types Economy
Single Premium Plan, Economy
Plan, Protect Plan, Health Plan
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Products In Overseas Market

Term

Insurance - for different specified

period
Renewable and non-renewable
Convertible and non-convertible

Two

other forms

Level Term Insurance provides specified

amount of coverage for the entire period
of policy
Decreasing Term Life Insurance
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Universal Life Insurance

Variation

of whole life, the pure

insurance part (the Term portion) is
separated from the investment (cash
portion)
Investment portion invested in money
market funds
Cash value portion is set up as an
accumulation fund to which investment
income is credited
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 Death

benefit (Term Insurance) is paid out

of accumulation fund
The cash value of Universal Life Insurance
grows at variable rate
The insured can vary his annual death
benefit and the annual premium
Provision for making partial surrender and
take policy loan against cash value
When earnings are good, policy owner can
put more money in the cash portion of the
policy
Normally there is guaranted minimum
interest rate
A few other options
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 Variable

Life Insurance

A form of whole life insurance Term portion;

premium towards administrative expenses; part
towards investment or cash value portion
The insured may select to invest the funds in
various investments : stocks, bonds, MFs. He
may only choose from investment vehicles from
the insurance companies portfolio.
Option to switch investment vehicles a few times
It is expensive commission and service fee is
high.
Value of death benefit may fluctuate up or down
depending on the performance of the investment
portion. However, death benefit can never fall
below a defined level.

63

 Whole

Life Insurance Products in Foreign

Markets
Part premium for insurance; small part towards
admin. expenses; balance for investment
Insurance coverage for entire life
Premium throughout life or selected term (10, 20,
30 years)
Provision for single premium
Cash value portion belongs to insured; can take
loan or cash; interest on accumulation fund is tax
free
Premiums are fixed regardless of the age or
health of the policy owner.
Investment vehicles are generally bonds and
mortgages

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 Progressive

Protection Policy

Designed to adapt to changing

circumstances
Lump sum in the event of death /
terminal illness
No cash-in-value; purely for protection;
No investment
Provision for increase / decrease in cover
at any time other than the first year
Option to have the policy increase
automatically every year
Option for mode of payment of premium
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THANK YOU

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