Life insurance

By
Shashank shankar.
 WHAT IS LIFE INSURANCE?

• An individual runs a Risk of

» Premature Death

» Living too long

• Life Insurance is a product that offers a solution in management of both the risks.
 WHAT DOES LIFE INSURANCE DO?

• Provides
• - Continuity of income
• - Mortgage protection
• - Protection against disabilities
• - Children’s education
• - Marriage expenditure
• - Retirement fund
• - Tax relief

• and most importantly

• Provides
• - PEACE OF MIND
 What is Premium ?
What are the Insurance Products?

• Premium is the Price the Policy holder pays for the Benefit that the Life
Insurance product offers.
• There are two parts of the premium
1. Risk part
2. Savings part

• The insurance products also have two basic parts

• Policy with Pure term cover, the Sum Assured is payable only on death

• - Policy with cash accumulation, it provides saving and security & the Sum
Assured is payable either on death and on maturity
 Life insurance

• Life Insurance can broadly be categorized as

1. Term.
2. Money back.
3. Unit linked.

• TERM INSURANCE :
Term insurance is a type of life insurance policy that provides coverage for a
certain period of time, or a specified "term" of years. If the insured dies during
the time period specified in the policy and the policy is active - or in force - then
a death benefit will be paid.
Term insurance is initially much less expensive when compared to permanent
life insurance. Unlike most types of permanent insurance, term insurance has no
cash value.
 Unit-linked insurance plan

• Unit-linked insurance plan

(ULIP) is a type of life insurance where the cash value of a policy varies according
to the current net asset value of the underlying investment assets. It allows
protection and flexibility in investment, which are not present in other types of life
insurance such as whole life policies. The premium paid is used to purchase units in
investment assets chosen by the policyholder.
• In India investments in ULIP are covered under Section 80C of IT Act. However,
the concept of having an investment is governed by the Insurance Regulatory and
Development Authority (IRDA).
 How is life insurance value calculated

1. Decide the amount of insurance you need.

2. Find the rates that are relevant to you.
3. Consider your age. A young person should get insurance cheaper than an older one.
Life insurance is based on life expectancy, and the older you are, the less change,
statistically, you have of living longer than someone 30 years your junior.

4. Multiply the number of thousands of insurance you want times the rate. If you want
Rs. 100,000 worth of insurance, you need to multiply 100 times the rate you found
per thousand. Almost all policies have a policy fee. There are also extra charges if
you pay more than once a year. Normally, the most inexpensive is an annual
payment, followed by a monthly payment coming from your checking account,
then semi-annual, quarterly and finally, if the company offers it, a monthly billing.
Normally, the premium on insurance climbs every year
 Human life value

• Human life Value(HLV) is the expected life time earnings of an individual, i.e.
what is the total income that the individual is expected to earn over the remainder
of his working life, expressed in present Rupee terms. In social and political
sciences, it is the marginal cost of death. prevention in a certain class of
circumstances. As such, it is a statistical term, the cost of reducing the (average)
number of deaths by one. It is an important issue in a wide range of disciplines
including economics, health care, adoption, political economy, insurance, worker
safety, environmental impact assessment, and globalization.
 Human life value calculation

• Enter your name

• Enter your age.
• Enter your retirement age
Your assets

Saving account/bank deposit A

Pf/ ppf B
Shares/direct equity investments C

Mutual funds/ elss D

Total assets ( TA= A+B+C+D)

 • YOUR LIABILITIES.
• Liabilities value
1. Home loan (E)
2. Personal loan (F)
3. Auto loan (G)
4. Educational loan & others (H)

5. Total liabilities (TL = E+F+G+H)

6. Your net worth (NW = TA- TL)

 Human life value calculation

• Your cash inflows (annual)

• Annual Net Income (self) (I)
• Net income from House Property (J)
• Other inflows(Eg. Bonus) (K)

• Total cash Inflows (CI = I + J + K )

 Human life value calculation

• goal setting protection

• Current Annual Cash Inflows
(I = Total Cash Inflows )
• % Average increase in income
(INT = Assuming fixed Rate, 5% )
• Capital required to protect lifestyle
• Capital value of Liabilities (TL)
• Capital value of assets (TA)
• Existing sum assured (SA)
• Additional SA requirement
• (ADSA = CPRO + TL – TA – SA)
 (1) Case study highlighting the importance of life
insurance
• While helping to build the metro system in Delhi , Amit singh was hit by a truck
and injured so severely that he was no longer able to work at his construction job.
Complications from the injury impacted his life in many ways. Even something
seemingly as simple as buying life insurance became very difficult. With two small
children, Amit and his wife, Seema, knew life insurance was a must.

Due to his poor health, Amit was only able to buy a small policy. Fortunately,
Seema, a teacher, was in great health and qualified for preferred rates on her policy,
which she bought with the help of insurance agent Suresh Kumar. During a
doctor’s visit just weeks later, Seema received devastating news. She had a
cancerous tumor in her abdomen. She battled the disease for several years, but in
early 2009 doctors gave her just a year to live. She and Amit invoked a provision in
her insurance policy that allowed for an early payout to a terminally ill
policyholder, and used one third of the death benefit to buy land in rural India and
build a home. Seema spent her final months there. She passed away at age 42
 (1) Case study highlighting the importance of life
insurance { continued }
• Amit remains unable to work, but a provision in Seema’s policy allowed
him to apply some of the death benefit toward life insurance coverage for
himself, regardless of his physical condition. Today, he supplements his
small Social Security disability payments with income generated by
invested insurance proceeds, plus rental income on a second home he and
Seema had built on their property. He also set up college funds for his
children, Jyoti and Anil .. “Without this policy they would have been in an
awful financial situation,” says Suresh Kumar “Amid all this grief at least
there are some silver linings.
 (2) Case study highlighting the importance of life
insurance
• When Swaroop’s husband died at a young age, with only enough life insurance to
pay for his funeral, Swaroop vowed that her young daughters, Vipul and Sujata ,
would be financially secure if anything ever happened to her. To keep this promise,
Swaroop immediately scheduled an appointment with insurance agent Saroj Singh
She said she wanted the best insurance she could buy, and I made sure her family
would be protected," says Saroj Singh.
Two years after purchasing her policy, Swaroop became ill with a lung infection
and was later diagnosed with lung cancer. Because the illness prevented her from
working, a provision in her policy covered the payment of her premiums while the
policy's disability benefit helped cover mounting health care costs. Despite her
illness, Swaroop's zest for life was unstoppable. She took a cross-country road trip
with her mom and daughters and even continued to organize parties and dinners for
family and friends.
 (2) Case study highlighting the importance of life
insurance
• When she found out that her condition was terminal, the accelerated death benefit
provision allowed Swaroop to access up to 75 percent of her benefits while still
alive. She used those proceeds to finance a home and a car for her daughters and
parents, and pre-pay her funeral. She even put some money away for college for her
daughters.
Swaroop died at age 38. But her dreams for the girls are very much alive. Vipul,
who graduated with honors from college this year, and Sujata, a senior in high
school, live with their grandparents in the home their mother purchased for them.
“Swaroop wanted the girls to have the best education and the same lifestyle after
she was gone," Swaroop’s mom Deepa says. "That's why she chose insurance, to
help them along the way. That was her greatest wish."
THANK YOU