Name: Raza Ali.

Roll No:
(2k20/BBAE/133)
Subject:Insurance
Class: BBA Part 2 Evening.
Dept :IBA

life insourance:-
Life insurance (or life assurance,
especially in the Common wealth of
nation) is a contract between an
insurance policy holder and an
insurer or assurer .where the insurer
promises to pay a designated
beneficiary a sum of money upon the
death of an insured person (often
the policy holder). Depending on the
contract, other events such as
terminal illnress or critical illness can
also trigger payment. The policy
holder typically pays a premium,
either regularly or as one lump sum.
Other expenses, such as funeral
expenses, can also be included in the
benefits.
Life insurance certificate issued by
the Yorkshire Fire & Life Insurance
Company to Samuel Holt, Liverpool,
England, 1851. On display at the
British Museum in London
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.
Difficulties may arise where an event
is not clearly defined, for example:
the insured knowingly incurred a risk
by consenting to an experimental
medical procedure or medication
resulting in injury or death.
Types of Life Insurance
-Overview
There are four major types of life
insurance policies. These life
insurance types are Whole Life
Insurance, Term Life Insurance,
Universal Life Insurance, and
Variable Universal Life Insurance.
Within each of these classes of life
insurance policy types, there are
even further variations that exist, but
the vast majority of all policies are
one of these four. Some policies will
make life insurance agent's more
money than others. For instance,
whole life will often make them the
largest commission for any given
death benefit, and term life
insurance will usually make them the
smallest commission. This means
that an agent does not have a very
big incentive to sell a policy that is
the most beneficial to the vast
majority of people. Arguments can
be made for the benefits of each
type, but each situation is unique
and calls for a careful understanding
of the costs and benefits involved.
For an in-depth discussion regarding
the pros and cons of "purchasing
term life insurance and investing the
difference", see our article on the
subject here. Below is a description
of each type of life insurance policy,
along
with some benefits and drawbacks of
each kind.

Term Life Insurance

Explained :-
Term life insurance is by far the least
expensive type of life insurance
policy to pay on a yearly basis. This
makes it very attractive to people,
but if you outlive the length of the
term policy you do not receive any
death benefit. If the insured person
dies will the coverage is "in force",
which is during the covered length of
the term, the beneficiaries will
receive a full death benefit.
Term life insurance has no cash value
and is of little use to anyone as an
investment. A life insurance company
statistically expects it's policy owners
to outlive any term coverage.
Term life insurance lasts exactly as its
name implies, for a specified length
of time, or in other words a specified
or "term". Typically policies will last
10, 15, 20, or 30 years, but there are
also other increments that some
companies may sell. Some
companies also sell term life
insurance products which will last
until a certain age, such as term to
age 90 (this may be referred to as T-
90 in life insurance parlance). Some
policies may have a return of all or a
portion of premiums paid if you
outlive the T-90, but many also do
not. Term life insurance normally has
a level premium, meaning the
amount that must be paid is the
same each year. Term life insurance,
which lasts until a certain age,
usually will rise in price a little bit
each year, eventually becoming
extremely expensive if the person
lives to be near the maximum age.
Typically an owner has the option to
pay yearly, semi-annually, quarterly,
and monthly. It can sometimes cost
more to make monthly payments
than less frequent payment modes.
At a certain point within the life of
the policy, a term life insurance may
be convertible to a whole life
insurance policy. This is known as a
"term conversion". The value of the
term conversion is the fact that no
further underwriting is needed in
order to convert the policy to a
whole life policy. This means that if
an insured person has health
problems during the course of the
term policy coverage they will not be
left without coverage after the term
ends. They can simply convert the
policy to a permanent form of life
insurance. Each policy may have a
different point at which it is eligible
for a term conversion. It is important
to understand the specific rules and
differences of each product before
you purchase the insurance. Each
company may have a difference
between the same product, and each
company may sell multiple product
types that may appear similar, but
they may have nuances that may
make a big difference to the owner
such as the return of premium
clause.
Whole Life Insurance
Explained
Whole life insurance is a type of life
insurance that is meant to be
permanent and last for an insured
person's "whole life". Whole life
insurance has a level premium
structure (the premiums due are the
same each year) and will build cash
value over time. Whole life insurance
is also eligible to receive dividend
payments from the life insurance
company. Whole life insurance
policies guarantee that the cash
value will build at least at a certain
rate if all payments are made on
time, but the dividend payment will
increase the rate at which value can
build. The amount paid by the
dividend payment is dependent
upon the performance of the
company over the previous year, and
the rate paid is multiplied by the
existing cash value of the policy.
Many policies will have a dividend
payment which becomes high
enough to pay the entire premium
due after a certain point. The cash
value will eventually grow enough so
a policy owner has a positive return
on the amount of money they put
into the policy. This also makes
whole life insurance a form of
investment. Whole life insurance
policies also allow for loans to be
taken against the cash value of the
policy. These loans can be taken for
any reason and can be paid back
upon the discretion of the owner of
the policy.
The big advantage of whole life is
that the insured person can never
outlive it. Beneficiaries are always
protected for the long term. For this
reason (and because the death
benefits are tax-free) whole life
insurance is often used for estate
planning, and to fund generational
trusts.
Universal Life Insurance
Explained
Universal life insurance is a
permanent form of life insurance.
The difference between whole life
insurance and universal life insurance
is that universal life insurance has a
flexible premium structure.
A universal life insurance policy has a
cash-value account, the insurance
charges are pulled from the cash
value account each month. Any
amount paid into the policy in excess
of the cost of insurance is added to
the cash value. The cash value then
grows at a rate determined by
insurance company performance and
prevailing interest rates, with a
guaranteed minimum of 2% annual
growth.
The cost of insurance rises over time
with a universal life insurance policy.
This means that a policy is of
greatest benefit to an owner when it
is well funded in the early policy
years when insurance costs are
lowest. As the costs rise, the growth
in cash value will hypothetically
more than make up for the rising
charges.
Universal life insurance can not
legally be sold as an investment. A
universal life insurance policy can be
surrendered for its cash value, or
loans and withdrawals can be taken
as well. Surrender charges may apply
for any withdrawals or full
surrenders. Variable Universal

Life Insurance Explained

Variable universal life insurance is
similar to universal life insurance in
that premium payments are flexible
and the cost of insurance rises over
time. The big difference between the
two kinds of policies though is that
variable universal life insurance has a
cash value account that does not pay
a fixed or guaranteed rate of return.
The cash value of a variable universal
life insurance policy is invested in
variable "subaccounts" within the
life insurance policy.
These subaccounts are essentially
mutual funds, which represent
investments in different asset
classes. The policy owner can choose
which sub-accounts the cash value is
invested in. The growth (or loss) of
the cash value is dependent upon
the market performance of the
variable accounts.
The benefit of variable universal life
insurance over universal life
insurance is that historically
speaking, the stock market
outperforms the guaranteed
accounts of universal life. The risk of
a variable universal life insurance
policy is that the market will decline,
and the owner will end up with a
poorly performing policy.
Variable universal life insurance is
permanent, and the cost of
insurance charges will rise over time.
Variable universal life insurance does
allow for loans or withdrawals, and
the policy can be surrendered for its
cash value at any time. Surrender
charges may apply for any surrenders
or withdrawals.
Term vs. Whole vs.
Universal vs. Variable
Universal Life insurance
To recap, here is an overview of the
different types of life insurance and
their characteristics:
ure Life Varia
Insur
e Univ
ance Life
Life ersal
Insur
Insur Life
ance
ance Insur
ance

You E X X X
can
choo
se
polic
y
lengt
h
Has E E E E
deat
h
bene
Feat Term Whol Univ
ersal ble
fits
Has X N/ N/ N/
living
bene
fits
Cash X N/ N/ X
valu
e
guar
ante
ed
Build X N/ N/ N/
s
cash
valu
e
Flexi X X N/ N/
ble
prem
ium
pay
ment
s
Flexi X X N/ v/
ble
deat
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amo
unt
X X X v/
Cash
valu
e
linke d
to inves
tmen ts

Most m X X X
affor
dabl
e
kind
of
life
insur
ance
Life Insurance Types - Choosing the
Right Policy
No matter which type of life
insurance you choose, it is very
important to understand the specific
rules and terms of each type of
insurance and each specific policy.
Different types of policies can be
appropriate for different people
depending upon their age, needs,
and appetite for risk. Each type of
policy carries a different charge, and
it is important to understand how
long the coverage is needed, how
long each policy will be in place, and
how much it will cost in the long run.
function of life insourance:-7
Functions of Insurance
Functions of insurance are to spread
the loss caused by a particular risk
over several persons, who are
exposed to it and who agree to
insure themselves against the risk.
Ad by Valueimpression The most
important function of insurance is to
spread the risk over a number of
persons who are insured against the
risk, share the loss of each member
of the society on the basis of the
probability of loss to their risk and
provide security against losses to the
insured.
So, insurance functions are;

1. The system to spread the risk

over several persons who are
insured against the risk;
2. The principle to share the loss of
each member of the society based
on the probability of loss to their
risk; and
3. The method to provide security
against losses to the insured.
The functions of insurance can be
studied into two parts; 1. Primary
Functions, and,
2. Secondary Functions.
7 functions of insurance are;
1. Insurance provides certainty,
2. Insurance provides protection,
3. Risk-Sharing,
4. Prevention of loss,
5. It Provides Capital,
6. It Improves Efficiency,
7. It helps Economic Progress.