INSURANCE

POLICIES AND
STRATEGIES
Session Objectives
￮ Insurance
￮ Types of Insurance
￮ Types of Life Insurance
￮ Insurance Myths
￮ Easy ways to buy a policy
￮ Computation of Human Life Value
￮ Types of General Insurance 2
0
1
8
B
S
2E
In
The Ups & Downs of Life
Positives
Education Better Job Marriage Children Wealth Creation Retirement

Premature Death Loss of Job Accident & Disability Critical Illness Unplanned Retirement

Negatives
Life Insurance mitigates the financial risks of Negative Events while boosting the
prospects for Positive events of Life!
3
Common risks faced by us
 Death (Loss of Income)
 Disability (Loss of Income temporarily)
 Critical Illness (High treatment charges)
 Illness & injuries (Hospitalization expenses)
 House: Fire, theft, calamity
 Motor: Accidents, theft, calamity

4
Insurance

5
Types of Insurance

6
LIFE insurance industry
Life Insurance Industry was liberalized in the year 1999-2000.

Currently there are 24 players in the Life Insurance Industry.

All the major international players are present in the Indian Insurance
market.

A high capital intensive industry - Rs.31,437 Cr deployed

Foreign partners have brought in capital of around Rs.5,053 Cr as FDI.

India has the largest in-force policies in the world.

7
Types of Life Insurance Policies

 Life Insurance Policies

 Term Insurance Policy
 Whole Life Policy
 Endowment Policy
 Money Back Policy
 Unit-Linked Insurance Plans (ULIPS)
 Annuities & Pension Plan
 Riders

8
Term Insurance Policy

 Provides cover for a specific period only

 Premium is very low.

 No returns/refund of premium
 No investment element
 100% Risk Cover

 Sum assured paid on death

 Best policy for adequate life cover

 Buy based on life insurance need analysis

9
Whole Life Policy

 Pays either at death or maturity

 Maturity usually 100 years age.

 Premium paid for life time

 Works for estate planning as benefits are generally enjoyed by family

 Very High Commission (up to 35%)

 Not Very flexible

 Expected Return : 4 – 6%

10
Term Insurance v/s Whole Life
Policy

11
Endowment Policy

 Most popular insurance policy in India

 Combines Investment + Risk Cover

 Sum assured paid on death or survival at maturity

 Bonus paid along with Sum Assured on maturity

 Premiums are higher than term plan due to a savings component

 Very High Commission (up to 40%)

 Not Flexible

 Expected Return : 4 – 6% 12
Money Back Policy

 Covers death & survival benefits

 Lump sum paid periodically.

 20% + 20% + 20% + 40% of SA at predefined intervals

 Full sum assured paid on death

 Popular for planning Children’s Education & Marriage

 Very High Commission (up to 40%)

 Expected Return : 4 – 6%

13
Annuities And Pension

Immediate Annuity Policy Deferred Annuity Policy

• Single Premium • Invest regularly for some

• Monthly Pension years
• Meant for Retirees investing • Monthly pension starts at
Retirement Proceeds retirement age
• Can commute up to 1/3 of
accumulation

14
What are Riders?

Accidental Additional Sum

Assured if death
Death

Critical If critical illness

diagnosed
Illness

Waiver of Waives off premium if

something happens Used mainly in
to person who is Children’s Policies
Premium paying premium

15
UNIT linked insurance plans
(ULIPs)
 Market linked investment where the premium paid is invested in
funds
 Different Options - Equity, Balanced, Debt. Switch facility available
 Greater flexibility in policy structure
 Sold as “Investment” Plans
 Higher of the SA or Fund value is paid at death / maturity
 Higher Liquidity

16
Various costs - ULIPs
 Mortality charges
 Cost of insurance coverage
 Premium allocation charges
 Usually goes towards agents commission
 Fund management charges
 To manage investment component like MFs
 Policy administration charges
 To cover operational costs
 Surrender charges
 Higher charges for early surrender

17
Examples of Life Insurance
Policies
￮ Term Plan

￮ http://www.iciciprulife.com/public/Life-plans/Life-Insurance-Term-
Plans.htm?UID=1061
18
Examples of Life Insurance
Policies
￮ ULIP

￮ http://www.sbilife.co.in/sbilife/content/9_7715
19
Insurance Myths

 Myth 1: Insurance is for tax saving

 Myth 2: Insurance is Investment

 Myth 3: I don’t need Insurance.

20
5 easy steps to buying a policy
Initially, calculate the exact amount of insurance that you need

Decide which product suits you best based on your life stage and need

Calculate the premium

Once you have decided on all the above parameters, get in touch with a Life Advisor

The Life Advisor will assist you in filling up a proposal form. In addition to a proposal form, you
need to submit some financial documents that are required in order to buy a policy.

The Life Advisor will notify the list of financial documents required for the same.

21
Computation

• The total required quantum of life insurance can be calculated using 2

different approaches as follows:
• Human Life Value Approach
• Need based approach
22
Human Life Value Approach
• The present value of the person’s future earnings.
• Information Required and Process:
• The number of years individual is likely to earn (Retirement age less
Present age)
• Average annual earnings during the ‘earning’ years
• Amount of personal expenses like taxes, cost of employment,
insurance premium, etc.,
• Deduct Personal expenses from average annual earnings
• Then find the present value of future earnings
• That is Human Life Value ; and that is the amount of insurance
required.
23
Need based Approach
• Cash Needs (Funeral expenses, Uninsured portion of medical bills, Legal
Needs are divided charges, …)
• Income Needs (Income for the family Less Family pension & other income…)
into three types • Special Needs (Debt, Child/ren’s education, Child/ren’s marriage,
Contingencies, etc.,.)

Estimate what is • Investments & Deposits

• Death benefits from employer
already available to • Existing Life Insurance
• Other Assets
meet these needs

• Add all needs (Cash Needs + Present Value of Income Needs + Special Needs)
Calculation: • Deduct all available Assets
• The resultant is the amount of Insurance required under this method.

24
Tips for buying life insurance
Buy insurance only from a licensed agent / intermediary 

Shop around

Understand the scope of cover, terms and conditions of the policy

Fill in your application carefully – Never sign blank proposals

Health related particulars should be true

Age and Address Proof should be correct

Ensure premiums are paid to your insurance company

Read your policy when you receive it

25
Whom can you buy Life Insurance
from

• Individual Agents

• Corporate Agents

• Insurance Brokers

• Directly from companies

• Branches
• Online from websites

• Bank assurance

26
Information for existing policy
holders
Always remember your premium due dates to avoid a policy lapse.

Always insist on a premium receipt as a proof of payment.

Ensure your age is stated correctly in the proposal. If it is incorrect, get it rectified at
the earliest.

Keep your policy in a safe place until the life insurance policy money is received.

Always keep the nomination under your policy alive and he/she should be aware
about it.

Always intimate change in address to insurance company immediately.

Always clarify any doubts you have about your policy with the life insurance
company / insurance advisor.
27
Protection of Policy holders
interest
Grievance Redressal Hierarchy
Register a Complaint with the Toll free number /
helpline of the Company

Complaint to the Grievance officer of the company

Note:-
There are 12 ombudsman Centre's in India.
Complaint to Council / IRDA / Ombudsman
The companies cannot challenge the decision of the ombudsman

28
General Insurance
Insurance can be for a variety of
other reasons than life

30
Types of general insurance

• Motor Insurance

• Health Insurance

• Fire Insurance

• Travel Insurance

• Home Insurance

• Critical Illness cover

31
Motor Insurance
￮ Taken for vehicles, mostly cars, two wheelers, etc. Commercial
insurance is taken for companies owning taxis, cars, trucks, etc. Here
we will deal with different policies for cars.
￮ For cars travelling on public highways, travelling without insurance is
an offence
￮ There are 3 main types of car insurance:
￮ Third Party Cover
￮ Third Party, Fire and Theft Cover
￮ Comprehensive Cover

32
Health insurance

Why is Health Insurance important?

• Rising medical costs

• Uncertain hospital bills

• Expensive / quality health care services

• Family health insurance at a lesser premium

• Tax benefit

• Changing lifestyle – Most Important reason

33
Health Insurance Features
Hospitalization Expenses over 24 hours

Room charges, Medicine & Test Charges, Operation, doctor fees etc.
covered

Family floaters available

Group mediclaim policy

Eligible for tax benefits under 80D

Rs 1 to 5 lakhs cover recommended based on affordability

34
Health Insurance does not cover
everything

35
Fire Insurance
￮ Fire insurance is actually a type of property insurance.
￮ Offers indemnification of costs and losses incurred on account of damage by fire.
￮ When a structure is insured for fire, in the event of the fire occurring, the insurer
will pay money to the insured for the damage and destruction caused.
￮ Fire insurance also comes combined with home or property insurance or it can be
taken separately depending on the policy, and the insurer.  
￮ The amount paid out by the insurer may be the actual value or the replacement
value.

36
Travel Insurance
￮ Taken to cover certain expenses when travelling
￮ Some of the risks covered include
￮ Medical costs or emergency
￮ Cancellation of trip
￮ Mid-way trip being canceled
￮ Injury caused by accident
￮ Death by accident
￮ Funeral expenses abroad or return of the mortal remains
￮ Lost, stolen or damaged baggage and/or documents of travel,
etc.

37
Home Insurance
￮ Designed to protect homeowners from insurable perils, including fire,
theft, hurricanes and several other events
￮ Some Home Insurance Coverage Types Are
￮ The Home Structure
￮ Other Structures
￮ Personal Belongings
￮ Loss of Use or Additional Expenses

38
Critical illness cover
 Benefit paid immediately on first diagnosis of the covered Major Medical
Illnesses and Procedure, Accidental Death /Permanent Total Disablement (PTD)
due to accident
 Choose between a cover of  3 Lakh,  6 Lakh or  12 Lakh sum insured and policy
duration between 1 year, 3 years or 5 years. 
Major Medical Illness & Procedures :
 Cancer
 Coronary Artery Bypass Graft Surgery
 Myocardial Infarction (Heart Attack)
 End Stage Renal Failure
 Major Organ Transplant
 Stroke
 Paralysis
 Heart Valve Replacement Surgery
 Multiple Sclerosis
39
THANK YOU