A STUDY ON

Life Insurance
for the award of
MASTER OF BUSINESS ADMINISTRATION
SUBJECT – Insurance Laws and Regulations

By
PARUL JAIN
Student of DPES College
PUNE
Roll No. 31
LEARNING OBJECTIVES

• Define Life insurance and describe its purpose and principle

• Determine your life insurance needs
• Distinguish between the types of life insurance companies
• Analyze various types of life insurance policies these companies' issue
• Factors affecting Life Insurance Premium and Costs
• Role and Functions of Life Insurance
• Importance of Life Insurance
AN INTRODUCTION

 Life insurance is a legally binding contract that pays a death benefit to the policy owner
when the insured dies.

 For a life insurance policy to remain in force, the policyholder must pay a single premium
up front or pay regular premiums over time.
PURPOSE OF LIFE INSURANCE

• Protect someone who depends on you from financial loss related to your
death.
• Other reasons are
• Pay off a home mortgage or other debts at the time of death
• Establish a regular income for survivors
• To save money for retirement or for income or education for children
• Uncovered medical expenses and funeral costs
PRINCIPLE OF LIFE INSURANCE

• THE PRINCIPLE OF LIFE INSURANCE:

Mortality tables provide odds on your dying, based on your age and sex
• HOW LONG WILL YOU LIVE?
Your premium is based on your life expectancy and the projections for the
payouts for persons who die
DETERMINE YOUR LIFE INSURANCE NEEDS

• DO YOU NEED LIFE INSURANCE?

• Do you have people you need to protect financially?
• Do you have a partner who works?
DETERMING YOUR LIFE INSURANCE OBJECTIVES

• How much money do you want to leave your dependents should you die
today?
• When do you want to retire, and what income do you think you’ll need?
• How much will you be able to pay for your insurance program?
ESTIMATING YOUR LIFE INSURANCE NEEDS

• The Easy Method

• You will need 70% of your salary for seven years while your family adjusts
• The DINK (dual income, no kids) Method
• The “Nonworking” Spouse Method
• Multiply the number of years until the youngest child reaches 18 by $10,000
• The “Family Need” Method
• More thorough than the first three because it also considers employer provided
insurance, Social Security benefits, and income and assets
TYPES OF LIFE INSURANCE COMPANIES

Stock life insurance companies

• are owned by the shareholders
• 77% are of this type.
• Sell non-participating policies
• If you want to pay the same premium each year, choose a non-participating
policy with its guaranteed premiums
TYPES OF LIFE INSURANCE COMPANIES

Mutual life insurance companies

• 23% are of this type
• Owned by the policyholders
• With participating policies, the premiums are higher than non-participating
policies
• Part of the premium is refunded to the policyholders annually. This is called the
policy dividend
TYPES OF LIFE INSURANCE POLICIES

Term life insurance

• Protection for a specified period of time
• If you stop paying premiums, coverage stops
• Renewability: You can renew the policy without having a physical at the end
of the term
TYPES OF LIFE INSURANCE POLICIES

Multiyear level term: 

Most popular form of term insurance
Conversion option: Can exchange term policy for whole life policy without having
a physical
Decreasing term insurance: Premium stays the same, but the amount of coverage
decreases as you age – mortgage insurance
Return on Premium: Policy refunds every penny of the premiums if one outlives
the defined term
TYPES OF LIFE INSURANCE POLICIES

Whole life insurance : 

Also called straight life
You pay a premium as long as you live
Amount of premium depends on your age when you start the policy
Provides death benefits and accumulates a cash value
You can borrow against the cash value or draw it out at retirement
Look carefully at the rate of return your money earns
TYPES OF LIFE INSURANCE POLICIES

Limited payment policy:

• Pay premiums for a stipulated period, usually 20 or 30 years, or until you reach
a specified age (65)
• Your policy then becomes “paid up” and you remain insured for life
• Variable life policy
• Minimum death benefit guaranteed, but the death benefit can be greater than
the minimum depending on earnings of the dollars invested in a separate stock
or bond fund
TYPES OF LIFE INSURANCE POLICIES

Adjustable life policy

• Whole life insurance policy, but you can change your policy as your needs change.
• You can change your premium payments to increase or decrease coverage.

Universal life
• Gives you more direct control
• Can pay premiums at any time in almost any amount.
• Amount of insurance can be changed more easily than a traditional policy
• The increase in the cash value of the policy reflects the interest earned on short-term
investments
FACTORS AFFECTING LIFE INSURANCE PREMIUM AND COSTS:

 Age: This is the most important factor because life expectancy is the biggest determinant of risk for the insurance company.

 Gender: Because women statistically live longer, they generally pay lower rates than a male of the same age.

 Smoking: A person who smokes is at risk for many health issues that could shorten life and increase risk-based premiums.

 Health: Medical exams for most policies include screening for health conditions like heart disease, diabetes and cancer, and
related medical metrics that can indicate risk.

 Lifestyle: Dangerous lifestyles can make premiums much more expensive.

 Family medical history: If you have evidence of major disease in your immediate family, your risk of developing certain
conditions is much higher.

 Driving record: A history of moving violations or drunk driving can dramatically increase the cost of insurance premiums.
ROLE AND FUNCTION OF LIFE INSURANCE
COMPANIES
• Saving Institution
• Term Financing Institution
• Investment Institutions
• Stabiliser in Share Market
• Biggest Employers in economy
IMPORTANCE

Life insurance is important,

• as it protects your family and lets you leave them a non-taxable amount at the time of
death.
• It is also used to cover your mortgage and your personal loans, such as your car loan.
• Your individual life insurance follows you when you retire, and you are no longer
insured by your employer.
• This insurance will also replace your family income when resources are less so they
can maintain their quality of life.