LIFE INSURANCE & PRODUCTS

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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
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KENNETH BLACK (JR.) AND HAROLD SKIPPER (JR.) HAVE
DEFINED INSURANCE UNDER TWO DIFFERENT PERSPECTIVES

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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 pool‘s assets.
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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. 5 . called the policy owner. called premium.LEGAL PERSPECTIVE  Insurance is an agreement (the insurance policy or insurance contracts). by which one party. pays a stipulated consideration.

WORKING OF INSURANCE 6 .

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8 . in return agrees to pay to the assured. either in a lump sum or in any other periodical payments. a stated sum of money on the happening of a particular event contingent on the duration of human life.WHAT IS LIFE INSURANCE ?  It is a contract in which the Insurer. or to the person for whose benefit the policy is taken. in consideration of a certain premium.

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.  9 .

LIFE INSURANCE BUSINESS IS DEFINED UNDER SECTION 2 (11) OF INSURANCE ACT. WHICH READS :  ―Life Insurance business‖ means the business of effecting contracts of insurance upon human life.IN INDIA. 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 : 10 . 1938.

trade or employment or of the dependents of such persons.   Disability and double or triple indemnity accident benefits. 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. 11 . if so provided in the contract of insurance.

  The insurance contracts. 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. sickness etc. accidental death alone. 12 . are excluded from the purview of life insurance. which deal with disability.

ESSENTIALS OF A VALID CONTRACT Offer and acceptance  Consensus ad idem (―meeting of the minds‖)  Parties competent to contract  Consideration  Legality of purpose  13 .

PRINCIPLES OF LIFE INSURANCE Special Features of Life Insurance Contracts  Insurable  Interest : The object of insurance should be lawful. This is known as Insurable Interest. 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. 14 .

the contract becomes wagering and hence illegal. If there is no insurable interest. Every individual has unlimited insurable interest on his/her life.    In Life Insurance the presence of insurable interest is essential at the time of effecting the Contract of Insurance. Husband has insurable interest on the life of his wife and vice versa 15 .

 16 .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.

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  17 . viz. 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.

the benefits. 18 .  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. pricing aspects etc. and hence will have to rely upon the insurer to ensure that the terms of the contract are fair and equitable.

must be accepted or rejected in total by the other party (the proposer). 19 .DOCTRINE OF ADHESION  The terms of the contract are most of the times fixed by one party (the insurer) and with minor exceptions.

 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.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.  20 .

CURRENT SCENARIO • • • • • • Growing at the rate of 15-20% annually 75% population has no insurance Adds 7% to country‘s GDP LIC market share come down to 75% and private insurers increased over 24% Annuity or pension product have over 33% of market Unity linked insurance scheme have monopoly  21 .

MAJOR PLAYERS 22 .

23 .MAIN TYPES OF LIFE INSURANCE  Whole Life Insurance  Intended to provide Life Insurance protection over one‘s lifetime – provides for payment of the assured amount upon the insured‘s death regardless of when it occurs.

 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 24 .

whenever it may happen  No fixed term  Variations – Pure Whole Life – Premium payable throughout the life of the insured till death. Whole  Life Insurance – Risk coverage for the death of the insured. 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 25 .

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can be cashed in early (or surrendered) and the holder then receives the surrender value which is determined by the insurance company depending on how long the policy has been running and how much has been paid in to it.ENDOWMENT INSURANCE  An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on death. fifteen or twenty years up to a certain age limit.  Endowments 29 . Typical maturities are ten.

 30 . Endowment Assurance – The insurer agrees 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.

DIFFERENCE B/W LIFE INSURANCE & ENDOWNMENT 31 .

limited pay. participating.ENDOWMENT WHOLE LIFE INSURANCE Payment: Death benefits paid at the time of death or a lump sum paid on maturity. Death benefits paid on death (in full) up to age 100 or 120. which builds cash value faster. Level premiums distributed throughout 32 life of insured and more affordable. Advantages: . Limited period to pay premium. single premium. Also. Whole life insurances are of different types: nonparticipating. it is possible get a lump sum of cash in case of illness or at the time of maturity. Higher premium as whole life insurance plans must always pay out eventually and builds a cash value Premium: Types: There are three different types of endowment policies: with-profit. Cost or premiums every month is comparatively expensive and premium paid over a shorter period of time. unitlinked and low-cost endowments insurance.

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the relevant term.TERM INSURANCE  Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the term. the death benefit will be paid to the beneficiary. 34 .

Term Insurance : a contract for limited number of years  payment only if death occurs during the term  low cost / high risk coverage  renewable feature and convertible feature  increasing or decreasing Term Insurance 35 .

ANNUITIES 36 .

 Series of periodic payments A life annuity is a financial contract in the form of an insurance product according to which a seller (issuer) — typically a financial institution such as a life insurance company — makes a series of future payments to a buyer (annuitant) in exchange for the immediate payment of a lump sum (singlepayment annuity) or a series of regular payments (regular-payment annuity). prior to the onset of the annuity. 37  .

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A pension is a fixed sum paid regularly to a person.  Types of pensions  Employment-based pensions (retirement plans)  Social and state pensions  Disability pensions  39 . given following a retirement from service. typically.

LIFE INSURANCE PRODUCTS Two groups viz.  Packaged Products – benefits under such products are pre-defined 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 LIC‘s products fall under this category  40 .

disability benefits.Non-packaged  Products – products with certain basic features like Endowment or Money-back. hospitalization cover etc. the customer to choose as per his needs and then expand it by rider benefits – accident cover. critical illness cover.  cater to niche market and have profit potential. 41 .

 (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‘. nothing is payable – ‗Pure Endowment‘. if death occurs during the period of insurance. 42 . Savings – lump sum amount is payable only if the insured survives till the end of the selected period.

LIC Products & Plans 43 .

Jeevan Anurag Jeevan Kishore Komal Jeevan Marriage Endowment Or Educational Annuity Plan Child Career Plan Child Fortune Plus Jeevan Chhaya 44 Child Future Plan .

Jeevan Aadhar Jeevan Vishwas The Endowment Assurance Policy The Endowment Assurance Policy-Limited Payment Jeevan Mitra(Double Cover Endowment Plan) Jeevan Mitra(Triple Cover Endowment Plan) Jeevan Anand New Janaraksha Plan Jeevan Amrit 45 .

Jeevan Shree-I Jeevan Pramukh The Money back policy-20yrs. Jeevan Surbhai-15 Jeevan Surbhai. The Money back policy-20yrs.20 Jeevan Surbhai-25 46 Jeevan Bharati-1 .

MARKET SHARE 47 .

Jeevan Saathi Plus Jeevan Saathi Jeevan Nidhi Jeevan Akshay-VI 48 .

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