INTRODUCTION TO INSURANCE

Insurance is a form of risk management in which the insured transfers the cost of
potential loss to another entity in exchange for monetary compensation known as
the premium.

Insurance is appropriate when you want to protect against a significant monetary loss.
Take life insurance as an example. If you are the primary breadwinner in your home, the
loss of income that your family would experience as a result of our premature death is
considered a significant loss and hardship that you should protect them against. It would
be very difficult for your family to replace your income, so the monthly premiums ensure
that if you die, your income will be replaced by the insured amount. The same principle
applies to many other forms of insurance. If the potential loss will have a detrimental
effect on the person or entity, insurance makes sense.

Everyone that wants to protect themselves or someone else against financial hardship
should consider insurance. This may include:

Protecting family after one's death from loss of income

Ensuring debt repayment after death

Covering contingent liabilities

Protecting against the death of a key employee or person in your business

Buying out a partner or co-shareholder after his or her death

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 Life insurance

Life insurance (or life assurance, especially in the Commonwealth), 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 (the benefit) in exchange for
a premium, upon the death of an insured person (often the policy holder). Depending on
the contract, other events such as terminal illness 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 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.

Life-based contracts tend to fall into two major categories:

Protection policies – designed to provide a benefit, typically a lump sum payment, in the
event of specified event. A common form of a protection policy design is term insurance.

Investment policies – where the main objective is to facilitate the growth of capital by
regular or single premiums. Common forms (in the U.S.) are whole life, universal life,
and variable life policies.

There are certain basic forms of life insurance. The different types of life insurance
policies include:

Type of
Insurance Features
Sr
Policy
No.

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 Term insurance is a life insurance product offered by an insurance
Term Life
1 company which offers financial coverage to the policy holder for a
Insurance
specific time period.
Whole Life The policyholder pays regular premiums until his death, upon
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Policy which the corpus is paid out to the family.
Endowment Endowment plans pay out the sum assured under both scenarios -
3
Plans death and survival
ULIP is a life insurance product, which provides risk cover for the
Unit Linked
4 policy holder along with investment options to invest in any number
Insurance Plans
of qualified investments.
Money back plan is a life insurance product as well as an
Money Back investment plan which provides life insurance cover against death
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Policy of the policy holder along with periodic returns as a percentage of
sum assured.

What are the various types of life insurance?

There are two basic types of life insurance policies viz. Traditional Whole Life and Term
Life Insurance. A whole life is a policy you pay till death of the policy holder and term life
is a policy for a fixed amount of time.

Term insurance

Term plans are the most basic form of life insurance. They provide life cover with no
savings / profits component. They are the most affordable form of life insurance as
premiums are cheaper compared to other life insurance plans.

Online term insurance plans provide pure risk cover, which explains the lower
premiums. A fixed sum of money - the sum assured – is paid to the beneficiaries if the
policyholder expires over the policy term. If the policyholder survives, there is no pay
out.

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Endowment plans

Endowment plans differ from term plans in one critical aspect i.e. Maturity benefit.
Unlike term plans which pay out the sum assured, along with profits, only in case of an
eventuality over the policy term, endowment plans pay out the sum assured under both
scenarios – death and survival. However, endowment plans charge higher fees /
expenses – reflected in premiums – for paying out sum assured, along with profits, in
either scenario – death or maturity. The profits are an outcome of premiums being
invested in asset markets – equities and debt.

Unit linked insurance plans (ULIP)

Ulips are a variant of the traditional endowment plan. They pay out the sum assured (or
the investment portfolio if its higher) on death/maturity.

Ulips differ from traditional endowment plans in certain areas. As the name suggests,
performance of ULIP is linked to markets. Individuals can choose the allocation for
investments in stock/debt markets. The value of the investment portfolio is captured by
the NAV (net asset value). To that end, there are many similarities between ulips and
mutual funds. Ulips differ in one area; they are a combination of investment and
insurance, while mutual funds are a pure investment avenue

Whole life policy

A whole life insurance policy covers a policyholder over his life. The main feature of a
whole life policy is that the validity of the policy is not defined so the individual enjoys
the life cover throughout his life. The policyholder pays regular premiums until his death,
upon which the corpus is paid out to the family. The policy expires only in case of an
eventuality as there is no pre-defined policy tenure.

Money back policy

A money back policy is a variant of the endowment plan. It gives periodic payments
over the policy term. To that end, a portion of the sum assured is paid out at regular

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intervals. If the policy holder survives the term, he gets the balance sum assured. In
case of death over the policy term, the beneficiary gets the full sum assured.

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 History

An early form of life insurance dates to Ancient Rome; "burial clubs" covered the cost of
members' funeral expenses and assisted survivors financially. The first company to offer
life insurance in modern times was the Amicable Society for a Perpetual Assurance
Office, founded in London in 1706 by William Talbot and Sir Thomas Allen.[1][2] Each
member made an annual payment per share on one to three shares with consideration
to age of the members being twelve to fifty-five. At the end of the year a portion of the
"amicable contribution" was divided among the wives and children of deceased
members, in proportion to the amount of shares the heirs owned. The Amicable Society
started with 2000 members.[3][4]

The first life table was written by Edmund Halley in 1693, but it was only in the 1750s
that the necessary mathematical and statistical tools were in place for the development
of modern life insurance. James Dodson, a mathematician, and actuary, tried to
establish a new company aimed at correctly offsetting the risks of long term life
assurance policies, after being refused admission to the Amicable Life Assurance
Society because of his advanced age. He was unsuccessful in his attempts at procuring
a charter from the government.

Overview

Parties to contract

The person responsible for making payments for a policy is the policy owner, while the
insured is the person whose death will trigger payment of the death benefit. The owner
and insured may or may not be the same person. For example, if Joe buys a policy on
his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on
Joe's life, she is the owner and he is the insured. The policy owner is the guarantor and
he will be the person to pay for the policy. The insured is a participant in the contract,
but not necessarily a party to it.

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Contract terms

Special exclusions may apply, such as suicide clauses, whereby the policy becomes
null and void if the insured commits suicide within a specified time (usually two years
after the purchase date; some states provide a statutory one-year suicide clause). Any
misrepresentations by the insured on the application may also be grounds for
nullification. Most US states specify a maximum contestability period, often no more
than two years. Only if the insured dies within this period will the insurer have a legal
right to contest the claim on the basis of misrepresentation and request additional
information before deciding whether to pay or deny the claim.

Death proceeds

Upon the insured's death, the insurer requires acceptable proof of death before it pays
the claim. The normal minimum proof required is a death certificate, and the insurer's
claim form completed, signed, and typically notarized. If the insured's death is
suspicious and the policy amount is large, the insurer may investigate the
circumstances surrounding the death before deciding whether it has an obligation to pay
the claim.

Payment from the policy may be as a lump sum or as an annuity, which is paid in
regular installments for either a specified period or for the beneficiary's lifetime.

Insurance vs. Assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In
general, in jurisdictions where both terms are used, "insurance" refers to providing
coverage for an event that might happen (fire, theft, flood, etc.), while "assurance" is the
provision of coverage for an event that is certain to happen. In the United States, both
forms of coverage are called "insurance" for reasons of simplicity in companies selling
both products. Some definitions, "insurance" is any coverage that determines benefits
based on actual losses whereas "assurance" is coverage with predetermined benefits
irrespective of the losses incurred

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Life insurance may be divided into two basic classes: temporary and permanent; or the
following subclasses: term, universal, whole life, and endowment life insurance.

Legal Principles

Insurance is a contract between the insurer (insurance company) and the insured in
which insurer agrees to provide financial protection to the insured on happening of
certain specified risks for a price called as premium.

Elements of a valid contract

Offer and acceptance

Consideration

Agreement between parties

Free consent

Capacity of the parties

Legality

Insurable interest is considered as legal pre requisite for insurance. It is the reasonable
concern of a person to obtain insurance for any individual against unexpected events.A
person has an insurable interest in something when loss or damage to it would cause
emotional or financial loss to that person.

Insurable interest can be in

Self (Own life)

Spouse’s life

Children’s life

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Asset/s owned

Proximate cause: It is defined as the active and efficient cause that sets in motion a
chain of events which brings about a result, without the intervention of any force started
and working actively from a new and independent source.

UTMOST Good Faith: Both parties should disclose all material facts relating to subject
matter of insurance, accurately, whether requested or not.

All commercial contracts form CAVEAT EMPTOR (Buyer’s Beware).

Material Facts to be disclosed

Life Insurance: Own medical history, family history, illness habits like smoking, drinking,
occupation etc.

Fire Insurance: Construction and usage of building, age of building, goods in premises.

Marine Insurance: Prescription of goods/methods of packing.

Motor Insurance: Description of vehicle, date of purchase, details of driver.

Financial planning

Life insurance: Your needs dictate the kind and level of protection

Life insurance, payable when you die, can provide a surviving spouse, children, and
other dependents the funds necessary to help maintain their standards of living, can
help repay debt, and can help fund education tuition costs. The amount you need
depends on your situation. If you make $100,000 a year, have a sizable mortgage, and
two kids headed to a good (read: expensive) college, you could need as much as $1
million in coverage.

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Value-accumulating whole life or universal insurance is often offered as death benefit
protection with a cash value component that you can borrow against or eventually cash
in by surrendering the policy. Term insurance costs less, but may remain in effect only
for a specified term of years. For many families, a combination of whole life and term
insurance may provide for current and future needs.

Your financial professional can help you assess your needs to determine the kinds and
amounts of life insurance that are right for you and your family.

Pension and Annuities

A defined contributions pension plan has employees and employers making

contributions to a general pension fund. At the time of retirement or a withdrawal at
another time, the worker can draw down money from the fund according to how much
he has contributed and how the fund's investments have performed.

Objectives

Regardless of the type, occupational pension funds must grow to ensure that they can
afford their current and future obligations to workers. As a result, pension funds make
significant investments in a variety of asset classes to ensure both growth and stability.
Pension funds have specific goals to meet, in that the amount of current workers who
will be able to claim benefits upon retirement and the number of retired workers
currently claiming benefits are both known.

Pensions explained - the different types of pension

A pension is a form of investment or savings plan designed to provide you with an

income to live on when you retire. There are many different types of pension
arrangement available, from state pension schemes offering limited financial support for
your old age to private pension plans giving you the freedom to build a larger fund for
your retirement. Even if your initial contribution is small, whatever you can put aside in

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the early years will be vitally important to getting your pension growing to avoid a poor
income in retirement.

Read on to learn more about the different terms associated with pensions and the main
types of pension available:

 Additional Voluntary Contributions (AVC)

 Personal Pensions / Private Pensions
 Company Pension / Workplace Pensions / Pension Scheme
 Final Salary Pension Scheme
 Money Purchase Pension Plan
 Pension Release
 Pensions Tax
 Self Invested Personal Pension (SIPP)
 Stakeholder Pensions
 State Pensions
 Unit Linked Pension
 Unitised with Profits Pension
 Additional Voluntary Contributions (AVC)

As a member of an Occupational Pensions Scheme, payments in the form of Additional

Voluntary Contributions can be made above the normal level of contribution to gain
additional pension benefits.

Personal Pensions / Private Pensions

A personal pension is usually arranged by yourself, not your employer, and is a type of
money purchase plan.

A personal or private pension is a tax-efficient savings plan that enables you to save for
retirement. Your pension contributions attract tax relief (up to annual limits) and can be
made in various ways, either regularly or by lump sum, or a combination of both.

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On retirement, up to 25% of your pension fund value can be taken as a tax-free cash
lump sum. The remainder of the funds left in your pension pot can then be used to buy
an annuity (a guaranteed income for life in return for a lump sum investment) or left
invested to produce an income directly from the fund. Alternatively, you could withdraw
the whole fund as a taxable lump sum.

Company Pension / Workplace Pension Scheme

A Company Pension Scheme (otherwise known as a Workplace or Occupational

Pension) is a pension that is set up by your employer to provide retirement benefits to
you while you are employed by them. It allows you to accumulate a pension fund during
your working life. You will usually be required to make regular pension contributions
based on a percentage of your salary into the workplace pension scheme. It is
customary for your company or employer to match the level of contribution you make.
Over the next few years, most employees will be auto-enrolled into a pension scheme.

Annuities are classified according to the nature of the payment and the duration of time
for payment. A fixed annuity requires payment in a specified amount to be made for the
term of the annuity regardless of economic changes due to inflation or the fluctuation of
the ventures in which the principal is invested. A variable annuity provides for payments
that fluctuate in size contingent upon the success of the investment of the principal.
Such variation offsets the effect of inflation upon the annuitant. If, however, the
investment has fared poorly, the size of the payments decreases.

A straight annuity is a contract by an insurance company to make variable payments at

monthly or yearly intervals. A life or straight life annuity is payable to an annuitant only
during the annuitant's lifetime and ceases upon his or her death. The size of the periodic
payment is usually fixed based upon actuarial charts that project the expected life span
of a person based upon age and physical condition. This type of annuity often contains
provisions that promise payment to be made to a secondary beneficiary, named by the
annuitant to receive benefits in case of the annuitant's death, or to the annuitant's heirs
for a period of time even if the annuitant has died before the expiration of the

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designated period. A deferred annuity is one in which payments start at a stipulated
future date only if the annuitant is alive at that time. Payment of the INCOME TAX due
on the income generated is delayed until payments start. A deferred annuity is used
primarily by a person who does not want to receive payments until he or she is in a
lower tax bracket, such as upon retirement.

A refund annuity, sometimes called a cash refund annuity, is a policy that promises to
pay a set amount annually during the annuitant's life. In case the annuitant dies before
receiving payments for the full amount of the annuity, his or her estate will receive a
sum that is the difference between the purchase price and the sum paid during the
annuitant's lifetime.

A joint annuity is one that is payable to two named persons but upon the death of one,
the annuity terminates. A joint and survivorship annuity is a policy payable to the named
annuitants during their lives and continues for the benefit of the surviving annuitant upon
the death of the other.

PAYMENTS UNDER A LIFE INSURANCE POLICY

A. Types of claims and claims procedure

A. Types of claims and claims procedure

1. Concept of claims

The real test of an insurance company and an insurance policy comes when a policy
results into a claim. The true value of life insurance is judged by the way a claim is
settled and benefits are paid.

Definition

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A claim is a demand that the insurer should make good the promise specified in the
contract.

A claim under a life insurance contract is triggered by the happening of one or more of
the events covered under the insurance contract. While in some claims, the contract
continues, in others, the contract is terminated.

Risk event and claim

Claims can be of two types:

I. Survival claims payable even when the life assured is alive and
ii. Death claim

Types of claims

While a death claim arises only upon the death of the life assured, survival claims can
be caused by one or more events.

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Examples of events triggering survival claims are:

I. Maturity of the policy;

ii. An instalment payable upon reaching the milestone under a money-back policy;
iii. Critical illnesses covered under the policy as a rider benefit;
iv. Surrender of the policy either by the policyholder or assignee;

Ascertaining whether a claim event has occurred

 For payment of a survival claim, the insurer has to ascertain that the event
has occurred as per the conditions stipulated in the policy.
 Maturity claims and money-back instalment claims are easily established
as they are based on dates which are determined at the beginning of the
contract itself. For instance, the date of maturity and the dates when the
instalments of survival benefits may be paid under a money back policy
are clearly laid out at the time of preparing the contract.
 Surrender value payments are different from other claim payments. Unlike
other claims, here the event is triggered by the decision of the policy
holder or assignee to cancel the contract and withdraw what is due to him
or her under the contract. Surrender payments would typically involve a
penalty for premature withdrawal and hence would be less than what
would have been due if the full claim were to be paid.
 Critical illness claims are ascertained based on the medical and other
records provided by the policyholder in support of his claim.

The complexity arises in case of a policy that has a critical illness claim rider and such
policy has been assigned. The purpose of a critical illness benefit is to enable a policy
holder to defray his expenses in the event of such an illness. If this policy where to be
assigned, all benefits would be payable to the assignee. Although this is legally correct,
it may not meet the intended purpose. In order to avoid such a situation, it is important
to educate policyholders about the extent of benefits that they may assign, by way of
a conditional assignment.

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A maturity or death claim or a surrender leads to termination of the insurance cover
under the contract and no further insurance cover is available. This is irrespective of
whether the claim is actually paid or not. Non-payment of a claim does not assure the
continuity of insurance cover under the contract.

Types of claims

The following payments may occur during the policy term:

A) Survival Benefit Payments

Periodical payments are made by the insurer to the insured at specified times during the
term of the policy. The policy bond is returned to the policyholder bearing an
endorsement of payments made after each survival benefit instalment.

B) Surrender of Policy

The policyholder opts for a premature closure of his policy. This is a voluntary
termination of the policy contract. A policy can be surrendered only if it has acquired
paid-up value. The amount payable to the insured is the surrender value which is
usually a percentage of the premiums paid. There is also a minimum guaranteed
surrender value (GSV), but the actual surrender value paid to the insured is more than
the GSV.

C) Rider Benefit

A payment under a rider is made by an insurance company on the occurrence of a

specified event according to the terms and conditions.
Under a critical illness rider, in the event of diagnosis of a critical illness, a specified
amount is paid as per terms. The illness should have been covered in the list of critical
illnesses specified by the insurance company.
Under hospital care rider, the insurer pays the treatment costs in the event of
hospitalisation of the insured, subject to terms and conditions.
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The policy contract continues even after the rider payments are made.
The following claim payments are made at the end of the policy term specified in the
insurance contract.

D) Maturity Claim

In such claims, the insurer promises to pay the insured a specified amount at the end of
the term, if the insured survives the plan’s entire term. This is known as a maturity
claim.

I. Participating Plan: The amount payable under a maturity claim, if participating, is the
sum assured plus accumulated bonuses less dues such as outstanding premium and
policy loans and interests thereon.
Ii. Return of Premium (ROP) Plan: In some cases premiums paid over the term period
are returned when the policy matures.
Iii. Unit Linked Insurance Plan (ULIP): In case of ulips, the insurer pays the fund value
as the maturity claim.
Iv. Money-back Plan: In case of money-back policy, the insurer pays the maturity claim
minus the survival benefits received during the term of the policy.

The insurance contact terminates after the claim is paid.

E) Death Claim

If the insured expires during the term of his / her policy, accidentally or otherwise, the
insurer pays the sum assured plus accumulated bonuses, if participating, less dues like
outstanding policy loan and premia plus interest there on respectively. This is the death
claim, which is paid to the nominee or assignee or legal whatever the situation may be.
A death claim marks the end of the contract as a result of death.
A death claim may be:

• Early (less than three years policy duration) or

• Non-early (more than three years)

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The nominee or assignee or legal heir has to intimate the insurer of the cause, date and
place of death.

I. Forms to be submitted for death claim

The following forms are to be submitted by the beneficiary with the insurer to facilitate

Processing of the claim

• Claim form by nominee

• Certificate of burial or cremation
• Treating physician’s certificate
• Hospital’s certificate
• Employer’s certificate
• Certified court copies of police reports like First Information Report (FIR), Inquest
Report, Post-Mortem Report, Final Report which are required in case of death by
accident.
• Death certificate issued by municipal authorities etc as proof of death

Forms to be submitted for Death Claim

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Ii. Repudiation of death claim

The death claim may be paid or repudiated. While processing the claim, if it is detected
by the insurer that the proposer had made any incorrect statements or had suppressed
material facts relevant to the policy, the contract becomes void. All benefits under the
policy are forfeited.

Iii. Indisputability Clause

However this penalty is subject to Section 45 of the Insurance Act,

1938.

Important

No policy of life insurance shall after the expiry of two years from the date on which it
was effected be called in question by an insurer on the ground that the statement made
in the proposal or in any report of a medical officer, or referee, or friend of the insured,
or in any other document leading to the issue of the policy, was inaccurate or false,
unless the insurer shows that such statement was on a material matter or suppressed
facts which it was material to disclose and that it was fraudulently made by the

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policyholder and that the policyholder knew at the time of making it that the statement
was false or that it suppressed facts which it was material to disclose.
Explanation:
If a policyholder suppressed material facts, at any time up to 2 years
from issuance of policy, repudiation can be done by insurer if material facts in proposal
are false.
The 2 – year period is a wait and watch period for the customer. After this period, an
insurer has to prove that that policyholder had made fraudulent statements and
suppressed material facts and knew that the statements given were false. Only after
obtaining proof can the insurer repudiate a policy after the 2-year period.

Iv. Presumption of Death

Sometimes a person is reported missing without any information about his where
abouts.The Indian Evidence Act provides for presumption of death in such cases, if he
has not been heard of for seven years.If the nominee or heirs claim that the life insured
is missing and must be presumed to be dead, insurers insist on a decree from a
competent court.It is necessary that premiums should be paid till the court decrees
presumption of death.Insurers may, as a matter of concession, waive the premiums
during the seven year period.

4. Claim Procedure for Life Insurance Policy

The IRDA (Protection of Policyholders Interests) Regulations, 2002 provides as follows:

Regulation 8: Claims procedure in respect of a life insurance policy

I. A life insurance policy shall state the primary documents which are normally required
to be submitted by a claimant in support of a claim.
Ii. A life insurance company, upon receiving a claim, shall process the claim without
delay. Any queries or requirement of additional documents, to the extent possible, shall
be raised all at once and not in a piece-meal manner, within a period of 15 days of the
receipt of the claim.

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Iii. A claim under a life policy shall be paid or be disputed giving all the relevant
reasons, within 30 days from the date of receipt of all relevant papers and clarifications
required. However, where the circumstances of a claim warrant an investigation in the
opinion of the insurance company, it shall initiate and complete such investigation at the
earliest. Where in the opinion of the insurance company the circumstances of a claim
warrant an investigation, it shall initiate and complete such investigation at the earliest,
in any case not later than 6 months from the time of lodging the claim.
Iv. Subject to the provisions of Section 47 of the Act, where a claim is ready for payment
but the payment cannot be made due to any reasons of a proper identification of the
payee, the life insurer shall hold the amount for the benefit of the payee and such an
amount shall earn interest at the rate applicable to a savings bank account with a
scheduled bank (effective from 30 days following the submission of all papers and
information).
V. Where there is a delay on the part of the insurer in processing a claim for a reason
other than the one covered by sub-regulation
(iv), the life insurance company shall pay interest on the claim amount at a rate which is
2% above the bank rate prevalent at the beginning of the financial year in which the
claim is reviewed by it.

5. Role of an agent

An agent shall render all possible service to the nominee/legal heir or the beneficiary in
filling up of claim forms accurately and assisting in submission of these at the insurer’s
office.

Apart from discharging obligations, goodwill is generated from such a situation whereby
there exists ample opportunity for the agent to procure business or referrals in future
from the family of the deceased.

Life insurance selling process

Explaining the Next Steps

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After you take your client or prospect through this simple 3-step process, and assuming
there is a life insurance need, then you should further explain the following important
details:

Step One – We need to apply for life insurance by completing a simple application

Step Two – We schedule a time for a mini-physical exam at your preferred time and
place

Step Three – The insurance company will request and review their medical records

Step Four – We will receive an official “offer” from the life insurance carrier

Once you receive this life insurance offer, you will set a time to meet again and review
the actual offer, which contains their health rating and the specific prices. This is the
time when you can begin working together and determine which kind – and which
amount – of life insurance makes the most sense. Note: I strongly suggest that you
do not provide any recommendations regarding any specific life insurance amounts – or
types – until after you receive the actual offer.

Minimize Pressure and Expectations

I also recommend that you make sure every client knows:

There is no cost to apply for life insurance

There is no cost when the insurance company acquires their medical records

There is no obligation to purchase any life insurance

Every client reserves the right to accept all, some, or none of your recommendations

In summary, once you take client through this 3-step educational process so they
understand what they own, how the other options work, and the “right amount”, this
usually creates an opportunity for changes and improvements.

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Customer service

Customer service handles company issues in stores, over the phone and even by email.
Companies that produce highly technical products, such as software or satellite
television, often have technical support staffs to resolve problems. Customer service is
important to an organization for a number of reasons. Foremost, it would be difficult for

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a company to survive without customer service, as there would be no one available to
handle payments or answer questions from prospective customers.

Roles and Responsibilities of an Insurance Agent

In an insurance industry, the insurance agent possesses multi-faceted roles to play as

enlisted below:

The insurance agent helps in promoting and selling of insurance products and
services to its customers.

Term insurance

Term life insurance or term assurance is life insurance that provides coverage at a fixed
rate of payments for a limited period of time, the relevant term. 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 or
conditions. If the life insured dies during the term, the death benefit will be paid to
the beneficiary. Term insurance is typically the least expensive way to purchase a
substantial death benefit on a coverage amount per premium dollar basis over a specific
period of time.

Term Insurance with Maturity Benefit India

The term life insurance plans with maturity benefits are slightly different form
the traditional life insurance plans. Normally, a traditional term insurance policy does not
offer any direct maturity benefits to the policyholder. They only provide death benefits
when a policyholder dies within the policy term.

So, if any buyer/policyholder wants to have maturity benefit, he/she can opt for a TROP
(Term Return of Premium) plan. A term return of premium plan provides income
replacement and refund the premiums at maturity, apart from offering all benefits of a

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traditional term life insurance plan. A TROP plan is a variant of pure term insurance plan
and ensures maturity benefits, if the policyholder survives till the end of policy tenure.

Key Features of Term Plans with Maturity Benefit

The term life insurance plans with maturity benefits or term return of premium plans
come with a lot of attractive features. Listed below are the key features of term life
insurance plans with maturity benefits:

15 days for manually purchased policy

Free-look period
30 days for policies purchased online.

Minimum entry age:18 years

Entry Age
Maximum entry age: 65 years

15 to 30 days based upon policy modes. Usually, 15 days for

Grace period
monthly mode policies and 30 days for other modes.

Term insurance plans offers flexibility in terms of choosing a

Plan type plan. One can choose a plan on single life basis or joint life
basis.

Premium paying
Single pay, Limited pay and Regular pay.
term

25 year/ 65 years/ 75 years to whole life. Differ from policy to

Age at maturity
policy.

The policy can revived within two years from the date of unpaid
Policy revival
premium.

28
Premiums Based on sum assured and age of the applicant.

Term life insurance policies with maturity benefits accept

Nomination
nomination.

Premium paying
Yearly/ monthly.
frequency

Vary from policy to policy offered by various life insurance

Sum Assured
companies.

Policy coverage Death benefits and maturity benefits.

Minimum- 5 years
Policy term
Maximum – 30-35 years

Benefits of Term Insurance with Maturity Benefit

The term life insurance plans with maturity benefits offer a number of attractive benefits
which include:

29
Death Benefits: Term insurance plans offer death benefits to designated nominees.
The nominees will receive these death benefits, if the life assured dies within the policy
tenure.

Maturity Benefits: Normally, traditional life insurance policies don’t offer maturity
benefits. But term return of premium life insurance policies offer maturity benefits by
returning the total amount of premiums paid so far, provided a policy is continued till the
end of term.

Tax Benefits: A policyholder can enjoy tax benefits over the premiums paid for term life
insurance plans with maturity benefits. The premiums paid and the amount received are
exempted from income tax assessment under section 80C and 10 (10D) of the Indian
Income Tax Act, 1961.

Term life insurance plans with maturity benefits also offer additional riders such as
Critical Illness and Accidental Death or Disability riders.

Term life insurance plans come at affordable premiums rates.

Top 5 Term Insurance Plans With Maturity Benefit India

Listed below are some of the term life insurance plans in India that come with maturity
benefits.

 LIC Jeevan Pramukh: This is an Endowment Assurance term life insurance plan
offered by Life Insurance Corporation of India. The plan provides financial
protection against death throughout the policy term and provides maturity
benefits, provided the policyholder holder survives till end of policy term. The
policy would pay the sum assured accompanied by accrued guaranteed
additions, vested simple reversionary bonuses and terminal Bonus( if any) in a
lump-sum as maturity benefits.

30
  MetLife Suraksha TROP: It is a non-participating term life insurance plan offered
by PNB metlife. The plan not only provides life insurance coverage at nominal
cost, it also offers the total of all premiums paid along with guaranteed additions.

 Max Life Premium Return Protection Plan: This is a term insurance plan with
maturity benefits offered by Max Life Insurance Company. The plan not only
protects your family against eventualities, it also returns all your premiums paid
at maturity.

 Aviva ishieldplan: This is an online non-linked non participating term life

insurance plan offered by Aviva. The plan provides guaranteed survival benefits/
money back benefits at maturity which is 110% of total premiums paid.

 Tata AIA Life Insurance iraksha TROP: This is an online term return of
premium plan which a returns all total premiums paid, if the policyholder survives
till the end of policy term.

How to Choose the Best Term Insurance Plans with Maturity Benefits

In order to choose the best the term life insurance plan with maturity benefits, you need
to shop around and do a primary research. Then, compare the plans available in the
insurance market and pick up a one based on your requirement.

31
Which is the best term insurance plan

Term insurance plan offers you a very large cover at very affordable premiums. Most of
the term insurance plans have moved online and it is relatively expensive to buy it
offline plans when the benefits are EXACTLY the same.
Now coming back to the question of the best term insurance part - I really have no
favorites. What is most important is that YOU fill up the application form yourself.
Ensure that all the information shared by you is accurate. That ensures that the
insurance company does not have a reason to reject your claim due to incorrect
representation. Apart from this you may also want to consider the claims ratio of the
insurance companies as one of the significant parameters. If you have filled up the
application form correctly, no insurance company can reject your claim. But if there is a
go do history to the insurance company it is better to use it in our favor.
Take term insurance right away, it is the best form of cover for your family and your
loved ones. So go check out the claims ratio of different life insurance companies on our
site and go in for a company which falls in the top 5. The other factor could be a brand

32
preference of yours. There are quite a few big brands operating in the life insurance
space and if you have an affinity for any one of them, you may go in for any of them.

Apart from these, there aren't really any other factors which impact the decision making
process. The benefits are more or less identical in the different plans. There are a few
variations in the way the payouts are made - some offer you a lump sum benefit and a
few others offer a regular monthly income options. Some companies offer a few riders
which come at an additional cost.

This is what I would recommend - take a term insurance plan RIGHT NOW. Term
insurance plans are the best form of cover for your family who is totally dependent on
your income. DO NOT put off this decision for later thinking that nothing will ever
happen to you.

What is the difference between term and endowment insurance plans?

Both are very different offerings - they are like chalk & cheese. Term insurance is a pure
risk cover and a product which is an absolute must for every individual who has any

33
dependent relying on their income. You typically should take a term insurance cover of
20 times your annual income. In term insurance, if you die, your nominee gets the sum
assured. In case you survive the policy term, nothing is paid out to you. They are by far
the cheapest form of cover.

Endowment Plans on the other hand are plans which are a combination of
both insurance + investment. You get a life cover and you get an investment component
also. You keep paying during the course of your policy term and at the end of the policy
term you get a maturity amount. A variation of Endowment plans are Money Back plans
where some part of the benefits are paid to you at regular intervals during the policy
term itself. Usually the insurance cover you get in these plans is not great or sufficient
for the policyholder's dependents but they can be used as good investment tools. There
is a sense of discipline and you keep paying regularly and build a corpus which can be
used for some major cash requirement at the end of the policy term - say for your child's
higher education or marriage or for buying a house.

Term Insurance Endowment Insurance

Term insurance plans only provide Endowment insurance plans

protection for the term specified in the provide protection along with an
policy document. investment opportunity.

They offer death as well as

They offer just the death benefits.
maturity benefits.

For the same sum assured, the

The premiums payable for
premium charged by term insurance
endowment plans are more
plans is much less than the endowment
expensive than term plans
plans.

34
Pure term plan

The simplest and cheapest of all, this one pays a fixed sum assured on the death of the
policyholder. However, if the policyholder survives the term, he gets back nothing. The
premium on term plans depends on three factors: age, term of the policy and the sum
assured you choose. Even as term plans are the cheapest insurance product you get a
further discount by buying them online.

Return of premium plan

Not everybody likes the thought of paying for years and not getting anything back at the
end. Return of premium plans are meant for such people. These are slightly more

35
expensive policies since they promise a return of premium. The policyholder gets the
return of premium at the end of the term, but if he dies mid way, the nominee gets the
sum assured.

Decreasing plan

A popular with mortgage products, the sum assured in this plan decreases every year,
as does your outstanding loan amount. The premiums on these plans are lower than
that of a level term plan since every year the sum assured decreases. Banks typically
bundle the single premium version of this policy and pay the premium on your behalf.
The amount of premium gets added to your total debt liability, which you pay through an
increased EMI. While it may seem easier to pay a single premium and get that added to
your debt, a more cost effective technique is to pay regular premiums and that too on
your own.

Increasing plan

This is the opposite of a decreasing plan. Here the amount of cover increases by about
5% every year until your sum assured increase by 50% or doubles up in value. The
premiums are on the higher side as the insurer puts more money at risk every year.
Unless you are sure that your assets won’t suffice for your family, avoid this one.

Convertible plans

This combines the benefits of a term plan with a savings plan. Here, initially you buy a
term plan, which you can convert into an investment-cum-insurance plan later. So, you
cover your insurance needs during, say, your initial years of work and if you think you
have saved enough over the years, you switch to a different plan where a part of your
money is invested. However, your premium may change at the time of conversion.

Term Life Insurance Policies

Sample rates are for a 25-year-old female in excellent health in Illinois. Get a quote to
see personal pricing.

36
Select Term Life Insurance

Select 10, 20, or 30 years of coverage and a guaranteed benefit. Coverage starts at
$100,000, and the affordable premiums are level for the initial policy term. Once past
the level premium period, premiums will increase annually. The policy is guaranteed to
renew up to age 95 and is convertible to a permanent policy regardless of health,
subject to age limits.

Select Term

10 Years 20 Years 30 Years

Starting at $15.00/mo* Starting at $15.45/mo* Starting at $20.23/mo*

$172.50 annually $177.50 annually $232.50 annually

$250,000 of coverage $250,000 of coverage $250,000 of coverage

Get a quote Get a quote Get a quote

Return of Premium Term Life Insurance

Return of Premium Term Life insurance offers you coverage with a level premium
payment for 20 or 30 years, whichever you choose. If you outlive that premium period,
all policy premiums you've paid will be returned to you. Coverage starts at $100,000.
The policy is guaranteed to renew up to age 95 and is convertible to a permanent policy
regardless of health, subject to age limits. Once past the level premium period,
premiums will increase annually.

37
Return of Premium

20 Years 30 Years

Starting at $39.80/mo* Starting at $40.25/mo*

$457.50 annually $462.50 annually

$250,000 of coverage $250,000 of coverage

Mortgage Term Life Insurance

Mortgage Life 15 or 30 is designed to provide funds for the repayment of a residential

mortgage in the event of premature death. Coverage is available for 15- or 30-year
periods. After the first five years, the death benefit, which is meant to behave similar to
your mortgage, decreases over the life of the policy. It is sometimes called a
"decreasing term" policy. You choose the amount of coverage ($50,000 minimum)
based on your mortgage balance. The policy is convertible to a permanent policy
regardless of health, subject to age limits.

Mortgage Life 15 or 30

15 Years 30 Years

Starting at $21.58/mo* Starting at $22.45/mo*

$248.00 annually $258.00 annually

$100,000 of coverage $100,000 of coverage

38
Advantages & Disadvantages of Life Insurance

Life insurance offers several advantages not available from any other financial
instrument; yet it also has disadvantages.

Advantages of Life Insurance

 Life insurance provides an infusion of cash for dealing with the adverse financial
consequences of the insured's death.
 Life insurance enjoys favorable tax treatment unlike any other financial
instrument.

 Death benefits are generally income-tax-free to the beneficiary.

 Death benefits may be estate-tax free if the policy is owned properly.
 Cash values grow tax deferred during the insured's lifetime.

Cash value withdrawals are treated on a first-in-first-out (FIFO) basis, therefore cash
value withdrawals up to the total premiums paid are generally income-tax free.

39
Policy loans are income tax free.

A life insurance policy may be exhanged for another life insurance policy (or for an
annuity) without incurring current taxation.

Note: All of the above statements are generally true; however the tax benefits of life
insurance have certain limitations which under the wrong set of circumstances can
cause the tax benefits mentioned to be lost. Please discuss with your insurance and tax
advisor.

Many life insurance policies are exceptionally flexible in terms of adjusting to the
policyholder’s needs. The death benefit may be decreased at any time and the
premiums may be easily reduced, skipped or increased.

A cash value life insurance policy may be thought of as a tax-favored repository of

easily accessible funds if the need arises; yet, the assets backing these funds are
generally held in longer-term investments, thereby earning a higher return.

Disadvantages of Life Insurance

 Policyholders forego some current expenditure to pay policy premiums.

Moreover, life insurance is typically purchased for the benefit of others and
usually only indirectly for the insured person.
 Cash surrender values are usually less than the premiums paid in the first
several policy years and sometimes a policyowner may not recover the
premiums paid if the policy is surrendered.
 The life insurance purchase decision and the positioning of the life insurance can
be complex especially if the insurance is for estate planning, business situations
or complex family situations.
 The life insurance acquisition process can be annoying and perplexing (e.g. Is
the life insurance agent trustworthy? Is this the right product and carrier? How
can medical underwriting be streamlined?).

40
 ADVANTAGES AND DISADVANTAGES OF TERM INSURANCE

Advantages
During the early years of a term policy, the premium will usually be significantly lower than for cash
value insurance.

 t's simple to understand.

 It may be purchased to meet a specific financial obligation, such as repayment of a loan.
 Many term policies can be converted to cash value life insurance if your insurance needs
change.

Disadvantages
 Term insurance provides coverage only for a limited period of time, although some term
policies can be renewed indefinitely.
 Premium rates are guaranteed only until the end of the term. Depending on the policy,
premiums may be level for a period of 1, 5, 10, 15, 20, 25, or 30 years and then cease without

Top 10 Life Insurance Companies in India

LIC of India

It has more than 2 crore customers holding their insurance plan. LIC is perhaps the largest life
insurance company in India.
People normally choose LIC to get insured. You can trust this company
from your closed eye. However, you have to be careful while choosing a
plan.
Products: Insurance plans, Pension plans, Unit plans, Health plans
Some of its plans are:
 Bima Plus
 Future Plus

41
  Jeevan Plus
 Money Plus
 Market Plus
 Fortune Plus
 Profit Plus
 Child Fortune Plus
 Endowment Plus

These were few best plans that LIC has to offer.

2. ICICI Prudential
Our second best life insurance company is ICICI prudential. It has over 10 lacs people holding the
plan. There are over 1000 branches all over India.
It has also a variety of plans like LIC. Some of ICICI’s plans are
 Term Plan
 Child Plan
 Wealth Plan
 Health Plan
 Retirement Plan
 ULIP Plan
 Group Plan
 Rural Plan
These are some of its plan. What I like about the ICICI is the term plan. It is much better than LIC
because terms and conditions are very easy to understand and realistic too.

3. Reliance Life

Reliance life is the 3rd company in our countdown list. It has over 7 lacs customers. One of the great
things about this company is that it is growing rapidly compared to other life
insurance companies in private sector.
Some of its plans are

42
  Protection Plan
 Saving & Investment Plans
 Retirement Plan
 Unit Linked Plan
 Child Plan
 Health Plan

The thing that sets Reliance Life from others is Reliance Life Insurance eTerm Plan.

4. Bajaj Allianz

The fourth company in our countdown list is Bajaj Allianz. It has over 6.5 lacs policies sold. This is
tentative figure hence it could be even more.
Bajaj Allianz is liked by people coming from upper middle class background because it has well laid
out plan structure.
Term Plan
 Secure Term

Investment Plan
 Gain III

Retirement Plan

 Cash Rich Insurance Plan

Child Plan

 Super CashGain Insurance Plan

Although Bajaj Allianz has plans for car and travel insurance but as far as life insurance is concerned

43
Secure Term plan is the best. I have known many satisfied customers using Secure Term.
5. Birla Sunlife

Birla Sunlife Insurance plan is 5th best in our top 10 best insurance companies. It has over 6 lacs
customers with the policy.
Some of their plans are
 Protection Plan
 Premium Back Term Plan
 Protection Plus Plan
 Future Guard Plan
 Classic Life Plan
 Dream Life Plan
 Empower Pension Plan
To be honest I know people who are using this plan and they say that there is nothing special about
Birla Sunlife Insurance. Only thing that they like is the customer support.

6. SBI Life Insurance

SBI is 6th best life insurance company. I got to know about SBI life insurance plan while I used to visit
the bank.
Their plans are mediocre and have over 5.5 lacs policies sold.
Its protection plans are
 eShield
 Smart Shield
 Smart Income Shield
 Swadhan
 Saral Shield
 Grameen Bima
It also has pension plans and saving plans. Moreover, it has worst customer care service compared
to other private life insurance companies.

44
 7. Max Life Insurance

Max Life Insurance Company is to look for. It may be small and ranked at 7th but solvency capital
ratio is around 500%, which is way more than required 150%.
Protection Plan could be divided into two:
 Platinum
 Premium Return Term Plan
Retirement Plan
 Forever Young Pension Plan
 Life Partner Plus Plan
 Immediate Annuity
 Saving Plans
 Whole Life
 20 Year Endowment
 Endowment to Age 60
 Life Gain Plus 20, 30 etc
 Life Pay Money Back

8. HDFC Standard

HDFC Standard is a private life insurance company and it is growing very rapidly. It is 8 th best
insurance company in India.
With over 500 branches in 900 cities and town in India HDFC standard has
come a long way.
Some of their term plans that you might like to choose are
 Click 2 Protect
 Term Assurance Plan
 Premium Guarantee Plan
 Loan Cover Term Insurance Plan

45
 What I like most about HDFC standard is that it has many plans targeted towards women. If you have
daughters then go for it.

9. TATA AIG General Insurance Company

Tata AIG is the 9th best company in India for life insurance. It has over 2 lacs policy holders across
the country.
It has variety of plans however you have to choose a plan that suits you the most.
What attracted me the most is the individual personal accident plan.
You get
 Accident guard
 Secured Future Plan
 Maharaksha Personal Injury
 Income Guard
 Secured Income Plan

10. ING Vysya Life Insurance Co

The last insurance company in our top 10 list is ING Vysya Life Insurance Co.
Their shareholders are growing rapidly and that is the good sign.
Some of its protection plans are
 My Term Insurance
 Term Life Plus
 Term Life Rider
The unique thing about ING Vysya is their inheritance plan for saving & investments.

Term insurance

46
The right Life Insurance policy goes a long way in providing risk cover for the insured as
well as saving hard earned money.

The Term Plan project carried out for www.investorsareidiots.com involves the analysis
of the various term plans provided by Life Insurance Companies.

A. Who has to buy a term plan?

B. What is the use of term plans?

C. Types of term plans? The parameters used for answering the question on term
insurance are.

Types of term plans.

 Types of premium paying term: There are 3 ways in which you can your premium

A) Regular.

B) Single.

C) Limited.

 Entry Age: What is the age at which you can enter the policy?

 Sum Assured: What is the amount of premium assured in the policy?

 Maturity Benefit: Is there any maturity benefit for the policy?

 Surrender Benefit: The benefit available if you surrender the policy

 Accessibility: How can you buy the policy?

 Additional Rider Benefit: The rider available along with the policy?

 Alteration to Premium: Is there a possibility to increase or decrease the premium

47
What do you mean by Term Insurance

Term plans are the purest form of insurance products and they are very affordable with
their low cost and high coverage. Term plans are not attached with any savings or
investment product. In a pure term plan product, if the policy holder dies the nominees
will get the money that has been promised by the insurance company as the Death
Benefit for the policy holder. In a pure term policy there is no maturity or surrender
benefit. In the market, many variations of Term Plan are available, which provide
maturity and surrender benefit. Insurance Premium would usually consist of 3 parts,
namely Mortality Charge, Administrative Expenses and Investments. Mortality Charge is
the charge paid to the insurance company by the policyholder for providing him with the
assurance of the Death Benefit. Expenses are administrative costs for documentation
and investments are the amount invested for providing the Maturity Benefit, if any, to the
customer. Since Maturity Benefit is usually zero in Pure Term Insurance Plans, there is
no requirement for Investment. Hence Term Plans are the cheapest plans in the
industry with the highest possible cover. Thus, any person will be able to take a high
cover for the protection of his family at a very nominal cost if he opts for a Term Plan.
Www.investorsareidiots.com Who has to buy it?

Who has to buy it

The usual customers for this plan would be someone who is the only earning member of
the family and has a number of dependents or someone who has taken a loan. It is also
beneficial for high net worth individual, who needs a very high cover. In certain plans the
coverage can be increased after taking the policy and hence can be availed by young
individuals who do not have much liability now.

What is the use of Term Plan?

It helps to provide income to the family in case of the policy holder’s death. The family
remains protected in financial terms even after death of the policy holder.

Types of Term Plans

48
 Level Term Plans: The life coverage remains the same throughout the policy tenure

 Increasing Cover Term Plan: The life coverage increases steadily at a certain fixed
rate of about 5% every year

 Decreasing Cover Term Plan: The life coverage decreases steadily at a fixed rate till it
reaches the threshold limit.

 Home loan Cover Term Plan: The plan is used for covering the home loan liability

 Income Plan Term Plan:

Analyasis

The plan provide monthly income for the family post the death of policy holder
www.investorsareidiots.com Analysis: In this assignment we analyzed the term plans
available in the Indian Market. Presently there are 24 companies in Life Insurance
Business in India The parameters we used while analyzing the term plan are

Type of Term plan.

 Type of premium paying term: There are 3 ways in which you can your premium a)
Regular. B) Single. C) Limited.

 Entry Age: The age at which you can enter the policy

 Sum Assured: The amount of premium assured in the policy

 Maturity Benefit: Maturity benefit for the policy

 Surrender Benefit: The benefit available on surrender of the policy

 Accessibility: How to buy the policy?

 Additional Rider Benefit: The rider available along with the policy

49
 Alteration to Premium: Is there possibility to increase or decrease the premium?

Bajaj Alliance life Insurance

Bajaj Alliance Life Insurance has 3 plans in Term insurance, they are isecure, New Risk
Care II and Term Care all of which are plain vanilla term insurance. Out of these 3 plans
isecure has a better option when one compares the sum assured, maturity age and
accessibility

Parameter Policy Name

Type of term plan Secure New risk careii Term care

Min –Max entry age Level term plan Level term plan Level term plan
Min –Max sum ((18 – 60) years (18 – 60 ) years (18-15) years
assured
2.5 lakh –no limit 2 lakh –no limit 1 lakh -10 lakh
Policy term 10- 30 years 5 – 40 years 5 – 40 years
Maturity age 70 years 65 years 65 years
Surrender benefits No Yes Yes
Accessibility Online Offline Online
Additional rider Accidental Accidental Accidental death
benefits protection benefits protection benefits benefit accidental
critical illness critical illness permanent
benefits hospital benefits .Hospital total/partial disability
cash benefits. cash benefits benefit .Wavier of
permanent benefit
(in case of
accidental
permanent total
disability)

50
 ING Vysya Life Insurance

ING Vysya has two plans in term insurance segment. The difference between plans is
with respect to sum assured and return of premium

Parameters Policy name

TERM LIFE PLAN TERM LIFE PLUS
TYPE OF TERM Level term plan Permium return plan
Min –Max entry age 18 -65 years 18 – 65 years
Min –Max sum assured 10 lakh –no limit 5 lakh – no limit
POLICY Term 10 -30 years 10 – 30 years
Maturity age 75 75
Surrender benefit No No
Accessibility Offline Offline
Additional rider benefits Accidental death benefits Accidental death benefits
accidental death disability & accidental death disability &
dismemberment benefits. dismemberment benefits.

51
 1. Key Person Insurance Case Study

People are often a company's biggest asset and losing a key person can be very
damaging. John Webster, age 45, works at diginet, a digital marketing company. John’s
expertise and contacts have contributed significantly to the company's success. His
annual salary is $100,000. Tim Stone, company owner knows that if something
happened to John, his business would be negatively affected. Tim purchases a John
Hancock Indexed UL policy for $800,000 as Key Person insurance on John, based on
eight times his annual compensation. The company can access the policy’s cash values
for business purposes if needed. When John retires at age 65: 1. Tim can transfer the
policy to John and pay the taxes due. 2. Diginet can keep the policy as a business
asset.

Year Approximate After Tax Corporate Annual Outlay Approximate Taxes Due By
Employee on Transfer Approximate Corporate Tax Deduction if Transferred to
Employee Approximate Withdrawal from Policy to Pay Taxes Approximate Net Cash
Surrender Value Approximate Net Death Benefit 1 $15,000 $0 $0 $0 $0 $815,000 10
$15,000 $0 $0 $0 $143,500 $950,000 20 $15,000 $0 $0 $0 $448,000 $1,100,000 21
$448,000 $157,000 $105,000* $157,000 $312,000 $943,000 *Tax deduction calculation
includes tax employer would pay on gain on transfer, a 35% tax rate for both parties.
This is a hypothetical for discussion purposes. Based on Male, Super Preferred Non-
Smoker, age 45. Twenty annual premiums of approximately $15,000. Assumes 100%
Capped Indexed Account with a current illustration rate of 6.73%.

Benefits:

 The Business benefits from having a source of income to cover expenses that occur
with the loss of a key person

.  The Business can access the potential cash value for cash flow, retirement benefits
or other unexpected expenses.

52
 The policy may be used to fund executive’s supplemental retirement income through
policy loans

2. Term Life Insurance Case Study

Client Profile

 Client runs a large international manufacturing plant.

 Business is owned by himself and his wife, both are active in the
business and hold key positions.
 Business would continue upon the death of either owner.
 Current total net worth $20 Million+.
 Premiums for $7.2 Million of Coverage

The Bayside Report showed that they were substantially over paying for their
existing term insurance coverage.

Without our help the client would have overpaid for their insurance by over
$118,000 in just the next 10 years.

Business insurance coverage had not been coordinated with the personal

53
coverage.

Business owner was substantially under insured when compared to current

situation and the existing agent had not been in contact with the client for
sometime.

Client needed help with an overall estate and tax plan.

Bayside Associated Recomendations

Lowered Life Insurance Premiums - reduced cost by 38% (cost per thousand).
Increased Company owned coverage to levels that will now adequately
payout; lines of credit, mortgages and other liabilities. Also it now protects the
Company
cash-flow at the passing of the founder or key person.

Helped in the setup of Trust and Estate Plan and recommended several key
advisors.

Setup Personal Universal Life Program with coverage on both husband and
wife.

This allows for adequate protection personally for either spouse.

Tax sheltering of business profits.

Funds to be accessed later to help fund retirement (if needed).

Death Benefit proceeds to be used to pay building tax liability.

54
 Conclusion

Term Insurance plan is one of the critical investments in person’s life. While choosing a
term insurance plan an individual has to consider his Age, family income, dependents,
liabilities and time period of cover. There are more than 100 term plan available in the
market. While choosing a term plan it is preferred to choose plain vanilla term plan and
online as you get more sum assured and longer coverage time with minimum amount of
money. As the term plan is not an investment for future but it is a product which helps
your family when you are no longer there to protect them financially.

Though there has been progress in sale of policies,lack of awareness of life insurance

still exists .One should purchase a policy at earliest because of-lower premiums,higher
premiums.Despite a few of its disadvantages purchase of a life insurance policyis a
smart move especially because the insurance sector is germinating in india.

55
 BIBLIOGRAPHY

www.google.c

http://en Wikipedia.org/wiki/life insurance

Newspaper

Books

http://top100.com/201004/advantages.and.disadvantages of life insurance &term

insurance.

http://www.licindia.in/

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