Life insurance
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Transcript of Life insurance
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Life insurance
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Nature of life insurance
1. Peculiar nature – event bound to happen
2. Covers death due to natural causes and accidents
3. It’s a long term contract
4. A contract of assurance
5. Can’t be indemnified (subrogation and contribution doesn’t apply)
6. It is an a long term investment
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Features and principles
I. Nature of a general contract
a) agreement
b) Competency (eligibility) of parties
c) Free consent of parties
d) Legal consideration -valid from 1st premium
e) Legal objective - support the family
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II. Insurable interest (Pecuniary interest)
Insurable interest
Own life
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III. Utmost good faith (indisputable clause)
IV. Warranties
1. Informative warranty
2. Promissory warranty
3. Breach of warranty
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V. Proximate cause
VI. Assignment and nomination
VII.Return of premium
VIII.Alaeatory
IX. Indemnity/subrogation (N/A)
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Aleatory
• Insurance contracts are aleatory• There is no equal value exchanged
1. Either insurer collects premium and if there is no loss doesn’t pay back
(or)
2. The insured pays small premium and collects huge amounts as compensation.
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Types of life insurance
I. Duration of the policy payments
II. Method of premium payments
III. Participation in profits
IV. Number of lives covered
V. Method of payment of claim
VI. Unit linked insurance
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Classification of policies
I. Duration of policy
- whole life policy
- limited payment whole life policy
- convertible whole life policy
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contd
2. On the basis of Term Insurance policies
- Temporary Assurance Policy
- Renewable Term Policies
- Convertible Term Policies
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contd
3. On the basis of Endowment Policies
-pure endowment policy
- ordinary endowment
- joint endowment
- double endowment
- fixed term (marriage)
- educational annuity policy
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contd
- triple benefit policy
- anticipated endowment
- multi purpose policy
- children’s deferred endowment assurance
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On the basis of premium payment
• Single premium• Level premium
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On basis of participation of profits
• Participating policy• Non participating policy
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On the basis of number of persons insured
• Single life • Multiple life
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On methods of payment
• Lump sum policies• Annuity policy
- immediate annuity
- deferred annuity
- fixed and variable annuity
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Money back policies
• Money back policy• Sinking fund policy
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(Contd)
• Unit linked policies• Group insurance schemes
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Actuaries
A business professional who deals with financial impact of risk and uncertainty
Deals in financial security systems like,
Asset management
Liability management
Analytical skills
Business knowledge, etc.,
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1. Life , health and pension actuaries- Deal in mortality risk, consumer
choice, morbidity,…
Products – deal with life insurance, annuities, pension, mortgage and credit insurance, long and short term disability, medical, dental and health care.
Types of actuaries
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2. Casualty actuaries- Non-life/general insurance act.- Deal with catastrophic, unnatural
risks
Products – auto, home owners, communal property, workers compensation, title insurance, malpractice, environment/marine, terrorism,..
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• Appointment:
1. An insurer registered to carry on business in India shall appoint an actuary – APPOINTED ACTUARY for IRDA act.
2. A resident of India
3. Fellow member of actuarial society of India and possess certificate of practices issued by the society.
4. Not above 70 years
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• Duties
1. Render actuarial service to insurer.
2. Product design and pricing/wording of contract investments and re-insurance.
3. Ensuring the solvency of insurer firms.
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4. To comply with provisions of act to,- Fix premium- Give interim bonus
5. To ensure policy holders responsible expectations been considered.
6. To ensure premium charged are fair
contd
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Cover notes/Binders
• Temporary document sent to the insured, till permanent certificate of policy issued
• In life insurance cover notes are not issued, but letter of acceptance is issued
after the first premium received as binders.
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Process of Assignment
1. Procedure
2. Notice
3. Priority
4. Acknowledgement
5. Recognition
6. Conditional assignment
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Surrender value• Amount the insurer decides to pay on
surrendering the policy
• Paid up value• If assured discontinues premium payment
after 2 years
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Days of grace • 15 days from due date (monthly premium)• 30 days (quarterly, half yearly, annual)
Revival of discontinued policies• During life time, within 5 years before date of
maturity
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Loans• When policy has surrender value it has a loan
value• 95% of surrender value given as loan• 5% kept as interest reserve• Repayment as per convenience of assured –
instalments or maturity value• Best form of investment for insurance company
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Age proof and death proof• Certificate of birth and death• 7 years of disappearance – (dead)
Suicide – intentional / willful act• If there is a clause insurer can avoid payment• Assignee given some consideration
Payment of claim• With proof as owner or nominee or assignee