2. ► Insurance and Life Insurance in different
perspectives
► Legal aspects of Life Insurance business in
India
► Principles of insurance and their
applications to Life Insurance
► Important types of Life Insurance
2
3. 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.
3
4. ► 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
4
5. Kenneth Black (Jr.) and Harold Skipper (Jr.)
have defined insurance under two different
perspectives :
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.
5
6. Legal Perspective
► Insurance is an agreement (the insurance policy or
insurance contracts), by which one party, called
the policy owner, pays a stipulated consideration,
called premium, 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.
6
7. What Is Life Insurance ?
► It is a contract in which the Insurer, in
consideration of a certain premium, either in a
lump sum or in any other periodical payments, in
return agrees to pay to the assured, or to the
person for whose benefit the policy is taken, a
stated sum of money on the happening of a
particular event contingent on the duration of
human life.
7
8. 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.
8
9. In India, Life Insurance business is defined
under Section 2 (11) of Insurance Act,
1938, which reads :
► “Life Insurance business” means the business
of effecting contracts of insurance upon human
life, 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 :
9
10. ► Disability and double or triple indemnity accident
benefits, if so provided in the contract of
insurance;
► 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, trade or employment or of the
dependents of such persons.
10
11. ► The insurance contracts, which deal with
disability, accidental death alone, sickness etc.
are excluded from the purview of life insurance.
► 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.
11
12. Essentials of a Valid Contract
► Offer and acceptance
► Consensus ad idem
(“meeting of the minds”)
► Parties competent to contract
► Consideration
► Legality of purpose
12
13. Principles of Life Insurance
Special Features of Life Insurance Contracts
► Insurable Interest :
The object of insurance should be lawful. 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. This is known as Insurable
Interest.
13
14. In Life Insurance the presence of insurable
interest is essential at the time of effecting the
Contract of Insurance.
If there is no insurable interest, the contract
becomes wagering and hence illegal.
Every individual has unlimited insurable interest
on his/her life.
Husband has insurable interest on the life of his
wife and vice versa
14
15. 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.
15
16. ► 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, viz., 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 16
17. 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,
the benefits, pricing aspects etc. and hence
will have to rely upon the insurer to ensure
that the terms of the contract are fair and
equitable.
17
18. Doctrine of Adhesion
►The terms of the contract are most of
the times fixed by one party (the
insurer) and with minor exceptions,
must be accepted or rejected in total
by the other party (the proposer).
18
19. 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.
► 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.
19
20. 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.
20
21. ► 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
21
22. Endowment Insurance
► Benefits under the policy paid on the death
of the life insured during the selected term or
on his survival to the end of the term.
Normal durations ranging from 10 to 30 years
or more; shorter term policies ranging from 3
to 10 years
Single premium endowment insurance policies
Money Back or Cash Back or Anticipated
Endowment Insurance Policies
22
23. Term Insurance
► Insurance protection for selected term only – in
case the insured person dies during the term, the
benefits are payable.
► In case of his survival till the end of selected term,
the policy normally expires without any benefit
becoming payable
► May be regarded as temporary insurance –
premium for term insurance is relatively low.
23
24. Annuities
► Series of periodic payments
► Annuity provider (insurer) agrees to pay the
purchaser of annuity (annuitant) a series of
regular periodical payments for a fixed
period or during someone’s life time.
24
25. Group Life Insurance
► There are groups of people who share
something in common and are connected
by some underlying similarity like
occupation, profession, employment, social
purposes or even entertainment can have a
similar need for life insurance which can be
met by a single insurance contract.
25
26. ► These categories of products that
cover the risk of a contingency
dependent on the life of a group of
persons, come under the group life
insurance.
26
29. 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
29
30. ►Non-packaged Products –
products with certain basic
features like Endowmnet or
Money-back. the customer to
choose as per his needs and
then expand it by rider benefits –
accident cover, critical illness
cover, disability benefits,
hospitalisation cover etc.
cater to niche market and have
profit potential.
30
31. ► Basic Elements :
(a) Risk coverage – to provide lump sum
amount to the family in the event of
untimely death of the breadwinner –
‘Term Insurance’ or ‘Temporary
Insurance’.
(b) Savings – lump sum amount is
payable only if the insured survives till
the end of the selected period; if death
occurs during the period of insurance,
nothing is payable – ‘Pure
Endowment’.
31
32. ►Term Insurance :
a contract for limited number of years
payment only if death occurs during
the term
low cost / high risk coverage
stricter underwriting rules and
restrictions
renewable feature and convertible
feature
increasing or decreasing Term
Insurance 32
33. ► Whole Life Insurance –
Risk coverage for the death of the insured- whenever it
may happen
No fixed term
Variations – Pure Whole Life – Premium payable
throughout the life of the insured till death. 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
33
34. ► 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.
34
35. Life Insurance Products In India
► Term Insurance
Two-year temporary insurance
Convertible term insurance for 5-7 years – option to
convert into limited payment whole life or endowment
assurance
Bima Sandesh – Return of premium on survival
Bima Kiran – Term insurance; Return of premium on
survival – free insurance cover for 10 years to the extent
of 30% - 60% of the face value of policy
Mortgage Redemption Assurance – to cover outstanding
loan under house mortgage.
35
36. ►Whole Life Plans
Whole Life Policy – premiums
payable for 35 years or age 80 years,
whichever is later; insurance money
payable on death
Limited Payment Whole Life Policy
Convertible Whole Life Policy –
Premiums payable upto age 70 of the
insured – limited payment – option to
covert at the end of 5 years into
Endowment Plan
36
37. Endowment Plans
► Endowment Assurance (with or without
profits)
► Bhavishya Jeevan Policy (with profits) – first 5
years premium are quite high from 6th year
scaled down to almost 1/3rd.
► Jeevan Mitra (Double Cover or Triple Cover)
► Jeevan Griha (Double Cover or Triple Cover)
– Low cost without profit endowment
assurance – face value paid on maturity
► New Jan Raksha (with profits)
► Jeevan Shree (without profits but with
guaranteed addition) – limited premium
paying period – keyman insurance 37
38. ► Jeevan Pramukh
► Asha Deep II (with profits) – Endowment Plan with
riders to cover four serious illnesses viz. cancer,
paralytic stroke leading to permanent disability,
kidney failure (both kidneys), and cardiac bye-pass
surgery – except 1st year – 50% of S.A. premium
waiver – annuity of 10% of S.A. till maturity
► Balance 50% of S.A. on death or maturity with bonus
► Marriage Endowment or Education Annuity (with
profits) – no immediate payment on death – payment
in lumpsum in case of marriage – payment in half
yearly instalments over 5 years in Education Annuity
from date of maturity only.
► Money back plans
38
39. Special Plans
► For Children –
Children Deferred Assurance Plans
New Children Deferred Assurance Plan
Jeevan Balya
Jeevan Kishore
Children’s Money Back Plan
Jeevan Anurag
► For Disabled Children
Jeevan Adhar
Jeevan Vishwas
IT exemption upto Rs. 20,000/- on premium
39
40. ► Jeevan Asha II
Endowment Assurance with medical benefit
rider
2% of face value paid every 2 year for medical
checkup
Reimbursement of expenses upto 20% to 50%
of face value of policy for minor / major
surgeries
On death full S.A.
► Joint Life Policies
Jeevan Saathi
Jeevan Saritha – benefit of joint life and last
survivorship annuity apart from lump sum
payment on death or maturity 40
41. Unit Linked Insurance Plan
► Bima Plus – Capital Market Linked
Insurance Plan
Premium has two parts
►Risk premium
►Investment premium
Investment at the choice of policyholder – from
three combinations viz.
►Secured fund (complete security)
►Balanced fund (moderate risk)
►Risk fund (high risk investments)
41
42. ► Investment Pattern
Equity Debt Liquid
Secured Not less than 10% 80 % 20 %
Balanced Not less than 30% 80 % 20 %
Risk Not less than 50% 75 % 25 %
42
43. ►Policy holder to select a
fund
►Switch over twice during the
term subject to minimum gap
of 2 years
►Cost of switching over 2% of
the current bid value of the
fund
43
44. Life Insurance Products of
Private Companies
► HDFC Standard Life
Endowment Assurance Plan
Money Back Plan – payment of cash lump sum
at 5 yearly intervals
Group Insurance Policy – specified group for a
term of one year
► Endowment Assurance Plans
ICICI Pru Single Premium Bond – savings with
life cover – fixed term plan of 5 or 10 years
44
45. ► ICICI Pru Save n’ Protect
Fixed term policy
Policyholder can accumulate funds for future
requirements on a regular basis i.e. Children’s
education, marriage etc.
Extended Term Assurance cover for 5 years for 50% of
S.A. without payment of premium
► Add-On’s or Riders
Option for additional benefits
► accident and disability benefit
► critical illness benefit
► major surgical assistance
► level term assurance
During tenure of extended life cover, no rider benefit
available 45
46. ICICI Pru Forever Life
►Regular income for life after prescribed
date
►Life cover during the deferment period
►Options
life time annuity
life annuity certain for 5, 10, 15 years
life annuity with return of purchase price
joint life, last survivor annuity
46
47. ► Add-On’s or Riders – one can be
chosen
Accident and Disability benefit
Major surgical assistance
Level Term Insurance
► ICICI Pru Cash Bank
Three-in-one combining savings, liquidity
and protection
Term of 15 or 20 years
Survival benefit at regular intervals
47
48. Add-on’s or Riders
►Accident and Disability benefit
►Critical illness benefit
►Major surgical assistance
►Level Term Insurance
► Protection Plans
The Pru Life Guard or Term Level
Assurance
►Death Risk Coverage
►No maturity benefits in case of single premium
level term policy
Add-on’s or Riders as in ICICI Pru Cash
Bank 48
49. Birla Sun Life Insurance
Company Ltd.
► Flexi Save Plus Endowment Plan
Premium for a fixed duration or in a single lump
sum
Benefit of insurance cover as also investment to
help savings grow – bonds / securities
Loan facility upto 90% of the total policy value
on payment of interest at fixed rate
Facility of withdrawal from 3rd policy anniversary
– can close the plan earlier – no surrender
charges after 4th year.
49
50. ►Flexi Cash Flow Money Back
Plan
fixed term policy with periodic
payback at fixed intervals
offers flexibility to choose
between the investment option,
automatic premium payment,
duration of the plan etc.
►Other benefits as in Flexi Save
Plus Endowment Plan 50
51. ►Flexi Life Line-Whole Life Plan
Higher return and security to
family
Members to keep paying
premium and enjoy the benefit of
savings and life insurance
Offers the flexibility to choose the
premium payment investment
option, duration etc.
51
52. Bajaj Allianz Life Insurance Co. Ltd.
► Group Credit Care Plan (Employer – Employee)
Group Term Insurance Scheme providing basic life
insurance protection to employees who have
taken loan from employer
Covering risk of outstanding loan in case of
premature death
One policy document – to the employer
Accidental death benefit – additional amount equal
to life cover granted – total accident cover limit 10
lacs
► Accidental Permanent Total Disability Benefit –
Payment of an amount equal to life cover granted
total accidental disability cover limit – 10 lacs 52
53. ►Group Risk Care Plan (Employer –
Employee)
Risk coverage
Life Insurance Benefit for all
members
One policy document to the employer
Accidental Death Benefit
Accidental Permanent Total Disability
Benefits
53
54. ► Group Credit Care Plan (Non Employer
– Employee)
Group Term Insurance Scheme to people
having availed a loan from an institution or
co-operative
Covers risk of outstanding loan
One policy document to the institution or
co-operative
Facility of enhancement of cover by adding
accidental death benefit / accidental
permanent total disability benefit.
54
55. ►Group Risk Care Plan (Non
Employer – Employee)
Basic life insurance protection to
group members
Covers risk of death – all members of
the scheme
One policy document to the group
policyholder
Facility of enhancement of cover –
Accidental death benefit / accidental
permanent – total disability benefit.
55
56. ►Term Care Plan –
Term Insurance Plan – life
cover with return of premium
on maturity
Life insurance cover at low
cost
Two premium payment
options
►regular premium payment
throughout the selected term 56
57. ► Option to choose upto 5 additional
benefits
economy
Protect – 3 in-built additional benefits
►Accidental death benefit
►Accidental permanent total / partial disability
benefit
►Waiver of premium benefit
Health
►Critical illness benefit
►Hospital cash benefit
Total – providing 5 in-built benefits of
‘Protect’ & ‘Health’. 57
58. ►Risk Care Plan
a pure term insurance plan – very
economical
offers cover at the lowest possible
cost
no survival benefit
►Life time Care Plan
a life time endowment plan with
profits
4 different plan type – economy,
protect health and total plan 58
59. ►Save Care Plan
Endowment plan with profits
for a specified period to meet
planned expenditures like
education / wedding of
children
Comes in 4 types – Economy
Single Premium Plan,
Economy Plan, Protect Plan,
Health Plan
59
60. Products In Overseas Market
► Term Insurance - for different specified
period
Renewable and non-renewable
Convertible and non-convertible
► Two other forms
Level Term Insurance – provides specified
amount of coverage for the entire period of
policy
Decreasing Term Life Insurance
60
61. Universal Life Insurance
► Variation of whole life, the pure insurance
part (the Term portion) is separated from
the investment (cash portion)
► Investment portion invested in money
market funds
► Cash value portion is set up as an
accumulation fund to which investment
income is credited
61
62. ► Death benefit (Term Insurance) is paid out of
accumulation fund
► The cash value of Universal Life Insurance
grows at variable rate
► The insured can vary his annual death benefit
and the annual premium
► Provision for making partial surrender and
take policy loan against cash value
► When earnings are good, policy owner can
put more money in the cash portion of the
policy
► Normally there is guaranted minimum interest
rate
► A few other options 62
63. ► Variable Life Insurance
A form of whole life insurance – Term portion;
premium towards administrative expenses; part
towards investment or cash value portion
The insured may select to invest the funds in
various investments : stocks, bonds, MF’s. He
may only choose from investment vehicles from
the insurance companies portfolio.
Option to switch investment vehicles a few times
It is expensive – commission and service fee is
high.
Value of death benefit may fluctuate up or down
depending on the performance of the investment
portion. However, death benefit can never fall
below a defined level. 63
64. ► Whole Life Insurance Products in Foreign
Markets
Part premium for insurance; small part towards
admin. expenses; balance for investment
Insurance coverage for entire life
Premium throughout life or selected term (10, 20,
30 years)
Provision for single premium
Cash value portion belongs to insured; can take
loan or cash; interest on accumulation fund is tax
free
Premiums are fixed regardless of the age or health
of the policy owner.
Investment vehicles are generally bonds and
mortgages
64
65. ► Progressive Protection Policy
Designed to adapt to changing
circumstances
Lump sum in the event of death / terminal
illness
No cash-in-value; purely for protection; No
investment
Provision for increase / decrease in cover
at any time other than the first year
Option to have the policy increase
automatically every year
Option for mode of payment of premium
65