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Life Insurance can be termed as an agreement betweenthe policy owner and the insurer, where the insurer fora consideration agrees to pay a sum of money uponthe occurrence of the insured individual's orindividuals' death or other event, such as terminalillness, critical illness or maturity of the policy.

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Insurance in India can be traced back to the Vedas. For instance,yogakshema, the name of Life Insurance Corporation of India'scorporate headquarters, is derived from the Rig Veda.

Bombay Mutual Assurance Society, the first Indian life assurancesociety, was formed in 1870.

Other companies like Oriental, Bharat

and Empire of India were also set upin the 1870-90s.

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It was during the swadeshi movement in the early 20th century thatinsurance witnessed a big boom in India with several more companiesbeing set up.

By the mid-1950s, there were around 170 insurance companies and 80provident fund societies in the country's life insurance scene. However, inthe absence of regulatory systems, scams and irregularities wereprevalent in most of these companies.

As a result, the government decided to nationalize the life assurancebusiness in India. The Life Insurance Corporation of India was set up in1956 to take over around 250 life insurance companies.

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For years thereafter, insurance remained a monopoly of thepublic sector. The sector was finally opened up to private

players in 2001.

The Insurance Regulatory & Development Authority, anautonomous insurance regulator set up in 2000, has extensive

powers to oversee the insurance business and regulate in amanner that will safeguard the interests of the insured.

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Protection

LiquidityTax ReliefMoney when you need it

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Sum assured is payable only in the event of death duringthe term.

In case of survival, the contract comes to an end at the endof term.

Term Life Insurance can be for period as long as 40 yearsand as short as 1 year.

No refund of premium

Non-participating policies

Low premium as only death risk iscovered.

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Increasing Term Insurance

Life insurance cover underthis plan goes on increasingperiodically over the term ina predetermined rate. (Riders)

Decreasing Term Insurance The sum assured decreases with the

term of the policy. Normally decreasing

term assurance plan is taken out formortgaged protection, under whichoutstanding loan amount decreasesas time passes as also the sum assured.

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Convertible term assurance policy

Under this plan a policyholderis entitled to exchange the termpolicy for an endowmentinsurance or a whole life policy.

Conversion can be done at anytime during the term except last2 years.

Level Term Life InsuranceThe sum assured throughout the term of the policy does notchange.

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Renewable Term Life Insurance

With renewable term insurance, the insurancecompany automatically allows you to renewyour coverage after the term of the policy isover (generally 5 to 20 years)

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Endowment insurance plans is an investment oriented planwhich not only pays in the event of death but also in the eventof survival at the end of the term.

Is a contract underwritten by a life insurance company to pay aFixed term plus Accumulated profits that are declaredannually.Premium is higherPremium includes 2 elements-mortality element & investment element

Minimum age at entry : 12yearsMaximum age at entry: 65yearsMaximum age at maturity : 75years

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Joint Life Endowment Plan:

Under this plan, two lives can be insured under onecontract.

The sum assured is payable at the end of the endowmentterm or death of either of the two.

Money Back Endowment Plan:

In this plan, there is an additional advantage of receiving acertain amount of money at periodic intervals during thepolicy term.

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Double Endowment policy: if the assured diesduring the endowment period, the basic sumassured is payable, and if he survives to theend of the term, double of the sum assured ispaid. Pure Endowment policy : opposite of termpolicy.

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Marriage Endowment Plan:

This plan has the specific condition that the sum assured ispayable only after the expiry of the term even if death ofthe life assured takes place earlier.

Educational Endowment Plan:

These plans are specially designed to meet educationalexpense of children at a future date. If the insured parentdies before the date of maturity the installment is paid inlump sum with immediate effect which helps to meet theeducational expenses.

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Whole life plans are another type of endowment plan,which cover death for an indefinite period.

When the policy holder dies, the face value of the policy,

known as a death benefit , is paid to the person or personsnamed in the life insurance policy (the beneficiary orbeneficiaries).

It can be with or without profits.

If you cancel the policy after a certain amount of time haspassed, the insurance company will surrender the cashvalue to you.

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1 Ordinary Whole Life Plan:This is a continuous premium payment plan. Theinsured pays premium throughout his life. It providesdual facility of protection plus savings.

2 Limited Payment Whole Life Plan:It provides the same benefit as above but premiums

are paid for a limited period. Premiums are sufficientlyhigher to cover the risk.

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Insurance coverage to group of people underone contract.

Schemes are provided for employees,association societies ,weaker section ofsociety etc.

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Since last few years insurance companies have startedoffering risk cover plans like limited payment whole life, andendowment assurance plan from the age of 12years andmoney back plan from age of 13 years(completed).

New plans have been specifically designed for childrenwhere the risk of the child starts much earlier say 7 years.

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Policies on the lives of children are takenout by other elders. After some time whenthe child becomes major and is competentto contract, the child may assume theownership of the policy. The policy is thensaid to vest in child.

The date on which this happens is called thetesting date .

The risk begins when the child attains 18years of age. This is called the deferred

date and the period between the deferreddate and the date of commencement ofpolicy is called the deferred period .

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It has emerged as one of the fastestgrowing insurance products.

It is a combination of an investmentfund( such as mutual fund) and aninsurance policy.

The premium amount is invested inthe stock market and returns betterincome on the maturity period.

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Better for long-term investment option.

ULIPs generally provide higher returns as largeportion of the funds are invested in equities.

There is also flexibility and the assured can chooselevels and extent of cover needed.

There is also option of switching over from one fundto another if it does not seem to be profitable.

ULIPs can be classified as Unit linked equities, bonds, real estate & money market

instruments Equity linked only in equities Index linked equity, bonds or money market instruments.

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Life insurance claim can arise either:

On the maturity of the policy Maturity Claim

On death of the policy holder Death ClaimSurvival up to specified period during the term Survival benefits

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In case of Endowment type of Policies, amount is payable at theend of the policy period.

Discharge Form & Policy Document

On receipt of these two documents post dated cheque is sent bypost so as to reach the policyholder before the due date

The gross amount consists of Basic sum assured and bonus ifany.

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Same as maturity claims, sum assured becomespayable on expiry of full term but on survival of theinsured.

In policies like, money back plan for 15 years term,1/4 th of the sum assured becomes payable on the lifeassured on surviving 5 year, further 1/4 th becomespayable after additional 5 years and rest balance atthe end of 15 years.

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2 Types: Premature death claim within 3 years Other claim after 3 years

Intimation of death is to be given by a proper person inwriting.1. Original Policy Bond2. Death Certificate3. Proof of relationship with the deceased person

In case of Accidental DeathPostmortern Report, FIR Copy , Final Police Report is alsorequired

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Suicide or attempted suicide or intentionalself-inflicted injuryUnder influence of drugs or alcohol,psychotropic substance not prescribed by aMedical Professional.

War, Civil War, Riots, Revolution or any warlike operation.Criminal or unlawful actService in the military or police

Flying activity other than as a payingpassenger.Racing vehicle.

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Premiums paid for Health Related Riders :

Some of the critical illness, hospitalization cash and other health related

riders attached to a Life Insurance policy may also be eligible for rebate

under section 80D of the Insurance Act.

This deduction is available to both Individuals & HUF.

Rs.15,000 is the maximum amount deductible during the year for an

individual as well as a senior citizen.

Condition for applicability of deduction is that the premium must be

paid by cheque in the previous year out of the income chargeable to tax.

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How Much Life Insurance CoverageShould Be Purchased?

The Rule of Thumb is-Coverage should equal to 6 to 10 times annual income.

The other Rule is-Coverage to cover his family consumption need.

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Functions of an Actuary in LifeInsurance Business

Main function of an actuary in life insurance is to do assessment and

valuation of mortality risk.

Due to medical advancement now the life span of an individual can be

determined which reduce the uncertainty of death.

Due to which medical selection by the insurer is necessary and

desirable both on the grounds of actuarial fairness i.e. charging

premiums to different lives on the basis of their different levels of risk

and for financial viability of the insurance company.

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