insurance examinations - tips on insurance - ebook - part 004e book insurance 004

8/12/2019 Insurance Examinations - Tips on insurance - ebook - Part 004e Book Insurance 004

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INSURANCE EXAMINATIONS TIPS ON INSURANCE

HISTORY OF INSURANCE

01.The idea of insurance was mooted out during 14thcentury02.Marine insurance is the oldest form of insurance throughout the world

03.

Fire insurance and life insurance were subsequently undertaken by insurers04.Fire insurance originated in Germany during 16thcentury05.Life insurance started in England during 16thcentury

06.The first life that was insured was of Mr. William Gybbons on 18.6.165307.The first registered office of life was in England with the name Hand in Hand society in 1696

08.Life insurance was started during the year 1818 in Bengal Presidency09.The name of the company was Orient Life Assurance Company

10.Bombay Life Assurance Company was started in 1823

11.Triton insurance company was commenced for general insurance in 185012.During 1871, Bombay Mutual Life Assurance Society was established

13.During 1874 Oriental Government Security Life Assurance Co Ltd was established

14.The first company which transacted general insurance business was the Indian Mercantile insurance

company limited15.During 1912, in order to regulate insurance the Indian Life Assurance companies act was

formulated

16.During the year 1928, the Indian Insurance companies act was enacted17.During 1938, there were 176 insurance companies in India18.The image of insurance was tainted on account of frauds during 1920 and 1930

19.Insurance act was passed during 193820.245 Indian and foreign life insurers and provident societies were under one nationalized corporation

during 1956

21.Life Insurance Corporation was formed by an act of Parliament vide LIC act 1956

22.The initial capital for LIC was Rs. 5 crore23.During 1968, insurance act was amended to regulate investment and also set up of tariff advisory

committee

24.

Non life insurance business/general insurance remained with private sector till 197225.There were 107 companies involved in the business of general operations26.General Insurance business was nationalized in India as per General Insurance Business

(Nationalisation) act 1972 with effect from 1.1.197327.107 private insurance companies were amalgamated and grouped into four companies namely

National Insurance Company, New India Assurance Company, Oriental Insurance Company and

United India Insurance Company

28.The above companies were the subsidiaries of General Insurance Company GIC29.Malhotra committee was formed during the year 1993 headed by former Finance Secretary and RBI

governor R N Malhotra

30.During the year 1999, IRDA act was passed and paved way for privatization of insurance sector in

India31.During the year 2002, IRDA act and insurance act have been amended

PRESENT SITUATION

32.Insurance business in India can be classified into Life Insurance business and General InsuranceBusiness

33.LIC of India is taking care of life insurance business34.General Insurance Corporation of India namely GIC Limited is taking care of general insurance

business

35.United India Insurance Company, Oriental Insurance Company, New India Assurance Company andNational Insurance Company are part and parcel of General Insurance Corporation of India

36.Insurance sector in India was liberalized in March 2000 by the formation of IRDA

37.IRDA means Insurance Regulatory and Development Authority


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38.As on 2,2.2011, there were 23 life insurance companies and 24 non life insurance companies in themarket.

INSURANCE CONCEPTS

39.Insurance business can be divided in four classes namely: Life Insurance, Fire insurance, Marine

insurance and Miscellaneous insurance

40.Life insurers transact life insurance business41.General insurers transact the rest42.No composites are permitted as per law

43.

The specific principles of insurance are uberrima fida(utmost good faith); insurable interest;indemnity; proximate clause; subrogation

44.The benefits of life insurance are protection against untimely death, saving for old age, encourage

savings, initiates investment, credit worthiness, social security, tax benefits.

45.Objectives of nationalization are To ensure general insurance business to the best advantage to the community

To promote competition in the economy

To prevent monopoly growth and concentration of wealth

To spread the activities over geograp0hical frontiers

To innovate new products to suit the requirements of the different sections of the population

To meet the social objectives by formulating policies for weaker sections

46.The major recommendation of Malhotra committee are

Insurance intermediaries

Surveyors Product pricing

Rural insurance

Regulation of insurance business

Liberalisation Investment

Restructuring of general insurance

Detariffing47.Insurance Institute of India was established in 1955

48.The examinations conducted by Insurance Institute of India are

The Inspectors examination (general insurance) Certificate of insurance salesmanship (agents)

Licentiate, associate and fellowship Pre recruitment test to insurance agents

49.Persons who have insurance interest in different types of properties are as detailed below: Immovable properties

Movable properties

Business Ships

Commencement of risk

Cause proxima

Payment of premium Right to contribution

Mitigation of loss

50.The different classifications of insurance are

Life insurance Non life insurance namely fire insurance business, marine insurance business,

miscellaneous insurance business Retail insurance

Corporate insurance

Coinsurance

Universal insurance Direct insurance

Reinsurance

51.The different acts connected with insurance:

Indian contract act 1872 The Insurance company act 1938


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General Insurance Business (Nationalisation) act 1972

Life Insurance act 1956

IRDA act 1999

Consumer protection act 1986

Foreign exchange maintenance act 1999

Motor vehicles act 1988

Marine Insurance act 1963 Married womens property act 1874

52.Actuary is a technical expert who combines an understanding of the risks involved in insurance

He also understands the mathematical techniques to develop insurance products to managethese risks

He advises on pricing the insurance products

He calculates the reserves to be held for meeting the financial risks of the insurance products

IRDA has made it compulsory for any life insurance company to appoint an actuary Without actuary insurance companies cannot carry on their life insurance business

53.Essential elements of a valid contract are:

Offer and acceptance

Intention

Consideration

Capacity of parties

Free consent

Lawful object

Agreement not declared valid Certain

Legal formalities54.Kinds of contract are:

Voidable contract Void agreement

Void contract

Illegal agreement Express contract

Implied contract

Executed contract Executor contract

Unilateral contract Bilateral contract

55.The various types of life insurance policies are: Term insurance

Whole life policy

Endowment Health insurance

Joint life policy

With profit

Without profit Double accident benefit

Annuity policy

Policies for women

Pension insurance Postal life insurance

Rural insurance plans Group life insurance

Insurance policies for children

Money back policy

Unit Linked Policy56.Term insurance offers pure risk cover without any element of saving for a given term. No benefits

are available to the policyholder till his death

57.Whole life the premium is payable for the lift time of the assured or for a lesser period. Sum

assured is payable only on the death of the assured58.Endowment plans


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This is considered to be the most popular plan of life assurance.

It cover the life of the assured in the event of his early death

It also provides for repayment of a lump sum to the assured if he survives the date of

maturity59.Money back:

It provides life insurance covers

Periodical payments are also paid to the assured The policyholder need not wait to get the returns till the date of maturity

60.Childrens assurance plan: The life of a child can be covered from the age of 7. Once the child

becomes a major he can continue the policy61.ULIPs: it is called Unit Linked Insurance Policy

It provides a combination of risk cover and investment

The dynamics of the capital market have a direct bearing on the performance of the ULIPs

The investment risk is generally borne by the investor A wide range of funds are offered to suit ones investment objectives, risk profile and tim e

horizons

Different funds have different risk profiles

The potential for returns also varies from fund to fund62.The common types of funds available under ULIP are equity funds; income, fixed interest and

bond funds; cash funds and balanced funds

63.Equity funds primarily invested in company stocks with the general aim of capital appreciation64.The risk category in the case of equity funds is found to be medium to high

65.

Income, fixed interest and bond funds invested in corporate bonds, government securities andother fixed income instruments and the risk category is found to be medium

66.Cash funds Sometimes known as money market funds; amount is invested in cash, bank depositsand money market instruments. The risk category is found to be low

67.Balanced funds Combination of equity investment with fixed interest instruments. The riskcategory is found to be medium

68.Non life insurance products-

Personal accident Workmen compensation

Fire, marine and motor insurance

Group and health insurance

69.

General Insurance products are: Fire insurance

Marine (cargo) insurance Marine (hull) insurance

Motor insurance

Aviation insurance Engineering insurance

Miscellaneous insurance

70.Marine insurance policies are:

Hull insurance Cargo insurance

Freight insurance

Liability insurance

71.

Various classes of marine insurance are: Voyage policies

Time policies Mixed policies

Valued policies

Unvalued policies

Floating policies Named policies

Single vessel and float policies

Currency policies

72.Various fire insurance policies are: Valued policy


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Valuable policy

Specific policy

Floating policy

Average policy

Excess policy

Declaration policy

Adaptable policy Maximum value with dissent policy

Reinstatement policy

Comprehensive policy Consequential loss policy

Sprinkler leakage policy

73.Paid up value = (Number of years premium paid/policy term) x sum assured + (bonus/1000) x sum

assured74.Surrender value = (surrender value factor x paid up value)/100

GROUP INSURANCE

75.It is a plan of insurance which provides life cover to a number of persons under single policy called

as master policy The premium is found to be cheaper on account of low administration cost

A number of group insurance schemes have been designed for various groups

The groups include employer-employee groups; associations of professionals (such as

doctors, lawyers, chartered accountants etc); members of cooperative banks; welfare funds;credit societies and weaker sections of the society

Individual lives are not assessed. A person will be covered so long as he remains eligible to

be the member of the group Double accident benefit is available payment of double the sum assured on death due to

accident without permanent disability benefit by payment of extra premium

76.The different types of reinsurance are:

Proportional form of reinsurance Non proportional form of reinsurance

77.Proportional form of reinsurance are: Quota method

Share surplus form

78.

Non proportional form of reinsurance are: Excess of loss method

Excess of loss ratio method

Pools method of reinsurance

Treaty method of reinsurance79.DICGC means DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION

80.The objectives of DICGC are:

Provide insurance against the loss or part of bank deposits by participating banks and other

financial institutions

Provide guarantee support to small scale borrowers by participating banks and other financiainstitutions

Provide credit guarantee support to the priority sectors agriculture, retain trade, smalbusiness, professional and self employed persons and education

81.

The important credit guarantee schemes operated by the corporation are:

Small loans guarantee scheme 1971 Small loans (financial corporation) guarantee scheme 1971

Service Cooperative Societies guarantee scheme 1971

Small loans (small scale industries) guarantee scheme 1981

Small loans (cooperative banks) guarantee scheme 1984 Credit guarantee schemes for small borrowers

Credit guarantee scheme for small scale industries

82.The objectives of insurance legislations are To fostering a sound, competitive and progressive insurance business

To monitor the activities of the insurance industry


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To protect the interests of the policy holders by ensuring the insurers, intermediaries andsurveyors abide the rules and regulations

To promote and preserve high standards of professionalism in the conduct of insurance

business

To provide regulatory and fiscal infrastructure conducive to the development of insurance

industry in the country

To coordinate investment and other activities of the insurers with the objectives of thenational economic policies

To provide the best treatments to policy holders of various insurance policies

To provide the best solutions to the insuring public83.The consumer protection redressal agencies were established by the consumer protection act in

India

84.District consumer forum

is set up by state governments in all districts in India. Each district forum is headed by a district judge with two other members

These forums have jurisdiction to entertain complaints and compensation claim does not

exceed Rs. 5 lakhs

85.The following unfair trade practices:

Falsely represent that the goods are of a particular standard, quality or grade

Falsely represent that the services are of a particular standard, quality or grade

Falsely represent any rebuilt, second hand, renovated, reconditioned or old goods as newgoods

Represent that the seller or supplier has sponsorship or approval which they do not have Making a false representation about the usefulness of any good or service

Giving public any warranty or guarantee of the performance efficacy or length of life ofproduct or any goods that is not based on adequate proper test

86.State consumer forum Shall have the jurisdiction to entertain complaints where the value of goods an services and

compensation if any claim exceeds Rs. 5 lakhs

It shall have the administrative control over all district forums within its jurisdiction in almatters

87.National consumer forum shall be headed by a judge of supreme court of India

Consists of four other members Has the jurisdiction to hear complaints where value of goods and services and compensations

if any claimed exceeds Rs. 2 lakhs and shall hear appeals against the orders of statecommissions.

88.The following are the features of motor vehicles act: Vehicle must be a motor vehicle

Use must be in a public place

Insurance policy should be in force Statutory contract between insurer and driver

Rights of third parties

Limitations of the third partys rights

89.Fire insurance consists of the following: Loss and profit policy

Industrial all risk policy and fire reinstatement

Declaration and floating policy

90.

Marine (cargo) insurance consists of the following: Inland transit policy

Import and export marine policy Special declaration policy

Annual open policy

Special storage policy

Sellers contingency insurance91.Marine (Hull) insurance consists of the following:

Fishing vessels,

Major fleets

Inland vessels Country crafts/motorized boats


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Builders risk ship policy

Ship breakage risks

Major/Sunday hulls

Vessels under erection cover92.Aviation insurance consists of the following:

Aircraft comprehensive insurance

Legal liability for passengers Legal liability of crews

Loss of licence

Flight coupon (personal accident insurance) Third party liability for crews

93.Engineering insurance consists of the following:

Machine cum erection and storage policy

Machinery breakdown Contractors all risks

Contracts plant and machinery

Advanced loss of profit

Electronic equipment insurance94.Miscellaneous insurance consists of the following:

Agricultural pumpsets

Householders comprehensive insurance

Shopkeepers comprehensive insurance

Baggage insurance NTV Coffee plantation insurance

Neon signs insurance

Personal accident individual and group insurance

School childrens personal accident insurance Fidelity guarantee individual

Employees liability insurance

Medical practitioners professional indemnity insurance, Burglary insurance (business premise)

Cash insurance

Product liability insurance Bankers blanket insurance

Personal accident social scheme and hut insurance Medical claim individual and group insurance

Overseas medical claim Boat and shipbuilders insurance

Bhavishya arogya

95.Personal selling of insurance is a selling process and assisting a prospective buyer to buy a product96.The quality of a salesman are:

Should have the ability to persuade people to buy products of their choice

Should have good communication ability

Should possess knowledge about customers and their wants and desire and the productsoffered to satisfy them or not

Should know the socio psychological factors of customers

Influence the buying behavior

Should understand various customers, their attitudes and behaviours Should have ability to recognize and handle them for successful salesmanship

Should follow AIDAS formula97.AIDAS means A for attention; I for interest; D for desire; A for action and S for satisfaction98.A sales person should have the following qualities:

Physical qualities

Social qualities Mental qualities

99.Skills of a salesman are:

Interpersonal skills

Communication skills Organization skills


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100. The characteristics and traits of salesman are:

Trustworthiness

Enthusiasm

Empathy

Persistence

Patience

Desire for self improvement Motivation

101. Insurance business both life insurance and non life insurance is procured through individuals

called as agents102. Individuals who want to be insurance agents should

Obtain a license from the controller of insurance of the IRDA in India

After obtaining the license, he should have to enroll with the insurance company to be

authorized to work as an insurance agent A well trained insurance agent can explain the details of various policies to the clients in

detail

103. Corporate agency system was introduced in India during 2003

104. A bank can act as an agent on behalf of an insurance company105. A corporate agent can be

A firm

A company under the companies act

A banking company

A corresponding new bank A regional rural bank

A cooperative society including a cooperative bank

A panchayat

A local authority A non government organization

A micro lending finance organization

A non banking finance company Any other organization that may be approved by IRDA

106. There are three categories of insurance brokers

107. Insurance brokers can be classified into: Direct broker

Composite broker Reinsurance broker

108. Objectives of Life Insurance Corporation of India are: Provide life insurance cover to insuring people in India and outside India

To create insurance awareness in rural areas in India

To achieve growth in new insurance business109. The subsidiaries of Life Insurance Corporation of India are:

The LIC housing finance Limited

LIC Mutual fund

LIC (Nepal) Limited LIC(international )EC Bahrain

110. Public sector Non Life Insurance corporations are:

General Insurance Corporation of India

National Insurance Company Limited The New India assurance company limited

The oriental insurance company Limited United India insurance company

Employees state insurance corporation

Deposit Insurance and credit guarantee corporation

Export credit guarantee corporation of India Agricultural Insurance Company of India Limited

111. Functions of DICGC

Deposit insurance functions

Credit guarantee functions112. Export credit insurance consists of


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Standard policy

Small exporters policy

Specific policies

Guarantee to banks

Special schemes

113. ECGC has evolved six types of guarantees

Packing credit guarantee Export production finance guarantee

Post shipment export credit guarantee

Export finance guarantee Export performance guarantee

Export finance (overseas lending) guarantee

114. The different types of insurance risk are:

Pure risk Speculative risk

Static risk

Dynamic risk

Subjective risk

Objective risk

Financial risk

Business risk

Personal risk

Property risk Liability risk

Underwriting risk

Credit risk

Market risk Liquidity risk

115. Pure risks and speculative risks are handled by:

Risk assessment Risk sharing

Risk exploitation

Risk monitoring116. The risk management strategies are:

Risk avoidance Risk retention

Risk transfer Risk reduction

Risk hedging

Risk combination Risk sharing

117. The risk management process consists of the following:

Risk identification and exposures to loss

Risk evaluation118. Risk identification and exposures to loss consists of the following:

Loss exposure check list method

Financial statement analysis

Flow charts Contract analysis

Physical verification and inspection Statistical analysis of past loss

119. The modern risk financing techniques are

Alternative risk transfer

Catastrophic bonds120. Alternative risk transfer consists of

Loss sensitive contracts

Finite insurance contract

Captive insurers Multi line insurance policies


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Multi trigger insurance policies

Contingent financial arrangements

Structured debt instruments

121. The different types of CAT bonds are:

Surety bond

Judicial BONDS

Public official bonds Fidelity bonds

Retirement planning

Annuity

122. Authorised capital is the amount which the company can raise through issue of equity

shares123. Issued capital is the amount for which shares have been issued either through initial public

offering or through private placement

124. Float refers to the shares which are available for trading125. Outstanding shares is the sum total of float and the shares which are not tradeable (viz.

issued to employees as stock options)

126. Market capitalization is also called as market cap127. Market capitalization is the market price of the outstanding shares of a company128. Market capitalization = number of outstanding shares multiplied by the market price of a

share on a particular day

129.

Earnings per share refers to the post tax profits of a company for a year divided by thenumber of equity shares

130. Price earning ratio shows the wealth created

131. Price earning ratio = market price of share/earnings per share132. Risk premium is the higher return which an investor in shares expects over and above the

interest on fixed deposit or a debt instrument. Suppose the average return (interest rate) in a debt

instrument is 6% and the average return in shares is 13%, the 7% differential is called risk

premium because of the risk an investor in share bears133. Relationship between interest rates and stock prices- stock prices fall when interest rates

rise. In the above example, if the interest rates are increased to 8%, the risk premium will comedown to 5%. This makes the share less attractive relatively. Some investors are likely to switch

their preferences to debt instruments and to that extent the demand for share will register a fall and

consequential fall in prices.134. Relationship between inflation rates and stock prices the rising inflation rate pushes the

cost of production and distribution high. This brings down the profits and dividends to shareholdersand results in fall in share prices.

135. Insurance is the contract between the insurer and policyholder.136. The risks in the case of human being are related to:

Early death

Living too long

Disabilities

Sickness

Unemployment

137. The benefits of life insurance: Life insurance is not only the best possible way for family protection

Insurance is the only way to safeguard against the unpredictable risks of the future. It is

unavoidable The terms of life are hard. The terms of insurance are easy

The value of human life is far greater than the value of property. Only insurance can

preserve it

Life insurance is not surpassed by any other savings or investment instrument, in terms ofsecurity, marketability, stability of value or liquidity

Insurance, including life insurance, is essential for the conservation of many businesses, just

as it is in the preservation of homes Life insurance enhances the existing standards of living

Life insurance helps people live financially solvent lives

Life insurance perpetuates life, liberty and the pursuit of happiness


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Life insurance is a way of life138. Risks are managed in three ways

Prevention of avoidance

Retention

Transfer

139. Who can be insured? the various possibilities are 1) individual adults ii) children

(minors) iii) two or more persons jointly under one policy140. What can be the sum assured? some plans stipulate a minimum sum assured. There can

be maximum limits also for sum assured as well as certain benefits, like accident benefits

141.

In what contingency would the sum assured be payable? could be on death or on survival142. When would the sum assured be payable? On the contingency happening or some other

dates

143. How would the sum assured be payable? Could be in one lump sum or in instalments

144. What would be the term (duration) of the policy? This determines the period during whichthe specified event should occur for the sum assured to be payable. Some plans provide for benefitseven beyond the term

145. When would the premium be payable? Variations are in the frequency of payment (monthly

quarterly, half yearly or yearly) as well as the period during which it is payable. Some plans providefor premiums to be paid for a period less than the return

146. Does the sum assured increases? This can happen because of participation in surpluses

and bonus additions or because of guaranteed increases in sum assured147. Does the sum assured reduce? This can also happen, if the plan is to meet reducing

liabilities under a mortgage148. Are there additional benefits? These, also called supplementary benefits and may be

provided by way of riders, in addition to the basic covers149. What is a without profit policy? without profit or non participating policies are not entitled

to bonuses, which are declared after actuarial valuations. With profit or participating policies pay aslightly higher premium for the right to participate in the progress of the insurer. With profit policies

are popular because the bonuses are expected to be more than the extra premium paid. With profit

policies, where the premium is payable for a limited period, will continue to participate even afterthe premiums have ceased

150. What do you mean by joint life policies? Two or more lives can be covered under one

policy and such policies usually cover married couples or parents. The sum assured is paid on thedeath of any of the insured persons during the term or at the end of the term. Some plans also

provide payment of sum assured on the death of one life and the policy is continued to cover thesecond life till maturity, without payment of further premium

151. In the case of joint life insurances A joint life declaration is necessary to create a joint interest in the policy

In the case of partnership insurance, the partnership deed will be examined to ascertain the

nature of financial interest of each partner Each life will be underwritten separately

Bonuses will accrue on the single basic sum assured only

152. A proposal is an application for an insurance cover. When a proposal is received, the insurer

will not grant the cover automatically. The insurer will make a decision as to the admissibility of theproposer to the pool of policyholders.

153. What do you mean by hazard? The factors affecting the risk on the life of an individual are

called as hazards and they can be physical; occupational and moral.

154.

Physical hazards are age, sex, build, physical condition, physical impairments, personahistory, family history, increasing extra risk, occupational hazards and moral hazard

155. Age As age increases, the probability of death increases and these probabilities are builtinto the mortality tables and thereby into the premium rates The underwriter looks into the factor ofaged mainly because of its relationship with other factors. Certain risks increase with age. Certainother risks decrease with age. For example, being overweight is a positive or favorable factor

among children, while it may not be so among older persons. Young persons who are underweightneed closer scrutiny than elders who are underweight

156. Sex Mortality of female lives is seen to be higher than male lives at younger ages, among

the poorer and uneducated sections. One reason could be the lack of adequate care in maternity

cases. Underwriting considerations are also different in female cases.


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157. Physical condition The medical examination of reflexes, blood pressure, pulse rates, urineetc. provides data with regard to the condition of important systems of the body

158. Physical impairments Blindness, deafness etc and other conditions which are not illnesses

or degenerative are hazards affecting the probabilities of death159. Personal history This is important as pointers to the health as well as the life style of the

person

160. Family history This is looked to see whether there are factors that make the personsusceptible to hereditary illnesses. Family history of early deaths of cardiac illnesses or diabetes,could be significant

161.

Increasing extra risk is related to certain impairments or ailments like blood pressure ordiabetes or cancer, which are expected to get worse as days go by. They do not have to, as modernmedicine has ways of containing them. Similarly, some impairments are expected to wear off as

days go by. These are called decreasing extra risks

162. Occupational hazards arise out of ones job. The nature of the job or the place in which the job is done have effects on the worker.

Contact with and installation of fumes, excessive temperatures, etc affect health and life

spans.

Those on flight duties on aircrafts run a greater risk of death by accident.

Those working in chemical factories are likely victims of various respiratory diseases.

Those working with high voltage electricity are susceptible to electrocution and burns.

The safety factor is important in heavy engineering factories, working at heights, workingwith high speed machines, adventure sports and so on

163.

Moral hazard refers to the intentions of the proposer. If the proposer is being made becausethere is a genuine need for insurance, there is no moral hazard. If the intention is to seek undue

advantage through the insurance policy, there is some moral hazard.164. The policy document it is the document given to the insured once the contract is

completed between the insured and insurer165. The policy document contains the following number of the policy, date of the policy, age

admitted, name of the policy holder, the address of the policyholder, premium amount, mode of

premium amount, plan number, term in years, date of commencement of the policy, date ofmaturity, name of the nominee, relationship with the policyholder

166. The following are usually accepted as proof of age:

Certified extract from the municipal records Certified of baptism

Certified extract from family bible if it contains of date of birth Certified extract from school or college records

Certified extract from service register or employer Passport

Identify cards issued by defence department in case of defence personnel

Marriage certificates issued by a Romans Catholic Church167. What do you mean by days of grace? The policy stipulates that the premium has to be paid

in the insurers office on the dates specified therein. These dates are called as due dates

168. How premium can be paid? It can be paid by cash, cheque, demand draft, postal order,

money order, bankers cheque. Nowadays electronic means of payment as well credit cards anddebit cards are also acceptable.

169. What is a grace period? Premiums are to be paid on the due dates mentioned in the policy

and insurers, however, allow a grace period for payment of premium. Payment within the grace

period is considered to be payment on time. The grace period would be one month, but not lessthan 30 days for yearly, half yearly or quarterly modes of premium and 15 days for monthly modes

of premium. Some insurers allow 30 days grace period for monthly modes also170. What is salary savings scheme? In the case of salary savings scheme, the premium

amount is deducted by the employer from out the salaries payable to the employee. When there isdelay in remitting the same to the office of the insurer, the delay is usually condoned. If the delays

happen frequently, the salary savings scheme arrangement may be terminated171. What is default? If the premium is not paid within days of grace, it is considered to be in

default and the policy is said to lapse. If the insured happens to die within the days of grace and the

premium has not been paid, the claim will be admitted in full and the premium for the current year

will be deducted from the claim amount


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172. What do you mean by lapse? A payment within the days of grace is deemed to be apayment on the due date and if the premium is not received by the insurer, within the days of

grace, there is a default on the part of the policyholder. The insurer is entitled to say that the policy

comes to an end. Such termination is called a lapse. No claims arise on the policy after a lapse andall premiums are forfeited

173. What do you mean by paid up value? Under this option, the sum assured is reduced to a

sum which bears the same ratio to the full sum assured as the number of premiums actually paidbears to the total number originally stipulated in the policy. Paid up value = (number of premiumspaid x sum assured)/number of premiums payable

174.

Surrender value or cash value is made available normally when the policy has remained inforce for at least three years. This is so, because in the first year, most of the premium goes out inexpenses and there is little left for accumulation.

175. Assignment transfers the rights, title and interest of the assignor to the assignee. Lega

provisions for assignment of insurance policies are available in almost all the countries.176. How assignment is done? the assignment can be done by an endorsement on the policy or

by a separate deed.

When the assignment is made by an endorsement on the polity itself, no stamp duty is

necessary.

Separate deeds have to be stamped

It must be signed by the transferor or his duly authorized agent

The signature must be attested by a witness

The assignment is effective as soon as it is executed

It must be sent to the insurer along with a notice The assignment is effective against the insurer only when the notice is delivered to the

insurer

Where there is more than one instrument of assignment, the priority of claims shall be

determined by the order in which the notices are delivered to the insurer177. What is meant by revival of the policy? When a policy lapses, it benefits neither the insurer

nor the insured. The insured loses the insurance risk cover for the full amount. It signifies a reversa

of the decision to arrange for the insurance cover and therefore, , exposes the policy holder adversecircumstances.

178. For revival of policies, the following will normally be necessary:

Arrears of outstanding premiums with interest Proof of continued good health

A fee for reinstatement or revival, in the case of some insurers179. What do you mean by nomination? It is a simple way to ensure easy payment of the

policy moneys in the case of a death claim. As per section 39 of the Insurance Act, 1938, the holderof a policy on his own life, may nominate the person or persons to whom the money secured by the

policy shall be paid in the event of his death. This can be made at the time of proposal or at any

time during the currency of the policy. A person having a policy on the life of another cannot effecta nomination.

180. The features of nomination:

Nomination can be done before the issue of the policy by mentioning in the proposal form or

by a letter giving details It can also be issued after issue of the policy by an endorsement on the policy

Cannot be done by a deed separate deed

The holder of a policy on his own life : i.e. the life assured, alone can make nomination

Policyholder retains full control and can deal with the policy without the consent of thenominee

Need not be supported by a consideration May be witnessed

Notice is required to be given to the insurer

Nominee has no right to sue under the policy

It can be altered by the life assured during the currency of the policy by cancellation ofnomination or by an assignment

Where nominee is a minor, appointment of an appointee by the life assured only is required

Appointee can be appointed in the wording of the nomination

No vested interest is created in favour of nominee


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Nominees right is only to collect policy moneys on the death of the assured, when paid bythe insurer

If the nominee dies after the life assured and before settlement of the claim, the policy

moneys would be payable to the heirs of the life assured

Creditors of the life assured can attach the policy moneys

181. The features of assignment:

Can be done only after issue of the policy by endorsement on policy Can be done also by a separate deed on stamped paper

The absolute owner of the policy may be either proposer or the life assured or the absolute

assignee or conditional assignee to the extent of his interest, can make assignment Policyholder loses control over the policy and assignee is the owner of the policy and can

deal with it

Must be supported by a consideration

Must be witnessed Notice is required to determine priority between other assignees

Assignee has right to sue under the policy

It cannot be cancelled by the assignor

When assignee is a minor, guardian is to be appointed

Guardian cannot be appointed in the wording of the assignment

Assignee acquires interest

The assignee is entitled to deal with the policy and to receive the policy moneys

If the assignee dies at any time, the policy moneys would be payable to the heirs of the

assignee Creditors of the life assured cannot attach the policy moneys unless the assignment is shown

to have been made to defraud the creditors182. What is a surrender?

A surrender is a voluntary termination of the contract by the policyholder A policyholder can surrender the life insurance policy before it becomes a claim

Surrenders are not allowed unless the policy has run for a minimum period of time, which

may vary from three to seven years. The amount payable by the insurer to the policyholder on surrender is called the surrender

value or cash value.

Surrender values are published and made known to policyholders by some insurers either aspart of the prospectus or by mention in the policy conditions

183.

What is a surrender value? It is usually a percentage of the premiums paid or a percentage of the paid up value.

The percentage increases as the duration of the policy increases The surrender value on a policy will be more after 15 years compared to the surrender value

after ten years.

The percentage decreases as the original term of the policy increases Between two policies of original term 20 and 30 years, both of which have been in force for

the same fifteen years, the surrender value on the former will be more than on the latter.

184. What is a foreclosure?

Foreclosure means closure or writing off the policy before its actual maturity When a loan is granted under a policy, the life assured has a choice to pay the interest or

allow it to accumulate to be adjusted from the policy moneys payable when the claim arises.

This is possible only if the premiums are paid regularly and the policy remains in force.

In case of paid up policies, the surrender value will not grow as fast as the accumulatedinterest

The principal loan and accumulated interest could become more than the surrender value atsome time

In the case of foreclosure it becomes necessary.

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