LIFE INSURANCE

INTRODUCTION TO LIFE INSURANCE

LIFE INSURANCEPurchase policy ; insurance company promises to pay a lump sum at the time of the policy holder’s death , or sometime while they are still alive.

PURPOSE OF LIFE INSURANCEProtect someone who depends on you from financial loss related to your death . Other reasons are:

• To leave at part of your estate.• To save money for retirement or for income or education for children.• To pay off a mortgage or debts at the time of death.

CHARACTERISTICS OF LIFE INSURANCE

1. Outcome of an offer2. Payment of Sum Assured3. Payment of Premium4. Contract of Contingency5. Insurable Interest6. Provides Financially help7. Encouragement of savings8. Wide Scope

PROCEDURE FOR TAKING A LIFE INSURANCE POLICY

1. Proposal2. Proof of age3. Medical Examination4. Confidential Report by the agent5. Acceptance of Proposal6. Payment of First Premium7. Insurance Policy

TYPES OF LIFE INSURANCE

Basically there are 2 types of life insurance:Basically there are 2 types of life insurance: TermTerm

andand

Whole LifeWhole Life

Term Life InsuranceTerm Life Insurance

Term Insurance The most basic and Term Insurance The most basic and least expensiveleast expensive type of life type of life insurance. You buy coverage for a certain amount of time, such as insurance. You buy coverage for a certain amount of time, such as 10, 15, 20 or 30 years. If you die before the term is over, your 10, 15, 20 or 30 years. If you die before the term is over, your beneficiary gets the benefit stated in your policy. If you live beyond beneficiary gets the benefit stated in your policy. If you live beyond the term, the policy expires.  the term, the policy expires. 

Therefore, if you purchase a 30 year term policy at Therefore, if you purchase a 30 year term policy at the age of 20 you will not have any life insurance beyond the age the age of 20 you will not have any life insurance beyond the age of 50of 50

Whole Life InsuranceWhole Life Insurance

Whole lifeWhole life or or Permanent InsurancePermanent Insurance This type of policy never This type of policy never expires. As long as premiums are paid, it remains in force. expires. As long as premiums are paid, it remains in force. Premiums are usually based on your age at the time of purchase Premiums are usually based on your age at the time of purchase and generally remain level. In addition to providing a death benefit, and generally remain level. In addition to providing a death benefit, premiums are also invested to produce returns – adding cash value premiums are also invested to produce returns – adding cash value to your policy. There are three major types of whole life or to your policy. There are three major types of whole life or permanent life insurance: traditional whole life, universal life, and permanent life insurance: traditional whole life, universal life, and variable universal life.variable universal life.

Types of Whole Types of Whole LifeLife

Traditional Whole LifeTraditional Whole Life You'll pay the same amount of premium for You'll pay the same amount of premium for the rest of your life. (Start young and the less expensive the premiums the rest of your life. (Start young and the less expensive the premiums will be.) Your cash value will accumulate based on a guaranteed rate. As will be.) Your cash value will accumulate based on a guaranteed rate. As long as your policy is current, you can borrow against the cash value at long as your policy is current, you can borrow against the cash value at the current policy loan interest rate. the current policy loan interest rate. Universal LifeUniversal Life gives you more flexibility. You pay a set initial premium, gives you more flexibility. You pay a set initial premium, but after that, you decide when and how much you want to pay. How but after that, you decide when and how much you want to pay. How does this work? The insurance company simply charges the insurance does this work? The insurance company simply charges the insurance cost from your cash value  account. cost from your cash value  account. Variable Universal LifeVariable Universal LifeThis insurance combines some features of policies to create a more This insurance combines some features of policies to create a more flexible life insurance product. As with universal life policies, you decide, flexible life insurance product. As with universal life policies, you decide, after the initial premium, when and how much more you want to pay after the initial premium, when and how much more you want to pay into your policy. You can adjust the death benefit, plus you have the into your policy. You can adjust the death benefit, plus you have the wide range of investment options. Your cash value  will increase or wide range of investment options. Your cash value  will increase or decrease, depending on the performance of the underlying funds.decrease, depending on the performance of the underlying funds.

Settlement OptionsSettlement Options In some cases there are four settlement options:In some cases there are four settlement options:

Lump sum:Lump sum: You receive the entire death benefit in a single amount, You receive the entire death benefit in a single amount, which allows you to use what you need for immediate expenses and which allows you to use what you need for immediate expenses and invest the rest. invest the rest.  Specific income provision:Specific income provision: The life insurance company pays you The life insurance company pays you both principal and interest on a predetermined schedule.  both principal and interest on a predetermined schedule. 

Life income option:Life income option: You receive a guaranteed income for life. The You receive a guaranteed income for life. The amount of income depends on the death benefit specified in the life amount of income depends on the death benefit specified in the life insurance policy, your gender, and your age at the time of the insurance policy, your gender, and your age at the time of the insured's death.  insured's death. 

Interest income option:Interest income option: The company holds onto the proceeds and The company holds onto the proceeds and pays you interest. The death benefit remains intact and goes to a pays you interest. The death benefit remains intact and goes to a secondary beneficiary upon your death.secondary beneficiary upon your death.

FIRE INSURANCE

FIRE INSURANCE

Fire insurance is a contract of indemnity and the insured cannot claim anything more than the values of goods lost or damaged by fire or the amount insured , whichever is less. The contract of fire insurance does controlling or preventing the fire but it is a promise to compensate the loss caused by fire.

CHARACTERISTICS OF FIRE INSURANCE

1. Contract of Indemnity

2. Offer and Acceptance

3. Premium

4. Insurable Interest

5. Payment of Premium

6. Policy Duration

7. Principle of Subrogation

8. Outcome 9. Claim Settlement

SCOPE OF FIRE INSURANCE• ORDINARY SCOPE• COMPREHENSIVE OR BROADER SCOPE

1. ORDINARY SCOPE : It includes only those risks which define the narrower scope of fire insurance i.e the losses caused by fire only. Under the fire insurance contract , the claim for loss by fire must fulfill two basic conditions:

a) There must be actual fire .b) The fire must be incidental .2. COMPREHENSIVE SCOPE OF FIRE INSURANCE: These

policies cover the various types of risks allied to the risks of fire . Coverage of such risks under the purview of fire insurance has widened the scope of fire insurance.

PROCEDURE FOR TAKING A FIRE INSURANCE PARTY1. Selecting the Insurance Company2. Proposal Form3. Evidence of Respectability4. Survey of Properties to be insured5. Cover Note6. Issue of Policy

Method of indemnity

1.Cash payment

2.Repairs

3.Replacement

4.reinstatement

Principle of subrogation

1.If the subject matter is destroyed due to the negligence act of the third party,,the insurer after indemnifying the insured shall entitled to get insured right of indemnification against third party

2.Under fidelity guarrantee insurance,insurer become entitled to claim reimburstement from the defaulter but after indemnifying the insured

3.Similarly if cargo is destroyed due to negligence of carrier then under the provisions of common law the carrier is held liable to the owner’s cargo

4.When a car of the insured is damaged due to the negligent driving of the driver of the other vehilcle

Rules governing subrogation1.It does not apply to life insurance2.The insurer assumes the rights of the insured only after the settlement of the claim3.The insurer will enjoy the same rights against third party which had previously insured4.Such rights can be exercised in the name of the insured5.Insured is the trustee ofr the insurer in respect of any compensation received from the third party

Principle of contribution

1.Sometimes a person gets the subject insured with more than one insurer called the double insurance

2.Whereby in the event of damage insured cannot claim anything more than the total loss from all the insurances together

3.Under principle of indemnity the insured cannot be restored to a better position than before the loss4.In such cases the total loss suffered by the insured is contributed bydifferent insurer in the ratio of the value of policies issued by them for the same subject matter

Application of principle of contribution1.The subject matter of insurance must be common to all policies

2.The peril which causes the loss must be common to all the policies

3.The policy must be legally enforceable.

4.The insurable interest under all policies must be same

5.The policy must be in force at the time of policy

6.Causa proxima or priciple of approximate cause

Practical aspect of proxima of cause1.Operation of a single cause

2.Concurrent causes

3.Successives cause

Mitigation of loss