Download VTU MBA 4th Sem 16MBAFM402-Risk Management and Insurance RMI Module 5 -Important Notes

Download VTU (Visvesvaraya Technological University) MBA 4th Semester (Fourth Semester) 16MBAFM402-Risk Management and Insurance RMI Module 5 Important Lecture Notes (MBA Study Material Notes)

Life Insurance
MODULE 5
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Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
? 3. Conditions and privileges: insurer usually extends certain
conditions/privileges like extended time to pay premiums, rules for
lapsing and re-activation, non-settlement conditions in case of suicide,
change in habits and risk during course of the policy etc. some of the
conditions and privileges are as follows:
- Nature and proof of age
- Revival of discontinued policy
- Forfeiture in certain events
- Guaranteed surrender value
- Assignment and nominations
- Normal requirements for a claim
- Payment of premiums and grace period
- Non-forfeiture regulations
- Suicide
- Loan
- Accident benefit and other riders
- Grievance redressal officer.
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
? 3. Conditions and privileges: insurer usually extends certain
conditions/privileges like extended time to pay premiums, rules for
lapsing and re-activation, non-settlement conditions in case of suicide,
change in habits and risk during course of the policy etc. some of the
conditions and privileges are as follows:
- Nature and proof of age
- Revival of discontinued policy
- Forfeiture in certain events
- Guaranteed surrender value
- Assignment and nominations
- Normal requirements for a claim
- Payment of premiums and grace period
- Non-forfeiture regulations
- Suicide
- Loan
- Accident benefit and other riders
- Grievance redressal officer.
?4. Endorsement and clauses: Many a
time insurance coverage is issued
limiting the insurer?s liability for a certain
period of time which gets cancelled
automatically at the end of the time
periods. They are called endorsements
and clauses.
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
? 3. Conditions and privileges: insurer usually extends certain
conditions/privileges like extended time to pay premiums, rules for
lapsing and re-activation, non-settlement conditions in case of suicide,
change in habits and risk during course of the policy etc. some of the
conditions and privileges are as follows:
- Nature and proof of age
- Revival of discontinued policy
- Forfeiture in certain events
- Guaranteed surrender value
- Assignment and nominations
- Normal requirements for a claim
- Payment of premiums and grace period
- Non-forfeiture regulations
- Suicide
- Loan
- Accident benefit and other riders
- Grievance redressal officer.
?4. Endorsement and clauses: Many a
time insurance coverage is issued
limiting the insurer?s liability for a certain
period of time which gets cancelled
automatically at the end of the time
periods. They are called endorsements
and clauses.
Premium calculation
Regular consideration paid by the insured for
getting insurance cover is called the premium.
Premium depends upon
? 1. Age of the life to be assured
? 2. type of plan/scheme chosen
? 3. period/term of insurance
? 4. mode of payment
? 5. Riders chosen
? 6. benefits offered by the insurer
? 7. physical and health condition of the life
assured
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
? 3. Conditions and privileges: insurer usually extends certain
conditions/privileges like extended time to pay premiums, rules for
lapsing and re-activation, non-settlement conditions in case of suicide,
change in habits and risk during course of the policy etc. some of the
conditions and privileges are as follows:
- Nature and proof of age
- Revival of discontinued policy
- Forfeiture in certain events
- Guaranteed surrender value
- Assignment and nominations
- Normal requirements for a claim
- Payment of premiums and grace period
- Non-forfeiture regulations
- Suicide
- Loan
- Accident benefit and other riders
- Grievance redressal officer.
?4. Endorsement and clauses: Many a
time insurance coverage is issued
limiting the insurer?s liability for a certain
period of time which gets cancelled
automatically at the end of the time
periods. They are called endorsements
and clauses.
Premium calculation
Regular consideration paid by the insured for
getting insurance cover is called the premium.
Premium depends upon
? 1. Age of the life to be assured
? 2. type of plan/scheme chosen
? 3. period/term of insurance
? 4. mode of payment
? 5. Riders chosen
? 6. benefits offered by the insurer
? 7. physical and health condition of the life
assured
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
? 3. Conditions and privileges: insurer usually extends certain
conditions/privileges like extended time to pay premiums, rules for
lapsing and re-activation, non-settlement conditions in case of suicide,
change in habits and risk during course of the policy etc. some of the
conditions and privileges are as follows:
- Nature and proof of age
- Revival of discontinued policy
- Forfeiture in certain events
- Guaranteed surrender value
- Assignment and nominations
- Normal requirements for a claim
- Payment of premiums and grace period
- Non-forfeiture regulations
- Suicide
- Loan
- Accident benefit and other riders
- Grievance redressal officer.
?4. Endorsement and clauses: Many a
time insurance coverage is issued
limiting the insurer?s liability for a certain
period of time which gets cancelled
automatically at the end of the time
periods. They are called endorsements
and clauses.
Premium calculation
Regular consideration paid by the insured for
getting insurance cover is called the premium.
Premium depends upon
? 1. Age of the life to be assured
? 2. type of plan/scheme chosen
? 3. period/term of insurance
? 4. mode of payment
? 5. Riders chosen
? 6. benefits offered by the insurer
? 7. physical and health condition of the life
assured
Presentations (10 marks)
(Each one evaluated separately)
? Life Insurance Classification-Classification on
the Basis ?Duration-Premium Payment-
Participation in Profit-Number of Persons
Assured-Payment of Policy Amount-Money
Back Policies-Unit Linked Plans.
(4/5 members team)
? Annuities-Need of Annuity Contracts, Annuity
V/s Life Insurance, Classification of Annuities.
(3/4 members team)
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
? 3. Conditions and privileges: insurer usually extends certain
conditions/privileges like extended time to pay premiums, rules for
lapsing and re-activation, non-settlement conditions in case of suicide,
change in habits and risk during course of the policy etc. some of the
conditions and privileges are as follows:
- Nature and proof of age
- Revival of discontinued policy
- Forfeiture in certain events
- Guaranteed surrender value
- Assignment and nominations
- Normal requirements for a claim
- Payment of premiums and grace period
- Non-forfeiture regulations
- Suicide
- Loan
- Accident benefit and other riders
- Grievance redressal officer.
?4. Endorsement and clauses: Many a
time insurance coverage is issued
limiting the insurer?s liability for a certain
period of time which gets cancelled
automatically at the end of the time
periods. They are called endorsements
and clauses.
Premium calculation
Regular consideration paid by the insured for
getting insurance cover is called the premium.
Premium depends upon
? 1. Age of the life to be assured
? 2. type of plan/scheme chosen
? 3. period/term of insurance
? 4. mode of payment
? 5. Riders chosen
? 6. benefits offered by the insurer
? 7. physical and health condition of the life
assured
Presentations (10 marks)
(Each one evaluated separately)
? Life Insurance Classification-Classification on
the Basis ?Duration-Premium Payment-
Participation in Profit-Number of Persons
Assured-Payment of Policy Amount-Money
Back Policies-Unit Linked Plans.
(4/5 members team)
? Annuities-Need of Annuity Contracts, Annuity
V/s Life Insurance, Classification of Annuities.
(3/4 members team)
Life insurance policies - Types
?On the basis of
?Duration
?Participation in profit ? whole life,
endowment
?Payment of SA ? money back
policy
?Unit linked policies
?Annuites
FirstRanker.com - FirstRanker's Choice
Life Insurance
MODULE 5
Basics of Life Insurance
? Life insurance is a contract wherein death of the
insured is compensated by the insurer.
? In exchange for a premium, insurance company
compensates a fixed amount called the sum assured
? Term insurance covers risk for a fixed term while
whole life, universal insurance provides life time
coverage.
? Insurer collects premia from a very large number of
insureds and pools them into a life fund which is used
to pay claims and for investments.
? Insurer must do sound calculations of premia and
death claims in order to sustain itself.
Acturial science
? Discipline that applies mathematical and statistical
methods to assess risk in insurance, finance and other
industries and professions is called Acturial science.
? It includes several disciplines like maths, stat, finance,
economics, computer programming.
? Historically actuarial science used models to construct
tables and premiums.
? Now-a-days with modern computers it is possible to analyse
rates of disability, morbidity, mortality, retirement,
survivorship etc.
? Using statistical models it is possible to estimate life span,
likelihood of catastrophe, weather-related event, etc
? They forecast risk and uncertainty and helps a firm plan
future probabilities and possibilities.
Features of life insurance
? Unilateral contract: only one party, the insurer makes
enforceable promise. The company cannot force the
insured to pay all the premiums but company has to pay up
the SA as per contract
? Contract of utmost good faith: both the parties are placed
under special duty to disclose all material facts within their
knowledge as well as to refrain from active
misrepresentation.
? Conditional contract: this contract has many conditions
which need to be fulfilled in order for the contract to remain
valid
? Aleatory contract(By chance): Payment is made upon
happening of contingency. An?aleatory contract?is which
the performance of one or both parties is contingent upon
the occurrence of a particular event by chance on which
neither party has any control.
? Contract of adhesion: terms are not arrived at
by mutual negotiations; they are decided by
the insurer. The insured can only accept or
reject the policy along with the conditions
(contract of adhesion between two parties,
where the terms and conditions of the
contract?are set by one of the parties, and the
other party has little or no ability to negotiate.
? Contract of guarantee: Life insurance does not
offer an indemnity; it is a contingency contract
by providing for payment of agreed amount
upon happening of an event.
? Standard form of contract: it follows all the
essentials of Indian contract act, 1872 for it to be
a standard valid contract
Life insurance document
? Life insurer issues a policy bond upon completion of all formalities
of scrutinizing proposal application. A typical bond has the
following features:
? 1. Preamble: it is a narrative where the insurer and the insured bind
themselves to a contract of insurance. Insurer declares that having
received all the necessary information and documents it intends to
extend risk coverage upon terms and conditions as given
subsequently.
? 2. Policy schedule: it contains particulars such as policy number,
date of commencement of policy, scheme opted, date up to
which the cover is extended, amount of assurance payable by the
insurer, amount of premium payable by the policy holder, , mode
of payment (monthly, Qtly, Hly, Yrly), name of the person whom
the benefit is payable, type of contingency upon which payable,
mode by which payable and so on. The bond is dated and signed
by a responsible officer of the insuring firm
? 3. Conditions and privileges: insurer usually extends certain
conditions/privileges like extended time to pay premiums, rules for
lapsing and re-activation, non-settlement conditions in case of suicide,
change in habits and risk during course of the policy etc. some of the
conditions and privileges are as follows:
- Nature and proof of age
- Revival of discontinued policy
- Forfeiture in certain events
- Guaranteed surrender value
- Assignment and nominations
- Normal requirements for a claim
- Payment of premiums and grace period
- Non-forfeiture regulations
- Suicide
- Loan
- Accident benefit and other riders
- Grievance redressal officer.
?4. Endorsement and clauses: Many a
time insurance coverage is issued
limiting the insurer?s liability for a certain
period of time which gets cancelled
automatically at the end of the time
periods. They are called endorsements
and clauses.
Premium calculation
Regular consideration paid by the insured for
getting insurance cover is called the premium.
Premium depends upon
? 1. Age of the life to be assured
? 2. type of plan/scheme chosen
? 3. period/term of insurance
? 4. mode of payment
? 5. Riders chosen
? 6. benefits offered by the insurer
? 7. physical and health condition of the life
assured
Presentations (10 marks)
(Each one evaluated separately)
? Life Insurance Classification-Classification on
the Basis ?Duration-Premium Payment-
Participation in Profit-Number of Persons
Assured-Payment of Policy Amount-Money
Back Policies-Unit Linked Plans.
(4/5 members team)
? Annuities-Need of Annuity Contracts, Annuity
V/s Life Insurance, Classification of Annuities.
(3/4 members team)
Life insurance policies - Types
?On the basis of
?Duration
?Participation in profit ? whole life,
endowment
?Payment of SA ? money back
policy
?Unit linked policies
?Annuites
Rules for presentation
? Contents of the slide is very important. It must effectively represent
the syllabus
? Slides must be brief and to the point. Cut-pasting long passages as it
is, is prohibited.
? Presenter must have deep understanding of the subject being
presented.
? Use adequate explanations in your own words. Mere reading out of
the slide tentamounts to bad presentation
? Use right intonation, pause and gesticulation to make your point.
Speak in simple English with confidence
? Handle questions professionally
? Submit hard and soft copies of slides for evaluation
? Imitating anchores and putting up TV shows is prohibited. Remember
that it is a business presentation and not variety entertainment
program or Sentia 2017
FirstRanker.com - FirstRanker's Choice