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1. Life Insurance

Insurance Sector

The Basics of Life Insurance

How life Insurance works

Types of Life Insurance

Taxation

Currently, the insurance sector size is estimated at Rs.500 billion.

The chamber (Associated Chambers of Commerce and Industry ) is expected to poise the business of insurance to reach at Rs.2000 billions in coming 2 years from the present level

Indias life insurance premium, as a Percentage of GDP is 1.8%

Life insurance offers a way to replace the loss of income that occurs when someone dies (usually the person who produces the majority of income in a family situation).

A good life insurance program does more than just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death funeral expenses, taxes, the need for housekeepers and child care, and so on.

More Importantly Provides

- PEACE OF MIND

Life insurance, like other forms of insurance, is based on three concepts:

Parties/Pooling: Many exposures into a group

Premiums: Accumulating a fund through contributions (premiums) from the members of the group.

Paying Out: Paying from this fund for the losses of those who die each year.

That is, life insurance involves the group sharing of individual losses.

To set premium rates, the insurer must be able to calculate the probability of death at various ages among its insured's, based on pooling

Term Life Insurance

Whole Life Insurance

Universal Life Insurance

Variable Life Insurance

First-To-Die Policies :-)

Stranger Originated Life Insurance (STOLI )

Children's Life Insurance

Senior Life Insurance

Mortgage Protection Life Insurance

Term life insuranceprovides protection for a specified period; is renewable (at increased premiums) and convertible and has a death benefit that is level or decreasing. The policy does not accumulate cash value

Death benefits: level or decreasing

Cash value: none

Premiums: increase at each renewal

Policy loans: not allowed

Partial withdrawals: not allowed

Surrender charges: none

Whole life insuranceprovides for payment of the face value upon death regardless of when the death may occur (permanent)

Death benefits: fixed level

Cash value: guaranteed amounts

Premiums: fixed level

Policy loans: allowed

Surrender charges: None

Universal life - allows the policyholder the flexibility to change the amount of the premium periodically, discontinue premiums and resume them at a later date without lapsing the policy, and change the amount of death protection

Death benefits: level or increasing

Cash value: guaranteed minimum cash value plus additional interest when rates are higher than guaranteed

Premiums: flexible

Policy loans: yes, but the interest credited to the account is reduced

Partial withdrawals: allowed

Surrender charges: yes

Variable life insuranceprovides the opportunity to invest funds in the stock market

Death benefits: guaranteed minimum plus increases from investments

Cash value: minimum not guaranteed; depends on investment performance

Premiums: fixed level

Policy loans: yes

Surrender charges: yes

First-to-die permanent life insurance policies pay cash benefits regardless of which spouse dies first. Covering both spouses with one policy can be cheaper than buying two policies.

Stranger Originated Life Insurance orSTOLIis a life insurance policy that is held or financed by a person who has no relationship to the insured person

There are laws to discourage or prevent STOLI.

There is no taxation on death benefits in life insurance (nor on dividends in participating policies)

There is no Taxation on the Cash Value over Maturity (which generally falls at the age 65or above)

Comparison Index Numbers - IRBA (Insurance Regulatory Body Act will provide Index number (1 to 5)to each company)

Smaller index numbers generally represent a better buy ( 90% death benefit Vs 10% Cash Value)

Insured

Policy Owner

Cash Value

Raiders

Actuaries

Sum Assured

Thank You

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