BANKING & INSURANCE
UNIT –III
Presented By
Senthil kumar.N
TODAYS DISCUSSION
Review of Last class
Life insurance
UNIT III B&I 2
What Is Life Insurance ?
It is a contract in which the Insurer, in
consideration of a certain premium, either in a
lump sum or in any other periodical payments,
in return agrees to pay to the assured, or to the
person for whose benefit the policy is taken, a
stated sum of money on the happening of a
particular event contingent on the duration of
human life.
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Essential features of life insurance
Elements of a valid contract
Insurable interest
Utmost good faith
Warranties
Assignment and nomination
Certainty of the event
Premium
Terms of policy
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Essentials of a Valid Contract
Offer and acceptance
Consensus ad idem
(“meeting of the minds”)
Parties competent to contract
Consideration
Legality of purpose
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Essential Features :
It is a contract relating to human life
The contract provides for payment of
lump sum money
The amount is paid at the expiration of a
certain period or on death of a person.
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In India, Life Insurance business is defined under
Section 2 (11) of Insurance Act, 1938, which reads :
“Life Insurance business” means the business of
effecting contracts of insurance upon human life,
including any contract whereby the payment of
money is assured on death (except death by
accident only) or the happening of any contingency
dependent upon human life and any contract which
is subject to payment of premium for a term
dependent on human life and shall be deemed to
include the granting of :
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Disability and double or triple indemnity
accident benefits, if so provided in the
contract of insurance;
Annuities upon human life; and
Superannuation allowances and annuities
payable out of any fund applicable solely to
the relief and maintenance of persons engaged
or who have been engaged in any particular
profession, trade or employment or of the
dependents of such persons.
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The insurance contracts, which deal with
disability, accidental death alone, sickness etc.
are excluded from the purview of life
insurance.
However, life insurance contracts can have
benefits payable on the accidental death or
disability of the persons insured as additional
benefits on the basic life insurance contracts.
UNIT III B&I 9
Main Types Of Life Insurance
Whole Life Insurance
◦ Intended to provide Life Insurance
protection over one‟s lifetime –
provides for payment of the assured
amount upon the insured‟s death
regardless of when it occurs.
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The payment of assured sum is a certainty;
only the time of the payment of the assured
sum is an uncertainty
◦ Ordinary Whole Life Insurance
◦ Limited Payment Whole Life Insurance
◦ Convertible Whole Life Insurance
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Endowment Insurance
Benefits under the policy paid on the death of
the life insured during the selected term or on
his survival to the end of the term.
◦ Normal durations ranging from 10 to 30 years or
more; shorter term policies ranging from 3 to 10
years
◦ Single premium endowment insurance policies
◦ Money Back or Cash Back or Anticipated
Endowment Insurance Policies
UNIT III B&I 12
Term Insurance
Insurance protection for selected term only – in
case the insured person dies during the term,
the benefits are payable.
In case of his survival till the end of selected
term, the policy normally expires without any
benefit becoming payable
May be regarded as temporary insurance –
premium for term insurance is relatively low.
UNIT III B&I 13
Annuities
Series of periodic payments
Annuity provider (insurer) agrees to pay
the purchaser of annuity (annuitant) a
series of regular periodical payments for a
fixed period or during someone‟s life
time.
UNIT III B&I 14
Group Life Insurance
There are groups of people who share
something in common and are connected
by some underlying similarity like
occupation, profession, employment,
social purposes or even entertainment
can have a similar need for life insurance
which can be met by a single insurance
contract.
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These categories of products that cover the
risk of a contingency dependent on the life of a
group of persons, come under the group life
insurance.
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Conventional Groups
Employer – Employee Groups
Creditor – Debtor Groups
Associations of Self-employed
Professionals
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Non-conventional Groups
Co-operative Societies
Trade Unions
Welfare Associations
Non-government Organizations
Voluntary Associations
Charitable Trusts, etc.
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Other Types of life insurance plans
Children plan
Plan for handicapped dependents
Plan for high worth individuals
Money back plans
Social security plans
Pension plans
Unit plans
Other special plans
UNIT III B&I 19
Life Insurance Products
Two groups viz.
Packaged Products –
◦ benefits under such products are pre-defined
and customer has to choose the plan that is
closest to this requirement
◦ Ability of the agent to explain the different
plans is important factor
◦ Most of LIC‟s products fall under this
category
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Advantages of Life Insurance
Risk Cover - Life today is full of
uncertainties; in this scenario Life
Insurance ensures that your loved ones
continue to enjoy a good quality of life
against any unforeseen event.
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Planning for life stage needs - Life
Insurance not only provides for financial
support in the event of untimely death
but also acts as a long term investment.
You can meet your goals, be it your
children's education, their marriage,
building your dream home or planning a
relaxed retired life, according to your life
stage and risk appetite. Traditional life
insurance
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Protection against rising health
expenses - Life Insurers through riders
or stand alone health insurance plans
offer the benefits of protection against
critical diseases and hospitalization
expenses. This benefit has assumed critical
importance given the increasing incidence
of lifestyle diseases and escalating medical
costs.
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Builds the habit of thrift - Life
Insurance is a long-term contract where
as policyholder, you have to pay a fixed
amount at a defined periodicity. This
builds the habit of long-term savings.
Regular savings over a long period
ensures that a decent corpus is built to
meet financial needs at various life stages.
UNIT III B&I 24
Safe and profitable long-term
investment - Life Insurance is a highly
regulated sector. IRDA, the regulatory
body, through various rules and
regulations ensures that the safety of the
policyholder's money is the primary
responsibility of all stakeholders. Life
Insurance being a long-term savings
instrument, also ensures that the life
insurers focus on returns over a long-
term and do not take risky investment
UNIT III B&I 25
Assured income through annuities -
Life Insurance is one of the best
instruments for retirement planning. The
money saved during the earning life span
is utilized to provide a steady source of
income during the retired phase of life.
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Facility of loans without affecting
the policy benefits - Policyholders have
the option of taking loan against the
policy. This helps you meet your
unplanned life stage needs without
adversely affecting the benefits of the
policy they have bought.
UNIT III B&I 27
Tax Benefits-Insurance plans provide
attractive tax-benefits for both at the
time of entry and exit under most of the
plans.
Mortgage Redemption- Insurance acts
as an effective tool to cover mortgages
and loans taken by the policyholders so
that, in case of any unforeseen event, the
burden of repayment does not fall on the
bereaved family.
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Non-packaged Products –
◦ products with certain basic features
like Endowmnet or Money-back. the
customer to choose as per his needs
and then expand it by rider benefits
– accident cover, critical illness cover,
disability benefits, hospitalisation
cover etc.
◦ cater to niche market and have profit
potential.
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Basic Elements :
(a) Risk coverage – to provide lump sum
amount to the family in the event of
untimely death of the breadwinner –
„Term Insurance‟ or „Temporary
Insurance‟.
(b) Savings – lump sum amount is payable
only if the insured survives till the end of
the selected period; if death occurs during
the period of insurance, nothing is payable
– „Pure Endowment‟.
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Term Insurance :
◦ a contract for limited number of years
◦ payment only if death occurs during the
term
◦ low cost / high risk coverage
◦ stricter underwriting rules and
restrictions
◦ renewable feature and convertible feature
◦ increasing or decreasing Term Insurance
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Whole Life Insurance –
◦ Risk coverage for the death of the insured- whenever it may
happen
◦ No fixed term
◦ Variations – Pure Whole Life – Premium payable throughout
the life of the insured till death. Risk coverage for duration of
life – amount payable on death
◦ Limited Payment Whole life – Premium payable for limited /
shorter period or till death if earlier risk coverage
throughout life
◦ Premium rate is low than Term Insurance
◦ Provide permanent protection at moderate cost
◦ Convertible Whole Life Plan
UNIT III B&I 32
Endowment Assurance – The insurer agrees
to pay the insurance money in the event of death of
the insured during endowment term
to pay the insurance money in the event of the
insured surviving till the end of the endowment term
◦ Economic concept – decreasing term assurance
and increasing investment – Reserve value
supplemented by Term Insurance
◦ Premium rates usually higher than Whole Life
Plan
◦ Sound plan for various types of customers.
UNIT III B&I 33
Life Insurance Products In India
Term Insurance
◦ Two-year temporary insurance
◦ Convertible term insurance for 5-7 years – option to
convert into limited payment whole life or
endowment assurance
◦ Bima Sandesh – Return of premium on survival
◦ Bima Kiran – Term insurance; Return of premium on
survival – free insurance cover for 10 years to the
extent of 30% - 60% of the face value of policy
◦ Mortgage Redemption Assurance – to cover
outstanding loan under house mortgage.
UNIT III B&I 34
Whole Life Plans
◦ Whole Life Policy – premiums payable for
35 years or age 80 years, whichever is
later; insurance money payable on death
◦ Limited Payment Whole Life Policy
◦ Convertible Whole Life Policy –
Premiums payable upto age 70 of the
insured – limited payment – option to
covert at the end of 5 years into
Endowment Plan
UNIT III B&I 35
Endowment Plans
Endowment Assurance (with or without profits)
Bhavishya Jeevan Policy (with profits) – first 5
years premium are quite high from 6th year scaled
down to almost 1/3rd.
Jeevan Mitra (Double Cover or Triple Cover)
Jeevan Griha (Double Cover or Triple Cover) –
Low cost without profit endowment assurance –
face value paid on maturity
New Jan Raksha (with profits)
Jeevan Shree (without profits but with guaranteed
addition) – limited premium paying period –
keyman insurance
UNIT III B&I 36
Jeevan Pramukh
Asha Deep II (with profits) – Endowment Plan with riders
to cover four serious illnesses viz. cancer, paralytic stroke
leading to permanent disability, kidney failure (both
kidneys), and cardiac bye-pass surgery – except 1st year –
50% of S.A. premium waiver – annuity of 10% of S.A. till
maturity
Balance 50% of S.A. on death or maturity with bonus
Marriage Endowment or Education Annuity (with profits)
– no immediate payment on death – payment in lumpsum
in case of marriage – payment in half yearly instalments
over 5 years in Education Annuity from date of maturity
only.
Money back plans
UNIT III B&I 37
Special Plans
For Children –
◦ Children Deferred Assurance Plans
◦ New Children Deferred Assurance Plan
◦ Jeevan Balya
◦ Jeevan Kishore
◦ Children‟s Money Back Plan
◦ Jeevan Anurag
For Disabled Children
◦ Jeevan Adhar
◦ Jeevan Vishwas
◦ IT exemption upto Rs. 20,000/- on premium
UNIT III B&I 38
Jeevan Asha II
◦ Endowment Assurance with medical benefit rider
◦ 2% of face value paid every 2 year for medical
checkup
◦ Reimbursement of expenses upto 20% to 50% of
face value of policy for minor / major surgeries
◦ On death full S.A.
Joint Life Policies
◦ Jeevan Saathi
◦ Jeevan Saritha – benefit of joint life and last
survivorship annuity apart from lump sum payment
on death or maturity
UNIT III B&I 39
Unit Linked Insurance Plan
Bima Plus – Capital Market Linked
Insurance Plan
◦ Premium has two parts
Risk premium
Investment premium
◦ Investment at the choice of policyholder –
from three combinations viz.
Secured fund (complete security)
Balanced fund (moderate risk)
Risk fund (high risk investments)
UNIT III B&I 40
Investment Pattern
Equity Debt Liquid
Secured Not less than 10% 80 % 20 %
Balanced Not less than 30% 80 % 20 %
Risk Not less than 50% 75 % 25 %
UNIT III B&I 41
Policy holder to select a fund
Switch over twice during the
term subject to minimum gap
of 2 years
Cost of switching over 2% of
the current bid value of the
fund
UNIT III B&I 42
Life Insurance Products of Private
Companies
HDFC Standard Life
◦ Endowment Assurance Plan
◦ Money Back Plan – payment of cash lump sum
at 5 yearly intervals
◦ Group Insurance Policy – specified group for
a term of one year
Endowment Assurance Plans
◦ ICICI Pru Single Premium Bond – savings with
life cover – fixed term plan of 5 or 10 years
UNIT III B&I 43
ICICI Pru Save n‟ Protect
◦ Fixed term policy
◦ Policyholder can accumulate funds for future requirements
on a regular basis i.e. Children‟s education, marriage etc.
◦ Extended Term Assurance cover for 5 years for 50% of S.A.
without payment of premium
Add-On‟s or Riders
◦ Option for additional benefits
accident and disability benefit
critical illness benefit
major surgical assistance
level term assurance
◦ During tenure of extended life cover, no rider benefit
available
UNIT III B&I 44
ICICI Pru Forever Life
Regular income for life after
prescribed date
Life cover during the deferment
period
Options
◦ life time annuity
◦ life annuity certain for 5, 10, 15 years
◦ life annuity with return of purchase
price
◦ joint life, last survivor annuity
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Add-On‟s or Riders – one can be chosen
◦ Accident and Disability benefit
◦ Major surgical assistance
◦ Level Term Insurance
ICICI Pru Cash Bank
◦ Three-in-one combining savings, liquidity and
protection
◦ Term of 15 or 20 years
◦ Survival benefit at regular intervals
UNIT III B&I 46
◦ Add-on‟s or Riders
Accident and Disability benefit
Critical illness benefit
Major surgical assistance
Level Term Insurance
Protection Plans
◦ The Pru Life Guard or Term Level Assurance
Death Risk Coverage
No maturity benefits in case of single premium level
term policy
◦ Add-on‟s or Riders as in ICICI Pru Cash Bank
UNIT III B&I 47
Birla Sun Life Insurance Company
Ltd.
Flexi Save Plus Endowment Plan
◦ Premium for a fixed duration or in a single
lump sum
◦ Benefit of insurance cover as also investment
to help savings grow – bonds / securities
◦ Loan facility upto 90% of the total policy value
on payment of interest at fixed rate
◦ Facility of withdrawal from 3rd policy
anniversary – can close the plan earlier – no
surrender charges after 4th year.
UNIT III B&I 48
Flexi Cash Flow Money Back Plan
◦ fixed term policy with periodic
payback at fixed intervals
◦ offers flexibility to choose between
the investment option, automatic
premium payment, duration of the
plan etc.
benefits as in Flexi Save Plus
Other
Endowment Plan
UNIT III B&I 49
Flexi Life Line-Whole Life Plan
◦ Higher return and security to family
◦ Members to keep paying premium
and enjoy the benefit of savings and
life insurance
◦ Offers the flexibility to choose the
premium payment investment option,
duration etc.
UNIT III B&I 50
Bajaj Allianz Life Insurance Co. Ltd.
Group Credit Care Plan (Employer – Employee)
◦ Group Term Insurance Scheme providing basic life
insurance protection to employees who have taken loan
from employer
◦ Covering risk of outstanding loan in case of premature
death
◦ One policy document – to the employer
◦ Accidental death benefit – additional amount equal to
life cover granted – total accident cover limit 10 lacs
Accidental Permanent Total Disability Benefit – Payment of
an amount equal to life cover granted total accidental
disability cover limit – 10 lacs
UNIT III B&I 51
GroupRisk Care Plan (Employer –
Employee)
◦ Risk coverage
◦ Life Insurance Benefit for all members
◦ One policy document to the employer
◦ Accidental Death Benefit
◦ Accidental Permanent Total Disability
Benefits
UNIT III B&I 52
Group Credit Care Plan (Non Employer –
Employee)
◦ Group Term Insurance Scheme to people having
availed a loan from an institution or co-
operative
◦ Covers risk of outstanding loan
◦ One policy document to the institution or co-
operative
◦ Facility of enhancement of cover by adding
accidental death benefit / accidental permanent
total disability benefit.
UNIT III B&I 53
GroupRisk Care Plan (Non Employer
– Employee)
◦ Basic life insurance protection to group
members
◦ Covers risk of death – all members of the
scheme
◦ One policy document to the group
policyholder
◦ Facility of enhancement of cover –
Accidental death benefit / accidental
permanent – total disability benefit.
UNIT III B&I 54
Term Care Plan –
◦ Term Insurance Plan – life cover
with return of premium on
maturity
◦ Life insurance cover at low cost
◦ Two premium payment options
regular premium payment
throughout the selected term
single premium payment
UNIT III B&I 55
Option to choose upto 5 additional
benefits
◦ economy
◦ Protect – 3 in-built additional benefits
Accidental death benefit
Accidental permanent total / partial disability benefit
Waiver of premium benefit
◦ Health
Critical illness benefit
Hospital cash benefit
◦ Total – providing 5 in-built benefits of „Protect‟
& „Health‟.
UNIT III B&I 56
Risk Care Plan
◦ a pure term insurance plan – very
economical
◦ offers cover at the lowest possible cost
◦ no survival benefit
Life time Care Plan
◦ a life time endowment plan with profits
◦ 4 different plan type – economy, protect
health and total plan
UNIT III B&I 57
Save Care Plan
◦ Endowment plan with profits for
a specified period to meet
planned expenditures like
education / wedding of children
◦ Comes in 4 types – Economy
Single Premium Plan, Economy
Plan, Protect Plan, Health Plan
UNIT III B&I 58
Products In Overseas Market
Term Insurance - for different specified
period
◦ Renewable and non-renewable
◦ Convertible and non-convertible
Two other forms
◦ Level Term Insurance – provides specified
amount of coverage for the entire period of
policy
◦ Decreasing Term Life Insurance
UNIT III B&I 59
Universal Life Insurance
Variation of whole life, the pure insurance
part (the Term portion) is separated from
the investment (cash portion)
Investment portion invested in money
market funds
Cash value portion is set up as an
accumulation fund to which investment
income is credited
UNIT III B&I 60
Death benefit (Term Insurance) is paid out of
accumulation fund
The cash value of Universal Life Insurance grows
at variable rate
The insured can vary his annual death benefit and
the annual premium
Provision for making partial surrender and take
policy loan against cash value
When earnings are good, policy owner can put
more money in the cash portion of the policy
Normally there is guaranted minimum interest
rate
A few other options
UNIT III B&I 61
Variable Life Insurance
◦ A form of whole life insurance – Term portion; premium
towards administrative expenses; part towards
investment or cash value portion
◦ The insured may select to invest the funds in various
investments : stocks, bonds, MF‟s. He may only choose
from investment vehicles from the insurance companies
portfolio.
◦ Option to switch investment vehicles a few times
◦ It is expensive – commission and service fee is high.
◦ Value of death benefit may fluctuate up or down
depending on the performance of the investment
portion. However, death benefit can never fall below a
defined level.
UNIT III B&I 62
Whole Life Insurance Products in Foreign
Markets
◦ Part premium for insurance; small part towards admin.
expenses; balance for investment
◦ Insurance coverage for entire life
◦ Premium throughout life or selected term (10, 20, 30
years)
◦ Provision for single premium
◦ Cash value portion belongs to insured; can take loan or
cash; interest on accumulation fund is tax free
◦ Premiums are fixed regardless of the age or health of
the policy owner.
◦ Investment vehicles are generally bonds and mortgages
UNIT III B&I 63
Progressive Protection Policy
◦ Designed to adapt to changing circumstances
◦ Lump sum in the event of death / terminal
illness
◦ No cash-in-value; purely for protection; No
investment
◦ Provision for increase / decrease in cover at any
time other than the first year
◦ Option to have the policy increase
automatically every year
◦ Option for mode of payment of premium
UNIT III B&I 64
THANK YOU,,,,,
UNIT III B&I 65