INSURANCE EXAMINATIONS TIPS ON INSURANCE

HISTORY OF INSURANCE



01. The idea of insurance was mooted out during 14
th
century
02. Marine insurance is the oldest form of insurance throughout the world
03. Fire insurance and life insurance were subsequently undertaken by insurers
04. Fire insurance originated in Germany during 16
th
century
05. Life insurance started in England during 16
th
century
06. The first life that was insured was of Mr. William Gybbons on 18.6.1653
07. 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 Presidency
09. 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 1850
12. 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 limited
15. 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 enacted
17. During 1938, there were 176 insurance companies in India
18. The image of insurance was tainted on account of frauds during 1920 and 1930
19. Insurance act was passed during 1938
20. 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 crore
23. 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 1972
25. There were 107 companies involved in the business of general operations
26. General Insurance business was nationalized in India as per General Insurance Business
(Nationalisation) act 1972 with effect from 1.1.1973
27. 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 GIC
29. 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
India
31. 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 Insurance
Business
33. LIC of India is taking care of life insurance business
34. 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 and
National 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
38. As on 2,2.2011, there were 23 life insurance companies and 24 non life insurance companies in the
market.
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 business
41. General insurers transact the rest
42. 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
Detariffing
47. 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
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 manage
these 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 formalities
54. 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 Policy
56. 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 assured
58. Endowment plans
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
maturity
59. 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 policy
61. 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 time
horizons
Different funds have different risk profiles
The potential for returns also varies from fund to fund
62. 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 appreciation
64. 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 and
other 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 deposits
and money market instruments. The risk category is found to be low
67. Balanced funds Combination of equity investment with fixed interest instruments. The risk
category 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
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
assured
74. 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 reinsurance
79. 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 financial
institutions
Provide credit guarantee support to the priority sectors agriculture, retain trade, small
business, 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
To protect the interests of the policy holders by ensuring the insurers, intermediaries and
surveyors 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 the
national economic policies
To provide the best treatments to policy holders of various insurance policies
To provide the best solutions to the insuring public
83. 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 new
goods
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 of
product 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 all
matters
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 state
commissions.
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 insurance
91. Marine (Hull) insurance consists of the following:
Fishing vessels,
Major fleets
Inland vessels
Country crafts/motorized boats
Builders risk ship policy
Ship breakage risks
Major/Sunday hulls
Vessels under erection cover
92. 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 insurance
94. 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 product
96. 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 products
offered 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 formula
97. AIDAS means A for attention; I for interest; D for desire; A for action and S for satisfaction
98. 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
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 agents
102. 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 company
105. 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 business
109. 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 functions
112. Export credit insurance consists of
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 monitoring
116. 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 evaluation
118. 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 bonds
120. Alternative risk transfer consists of
Loss sensitive contracts
Finite insurance contract
Captive insurers
Multi line insurance policies
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
shares
123. 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 trading
125. 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 cap
127. Market capitalization is the market price of the outstanding shares of a company
128. 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 the
number of equity shares
130. Price earning ratio shows the wealth created
131. Price earning ratio = market price of share/earnings per share
132. 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 bears
133. 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 come
down 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 shareholders
and 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 of
security, 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
Life insurance is a way of life
138. 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 policy
140. 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 survival
142. 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 which
the specified event should occur for the sum assured to be payable. Some plans provide for benefits
even 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 provide
for 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 assured
147. Does the sum assured reduce? This can also happen, if the plan is to meet reducing
liabilities under a mortgage
148. Are there additional benefits? These, also called supplementary benefits and may be
provided by way of riders, in addition to the basic covers
149. 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 a
slightly 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 after
the 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 the
death 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 the
second 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 the
proposer 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, personal
history, family history, increasing extra risk, occupational hazards and moral hazard
155. Age As age increases, the probability of death increases and these probabilities are built
into the mortality tables and thereby into the premium rates The underwriter looks into the factor of
aged mainly because of its relationship with other factors. Certain risks increase with age. Certain
other 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 underweight
need 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.
157. Physical condition The medical examination of reflexes, blood pressure, pulse rates, urine
etc. 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 death
159. 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 person
susceptible 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 or
diabetes or cancer, which are expected to get worse as days go by. They do not have to, as modern
medicine 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, working
with high speed machines, adventure sports and so on
163. Moral hazard refers to the intentions of the proposer. If the proposer is being made because
there 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 insurer
165. 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 of
maturity, 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 Church
167. 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 and
debit 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 less
than 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 also
170. 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 is
delay 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 terminated
171. 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
172. What do you mean by lapse? A payment within the days of grace is deemed to be a
payment 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 and
all 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 paid
bears to the total number originally stipulated in the policy. Paid up value = (number of premiums
paid x sum assured)/number of premiums payable
174. Surrender value or cash value is made available normally when the policy has remained in
force for at least three years. This is so, because in the first year, most of the premium goes out in
expenses and there is little left for accumulation.
175. Assignment transfers the rights, title and interest of the assignor to the assignee. Legal
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 insurer
177. 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 reversal
of the decision to arrange for the insurance cover and therefore, , exposes the policy holder adverse
circumstances.
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 insurers
179. 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 holder
of 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 effect
a 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 the
nominee
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 of
nomination 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
Nominees right is only to collect policy moneys on the death of the assured, when paid by
the 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 creditors
182. 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 as
part 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 accumulated
interest
The principal loan and accumulated interest could become more than the surrender value at
some time
In the case of foreclosure it becomes necessary.