INTRODUCTION:

1.1 SELECTION AND RELEVANCE

Buying life insurance is one of the most important financial decisions, but believe it or not, only 10 per
cent of Indians are insured. But why is it so important?
No one knows what the future holds. Lots of people die every year from illness or accident and, if you
happen to be the sole earner in the family and you were to pass away, it could have been a devastating
consequence for your loved ones.
Their ability to pay household expenses, debts and maintain their standard of living.
The least you can do is to secure your family's financial future by buying a Life Insurance Policy.

REASONS FOR BUYING LIFE INSURANCE POLICY:

1.Looking after your loved ones even after you're gone:

This is the most important aspect of life insurance that one needs to understand. Your family is dependent
on you even after you're gone and you certainly don't want to let them down. Whether it's for replacing
lost income, paying for your child's education or making sure your spouse get the much-needed financial
security, life insurance could save the day for your surviving dependents.

2. Dealing with debt:

You don't want your family to deal with financial liabilities during a crisis. Any outstanding debt-a
home loan, auto loan, personal loan, or a loan on credit cards-will be taken care of if you happen to buy
the right life insurance policy.

3. Helps achieve long-term goals:

Since it is an instrument that keeps you invested for the long term, it would help you achieve your long-
term goals such as buying a home or planning your retirement. It also provides you with diverse
investment options that come along with different types of policies.

4. Life insurance supplements your retirement goals:

Who wouldn't like their retirement savings to last until they do? With a life insurance plan, you can
ensure you have a regular stream of income every month. Putting money in an annuity is like a pension
plan- put in some money regularly in a life insurance product and enjoy a steady income every month
even after retirement.
5. Your business is also taken care of:
Life insurance isn't only for yourself and your family. Some insurance policies also take care of your
business. If you own a business, then your business partner can purchase your portion of the business
without hassle. Your business partners will enter a buy-sell agreement and the pay-out would go to the
deceased partner's nominees, but without giving them a stake in the company. There are two types of
life insurance policies-a term insurance policy and a life insurance policy.

7. Tax-saving purposes:
You could save taxes with insurance policies irrespective of what plan you buy. The premium you pay
on an insurance policy is eligible for a maximum tax benefit of Rs 1.5 lakh under Section 80C, and for
tax-free proceeds on death/maturity under Section 10 (D) of the Income Tax Act, 1961.

8. A tool for forced savings:

If you choose a traditional or unit-liked policy, you pay a premium each month, which is higher than
what it costs to insure you. This bit of extra money is invested and it accrues cash value. This cash can
then be borrowed against the policy or you can choose to sell it or draw income from it.

1.2 HISTORY OF:

Life Insurance:

In the year 1818, the Oriental Life Insurance Company was established in Calcutta. However Oriental
Life Insurance Company was failed in 1834. In the year 1829, Madras Equitable started operating in the
field of life insurance sector in the Madras Presidency. 1870 saw the enactment of the British Insurance
Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874)
and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated
by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal
Insurance, Liverpool and London Globe Insurance and the Indian companies were up for hard
competition from the foreign companies.

In 1912 the Life Insurance Act and Provident Act were passed. Life Insurance Act was the first
regulatory authority in life insurance industry in India. In the year 1928, the Indian Insurance Companies
Act was passed. This act has given right to the government of India, to get statistical information from
the insurance companies, operating in life as well as non-life insurance fields. In the year 1938,
subsequent insurance act was passed.
The main objective of this act was to keep control over the insurance industry and to stop failures of
unsound ventures. In the year 1944, a bill was presented in legislative assembly of India to nationalize
the whole Indian insurance industry.

On 1st September 1956 the Life Insurance Corporation of India came into force. Life Insurance
Corporation of India was created by nationalizing 245 private life insurance players and other entities
which were involved in life insurance business. As a result of Industrial Policy Resolution of 1956, the
whole insurance industry was nationalized in India. The life insurance industry become stable and started
growing rapidly after nationalization.

Life Insurance Corporation of India started working with 5 zonal offices, 33 divisional offices and 212
branch offices in India. Life Insurance Corporation was the only life insurance player in India before the
entry of various private life insurance players. Life Insurance Corporation of India has enjoyed
monopoly in the life insurance industry for a long time.

Bajaj Allianz:

Bajaj Allianz Life Insurance is a joint venture between Bajaj Finserv Limited (formerly part of Bajaj
Auto Limited) owned by the Bajaj Group of India and Allianz SE, a European financial services
company. Being one of the private insurance companies in India, it offers insurance products for
financial planning and security. It is led by Tarun Chugh who is the Managing director and Chief
Executive Officer of the company.

Bajaj Allianz Life Insurance began operations on 12 March 2001 and today has a pan-India presence of
759 branches.[5] It is headquartered in Pune, India. Bajaj Allianz Life Insurance received the Insurance
Regulatory and Development Authority (IRDA) certificate of Registration on 3 August 2001 to
conduct Life Insurance business in India.
1.3 DEFINITIONS:

INSURANCE:

A contract (an insurance contract) whereby one person, the insurer, promises and undertakes, in
exchange for consideration of a set or assessed amount of money (called a "premium"), to make a
payment to either the insured or a third-party if a specified event occurs, also known as "occurrences".

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used
to hedge against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, insurance carrier
or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder.

The insured receives a contract, called the insurance policy, which details the conditions and
circumstances under which the insurer will compensate the insured. The amount of money charged by
the insurer from the insured for the coverage set forth in the insurance policy is called the premium. If
the insured experiences a loss which is potentially covered by the insurance policy, the insured submits
a claim to the insurer for processing by a claims adjuster. The insurer may hedge its own risk by taking
out reinsurance, whereby another insurance company agrees to carry some of the risk, especially if the
primary insurer deems the risk too large for it to carry.

LIFE INSURANCE:

Life Insurance is defined as a contract between the policy holder and the insurance company, where the
life insurance company pays a specific sum to the insured individual's family upon his death. The life
insurance sum is paid in exchange for a specific amount of premium. Life is beautiful, but also uncertain.
Whatever you do, however smart and hard you work, you are never sure what life has in store for you.

It is therefore important that you do not leave anything to chance, especially ‘life insurance’. As death
is the only certain thing in life, apart from taxes, it pays to insure it well in advance.

Life Insurance Definition and Explanation:

If you were to go by the dictionary definition, “life insurance” is a financial product that pays you or
your dependants a sum of money either after a set period or upon your death as the case may be.

However, if you were to understand the term clearly and also appreciate its importance in your life,
consider “life insurance” as a back-up plan for life. Life insurance in its simplest form means being
prepared financially, come what may. It ensures that your family and you receive financial support in
case you are not able to bring in the much-needed income yourself (maybe due to an accident, retirement,
or untimely demise).

In legal terms, life insurance is a contract between an insurance policy holder (insured) and an insurance
company (insurer). Under this contract, the insurer promises to pay a pre-decided sum of money (also
known as “Sum Assured” or “Cover Amount”) upon the death of the insured person or after a certain
period.

The significance of having a life insurance is to avail the "peace of mind" that it brings along. However,
having an adequate amount of life insurance effectively sets your mind free of some important questions
like:

• What will happen to my family financially after I die?

• How will my wife and kids take care of their expenses after I am no more?
• How will I provide for my family in case I lose my job after an accident?

• How do I ensure that I am able to fund my child’s higher education?

• How do I ensure an income after my retirement?

Now, in order to have a financially secured future, you (the insured) have to pay the insurer (insurance
company) a “life insurance premium”, which is either a regular annual payment or a one-time payment
as the case may be.

1.4 CONCEPTS:

For life insurance we could say that “it is a combination of savings and insurance” which offers
protection and creates the financial security of a person, its family or/and his business. (Xhevat Bakraçi,
2004, page 233) According to the authors Green & Trieschmann, life insurance is a method with which
a group of people can cooperate to alleviate the loss which results from the premature death of the
members of that group. According to them life insurance can also be defined as a way of saving money
for their current wealth, which later can be used as an income source in old age. The main types of life
insurance are:

a) Term insurance – is one of the oldest and simplest life insurances. The amount of the insurance
is paid only if the person dies during the period of the contract, which means that the payment takes
place after the person is dead. Whereas, if the person continues to live during the period of the
contract, then the payment belongs to the insurer.

b) Whole life insurance – in this type the amount of the insurance is paid after the death of the
person, despite when the death happened. This type of the insurance also has the element of saving
and among others a fixed premium.

c) Insurance of the contracting amount in case of experiencing – in this case the insurer is obligated
to pay the amount only in cases if the client experiences it in the fixed term. If so happens that the
insured dies prior this term the insurer is not obligated to pay the amount of the insurance.

d) Mixed life insurance or Insurance in case of death and life – in this case the insurer pays the
insured amount both in case of the death of the insured or life. e) Renters insurance – is a type of
insurance in which the insured with the payment of the premium fully or with instalments wants to
secure its future or the future of its family.

Agreement for life insurance can sign healthy people from 15 to 55 years old and can be contracted
for a period from 10 to 30 years. We need to take into account that the premiums of life insurance
are variable, depending on the gender, age and the period of the insurance. As characteristics of life
insurance we can mention:

• Life insurance offers protection and gives financial security to the individual, its family or and its
activity.
• Covers the risk of death.
• Long-term
• Fixed premiums
• Savings component
• Payment of remuneration
• The calculated gross premium is a paid premium
• Bearer premium is not calculated Research Journal of Finance and Accounting
• Tax reliefs exist.

Risks that are covered with life insurance are:

• The death of the head of the family

• Children’s education
• Mortgage debts
• Protection of partnership
• Protection of business
• Unemployment
• Survival of the insured.

Despite the risks that are covered with life insurance, we also have cases that life insurance
companies do not cover. As two more important cases are:

a) The death happens casually or by accident. If the death is premature but not sudden then the case
is not insurable for the life. For example, if a 30 year old who is diagnosed with cancer has a
premature but not sudden death, therefore it is not insurable. On the other hand, if a 30 year old dies
in a traffic accident, then his death is premature and sudden, therefore this case is insurable.
 b) For a death to be sudden it should happen without premeditation. In this case, the cases that
happen as a result of suicides and the cases with high risk are not insurable. For example, if someone
drives a car under the influence of alcohol and as result to this dies or if someone dies while
exercising a hobby, these risks are not insurable.

The Legal Concept of Life Insurance Contract:

Within the small print on nearly every insurance policy, there is generally found some highly technical
legal provisions and contractual terms. These terms are intended to cover just about every possible
scenario – and, policies are usually being updated and revised continuously in order to keep up with
both coverage and industry changes.

Life insurance is one of the best purchases you can ever make for your family and loved ones, but the
whole process can be confusing. There are probably going to be terms and jargon you don’t
understand. Most people just sign where they are told without understanding the forms or what they
are signing.

That’s why we are here to help. It’s our mission to help you get the coverage you need and give your
family the protection they need. We have years of experience working with all kinds of clients and
different insurance contracts. Hopefully, this article will answer any questions you have about life
insurance plans and the terms in the contract.

Components of the Insurance Contract:

While many people may be familiar with life insurance policy premiums and benefits, it is also
important to understand that insurance policies are considered to be legal contracts between the insurer
and the insured. Such contracts will determine the claims in which the insurer is legally required to pay
in exchange for a premium payment from the policy owner.

As life insurance plans are considered to be legal contracts, the terms that are found within these
contracts will essentially outline the limitations of the particular events that are insured. With this in
mind, policies will also typically include specific conditions under which coverage is specifically
excluded. Some examples here can include claims that are related to fraud, suicide (typically excluded
for two years after policy issuance), and acts of war.
 Your life insurance contract is the most important part of the whole insurance process. It’s the only
thing which guarantees the policy will be paid out if something tragic were to happen to you. You
should never sign a contract without reading through all of the various terms and conditions.

Therefore, based on insurance code, a valid insurance contract is required to have the following
specifications:

 The parties between whom the contract is being created

 The property, asset, or life that is being insured
 The interest of the insured in the property, asset, or life that is being insured – provided that he or she
is not the absolute owner
 The risks that are being insured against
 The period during which the insurance is being continued
 Either a) A statement of the insurance premium that is due, or b) A statement of the basis and the rates
upon which the final premium will be determined and paid, provided that the insurance is the type
where the exact premium can only be determined upon the termination of the contract