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Life insurance

Avinash kumar singh 4111014014

What is life insurance ?

Life insurance (or life assurance) is a contract between an individual (policy owner) and the insurer, where the insurer agrees to pay the beneficiary a sum of money (generally referred to as Sum Assured) upon the death of the individual. In return for this obligation on part of the insurer, the policy owner agrees to pay a stipulated amount as premiums over regular intervals or as a lump-sum amount. when an individual buys a life insurance policy: he is referred to as policy owner / policyholder he agrees to pay a certain amount of money (premiums) to the insurer for a certain period of time the insurer agrees to pay a certain lump-sum amount to a person nominated by the policy owner upon the death of the policy owner in some forms of life insurance products, the insurer also agrees to pay a lump-sum amount on the completion of the term of the policy upon the non-occurrence of the insured event i.e. on the survival of the policy owner

Why do we need life insurance ?

We need life insurance to ensure: that your family can continue to lead their lives with a lifestyle they are accustomed to our debts are paid off without adding an additional financial burden on our dependents key events and requirements of our family such as childrens education and marriage are provided for long term savings to meet various life stage requirements.

Types of life insurance policies

Protection oriented policies: These products are primarily designed to cover the life of the insured and provide for a lump-sum benefit in case the life insured dies. Such products are generally referred to as Term plans. No survival benefits are available. Investment/savings oriented policies - have an associated survival benefit i.e. if the policyholder survives the term of the policy, then a payment is made to the policy owner at the end of the policy term.These products are primarily savings plans with attached life insurance. Unit linked insurance plans(ULIP) - Unit linked plans are life insurance plans that combine protection with investment. On the death of the life insured, the ULIP plan will provide for the payment of the higher of the sum assured or the fund value of the policy, to the policyholders nominees or next of kin. In the event of maturity of the policy, the ULIP plan will return the fund value to the policyholder.

Which type of life insurance meets your requirements?

If securing your familys financial future is the primary need, then you should actively consider a term plan. If however, there is already adequate financial protection available for your dependents and your primary need is long term savings for capital appreciation and / or conservation, available options under savings oriented plans should be considered.

How do you calculate your right cover ?

Example Ajay, aged 32 years has a family of 4 (self+wife+2 kids) and earns monthly income of 60,000/-. He wants to make sure that his family should be covered properly and he should be able to cover his family for regular income and pay off all the current liabilities he has and also provide some money to meet his future goals. Details Monthly expense 40,000 - This expenses is required for next 20 years Current Liabilities 15,00,000 - Home loan outstanding Future Goals 40,00,000 - Kids Education & Marriage Current Assets 20,00,000 - Investments His Life Insurance Need 1.1 Cr With 8% inflation

What are riders and what do they mean ?

Riders are the extra benefits that can be purchased and covered for under the life insurance policy. 1. AD (Accidental Death) - In this rider, you get additional sum assured if the death is because of an accident. Note that the basic sum assured is anyways paid in case of death by any way, but if you have accidental rider, you get additional sum assured. 2. CI (Critical Illness) - This rider gives you a lump sum amount if you are diagnosed with an illness which is pre-specified and is mentioned in the policy. 3. DR (Accidental Disability Rider) - This rider covers you for disability and pays you Sum assured in 10 instalments per year in case you become temporarily or permanently disabled. 4. WP (Waiver of Premium) - This rider makes sure that in case you are not able to pay future premium due to disability or income loss, the future premiums are waived off but your policy is still in force like always.

TAX benefits available for life insurance in india

Tax Benefits for Life Insurance: Section 80C of the Income Tax Act is an effective way for the salaried person to reduce tax liability. Under this section, investments made in the specified instruments are subject to rebate. Currently, the amount available for rebate under section 80C is Rs. 100,000 which can be invested in life insurance premiums, pension superannuation fund, employee provident fund, equity linked mutual fund schemes (ELSS), National Savings Certificates and public provident fund (maximum Rs 70,000).

TAX benefits on premiums paid

Life Insurance Premium: paid by an individual in respect of himself/herself, his/her spouse, and any of his/her children. Premium amount paid should not exceed 20% of the sum assured. Example Ajay pays Rs. 15000/- yearly as Term Plan premium for himself. So now suppose his salary was Rs. 7,50,000/-. Then he can claim a deduction of Rs. 15000 and his taxable income will reduce to 7,35,000/-. So in case he was in a 20% tax bracket. He will save 20% of 15,000 as tax benefit and will save Rs 3,000.

TAX benefits in death claims and maturity benefits

Death Claims and Maturity Benefits: Life Insurance Policies are currently under an EEE regime i.e. that the Premiums Paid, Income earned by the Investments, and payment of Maturity proceeds or claim are all exempt E from tax. Example Ajay was covered for Rs. 75 lakhs under a XYZ Term Plan. In the event where Ajay dies, his family will receive Rs. 75 lakhs as the death claim. This Rs. 75 lakhs attracts NO TAX!

Life insurance companies granted permission by IRDA

1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Co. Ltd 3. HDFC Standard Life Insurance Co. Ltd 4. ICICI Prudential Life Insurance Co. Ltd. 5. ING Vysya Life Insurance Company Ltd. 6. Life Insurance Corporation of India 7. Max New York Life Insurance Co. Ltd 8. Met Life India Insurance Company Ltd. 9. Kotak Mahindra Old Mutual Life Insurance Limited 10. SBI Life Insurance Co. Ltd 11. Tata AIG Life Insurance Company Limited 12. Reliance Life Insurance Company Limited. 13. Aviva Life Insurance Co. India Pvt. Ltd. 14. Sahara India Life Insurance Co, Ltd. 15. Shriram Life Insurance Co, Ltd. 16. Bharti AXA Life Insurance Company Ltd. 17. Future Generali Life Insurance Company Ltd.

Term Insurance plans for a 30 year old male with coverage amount of Rs 10 Lakhs, and policy tenure of 20 years.

Institution Name

Product Name

Coverage Amount


Policy Term

SBI Life

SBI Shield - Annual Rs. 10,00,000 Premium Level Term Policy Secure Confident Term Assurance Regular Premium Rs. 10,00,000 Rs. 10,00,000

Rs. 2,454


Max New York Bharti AXA

Rs. 2,710 Rs. 2,850

20 20

HDFC Standard

Rs. 10,00,000

Rs. 2,920



Suraksha Regular Premium Future Care

Rs. 10,00,000

Rs. 3,100


Future Generali

Rs. 10,00,000

Rs. 4,110


Claim settlement Ratio of Insurance Companies

CLAIMS REPORT 2009-10 ** Claims repudiated LIC ICICI Prudential HDFC Life Aviva Life Birla Sun Life India First Life Max New York Life SBI Life IDBI Federal Life 1.21 3.27 4.67 9.75 10.62 7.69 12.31 14.75 23.81 Claims settled 96.53 90.17 91.14 87.11 89.09 53.85 65.51 83.27 49.52 Claims pending 1.41 6.56 4.20 3.14 5.82 38.46 7.14 1.96 26.67 Claims repudiated 1.09 2.80 3.97 4.10 4.99 9.40 14.85 16.74 21.00 2010-11*** Claims settled 97.50 94.40 96.03 87.11* 94.66 90.58 78.01 82.24 65.00 Claims pending 1.47 2.60 0.61 3.14* 0.35 0.03 7.14 1.03 14.00

Thank you