UNIT I

TERM INSURANCE
INTRODUCTION
Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of
payments for a limited period of time, the relevant term. After that period expires, coverage at
the previous rate of premiums is no longer guaranteed and the client must either forgo coverage
or potentially obtain further coverage with different payments or conditions. If the life insured
dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least
expensive way to purchase a substantial death benefit on a coverage amount per premium dollar
basis over a specific period of time.
Term life insurance can be contrasted to permanent life insurance such as whole life, universal
life, and variable universal life, which guarantee coverage at fixed premiums for the lifetime of
the covered individual unless the policy owner allows the policy to lapse. Term insurance is not
generally used for estate planning needs or charitable giving strategies but is used for pure
income replacement needs for an individual. Term insurance functions in a manner similar to
most other types of insurance in that it satisfies claims against what is insured if the premiums
are up to date and the contract has not expired, and does not provide for a return of premium
dollars if no claims are filed. As an example, auto insurance will satisfy claims against the
insured in the event of an accident and a home owner policy will satisfy claims against the home
if it is damaged or destroyed by, for example, a fire. Whether or not these events will occur is
uncertain. If the policy holder discontinues coverage because he has sold the insured car or
home, the insurance company will not refund the full premium. This is purely risk protection.

More common than annual renewable term insurance is guaranteed level premium term life
insurance, where the premium is guaranteed to be the same for a given period of years. The most
common terms are 10, 15, 20, and 30 years.

In this form, the premium paid each year remains the same for the duration of the contract. This
cost is based on the summed cost of each year's annual renewable term rates, with a time value of
money adjustment made by the insurer. Thus, the longer the period of time during which the
premium remains level, the higher the premium amount. This relationship exists because the
older, more expensive to insure years are averaged, by the insurance company, into the premium
amount computed at the time the policy is issued.
Most level term programs include a renewal option, and allow the insured person to renew the
policy for a maximum guaranteed rate if the insured period needs to be extended. The renewal
may or may not be guaranteed, and the insured person should review the contract to determine
whether evidence of insurability is required to renew the policy. Typically, this clause is invoked
only if the health of the insured deteriorates significantly during the term, and poor health would
prevent the individual from being able to provide proof of insurability.
Most term life policies include an option to convert the term life policy to a Universal Life or
Whole Life policy. This option can be useful to a person who acquired the term life policy with a
preferred rating class and later is diagnosed with a condition that would make it difficult to
qualify for a new term policy. The new policy is issued at the rate class of the original term
policy. This right to convert may not extend to the end of the Term Life policy. The right may
extend a fixed number of years or to a specified age, such as convertible to age seventy.
More common than annual renewable term insurance is guaranteed level premium term life
insurance, where the premium is guaranteed to be the same for a given period of years. The most
common terms are 10, 15, 20, and 30 years.
In this form, the premium paid each year remains the same for the duration of the contract. This
cost is based on the summed cost of each year's annual renewable term rates, with a time value of
money adjustment made by the insurer. Thus, the longer the period of time during which the
premium remains level, the higher the premium amount. This relationship exists because the
older, more expensive to insure years are averaged, by the insurance company, into the premium
amount computed at the time the policy is issued.
Most level term programs include a renewal option, and allow the insured person to renew the
policy for a maximum guaranteed rate if the insured period needs to be extended. The renewal
may or may not be guaranteed, and the insured person should review the contract to determine

whether evidence of insurability is required to renew the policy. Typically, this clause is invoked
only if the health of the insured deteriorates significantly during the term, and poor health would
prevent the individual from being able to provide proof of insurability.
Most term life policies include an option to convert the term life policy to a Universal Life or
Whole Life policy. This option can be useful to a person who acquired the term life policy with a
preferred rating class and later is diagnosed with a condition that would make it difficult to
qualify for a new term policy. The new policy is issued at the rate class of the original term
policy. This right to convert may not extend to the end of the Term Life policy. The right may
extend a fixed number of years or to a specified age, such as convertible to age seventy.
More common than annual renewable term insurance is guaranteed level premium term life
insurance, where the premium is guaranteed to be the same for a given period of years. The most
common terms are 10, 15, 20, and 30 years.
In this form, the premium paid each year remains the same for the duration of the contract. This
cost is based on the summed cost of each year's annual renewable term rates, with a time value of
money adjustment made by the insurer. Thus, the longer the period of time during which the
premium remains level, the higher the premium amount. This relationship exists because the
older, more expensive to insure years are averaged, by the insurance company, into the premium
amount computed at the time the policy is issued.
Most level term programs include a renewal option, and allow the insured person to renew the
policy for a maximum guaranteed rate if the insured period needs to be extended. The renewal
may or may not be guaranteed, and the insured person should review the contract to determine
whether evidence of insurability is required to renew the policy. Typically, this clause is invoked
only if the health of the insured deteriorates significantly during the term, and poor health would
prevent the individual from being able to provide proof of insurability.
Most term life policies include an option to convert the term life policy to a Universal Life or
Whole Life policy. This option can be useful to a person who acquired the term life policy with a
preferred rating class and later is diagnosed with a condition that would make it difficult to
qualify for a new term policy. The new policy is issued at the rate class of the original term
policy. This right to convert may not extend to the end of the Term Life policy. The right may
extend a fixed number of years or to a specified age, such as convertible to age seventy.

More common than annual renewable term insurance is guaranteed level premium term life
insurance, where the premium is guaranteed to be the same for a given period of years. The most
common terms are 10, 15, 20, and 30 years.
In this form, the premium paid each year remains the same for the duration of the contract. This
cost is based on the summed cost of each year's annual renewable term rates, with a time value of
money adjustment made by the insurer. Thus, the longer the period of time during which the
premium remains level, the higher the premium amount. This relationship exists because the
older, more expensive to insure years are averaged, by the insurance company, into the premium
amount computed at the time the policy is issued.
Most level term programs include a renewal option, and allow the insured person to renew the
policy for a maximum guaranteed rate if the insured period needs to be extended. The renewal
may or may not be guaranteed, and the insured person should review the contract to determine
whether evidence of insurability is required to renew the policy. Typically, this clause is invoked
only if the health of the insured deteriorates significantly during the term, and poor health would
prevent the individual from being able to provide proof of insurability.
Most term life policies include an option to convert the term life policy to a Universal Life or
Whole Life policy. This option can be useful to a person who acquired the term life policy with a
preferred rating class and later is diagnosed with a condition that would make it difficult to
qualify for a new term policy. The new policy is issued at the rate class of the original term
policy. This right to convert may not extend to the end of the Term Life policy. The right may
extend a fixed number of years or to a specified age, such as convertible to age seventy.
More common than annual renewable term insurance is guaranteed level premium term life
insurance, where the premium is guaranteed to be the same for a given period of years. The most
common terms are 10, 15, 20, and 30 years.
In this form, the premium paid each year remains the same for the duration of the contract. This
cost is based on the summed cost of each year's annual renewable term rates, with a time value of
money adjustment made by the insurer. Thus, the longer the period of time during which the
premium remains level, the higher the premium amount. This relationship exists because the
older, more expensive to insure years are averaged, by the insurance company, into the premium
amount computed at the time the policy is issued.

Most level term programs include a renewal option, and allow the insured person to renew the
policy for a maximum guaranteed rate if the insured period needs to be extended. The renewal
may or may not be guaranteed, and the insured person should review the contract to determine
whether evidence of insurability is required to renew the policy. Typically, this clause is invoked
only if the health of the insured deteriorates significantly during the term, and poor health would
prevent the individual from being able to provide proof of insurability.
Most term life policies include an option to convert the term life policy to a Universal Life or
Whole Life policy. This option can be useful to a person who acquired the term life policy with a
preferred rating class and later is diagnosed with a condition that would make it difficult to
qualify for a new term policy. The new policy is issued at the rate class of the original term
policy. This right to convert may not extend to the end of the Term Life policy. The right may
extend a fixed number of years or to a specified age, such as convertible to age seventy.

LIFE INSURANCE
Life insurance or life assurance, especially in the Commonwealth, is a contract between
an insurance policy holder and aninsurer or assurer, where the insurer promises to pay a
designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death
of an insured person (often the policy holder). Depending on the contract, other events such
asterminal illness or critical illness can also trigger payment. The policy holder typically pays a
premium, either regularly or as one lump sum. Other expenses (such as funeral expenses) can
also be included in the benefits.
Life policies are legal contracts and the terms of the contract describe the limitations of the
insured events. Specific exclusions are often written into the contract to limit the liability of the
insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion.
Life-based contracts tend to fall into two major categories:

Protection policies designed to provide a benefit, typically a lump sum payment, in the
event of specified event. A common form of a protection policy design is term insurance.

Investment policies where the main objective is to facilitate the growth of capital by
regular or single premiums. Common forms (in the U.S.) are whole life, universal life,
andvariable life policies.

An early form of life insurance dates to Ancient Rome; "burial clubs" covered the cost of
members' funeral expenses and assisted survivors financially. The first company to offer life
insurance in modern times was the Amicable Society for a Perpetual Assurance Office, founded
in London in 1706 by William Talbot and Sir Thomas Allen.[2][3] Each member made an annual
payment per share on one to three shares with consideration to age of the members being twelve
to fifty-five. At the end of the year a portion of the "amicable contribution" was divided among
the wives and children of deceased members, in proportion to the amount of shares the heirs
owned. The Amicable Society started with 2000 members.[4][5]
The first life table was written by Edmund Halley in 1693, but it was only in the 1750s that the
necessary mathematical and statistical tools were in place for the development of modern life
insurance. James Dodson, a mathematician and actuary, tried to establish a new company aimed
at correctly offsetting the risks of long term life assurance policies, after being refused admission

to the Amicable Life Assurance Society because of his advanced age. He was unsuccessful in his
attempts at procuring a charter from the government.
His disciple, Edward Rowe Mores, was able to establish the Society for Equitable Assurances on
Lives and Survivorship in 1762. It was the world's first mutual insurer and it pioneered age based
premiums based on mortality rate laying "the framework for scientific insurance practice and
development"[6] and "the basis of modern life assurance upon which all life assurance schemes
were subsequently based".[7]
Mores also gave the name actuary to the chief official - the earliest known reference to the
position as a business concern. The first modern actuary was William Morgan, who served from
1775 to 1830. In 1776 the Society carried out the first actuarial valuation of liabilities and
subsequently distributed the first reversionary bonus (1781) and interim bonus (1809) among its
members.[6] It also used regular valuations to balance competing interests.[6] The Society sought
to treat its members equitably and the Directors tried to ensure that policyholders received a fair
return on their investments. Premiums were regulated according to age, and anybody could be
admitted regardless of their state of health and other circumstances.[8]
The sale of life insurance in the U.S. began in the 1760s. The Presbyterian Synods
in Philadelphia and New York City created the Corporation for Relief of Poor and Distressed
Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar
fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were
started, but fewer than half a dozen survived. In the 1870s, military officers banded together to
found both the Army (AAFMAA) and the Navy Mutual Aid Association (Navy Mutual), inspired
by the plight of widows and orphans left stranded in the West after the Battle of the Little Big
Horn, and of the families of U.S. sailors who died at sea.
Types of Life Insurance in India[edit]
Life insurance products come in a variety of offerings catering to the investment needs and
objectives of different kinds of investors. Following is the list of broad categories of life
insurance products:

Term Insurance Policies

The basic premise of a term insurance policy is to secure the immediate needs of nominees or
beneficiaries in the event of sudden or unfortunate demise of the policy holder. The policy holder
does not get any monetary benefit at the end of the policy term except for the tax benefits he or
she can choose to avail of throughout the tenure of the policy. In the event of death of the policy
holder, the sum assured is paid to his or her beneficiaries. Term insurance policies are also
relatively cheaper to acquire as compared to other insurance products.
Money-back Policies
Money back policies are basically an extension of endowment plans wherein the policy holder
receives a fixed amount at specific intervals throughout the duration of the policy. In the event of
the unfortunate death of the policy holder, the full sum assured is paid to the beneficiaries. The
terms again might slightly vary from one insurance company to another.
Whole life policy
A whole life insurance plan covers the insured over his life. The primary feature of this product
is that the validity of the policy is not defined so the policyholder enjoys the life cover
throughout his life.[citation needed]
Unit-linked Investment Policies (ULIP)
Main article: Unit-linked insurance plan
Unit linked insurance policies again belong to the insurance-cum-investment category where one
gets to enjoy the benefits of both insurance and investment. While a part of the monthly premium
pay-out goes towards the insurance cover, the remaining money is invested in various types of
funds that invest in debt and equity instruments. ULIP plans are more or less similar in
comparison to mutual funds except for the difference that ULIPs offer the additional benefit of
insurance.

Pension Policies
Pension policies let individuals determine a fixed stream of income post retirement. This
basically is a retirement planning investment scheme where the sum assured or the monthly pay-

out after retirement entirely depends on the capital invested, the investment timeframe, and the
age at which one wishes to retire. There are again several types of pension plans that cater to
different investment needs. Now it is recognized as insurance product and being regulated by
IRDA.

CLASSIFICATION OF LIFE INSURANCE

Whole life insurance policy is defined as an insurance in which the insured person pays the
premium in the installment basis for full duration of his/her life. After the death of insured,
his/her nominee receives the insured amount. There are 3 types of whole life insurance policy
Ordinary whole life insurance policy. In this policy, insured person has to pay the premium to
his/her concerned insurance company till his/her death. The insured person cant utilize the
insured amount because this amount will be returned after his/her nominee
limited premium whole life insurance policy: Under this policy, the insured person has to pay
the premium for limited time and the insured amount will be returned after the death of insured
person to his/her nominee
Convertible whole life insurance policy: It is that type of policy which can be converted to
endowment life insurance policy after a certain time. It is suitable for those people who have
lower income at present and they hope for increment in income in the near future.
Endowment life insurance policy:
It is defined as that type of insurance in which the insured person pays the premium for a certain
time and after certain time they receive insured amount. If she/he dies before the insured period
his/her nominee receives the insured amount. Generally endowment life insurance policy is done
for 10, 15 20 years and more. The insured has to pay the premium either till the end of insured
period or till the death of insured which ever is earlier.
Ordinary endowment life insurance policy: Under this policy, time will be fixed foe a certain
period and insured person have to pay either till the end of insured period or till his/her death. If
he/she dies earlier before insured period, his/her nominee receive the amount. And if she/he is
alive then himself/herself go and receive the amount.

Joint endowment life insurance policy: In this policy, two or more persons are involves s the
insured person .the premium amount should be paid till the insured persons death like in
ordinary endowment life insurance policy.
Double endowment life insurance policy: Under this policy, the insured person receives double
of the insured amount is she/he is alive till the end of the maturity time. If she/he dies before the
insured person his/her nominee receive only single insured amount.
Pure endowment life insurance policy: Under this policy, insured person receive the insured
amount after the certain time when he/she us alive. If the insured person dies before the end of
maturity time the insurer becomes free from its liability.
Term life insurance policy
Straight term life insurance policy: Under this policy premium is paid as lump sum money. The
insured time maturity period is not more than 2 year. Therefore it is known as temporary term
life insurance policy. If the insured person dies before the insured period his/her nominee
receives the insured amount. But if he/she is alive then he/she doesnt receive anything.
Straight term life insurance policy: Under this policy premium is paid as lump sum money.
The insured time maturity period is not more than 2 year. Therefore it is known as temporary
term life insurance policy. If the insured person dies before the insured period his/her nominee
receives the insured amount. But if he/she is alive then he/she doesnt receive anything.
Renewal term life insurance policy: Under this period the insurance can be renewed after the
maturity of the insured period. Second rate of premium may be higher than the first rate of
premium. Because the age of the person also increases with renew of insurance. It doesnt need a
new health report or any sort of gent report for renewal.
Convertible term life insurance policy: It is generally done for 5, 6 or 7 years like term life
insurance policy. If the insured person want to convert this insurance policy in whole life
insurance policy and endowment life insurance policy it can easily be converted.
On the basis of profit distribution
With profit policy: Under this policy the insured person receive the insured amount with the
profit of insurance company. In other words if the insured person dies before the term of insured
period his/her nominee receive only insured amount not the profit o the company. But if he/she is

alive then with the amount of premium the portion of profit of the insurance company is also
received by the insurer.
Without profit policy: Under this policy the insured person doesnt receive the insured amount
with the profit of insurance company .in other words if the insured person dies before the term of
insured period or remains alive till the end his/her nominee r himself/herself receive only insured
amount not the profit o the company.
On the basis of number of insured:
Single life insurance policy: Under this policy there is only one individual as a insured person.
In other words, the life of a single person is done insurance. Single life insurance policy is
applied in whole life insurance policy, endowment life insurance policy and term life insurance
policy.
Joint/ multiple life insurance policy : Under this policy two or more than 2 person are involved
as husband and wife, partners of partnership firm and other people may conduct the joint life
insurance policy. It may be applied in whole life insurance policy and endowment life insurance
policy.
On the basis premium payment:
Single premium life insurance policy: Under this policy, insured person pay the premium to the
insurance company at the beginning in the lump sum amount. There is no tension to pay the
premium timely later on. It is mostly used in that case when a person wins a lottery.
Regular premium life insurance policy: under this policy the insured person pay the premium
up to his/her death for a certain time. In other words, the insured person pays the premium to
insurance company regularly or timely.
Limited payment premium life insurance policy: under this policy the insured person pay the
premium up to his/her death for a certain time. The time is however less than the insured period.
On the basis of payment of insured mount :
Lump sum payment policy: under this policy the insured person receives the total insured
amount. Even all premiums have not been paid total insured amount is received by the nominee

of the insured person and if the total amount has been paid she/he receives the total insured
amount himself or herself.
Installment payment policy: under this policy, the insured person and nominee receive the
insured amount in the installment basis. It is useful to those individual who are old and lump sum
mount may be misused.
ROLE OF RELIANCE LIFE INSURANCE
Reliance Life Insurance is amongst the top 5 private sector life insurance companies in
terms of individual WRP (weighted received premium) and new business WRP. The
company is by far the largest non-bank promoted private life insurer with over 10
million policy holders, a strong distribution network of over 800 branches and over
1,00,000 advisors as on March 31, 2015. Claim Settlement Ratio stands at 94.53% as of
March 31, 2015.
Reliance Lifes vision is "To be a company people are proud of, trust in and grow with;
providing financial independence to every life we touch." As a result of this endeavour,
the company has been rated amongst the Top 2 Most Trusted Private Life Insurance
Service Brands by Brand Equity-Nielsen Most Trusted Brands Survey 2014.
Japan's largest life insurer, Nippon Life Insurance Company, acquired 26% interest in
equity share capital of the Company effective October 7, 2011 subsequent to receipt of
all regulatory approval.

A life insurance policy allows you to provide the right security for your family in case of your
unfortunate absence. As you are the sole bread earner of the family, an untimely demise can
cause them severe financial distress. While no amount of money can ever replace a person, life
insurance gives you the peace of mind, knowing that your family will have the right financial
support to continue living in case of your absence.
Life insurance is a long-term financial instrument that works as a financial backbone to fulfill
your family members financial needs at important milestones even in your absence. Most
importantly, it allows the family to pay off any mortgage, liabilities, medical expenses or loans,

so that these liabilities dont cause an additional burden to them. It is therefore important, to
choose an insurance policy that allows your family to continue the same kind of lifestyle and
cherish the wonderful memories that come along.
6 Steps to a Wholesome Protection Package
1. Self-analysis What is your current family size and financial situation and where do you
see yourself in the future? Are you the sole breadwinner in your family? Most
importantly, analyse of your current savings and how much cover you need.
2. Evaluate Options Depending on your life stage, you can evaluate life insurance policies
with different coverage plans. For the basic need of family protection, a term plan can be
considered whereas for a specific type of need, you can choose from health, savings, child
and other plan types.
3. Research Once you have determined the amount of cover and the type of life insurance
you need, you need to have complete information about the chosen type of life insurance
plan, understand the benefits and conditions of the plan.
4. Calculate Premium Once you have identified the plan you need, you can calculate the
premium payable on the plan, depending on the coverage you require.
5. Read the offer document This is the most critical stage of buying any policy; it is always
advisable to have a complete understanding of the offer documents with your insurance
agent, before signing anything. Do not hesitate to ask your agent any policy related
questions.
6. Final Confirmation Life insurance is for life. So conduct an extensive analysis and have
complete confidence in the plan that you are going to buy. Once the plan is purchased and
later on, there is any disagreement relating to the policy, you can still back off by
returning the Policy Document to the Company within the Free Look period.

More than providing peace of mind your family and yourself, life insurance can be one of the
best investment decisions you have ever made. With stringent regulatory conditions to safeguard
policyholders, traditional life insurance policies carry minimum investment risk and provide
long-term insurance benefits.

Most life insurance policies include retirement income on maturity. Another advantage of life
insurance is that the coverage amount can be increased over time. So, while presently, you can
afford only a low insurance premium with your current salary, over time with increasing income
through promotions or new income sources, you can increase your insurance cover by paying
slightly higher premiums and provide a better life cover for your family even when you are not
around.
While choosing a life insurance policy, it is generally advisable to look at various products that
different organizations provide. Many insurance companies offer an array of insurance plans that
best suit the needs of the entire family.
It is always better to invest your hard earned savings which will provide you with long-term
benefits than to seek short-term benefits from high-risk investment ventures. Whether you have
just started your career, are recently married or blessed with a family, securing adequate life
insurance can prove to be the best investment decision you ever made.
5 Retirement Income Planning Tips
1. Envision your Lifestyle When you think about retirement, how do you visualize your
life after you retire? Understand your lifestyle requirements in order to plan your
retirement income as part of your life insurance.
2. Evaluate the Economy With increasing prices, it is important to evaluate the value of
every rupee you will save with the hope of sustaining your current lifestyle postretirement. It is therefore important to have realistic expectations before planning to invest
in a retirement plan.
3. Health Implications As you get older, your health concerns increase. Your retirement
income should therefore be able to take care of any medical emergencies to ensure that
your health never takes a backseat in your life.
4. Different Income Resources Life insurance should not be your only source of income.
Consider investing in other investment avenues such as Fixed Deposits (FDs), Public
Provided Fund (PPF), National Savings Certificate (NSC) etc. that secure your principal
investment along with ensuring safer returns that enable you to lead a comfortable life
post retirement.

5. Always Plan for more Years As the quality and standard of life increases along with
medical advancements, it is always recommended to plan ahead, at least 5-7 years more
than your life expectancy estimates that you may have made.
Life Insurance policies give you an additional advantage of tax benefit. As your income
increases, the tax bracket also widens. The most apt method to save your hard earned rupee is
through investment in insurance policies.
With most insurance policies, the premium you pay is eligible for tax benefits. Under Existing
Income Tax Laws, contribution towards life insurance policy is allowed as deduction in income,
thereby decreasing tax liability. It means that you not only provide financial security for your
loved ones in the unfortunate event of your demise, but also reap the benefits of additional
income from tax savings through premium contribution in unit linked life insurance policies.
Any profit earned from Unit linked life insurance schemes also provides tax benefits to the
payee. Another advantage of life insurance is that the lump sum benefit payable on death is tax
free.
Life insurance is therefore your greatest ally to help you save your hard earned money from the
burden of tax.
4 tax Benefits through Life Insurance
1. For Individuals and HUF An individual or HUF paying life insurance premium can
avail deductions on taxable income up to Rs. 100,000 under existing income tax laws
subject to applicable conditions.
2. On payment of any bonus Any amount of insurance benefit received as a lump sum
payment from life insurance policy is considered as a non-taxable amount under existing
income tax laws subject to applicable conditions.
3. Premium payment on behalf of spouse Income Tax deduction is also available on life
insurance premiums paid on behalf of your spouse.
4. On maturity of policy Life insurance proceeds are not taxable for the deceaseds family.

CLASSIFICATION OF LIFE INSURANCE

Whole life insurance policy is defined as an insurance in which the insured person pays the
premium in the installment basis for full duration of his/her life. After the death of insured,
his/her nominee receives the insured amount. There are 3 types of whole life insurance policy

Ordinary whole life insurance policy. In this policy, insured person has to pay the premium to
his/her concerned insurance company till his/her death. The insured person cant utilize the
insured amount because this amount will be returned after his/her nominee
limited premium whole life insurance policy: Under this policy, the insured person has to pay
the premium for limited time and the insured amount will be returned after the death of insured
person to his/her nominee
Convertible whole life insurance policy: It is that type of policy which can be converted to
endowment life insurance policy after a certain time. It is suitable for those people who have
lower income at present and they hope for increment in income in the near future.
Endowment life insurance policy:
It is defined as that type of insurance in which the insured person pays the premium for a certain
time and after certain time they receive insured amount. If she/he dies before the insured period
his/her nominee receives the insured amount. Generally endowment life insurance policy is done
for 10, 15 20 years and more. The insured has to pay the premium either till the end of insured
period or till the death of insured which ever is earlier.
Ordinary endowment life insurance policy: Under this policy, time will be fixed foe a certain
period and insured person have to pay either till the end of insured period or till his/her death. If
he/she dies earlier before insured period, his/her nominee receive the amount. And if she/he is
alive then himself/herself go and receive the amount.
Joint endowment life insurance policy: In this policy, two or more persons are involves s the
insured person .the premium amount should be paid till the insured persons death like in
ordinary endowment life insurance policy.
Double endowment life insurance policy: Under this policy, the insured person receives double
of the insured amount is she/he is alive till the end of the maturity time. If she/he dies before the
insured person his/her nominee receive only single insured amount.
Pure endowment life insurance policy: Under this policy, insured person receive the insured
amount after the certain time when he/she us alive. If the insured person dies before the end of
maturity time the insurer becomes free from its liability.
Term life insurance policy

Straight term life insurance policy: Under this policy premium is paid as lump sum money. The
insured time maturity period is not more than 2 year. Therefore it is known as temporary term
life insurance policy. If the insured person dies before the insured period his/her nominee
receives the insured amount. But if he/she is alive then he/she doesnt receive anything.
Straight term life insurance policy: Under this policy premium is paid as lump sum money.
The insured time maturity period is not more than 2 year. Therefore it is known as temporary
term life insurance policy. If the insured person dies before the insured period his/her nominee
receives the insured amount. But if he/she is alive then he/she doesnt receive anything.
Renewal term life insurance policy: Under this period the insurance can be renewed after the
maturity of the insured period. Second rate of premium may be higher than the first rate of
premium. Because the age of the person also increases with renew of insurance. It doesnt need a
new health report or any sort of gent report for renewal.
Convertible term life insurance policy: It is generally done for 5, 6 or 7 years like term life
insurance policy. If the insured person want to convert this insurance policy in whole life
insurance policy and endowment life insurance policy it can easily be converted.
On the basis of profit distribution
With profit policy: Under this policy the insured person receive the insured amount with the
profit of insurance company. In other words if the insured person dies before the term of insured
period his/her nominee receive only insured amount not the profit o the company. But if he/she is
alive then with the amount of premium the portion of profit of the insurance company is also
received by the insurer.
Without profit policy: Under this policy the insured person doesnt receive the insured amount
with the profit of insurance company .in other words if the insured person dies before the term of
insured period or remains alive till the end his/her nominee r himself/herself receive only insured
amount not the profit o the company.
On the basis of number of insured:
Single life insurance policy: Under this policy there is only one individual as a insured person.
In other words, the life of a single person is done insurance. Single life insurance policy is

applied in whole life insurance policy, endowment life insurance policy and term life insurance
policy.
Joint/ multiple life insurance policy : Under this policy two or more than 2 person are involved
as husband and wife, partners of partnership firm and other people may conduct the joint life
insurance policy. It may be applied in whole life insurance policy and endowment life insurance
policy.
On the basis premium payment:
Single premium life insurance policy: Under this policy, insured person pay the premium to the
insurance company at the beginning in the lump sum amount. There is no tension to pay the
premium timely later on. It is mostly used in that case when a person wins a lottery.
Regular premium life insurance policy: under this policy the insured person pay the premium
up to his/her death for a certain time. In other words, the insured person pays the premium to
insurance company regularly or timely.
Limited payment premium life insurance policy: under this policy the insured person pay the
premium up to his/her death for a certain time. The time is however less than the insured period.
On the basis of payment of insured mount :
Lump sum payment policy: under this policy the insured person receives the total insured
amount. Even all premiums have not been paid total insured amount is received by the nominee
of the insured person and if the total amount has been paid she/he receives the total insured
amount himself or herself.
Installment payment policy: under this policy, the insured person and nominee receive the
insured amount in the installment basis. It is useful to those individual who are old and lump sum
mount may be misused.
ROLE OF ACTUARIES IN TERM INSURANCE
In todays ever-changing fi nancial environment, its important to know there are some things
you dont have to worry about. Life insurance can be the foundation of fi nancial security for you
and your family. It can be the base upon which other insurance and investment decisions are
built.

Protections and guarantees are subject to the claims-paying ability of the issuing life insurance
company. As your personal situations change (i.e., marriage, birth of a child or job promotion),
so will your life insurance needs. Care should be taken to ensure this product is suitable for your
long-term life insurance needs. You should weigh any associated costs before making a purchase.
Life insurance has fees and charges associated with it that include costs of insurance that vary
with such characteristics of the insured as gender, health and age, and has additional charges for
riders that customize a policy to fi t your individual needs.
Why do I need life insurance?
Life insurance is a way to provide cash to your family when you die. The money your benefi
ciaries receive can be used to cover fi nal expenses, pay off debt and cover the mortgage or rent.
It can provide a college fund, provide retirement money, create cash to pay estate taxes or simply
provide a stream of income that will help your family maintain its present lifestyle. The death
benefi t paid is generally income tax free. Business owners use insurance to help transfer the
business to the next owner

What is term life insurance?

Term life insurance provides protection over a specifi c period of time. It pays a benefi t only if
the insured dies during this specifi c period or term. Terms can vary from policy to policy, but
can range from a one-year term to a 30-year term. At the end of each term, the insurer may
require you to provide evidence of good health to purchase continued protection. Annual
renewable term may continue without further qualifi cation, but premiums may increase each
year.
How is permanent life or cashvalue life insurance diff erent?
Permanent life insurance provides lifelong protection. As long as you pay the premiums, the
death benefi t remains in eff ect. And, most permanent life insurance builds a cash value term
policies dont. Permanent life insurance policies are designed and priced to be kept for long
periods of time. Individuals who seek long-term protection should consider permanent insurance
instead
Are there diff erent kinds of term life insurance?

There are many diff erent varieties of term life insurance. Because term life insurance is designed
to provide the maximum amount of protection for the least amount of premium, insurance
companies can off er modifi ed plans to fi t your circumstances. Annual Renewable Term The
death benefi t is a level amount. The policy is automatically renewed the next year without
evidence of insurability. However, the premiums may increase each year with age. Level Term
The death benefi t is a level amount. The policy is generally purchased for a period of 10, 20
or 30 years, and the premium will often remain level over the entire period. Premiums will
generally be higher than the initial premium for an annual renewable term of the same face
amount. But, the premium will remain the same in later years when the annual renewable term
premium is still increasing. Decreasing Term Typically used to help pay the mortgage,
decreasing term maintains a level premium over a specifi c number of years and the benefi t
decreases every year until the selected term period expires. For example, you may purchase a
$100,000, 30-year policy to help provide funds that may be used to pay the mortgage in the event
of your death. The life insurance benefi t will decrease with your mortgage over time. After 30
years, your coverage will end. Credit Insurance You may receive off ers in the mail for
mortgage insurance or credit insurance. They are really off ering you a type of term insurance
and at a hefty price. If your health is good, you may be able to purchase an individual term
policy to provide this coverage at a fraction of the cost.
What are the conversion privileges?
Many insurance companies off er a conversion privilege. This means you may convert or
exchange your term policy for a permanent, cash-value policy equal to the current death benefi t
amount of the term coverage. Usually, there are no further medical questions. Keep in mind the
longer you wait to convert, the higher the premiums will be on your new permanent policy. Some
restrictions may apply.
What are the advantages of term life insurance?
Flexibility to choose from many diff erent coverage periods
Low initial cost compared to permanent insurance
Large amounts of coverage can be purchased relatively inexpensively
Many term policies off er a term-topermanent insurance privilege

 May be good for temporary needs such as a mortgage or car loan

What are the disadvantages of term life insurance?
Premiums can increase at renewal as you grow older
Coverage may terminate at the end of the term and may become too expensive to keep at
renewal
Term policies do not build cash value

TERM INSURANCE PRODUCT PROFILE

The right Life Insurance policy goes a long way in providing risk cover for the insured as well as
saving hard earned money. The Term Plan project carried out for www.investorsareidiots.com
involves the analysis of the various term plans provided by Life Insurance Companies. This
project answers some questions on buying term insurance
The Term Plan project carried out for www.investorsareidiots.com involves the analysis of the
various term plans provided by Life Insurance Companies.
This project answers some questions on buying term insurance
a. Who has to buy a term plan?
b. What is the use of term plans?
c. Types of term plans?
The parameters used for answering the question on term insurance are.
Types of term plans. Types of premium paying term:
There are 3 ways in which you can your premium
A) Regular.

B) Single.
C) Limited.
Entry Age: What is the age at which you can enter the policy? Sum Assured: What is the
amount of premium assured in the policy? Maturity Benefit: Is there any maturity benefit for
the policy? Surrender Benefit: The benefit available if you surrender the policy Accessibility:
How can you buy the policy? Additional Rider Benefit: The rider available along with the
policy? Alteration to Premium: Is there a possibility to increase or decrease the premium?

Term plans are the purest form of insurance products and they are very affordable with their low
cost and high coverage. Term plans are not attached with any savings or investment product. In a
pure term plan product, if the policy holder dies the nominees will get the money that has been
promised by the insurance company as the Death Benefit for the policy holder. In a pure term
policy there is no maturity or surrender benefit. In the market, many variations of Term Plan are
available, which provide maturity and surrender benefit. Insurance Premium would usually
consist of 3 parts, namely Mortality Charge, Administrative Expenses and Investments. Mortality
Charge is the charge paid to the insurance company by the policyholder for providing him with
the assurance of the Death Benefit. Expenses are administrative costs for documentation and
investments are the amount invested for providing the Maturity Benefit, if any, to the customer.
Since Maturity Benefit is usually zero in Pure Term Insurance Plans, there is no requirement for
Investment. Hence Term Plans are the cheapest plans in the industry with the highest possible
cover. Thus, any person will be able to take a high cover for the protection of his family at a very
nominal cost if he opts for a Term Plan.
The usual customers for this plan would be someone who is the only earning member of the
family and has a number of dependents or someone who has taken a loan. It is also beneficial for
high net worth individual, who needs a very high cover. In certain plans the coverage can be
increased after taking the policy and hence can be availed by young individuals who do not have
much liability now.
Types of Term Plans Level Term Plans:

The life coverage remains the same throughout the policy

tenure Increasing Cover Term Plan: The life coverage increases steadily at a
certain fixed rate of about 5% every year Decreasing Cover Term Plan: The life coverage
decreases steadily at a fixed
rate till it reaches the threshold limit. Home loan Cover Term Plan: The plan is used for
covering the home loan
liability Income Plan Term Plan: The plan provide monthly income for the family

Term life insurance is designed to provide immediate financial resources for your family in the
event of your premature death. You choose the amount of coverage you need and the length of
time (the term) you need it for. Here are some of the benefits of term life insurance:
Flexible term coverage
You simply choose the term that fits your needs (typically 10 to 20 years). For
example, young parents in their prime earning years might choose a 20-year term
so they can protect their family until their children are through college.
Protection thats affordable
Term life insurance provides financial protection over a specific time period.
Because the coverage is for the specific time period you select and not your entire
lifetime, it is the most affordable type of protection available.
Predictable costs
With Fidelity term life insurance, there are no rising costs for the period you select
you lock in a fixed premium. If you buy a 20-year policy, your premium will be the
same for 20 years.
Simple policy renewal
Should you decide you want to continue your insurance beyond the term period
youve selected, you can continue to pay for the coverage without any additional

medical exams. After the original term period is over, however, your premiums will
be subject to annual increases.
Avoids legal delays and expenses3
The insurance company pays your beneficiaries directly, so they receive the funds
without the delays and expenses associated with the probate process that governs
assets passed down via wills. Depending on the size of your estate, benefits from a
life insurance policy may be subject to estate tax.
Federal tax free income
Term life insurance proceeds are paid in a lump sum and are considered federal
income tax free, which means your beneficiaries will have more money when they
need it most.

Analysis:
In this assignment we analyzed the term plans available in the Indian Market.
Presently there are 24 companies in Life Insurance Business in India The parameters
we used while analyzing the term plan are Type of term plan. Type of premium
paying term: There are 3 ways in which you can your premium a) Regular. b)
Single. c) Limited. Entry Age: The age at which you can enter the policy

Sum

Assured: The amount of premium assured in the policy Maturity Benefit: Maturity
benefit for the policy Surrender Benefit: The benefit available on surrender of the
policy Accessibility: How to buy the policy? Additional Rider Benefit: The rider
available along with the policy

Alteration to Premium: Is there possibility to

increase or decrease the premium?

Analysis:
In this assignment we analyzed the term plans available in the
Indian Market. Presently there are 24 companies in Life Insurance
Business in India
The parameters we used while analyzing the term plan are
Type of term plan.

 Type of premium paying term:

There are 3 ways in which you can your
premium a) Regular. b) Single. c)
Limited.
Entry Age: The age at which you can enter the policy
Sum Assured: The amount of premium assured in the policy
Maturity Benefit: Maturity benefit for the policy
Surrender Benefit: The benefit available on surrender of the
policy
Accessibility: How to buy the policy?
Additional Rider Benefit: The rider available along with the
policy
Alteration to Premium: Is there possibility to increase or
decrease the premium?

Bajaj Alliance life Insurance

Bajaj Alliance Life Insurance has 3 plans in Term insurance, they
are iSecure, New Risk Care II and Term Care all of which are plain
vanilla term insurance. Out of these 3 plans iSecure has a better
option when one compares the sum assured, maturity age and
accessibility.

HDFC Standard Life

HDFC Standard Life has 3 plans under level term plan. Click 2
Protect is available online. The HDFC protection loan is to insure
the family from home loan in case of any unfortunate demise.

ICICI Prudential
ICICI Prudential has 7 plans in term insurance of which five are
level term plans, one return of premium term plan and one home
loan term plan.
The home loan term plan is to insure policyholders family from
home loan liability in case of anything unfortunate happens to
policyholder.
ICICI iCare is only term plan available online.

ING Vysya Life Insurance

ING Vysya has two plans in term insurance segment. The
difference between
plans is with respect to sum assured and return of premium

Life Insurance Cooperation

LIC has 4 plans all are level term plans. No online facility is
available

MAX Life Insurance

Max Life has two term plans one level term and other premium
return.

Met Life India

Met Life provides 5 types of term plan in which there are 3 level
term plans, one return of premium and one home loan term plan.
Protect Plan is an online product.

KOTAK Mahindra
Kotak offers 6 term plans, 5 are level term plans and one is micro
insurance term plan. E-Term and e-Term preferred are online
products.

SBI Life Insurance

SBI has two income term plan, two level term plan and one return
of premium. All plans are offline.

Reliance Life Insurance

Reliance Life has 5 term plans.3 level term plans and two loan
recovery loans. E-Term Plan is online product.

Aviva Life Insurance

Aviva Life Insurance has 6 tem plans, 5 of the Level Term Plan and
one return of
premium.

Short Term Insurance

Put simply, short term insurance is about protecting the value or the specific cost of an item or
event in your life such as your car, your home or a holiday abroad.
Short term insurance usually includes the following:

Car insurance: This covers the financial costs involved if your car is stolen or in an
accident. Besides covering the costs of replacing or repairing your vehicle, it can also
cover costs to do with your passengers, and other drivers and their vehicles.

Household contents insurance: Picture turning your house upside down and shaking it.
Everything that falls out such as your computer, jewellery, furniture and clothes can
be insured against loss, theft or damage with a household contents insurance policy.

Homeowner's insurance: This covers the actual structure of your home against damage.
For example, if your house floods due to a burst geyser or pipe, your homeowner's
insurance will cover the costs of these repairs. Also, most financial institutions won't let
you take out a home loan unless you have some kind of homeowner's insurance in place.

Travel insurance: This insurance protects you should something happen while you're
travelling. Examples are if your flight is cancelled, your baggage is stolen or you fall ill
while you're away and need medical help.

Long Term Insurance

Long term insurance is the name given to insurance for anything that has to do with your life. As
opposed to short term insurance, you can't indemnify yourself in the long term. Rather, you
select a cover amount that suits your lifestyle, and thats what will be paid to you or your
beneficiaries by your life insurance policy should you claim.
Within life insurance, there are two main types of benefits:

Death benefits: These benefits protect surviving family members should the insured life
die, by providing them with either a lump sum of money or a regular income. This money
can be used for things such as repaying debt, paying for a funeral or providing for
children and other dependants.

Living benefits: These benefits deal with the significant costs involved should something
happen to you where you can't earn an income anymore. For example, if you become
disabled, life insurance compensates you for the extra expenses you may incur. These can
include the costs of adapting your lifestyle and paying medical bills not covered by your
medical aid. Retrenchment cover provides you with an income should you become
retrenched and stop earning an income.

FINDINGS
Adaptation to the relevant risk-free term structure or Counter-Cyclical Premium (CCP): Crisis
measure to complement market observations when these are determined to be temporarily
unreliable or unfit for the prudential purpose, due to spread-related crisis situations in financial
markets.
Extrapolation: Properties of modelling used to value liabilities in order to supplement market
observations when reliable market information is no longer available.
Classical Matching Adjustment: Permanent measure providing an adjusted riskfree rate for
(re)insurance annuities managed under a strict asset liability matching regime which does result
in an immaterial exposure to short-term market volatility.
Extended Matching Adjustment: The extension of the former measure envisaged to cover
business of a long-term nature, but with a lower degree of certainty and predictability of cash
flows.
Transitional: Measure providing a smooth transition to Solvency II for certain long-term
guarantees business underwritten under Solvency I economic and prudential conditions, avoiding
disruptive events whilst ensuring right incentives.
Extension of the Recovery Period: Measure to allow for an adjustment of the supervisory
reaction to an individual breach of the solvency capital requirements in cases of exceptional falls
in financial markets.

Suggest an improvement or addition to the Insurance and Risk Management Glossary

Buy a print version of the Insurance and Risk Management Glossary

Link to the Insurance and Risk Management Glossary

CONCLUSION
In the modern scenario and in an era of globalization, life is full of risks, on every step of life;
there is a risk of life. Being a social animal man always tries to reduce risk. The business of
insurance is related to the protection of economic values of assets. The asset is valuable to the
owner, because he expects to get some benefits from it. Although insurance cannot prevent the
occurrence of accident but it provides for the losses caused thereto. Basically, insurance is a
means to identify the risks by the payment of nominal sum of premium. Hindu philosophy gives
the axiomatic truth of the nature of insurance "Yat bharvathi tat nasyathi' which means whatever
is created will be destroyed. Thus, creation is inevitably followed by destruction. Destruction is
an optimum change to the worse, in that sense change is natural course and its occurrence
involves risk.
The need for insurance was not felt in India till the 19th century. The Joint family system and the
cohesive living in the villages were working well. As the families, split into nuclear families, the
need for insurance cover becomes stronger and more pronounced. Today, insurance business is
one of the fast promising financial services, mainly in the developing nation like India. Insurance
business performs remarkable feats by insuring the insurable public and its properties. However,
it is submitted that even after six decades of the liberalization, the progress in insurance sector in
India has not been satisfactory.
It cannot be denied that the modern industrialization society has rendered man and his property
most vulnerably exposed to different kinds and varying 271 degrees of risks and uncertainties.
The annual losses to individuals and businessman from premature deaths, health, problems, fire,
water, accident, wind, storm, sea perils, earthquakes, floods, dishonesty, negligence
unemployment etc are beyond estimation and hence indicate the importance of recognising and
meeting them intelligence. In order to avoid these unexpected and unfortunate calamities man
has devised various plans to protect himself. One such rational method is insurance.

Today, the entry of private players in the Indian insurance market has changed the nature of
competition and the vigorous campaigns of these players have increased customer awareness.
This has led to rapid increase in insurance business and a sizeable gain of this has also been
reaped by Life Insurance Corporation of India (LIC). Today, the consumer is the focus of all
marketing strategies and the only viable means of survival and growth in the insurance
competition is by developing higher value to the consumer. There is a shift in the paradigm from
meeting consumers, needs to mass customization strategies for delivering value. Therefore, in the
days to come, marketing success would not be gauged by increasing marketing share by any
means, but by delivering higher value to the consumer