nof insurance Sector (F.C-1V) ~S.Y.0.p 5 gee An Overview of b Sony J. AN INTRODUCTION TO LIFE INSURANCE Life Insurance Business ~ Components, Human Life Viti Ap : Mutuality, Principle of Risk Pooling, Life Insurance Contract, Determ Risk Premium + Proach, Mants of © Products of LIC - Introduction of life insurance plans - Traditional Life Insurance Plans ~ Term Plans, Whole Life Insurance, Endowment Assurance, Dividend Method of Profit Participation Purpose of plans, Riders in Plan Introduction, Forms and procedures ¢ Non Traditional Life Insurance Products (Those of SBI and IcIcy _ Introduction, Forms and procedures) 1.1 LIFE INSURANCE BUSINESS 1.1.1 What is Insurance Do you remember your days when after your 10% examination results, you had applied in various colleges for admission? It may be similar for post 17s examination results. Why. did you apply in multiple colleges and not, just one college? Obviously, you did not want to take the risk of not getting admission in that single college. When you applied in multiple colleges, you would see your ame appearing in Merit List of one or more colleges, if not all. When we say ‘tisk of not getting admission’, what does that mean? It is the risk of losing one academic year, doing hothing but sitting at home. To avoid ot mitigate this risk, you applied in multiple colleges and ensured your admission, How is this similar with Life Insurance? Sanjay and Sanika have two kids, and Sanika is 28 years old. Both take the only earning member within the such as food, shelter, education; Bet together. He funds for thes from his salary or business, Sanket and Sonakshi. Sanjay is 30 yeais old care of their kids with lot of love. Sanjay is family. He takes care of family’s basic needs Social needs such as entertainment and social ities through his earning. This earning comes ; and se actit We will be using names of these family members in subsequent ex When can this earnin the income stops. Retire can stop in oth amples. 8 stop? When Sanjay reaches age 60, he would retire and ment age is certain and Sanjay can decide when to retire. : er events, whi i j orerit That een hich are uncertain and Sanjay has no control © Loss of jobrodetion to Life Insurance a ante ey fe Sanjay's accidental disability, either temporary or Permanent © Sanjay’s death 1f Sanjay loses his job, he can search for it and get another one. fhe is not f to work due to disability or if he dies young before Sanket and Sonaksh ‘ independent, how will the family survive? Life Insurance plays a major role dating ing these uncertain events. ‘We can define insurance as follows: Insurance is a contract between the insurance company (insurer) and the policyholder. (insured). In return for a consideration (the premium), the insurance company promises to pay a specified amount (stim assured) to the insured on the happening of a specific event. The specific even could be either natural or accidental death of the insured person or accidental disability of the insured person. * ‘A person can buy Life Insurance with a small premium, but on loss of insured person’s life, Life Insurance Company makes huge sum available to dependents of insured person. It is one thing that a perSon‘can buy: a) Insufficient amounts b) On terms that he can meet ©) To unconditionally do the job he wanted done in times when there is no earned income 1.1.2. Life Insurance Business Component Life Insurance Business has following components. Names given in examples are from same family mentioned above. Component Description Insurer : Life Insurance Company which provides the life insurance cover or the Policy, is called the Insurer Owner of Policy This is the Proposer of the insurance policy. E.g. if Sanjay takes insurance policy for his wife Sanika, he becomes the Owner of the Policy. Insured Member This ‘is the person on whose Life Insurance Company provides insurance cover. If Sanjay takes insurance’ policy on his, wife Sanika, Sanjay is the Owner or Proposer and Sanika is: the Insured Member. If Sanjay takes insurance policy on his own life, he becomes Owner as well as Insured Member.4 weet Component Beneficiary Member | Actuaries while the policy is in force i! £0 Overview of surance Sector (F.-Y) ~SY.n 4. (Sem.-ty Description Proposer or Insured Member Beneficiary Member who ha Death Claim Benefit if th nominates the 8s the right to receive the le Insured Member dies Person with speci Industry, who deci the insurance prop alised knowledge of Insurance ides whether t Accept oF reject posal. If the Proposal is to be le Underwriter decides at what Price Life Insurance Company has to accept These "SFU of ‘people. having speciaiseg Knowledge for: calcilating the Standard price of Products. They analyse statistical data and the past claims experience of the company. Actuaties make overall financial assessment of the insurance company from. time to time to make sure that the 88 sufficient reserves to pay for future Third Party Administrators | TPA form hospital networks and help -with (TPA) eR ee approvals a the tine of hospital, ‘settling “the discharge cashless admission toa bill with: the insurer on Loss Adjusters / Surveyors The Regulator Surveyors assess and certify a loss when a Life Insurance Company receives a claim, They have a major role to play in non-life insurance business The Regulator has the Tesponsibili smooth running“ of’ the. insur: Insurance Regulator lity of ensuring the ‘ance sector. The ry and Development Authority (IRDA) is the insurance Regulator in India. IRDA Brants licences to insurance companies and makes Sure that all insurance companies always comply with the regulations. It also has a responsibilty 10 Protect the interests of the small. policyholders against the insurance companies,“am Introduction to Life Insurance Component Description He is a qualified person w Auisote Percentage of in; agent's primary | — The Agents or Insurance Intermediaries Death Claim Benefit insurance. policies lump sum. amount tes Pay out the death benefit as a This is also called the Sum Assured Cash Value It is the investment component of a permanent Life Insurance, Which accumulates Cash Value, which the policyholder. may withdraw or borrow. The basic : » | form of permanent insurance is.whole life. Whole life insurance offers a way to accumulate wealth as the paid premiums go towards both payments of the insurance portion (mortality charges) as well as toward investment. 1.1.3. Human Life Value (HLV) For any individual to take life insurance policy, it is necessary to calculate the required insurance cover or Sum Assured (SA). What will the family’s loss if Sanjay dies while Sanket and Sonakshi are still school students? There are two types of losses. First is the loss of father to kids and husband to wife. This loss has the Emotional Value, which we cannot measure. There is another oss, which is the loss of earnings that Sanjay. would have brought to family during his earning period up to age 60. ‘ ; 5 3 Human Life Value (HLV) Method determines an estimated human life value of person’s life. Important points of HLV are: © It calculates amount of life insurance needed in multiples of current earning income TUM ON RRND Str Sar eras 4 Warnane ‘4M Oversew of surance Seton F-C-1Y)~ S.BB.. (omy It is based on the theory that the purpose of life insurance is to rey place the Joss of earning when a person dies @ It assumes that individuals have dependents and the level of ; earned income provides a satisfactory standard of living that will remain co stant ¢ It fails to consider special financial needs in situations such as i Patentaj care, health care expenses during later years Human Life Value method calculates the net contribution of the insureg person to the family’s.living standard! by subtracting the insured person's current expenses and income tax liabilities. Following are the steps to calctlates Human Life Value 1, Take individual's current annual income 2. Calculate the working period, which is the number of years left from current age to retirement age 4 3. Deduct the amount spent on self and income tax paid H 4. Using a reasonable rate of interest, determine the HLV of Sanjay Sanjay’s Age Today 30 Retirement Age 60 Years to Retire 30 Current Annual Income 3,00,000 Personal Expenses and Income Tax paid 96,000 Net Income for Family 2,04,000 Discounting Rate 7% Human Life Value 29,14,295 Today if Sanjay suddenly passes away, his family will lose his future earnings. However, if the family has % 29,14,295 invested at 7% interest rate then the family will be able to withdraw € 2,04,000 every year. We calculate this amount as follows: : Amount needed every year// Interest Rate = 2,04,000 / 7% = 2,04,000 / 0.07 = 29,14,295pu tirtution oie Tasrance moe Hence, Human Life Value of Sanjay is 29,14,295 which we can round off to 29, 15,000 (next thousand). 1.1.4 Mutuality, Principle of Risk Pooling Mutuality is one of the important ways to reduce risk in financial markets Mutuality oF pooling combines funds of various individuals. We have funds flow from many sources to one. Mutuality or the Risk Poolin, 7 ig Principle plays tw specific kinds of roles in life insurance. ple plays two 1, It provides protection against the financial loss due to one's untimely death. Contributions of many, called Life Insured Members, who, have entered into the life insurance contract create a pool of fund to shoulder this loss 2. The principle of risk pooling involves the pooling and evening out of financial risk. It pools the premiums, the funds and consequently the attendant risks of various kinds of contracts taken by individuals at different points of time. This Pooling happens among existing policyholders since the beginning of Life Insurance Company. The outcome of this pooling is trying to ensure that in good as well as bad times the life insurer is able to pay a uniform rate of return (a uniform bonus) through levelling out the returns across time. 1.1.5 Life Insurance Contract In Mutuality, Life Insured Members, who have entered into the life insurance contract, create a pool of fund. A Policy Document is the Life Insurance Contract between The Proposer and ‘Life Insurance Company. Proposer and Insured Member may or may not be same. Insured Member may be a Minor and cannot be part of Life Insurance Contract. Contract is with the Proposer, who is always a Major person, that is, of age 18 or more. Following are the elements of valid Life Insurance Contract: Life Insurance Company communicates the acceptance to the proposer, which results in the formation of a contract. When a proposer accepts the terms of the insurance plan, he shows his permission by paying the deposit amount. On acceptance of the proposal, this deposit amount becomes First Premium, and the proposal becomes a Policy. If Life Insurance Company puts any condition, it becomes a counter offer. The Policy Bond becomes the evidence of the contract. weer Vy WOME ur un“9° An Oe mie Secor EI) 8.88 Sem yy we'n 1 2 Consideration Consideration means the contract must contain some mutual benefit for the ber, ang pany, ties involved. The premium is the consideration from the Insured Mer artes 3 : 7 promise to indemnify, is the consideration from the Insurance Com he Agreement » Both the parties will have to agree to the same thin, other words, there should be Consensus ad-idem (Metin, both parties. The Insurance Company and the Policyh same thing in the same sense, 8 in the same sense, tn 8 Of the Minds) betwee, older must agree on th As f : Uberri Free consent ae There should be free consent while entering into a contract. . For Consent to that ev be free, it has to be free from following subject © Coercion ; Utmos © Undue irifluence Su ° Fraud cannot : - facts, © Misrepresentatior © Misrepresentation inform © Mistake . inform When consent to an agreement is due to coercion, fraud or misrepresentation, Fo the agreement is voidable. Ke Capacity of the parties the po ji pe 5 operat Both the parties to the contract must be legally eligible to enter into the atid contract. The Policyholder must have attained the age of majority at the time of signing the proposal, and shoul: him tc Id be of sound mind and not disqualified under law. For example, minots cannot Karan’ enter into insurance contracts, Tt Legality insura The reason for taking life insurance Policy must be legal. For example, no at the Person can take insurance for illegal acts, Every agreement of which the object or | Hence consideration is unlawful is void. For example, person Wanting to commit suicide rejecte taking Life Insurance policy so his family will I get money after his death is an. 1.1.6 illegal act. © : Wee Li 1. Coercion ~ Person has to take Policy as per his / her need and not by force tisk from Agent / Broker or any such intermediary. cn 2. Undue Influence — Person has to take Policy as per his / her willingness follow and not under influence of what the Intermediary says. 26sanction sensu pitas : ae grand ~ Intermediary has (0 share all details about the Plan to help the "person take right decision about taking the Policy. Any hiding of jnformation or making false statements leads to fraud d Mistake - While submitting the Proposal Form, Proposer / Life insured as well as the Intermediary has to provide all correct and known information If Proposer makes any mistake in understanding the Plan details ot intermediary's mistake in explaining the details may result in cancellation of Proposal / policy. - ‘Asa Contract, Insurance contract has following special features uberrima Fides or Utmost Good Faith This is one of the fundamental principles of an insurance contract. It means that every party to the contract must disclose all material facts relating to the subject matter of insurance. Utmost Good Faith Subject matter of the Insurance contract is intangible and Insurance Company cannot easily know it through direct observation or experience. There are many facts, which only Proposer knows. The insurer has to rely entirely on the information that Proposer shares. Proposer has a legal duty to disclose all material information that the Insurance Company asks using the Proposal Form. Following example will explain these elements. Karan made a proposal for a life insurance policy. At the time of applying for the policy, Karan was suffering from heart disease and already had angioplasty operation. Karan did not disclose this fact to the life insurance company. Karan was in his thirties, so the life insurance company issued the policy without asking him to undergo a medical test. Few years’ later, Karan died due to heart attack. Karan’s family submitted a Death Claim to the Life Insurance Company. The Life Insurance Company rejectéd the claim. In its investigation, the insurance company found out that Karan was already suffering from heart disease at the time of applying for the policy and Karan had deliberately hidden this fact. Hence, the insurance contract was declared null and void and the claim was “rejected. 1.1.6 Determinants of Risk Premium ‘Life Insurance Company has premium tables, which lists premium for various risk cover (Sum Assured) at ‘different age. Actuary does this calculation of Premium rates. The process of setting the premium in case- of traditional life insurance policies like term insurance, whole life and endowment considers following elements: 2SY.B.B1.-An Overview of Insurance Sector (PCIV) (Sem-1V)‘An Overview of Insurance Sector (F.C-1V) ~ Sig, 10 a's cn Mortality i © Interest © Expenses of management © Reserves © Bonus loading Mortality along with Interest give us the Net Premium. By adding th elements to the Net Premium, we get the Gross or Office Premium. Thi, fe of adding other elements is Loading. 1, Mortality and Interest Mortality is the basis for premiums. Mortality is the chance or likelihog a person of a certain age would die during a given period, of typically one ye,,_ find out the expected Mortality of a person, Insurance Company uses Mong, Table, which gives an assumption or estimate of the rate of mortality for ify, ages. EXAMPLE If the mortality rate for age 35 is 0.0035 it implies that out of every 1g People who are alive as on age 35, 3.5 (or 35 out of 10,000) are expected 10, between age 35 and 36, which is next one year. " Insurer uses the Mortality Table to calculate mortality cost for different age For example the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 1000 (sum assured) = & 3.50 per thousand sum assured. That means, for 2,0 sum assured (basic 1000 sum assured as per rate chart x 2), rate will be €35y =?7. . . The above cost is called the Risk Premium. Higher the age higher will bet premium rate. ! 2. Expenses and reserves Life Insurance Company incurs various types of operating expenses includin: © Insurance Advisor's (Agent, Brokers) training and recruitment © Commissions of Agents, Brokers © Staff salaries © Office accommodation © Office stationery © Electricity chargestution tse sure ne : te | iy ance Company pays all these expenses from premiums that i 3 aie ose expenses are loaded to the net premium, ceutcts: These ‘alife insurer incl 1, New Business Expenses, incurted at the beginning stage of the contract urs two types of expenses: 2, Renewal Expenses, is incurred during subsequent years jnitial or new business expenses can be substantial, By law, Life Insurance Company holds certain margins as reserves to ensure they can’ meet their sbligations even in those situations when their actual experience is worse than assumed. The initial expenses along with the margins, together’ called Reserves are typically higher than the initial premiums received by the life insurer. Subsequent annual premiums can only help recovering initial outflow. Life insurers cannot afford to have large number of their policies cancelled or lapsing in initial years, before they recover the expenses. Another consequence of new business strain is that life insurance companies begin to make profits only after a gestation period of some years. : Expenses are also determined in different ways, depending on the type of expense. : 1. Commissions and incentives for agency managers / Development Officers is as a percentage of the premiums earned. 2. Medical examiners’ fees and policy stamps duty. depend on the amount of sum assured or face value of the policy. ze : 3. Overheads such as salaries and-rents generally vary with the amount of activities. These in turn depend on the number of policies serviced. More the number of policies higher will be the overhead expenses. All the above types of expenses are suitably loaded to the net premium. P ly PI Lapses and contingencies senna Apart from expenses, the life insurer, also,constantly faces the risk that actual experience may be different from the assumptions made at the stage of designing the contract. One source of risk is that of lapses and withdrawals. A lapse means that the policyholder discontinues payment of premiums. In case of withdrawals, the policyholder’ surrenders the policy and receives an amount from the policy's, acquired cash value. : Lapse of policy usually happens within the first three years with highest incidence being typically in-the very first year of the contract. Life insurers incorporate a loading in anticipation of leakages that may arise as a result. is ip yR SRS An Overview of nuance Sector (F.C-1V)~8.Y.B.8, *Y.BBLL (Sem, , y Insurers include a loading margin in the premium, which ne ; a cr absorbing any adverse loss that ‘may arise between expected ould het, experience. and Actual ¢) With Profit policies and Bonus loading During the early years of the life insurance industry, the major u faced was about the rate of mortality. To resolve this, Life Insurance neering charges excessive premiums in advance. This would ensure that the solvent even in adverse situations. With sufficient experience in subse: Insurers found that the premiums were higher than needed and wg e oe excess or some portion of it to policyholders by way of bonus, Thi return the of traditional With Profit Policies.” Emenee ‘ompany 'Y Femaineg 1 Origin Participation in profits considers an element called Bonus Loadi F : ; fading i premiums. It provides a margin for profits as a loading in the premium, ae into i i i , Sucl it served as an added cushion against unforeseen contingencies and paid fc that policy’s share of surplus distributed, as bonus. Paid for the Gross Premium = Net Premium : + Loading for Expenses + Loading for Contingencies + Bonus Loading After calculating the Gross Premium, Insurer may give certain discount or charge extra as per'certain conditions. Rebates Life insurance companies may also offer certain types of rebates on the premium that is payable. Two such rebates are: e For higher sum assured © For mode of premium a) Rebate for sum assured Insurer gives rebate for sum assured to those who buy policies with higher f sum assured. It is a way of passing on to the customer, the gains that y make when servicing higher yalue policies. Whether an insurer 1. € 50,000 or & 5,00,000, the amount of effort required for the cost of processing these policies remain the same. id more premium and so more profits. amounts 0! the insurer ma) services a policy for -both, and consequently, However, higher sum assured policies yielPA HOSEN G, anttraucton fo Life surance rag )_ Rebate for mode of premium : Insurer offers rebate for the mode of premium premiums on annual, half yearly, quarterly or monthly § mode, more the cost of service. Yearly and half-ye: and accounting only once a year while quarterly ang the process is more frequent. Half-yearly or yearly p in administrative costs as compared to quarterly or the yearly mode, the insurer can utilise this earn interest on it. Insurers would hence ence yearly modes by allowing a rebate on these, extra charge to cover additional administr Policy Holder ¢q "pa basis, tld Morte frequent the arly modes invotye collection ' monthly modes would remiums thus enable a 5, Monthly modes. Moreoy, amount during ourage p: Monthly mean faving et, in the entire year and ayment via yearly and half. . mode of payments may have rative expenses involved 3. Extra charges The tabular premium is charged for a not subject to any significant factors. th, individual lives are called. standard lives ordinary rates. Sroup of insured individuals who are at would pose an extra risk. Such and the rates charged are known as If a person proposing for insurance suffers fr heart ailments or diabetes, it can create a haza considers such life ‘as Sub-standard ‘om certain health problems like rd to his life. Insurance Company in relation to other Standard lives. The insurer may decide to impose an extra premium by way of a health extra. Similarly, Insurer may impose an occupational: extra on those engaged in a hazardous occupation, such as Mine Worker. These extras would result in the premium being more than the tabular premium, An insurer may offer certain extra benefits under a policy, which aré available on payment of an extra premium. Insurer pays bonus as an addition to the basic benefit payable under’a contract. It may appear as an addition to basic sum assured or basic pension per annum. It is expressed, for example, as & 60 per thousand sum assured. The most common form of bonus is the reversionary bonus. The company is expected to declare such bonus additions each year, throughout the lifetime of the contract. Once declared, they get attached and cannot be taken away. They form Part of the liabilities of the company. They are called Reversionary bonuses because the policyholder only receives them when the contract becomes a claim by death or maturity. Bonusés may also be payable on surrender. In such cases, it is onan mandatory that the contract should hhave run for a certain term (say five years) become eligible.An Overview , nus : rt Reversionary Bol tage of the basic cash benefit unde x simple ad ag a percentags wee nis is a bonus exPr ote per thousand sun ASsuret™ his is a . as am‘ contract. It is declared 2, Compound Bonus i : e:! Here the company XP is thu! already attached bon ciel can «- sum assured plus atta 8% of basic SU} 3, Terminal Bonus sts, Policy is eligible for this bonus only on its contrac, Mo aa ath maturity). ‘The bonus is declared only for claims of y termination (y fi t any commitment about subsequent years (as in case ensuing year withou, “0 the terminal bonus declared for 2018 would en i bonuses). Thus, : : ec s that Insurance Company receives during 2017-18 and not ¢ 6 as a percentage of basic benefit , a bonu Insurer may detlare j, s a bonus on a bonus. rev : apply to claim subsequent years. Finally, terminal bonuses depend on the time duration of the contract, ar increases as the duration increases. Thus, the terminal bonus for a policy for2 years duration would be higher than for policy for 15 years. : Riders Life Insurance Company offers'a number of riders through which the value their ‘offerings gets. enhanced. A rider is a provision made through 2 endorsement on Policy Bond, which then becomes part of the contract. Rider provide some sort of supplementary benefit or increase the amount of deat benefit provided by a policy. Following Riders are available on Life Insurance Policy © Disability e Term Insurance © Critical Illness © Hospital Cate Availability of Ridérs deperids onInsurer and some of the riders may b available at the beginning (Inception) of the Policy. [1.2 PRODUCTS OF LIC 1.2.1. Term Plan LIC's Amulya Jeevan - II isa pure protection plan, which provides financial Protection to the insured's family in case of his/her unfortunate demise. _Death Benefit : In case of unfortunate death of the Life Assured during the Policy term Sum Assured shall be payable.i Tat ta, ae er om, q parrot Ian eas : Maturity Benefit : On survival to the end of the policy term, © payable. : Bligibility Conditions Nothing shall be Minimum Sum Assured 725,00,000 ‘Maximum Sum Assured ‘No init (The Sum Assured shall be in multiples of 1,00,000) ‘Minimum age at entry 18 years (completed) ‘Maximum age at entry 60 years (nearest birthday) Maximum cone ceasing age 70 years (nearest birthday) ‘Minimum policy term 5 years ‘Maximum policy term e 35 years Payment of Premiums Premiums can be paid regularly during the term of the policy at yearly or half- yearly intervals. A grace period of one month but not less than 30 days is allowed for payment of prémiums. 3 Revival : If premiums are not paid within the grace period then the policy will lapse. A lapsed policy can be revived within a period of 2 consecutive years from the date of first unpaid premium but before the expiry of policy term, by paying all the arrears of premium together with interest (compounding half-yearly) at such rate as fixed by the Corporation at the time of the payment. Insured member has to satisfactory evidence of continued insurability. The cost of the medical reports, including special reports, if any, required for the purpose of revival of the policy, shall be borne by the Life Assured. This policy shall not acquire any paid-up value. Surrender Value : No Surrender Value will be available under this plan. Taxes Taxes, if any, shall be as per the Tax laws and the rate of tax shall be as applicable from time to time. The ainount of tax as per the prevailing rates shall be payable by the Policyholder on Instalment premiums including extra premiums, if any. Calculation of benefits payable under the plan does not consider the amount of tax paid.7 ae 4 Oneroew of surance Seton (E.C-1Y)~ 8.8... Sq, a Cooling-off period 1 If the Policyholder is not satisfied with the Terms and Conditions oj policy, he/she may return the policy to LIC within 15 days from the q seceipt of the policy bond stating the reason of objections. On receipt of th LIC cancels the policy and returns the amount of premium deposited al deducting the proportionate risk premium for the period on cover, stamp aa charges, expenses for medical examination and special reports, yy f the late 1 Sam ifany, Exclusion Suicide . This policy shall be void if the Life Assured (whether sane or insan suicide within 12 months from the date of commencement of risk date of revival. If policy is in force, LIC Pays an amount equal to premiums paid until the date of death (excluding any taxes, rider premiums, if any). LIC does not entertain any other clair 1.2.2. LIC Whole Life Plan LIC’: ) commits Or from the 80% of the extra premium ang im under this policy, s Jeevan Umang plan offers a combination of income and protection, This Plan provides for annual survival benefits from the end of the premium paying term until maturity and a lump sum payment at the time of maturity or on, death of the policyholder during the policy term. Loan is available against this policy, 1. Benefits payable under an in force policy : 1. Death Benefit On death of the Life Assured during the policy term, provided all due premiums have been paid then i) On death before the:commencement of Risk: Return of premium/s paid without interest shall be payable. ii) On Death after the commencement of Risk : Death Benefit, defined as sum of “Sum Assured ‘on Death” and vested Simple Reversionary Bonuses (as mentioned in 2 below) and Final Additional bonus, if any, shall be payable. Where Sum Assured on Death is the highest of the following Ten times of annualised premium; or e Sum Assured on Maturity; or © Absolute amount assured to be paid on death, i.e. Basic Sum Assured. This death benefit shall not be less than 105% of all the premiums paid as on _ date of death.ras 7 fe surance extra amount chargeable under the policy due to satan A excludes taxes, mium : i seit decision and rider premium(s), if any. unde g, survival Benefit 5 rviving to the end of the premium paying term, on the life assured su) -ovided Policynolder pays all premiums, a survival benefit equal to 8% of Basic sum Assured shall be payable each year. The first survival benefit payment is ayable at the end of premium paying term and thereafter on completion of each fubsequent year till the Life assured survives or till the policy anniversary prior.to whe date of maturity, whichever is earlier. 3, Maturity Benefit on the life assured surviving to the end of the policy term, provided all due ave been paid, Sum Assured on Maturity along with vested Simple premiums hi Bonuses (as mentioned in 2 below) and Final Additional bonus, if Reversionary any, shall be payable. Where “Sum Assured on Maturity” is equal to Basic Sum Assured. 2. Participation in profits + : Depeniding upon the Corporation’s experience with regard to policies issued uunder‘this plan, the policy shall participate in profits during the policy term. During the premium paying term : y Policies shall be eligible to receive Simple Reversionary Bonuses de per the experience of the Corporation during the premium paying term provided clared as the policy is in force. LIC may also declare Final Addi year when such policy results into Bonus shall not be payable under pai the premium paying term. : In case the premiums are not duly paid, the poli future profits during premium paying term. ‘After the premium paying term (applicable only, for fully paid-up policies or for paid-up policies with Maturity Paid-up Sum Assured of & 2 tional Bonus undef ‘an in force policy in the a claim by death.. However, Final Additional id-up policy or on surrender of a policy during icy shall cease to participate in lakhs or more): Under a fully paid-up policy, the policy are paid, or in a paid-u % 2 lakhs or more, the terms for p: will be as per LIC’s experience under this plan.at that time. where all premiums payable during the term of p policy with Matiirity Paid-up Sum Assured of articipation of profits after the premium payingwee 4 Overview of surance Sector PCM) ~8Y.B.4, g, 8 m a : in Final Additional Bonus under the policy in the”! C may also declare LIC may Jaim by either death or maturity, In aq,.2% ave Yy Y. Addit, when a policy results into ‘ or ma applicable Final Additional Bonus for surrendering policies, if any, shay. included in Special Surrender Value calculation. Under a paid-up policy with Maturity Paid-up Sum Assured of less than y lakhs, the policy shall.not participate in future profits. 2 3. ,, Optional Benefit : » sThe policyholder has an option of availing following Rider benefit(s); 1. Accidental Death and Disability Benefit Rider 2. Accident Benefit Rider 3. New Term Assurance Rider * 4, New Critical Illness Benefit Rider Rider sum assured cannot exceed the Basic Sum Assured, 4. Eligibility, Conditions and Other Restriction: Minimum Basic Sum Assured %2,00,000 Maximum Basic Sum Assured No Limit The Basic Sum Assured shall be in multiples of 25,000 - Premium Paying Term 15, 20, 25 and 30 years Policy Term | (100 - age at entry) years | Minimum Age at entry ] 90 days (completed) Maximum Age at entry 55 years (nearest birthday) Minimum Age at the end of premium paying term | 30 years (nearest birthday) Maximum Age at the end of premium paying term | 70 years (nearest birthday) Age at maturity 100 years (nearest birthday) Date of commenceinent of risk: In case the age at entry of the Life Assured is less than 8 years risk will commence, either one day before the completion of 2 years from the date of commencement of policy or, one day before the policy anniversary coinciding with or immediately following the completion of 8 years of age, whichever is earlier. For those aged 8 years or more, risk will commence immediately.re 19 ife Insurance under this plan: automatically vest on the, Life ttn f vesting pate o all Adgured on the’ poalley licy 5 The einciding ‘vith or immediately following the completion of 18 years anniversns all on such vesting form a contract between the LIC and Life of age 9 assured. payment of Premiums: premium payment modes are yearly half-yearly, quartetly or monthly vrais or through salary deductions during the Premium Paying Term of the ei ‘mium payment is through NACH only. policy. Monthly pre LIC allows a grace period of one month but not less than 30 days for payment of yearly oF halfyearly oF quarterly mode and 15 days for monthly mode of premium payment. Mode Rebate: Yearly Mode 2% of tabuldt premium Half-yearly mode 1% of tabular premium Quarterly, Monthly (NACH), Salary Deduction ‘Nil ie f fa High Basic Sum ‘Assured (BSA) Rebate on tabular premium (®) 2,00,000 to 4,75,000 Nil 5,00,000 to 9,75,000 1.25 %o BSA 10,00,000 to 24,75,000 z 1.75 %0 BSA 25,00,000 and above 2.00 %o BSA Paid-up: If policyholder pays premiums for less than three years, all the benefits under the policy shall cease after the expiry of grace period and nothing shall be payable. If Policyholder pays at least three full years’ premiums and does not pay any future premiums, the policy shall not be void but shall continue as a paid-up policy until the end of policy term. ‘The Sum Assured on Death under a paid-up policy shall be reduced to'a sum called Death Paid-up Sum Assured and shall be equal to (Number of premiums paid / Total number of premiums payable) *Sum Assured on Death20 wen _ AN Orercin af suraee Secor EC 1V) ~ 8.8.4. (gy a The Sum Assured on Maturity under a paid-up policy reduces to a * called Maturity Paid-up Sum Assured calculated as uy (Number of premiums paid /Total number of premiums Payable)*(s,,, Assured on Maturity) Survival benefits under a paid-up policy : 1. If Maturity Paid-up Sum Assured is less than the minimum Basic Su Assured i.e. & 2 lakhs, LIC will not pay the Survival Benefits under Such policies. 2. If Maturity Paid-up Sum Assured is equal to or more than minimum Basic Sum Assured of € 2 lakhs, Survival Benefits equal to 8% of Maturity Pais up Sum Assured shall be payable each year. The first survival benefit Payment is payable at the end of premium paying term and thereafter oy, completion of each subsequent year till the Life assured survives or till the i: policy anniversary prior to the date of maturity, whichever is earlier, i . A paid-up policy shall not be entitled to Participate in the future Profits during the premium paying term, however, Bonuses shall remain attached to the reduced wherein the Maturity Paid-up Sum Assured is the vested Simple Reversionary paid-up policy. If a paid-up policy % 2 lakhs or more continues after Premium paying term, it may participate in future profits after the premium paying term, depending on the Corporation's experience under such paid-up policies. Rider(s) shall not acquire any paid-up value and the rider benefit(s) cease to apply, if policy is in lapsed condition. Surrender Value: The Policyholder can surrender the policy at any time provided he had paid the premiums for at least three consecutive years. On surrender of the policy, the Corporation shall pay the Surrender Value equal to higher of Guaranteed Surtender Value and Special Surrender Value, LIC reviews and determines the Special Surrender Value from time to time subject to prior approval of IRDAL. The Guaranteed Surrender Value payable during the policy term shall be equal to the total premiums paid multiplied by the Guaranteed Surrender Value factor applicable to total premiums paid. These Guaranteed Surrender Value factors expressed as percentages will depend on the policy term and policy yeat in which the policyholder surrenders the policy. LIC has tabular chart for Surrender Value Factor.ay btotcton fo Life Insurance : ree a surrender value of vested Simple Rey Y Bonuses, if er vale of ses, if an ayable, which is equal to vested bonuses multiplied by Guar, a foe ‘uaranteed Surrender value factors applicable to vested bonuses, as explained aboy, ’ above, Policy Loan: Loan can be availed during the policy term provided the policy f olicy has surrender value and subject to the terms and conditions a specify from time to time, 8 a8 the Corpo} acquired a ration may If loan is availed during the premium paying term: The maximum loan as a percentage of surrender value sh ; 4 all by : © For inforce policies- upto 90% Pac © For paid-up policies- upto 80% Ifloan is availed after the premium paying term: The maximum permissible amount of new Lo. shall be arrived at i such'a way that the effectiy. i © annual interest amount payabl on Joan does not exceed 50% of the annual survi fable des the! val benefit ene Payable under the LIC recovers any loan outstanding along with interest 5 from claim proc: the time of exit. Proceeds at Taxes: Statutory Taxes, if any, imposed on such insurance plans by the Government of India or any other constitutional Tax Authotity of India shall be as per the Tax laws and the rate of tax as applicable from time to time. Cooling-Off Period This is same as mentioned in Term Plan. Exclusion: Suicide : This policy shall be void i) “If the Life Assured (whether sane or insane) commits suicide at any time within 12 months from the date. of commencement of risk, the Corporation will not entertain any claim under this policy except for 80% of the premiums paid, provided the policy is in force. This clause shall not be applicable in case age at entry of the Life Assured is below 8 years. ii) If the Life Assured (whether sane or insane) commits suicide within 12 months from date of revival, an amount which is higher of 80% of the premiums. paid till the date of death or the surrender value, shall be payable. The Corporation will not entertain any other claim under this policy. This clause shall not be applicable:Pa an's ‘An Oercew of surance Secor F.C-IV)~S..B.04. (Gop > v1, In case the age of Life Assured is below 8 years at the time of rey,” val. or , L 2. For a policy lapsed without acquiring paid-up value and not! be payable under such policy. 1.2.3. LIC New Endowment Plan ing shay LIC's New Endowment Plan is a participating non-linked plan, which o an attractive combination of protection and saving features. This combi provides financial support for the family of the deceased policyholder an; before maturity and good lump sum amount at the time of maturity for 1h, surviving-policyholders\ This plan also takes care of liquidity needs through oan aS : ae fers ation Y time 1. Benefits: Death benefit: In case of death during the policy term provided all due premiums have been paid Death benefit, defined as sum of Sum Assured on Death and vested Simple Reversionary Bonuses and Final Additional bonus, if any, shall be payable. Where, , Sum Assured on Death is higher of Basic Sum Assured or 10 times of annualised premium. This death benefit shall not be less than 105% of all the premiums paid as on date of death. Premiums exclude service tax, extra premium ai premiums, if any. Maturity Benefit: ind rider "wos Basic Sum Assured, along. with vested simple reversionary bonuses and Final Additional bonus, if any, shall be payable in lump sum on Survival to the, end of the policy term provided all due premiums have been paid. Participation in Profits: The policy shall participate in profits of the Corporation and shall be entitled to receive Simple Reversionary Bonuses declared'as per'the experience of the Corporation, provided thé policy is in full force. Final (Additional) Bonus may ‘also be declared under the policy in the year when the policy results into a claim either by death’ or maturity, provided the policy has run for certain minimum term. : 2. Optional Benefit: LIC’s Accidental Death and Disability Benefit Rider: LICs Accidental Death and Disability Benefit Rider is available as an optional rider by payment of additional premium. In case of accidental death, the Accident Benefit Sum Assured will be payable as lump sum along with the death benefit under the basic plan. LL faa notion Lo Life surance, f accidental d meat a In case of accidental permanent lsability arising due to an days fiom the date of accident), © accident, (within 180 An-amount equal to the Accident Benefit § equal monthly instalments spread over 10 ‘um Assured will be paid in Accident Benefit Sum Assured Years.and future premiums for @ LIC will waive off premiums for the Portion of Basic Sui i is equal to Accident Benefit Sum Assured under the poli eae wl Eligibility Conditions and Other Restrictions For Basic Plan “Minimum Basic Sum Assuied | 24 Maximum Basic Sum Assured aoe (In multiples of & 5,000/-) Minimum Age at.entry 8 years (completed) Maximum Age at entry 55 years (nearest birthday) * Maximum Maturity Age 75 years (riearest birthday) Minimum Term 12 years Maximum Term 35 years For LIC’s Accidental Death and Disability Benefit Rider 1. Minimum Accident Benefit Sum Assured : € 1,00,000 "2. Maximum Accident Benefit Sum Asstired : An amount equal to the Sum Assured under the Basic Plan with upper limit of € 50 lakhs taking all existing policies of the Life Assured under individual as well as group schemes including policies with in-built accident benefit taken with Life Insurance Corporation of India and the Accident Benefit Sum Assured under the new proposal into consideration. (The Accident Benefit Sum Assured shall be in multiples of € 5,000/-) Minimum Age at entry 18 years (completed) The cover can. be opted for at any policy anniversary during the’ policy term but before Maximum Age at entry the policy anniversary on which the age nearer birthday of the Life Assured is 70 years. M | Maximum cover ceasing age __| 70 years (nearest birthday)u ree ‘An Overvicaof insurance Sector (.C-1V)~S.¥.B.B (5, a Payment of Premiums: Premiums can be pad regularly at yeatly, half-yearly, quarterly oF mon mode (through NACH only) or through salary deductions over the term of ,. th Pog LIC allows a grace period of one month but not less than 30 days for pay, of yearly or half-yearly or quarterly premiums and 15 days for monthly my Mode and High S.A. Rebates: Mode Rebate (On Tabular Premium); Mode | Rebate | Yearly 2% Half-Yearly 1% Quarterly Nil ; Monthly Nil Salary deduction Nil High Sum Assured Rebate: Basic Sum Assured | Rebate (BSA) 1,00,000 to 1,95,000 Nil | 2,00,000 10 4,95,000 | 2% of BSA 5,00,000 and above 3% of BSA Revival: If Policy Holder does not pay premiums.within the grace period then the policy will lapse. A lapsed policy can be revive within a period of 2 consecutive years from the date of first unpaid premium and before the date of maturity, 5 the case may be, by paying all the arrears of premium together with: interes (compounding half-yearly) at such rate as fixed by the Corporation at the time of the payment. This is subject to submission of satisfactory evidence of continued insurability. Revival of rider, if opted for, will be along with revival of the Basic Policy, and not in isolation. Paid-up Value: If policyholder pays at least three full years’ premiums and does not pay any subsequent premiums, then policy shall not be wholly void, but shall continue &tc ecanee wes 4 an sap policy: The Basie Sum Assured under the policy shall be reduced to an a pat” unt, called Paid-up Sum Assured and shall bear the same ratio to the Basic oun e ai sum ‘Assul asic Su ‘This Paid-Up Sum Assured along with vested simple reversionary bonuses, if any, i payable on the expiry of policy term or in case of prior death. The sressionary bonuses already accrued to the policy as on the date of paid-up wil remain attached to the policy. A paid-up policy will not accrue any further red as the premiums paid bears to the total number of premiums i.e, Assured (number of premiums paid / number of premiums payable). bonuses. Riders do not acquire any paid-up value and the rider benefits cease to apply, . ifpolicy is in lapsed condition. surrender Value: The policyholder can surrender the policy for cash if he pays at-least three full year’s premiums. The Guaranteed Surrender value shall be percentage of total premiums paid (net of service tax) excluding extra premiums and, premiums for riders, if opted for. This percentage will depend on the policy term.and policy year in which policyholder surrenders the policy. In addition, the surrender value of any vested simple reversionary bonuses, if any, shall also be payable, which is equal to vested bonuses multiplied by the surrender value factor applicable to vested bonuses. These factors will depend on the policy term and policy year in which the policyholder surrenders the policy. LIC has a chart specifying the surrender value percentage and surrender value factors for each term and policy year. Though these charts specify the surrender value percentage and surrender value factors, LIC may pay Special Surrender value, if it.is more favourable to the Policyholder. Policy Loan: Loan’ can be availed under the policy provided the policy has acquired a surrender value and subject to the terms and conditions as the company may specify from time to time. Taxes: Taxes, if any, shall be as per the Tax laws and the rate of tax shall be as applicable from time to time. The amount of tax as-per the prevailing rates shall be payable by the Policyholder on premiums including extra premiums, if any. Calculation of benefits payable under the plan does not consider the amount of tax paid. YSYB.BL- An Overew of lsrane Sector (FCAV)(Sem-1V)E.C-IV) -S.V-B-BL (Sem.-ty 29's" ‘An Overview of Insurance Sector ( Cooling-off period: This is same as mentioned in Term Plan. Exclusion: ; Suicide : Policy becomes void e If the Life Assured (whether sane or insane) commits suicide at any time within 12 months from the date of commencement of risk and the Corporation will not entertain any claim under this policy except to the extent of 80% of the premiums paid excluding any taxes, extra premium and rider premiums, if any, provided the policy is in force. e If the Life Assured (whether sane or insane) commits suicide within 12 months from date of revival, an amount which is higher of 80% of the premiums paid till the date of death (excludin 8 any taxes, extra premium and rider premiums, if any, ) or the surrender value, Provided the policy is in force, shall be payable. The Corporation will not enter tain any other claim under this policy. : y 1.3 NON-TRADITIONAL INSURANCE PRODUCTS ite tripieenn na ae Seen ered “