keyman info 2

8/4/2019 Keyman Info 2

1/17

Life insurance orlife assurance is a contract between the policy owner and the insurer, wherethe insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of theinsured individual's or individuals' deathor other event, such as terminal illness or critical illness.In return, the policy owner agrees to pay a stipulated amount at regular intervals or in lumpsums. There may be designs in some countries where bills and death expenses plus catering for

after funeral expenses should be included in Policy Premium. In the United States, thepredominant form simply specifies a lump sum to be paid on the insured's demise.

As with most insurance policies, life insurance is a contract between the insurer and thepolicyownerwhereby a benefit is paid to the designatedbeneficiariesif an insured eventoccurs whichis covered by the policy.

The value for the policyholder is derived, not from an actual claim event, rather it is the valuederived from the 'peace of mind' experienced by the policyholder, due to the negating of adversefinancial consequences caused by the death of the Life Assured.

To be a life policy the insured eventmust be based upon the lives of the people named in thepolicy.

Insured events that may be covered include:

Serious illness

Life policies are legal contracts and the terms of the contract describe the limitations of theinsured events. Specific exclusions are often written into the contract to limit the liability of theinsurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

Life-based contracts tend to fall into two major categories:

Protectionpolicies - designed to provide a benefit in the event of specified event,typically a lump sum payment. A common form of this design is term insurance.

Investmentpolicies - where the main objective is to facilitate the growth of capital byregular or single premiums. Common forms (in the US anyway) arewhole life, universallife andvariable life policies.

Contents

[hide]

1 Overviewo 1.1 Parties to contract

o 1.2 Contract terms

o 1.3 Costs, insurability, and underwriting

o 1.4 Death proceeds

o 1.5 Insurance vs Assurance

2 Types of life insurance
http://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Deathhttp://en.wikipedia.org/wiki/Deathhttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Beneficiaryhttp://en.wikipedia.org/wiki/Beneficiaryhttp://en.wikipedia.org/wiki/Illnesshttp://en.wikipedia.org/wiki/Protectionhttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Whole_life_insurancehttp://en.wikipedia.org/wiki/Whole_life_insurancehttp://en.wikipedia.org/wiki/Universal_life_insurancehttp://en.wikipedia.org/wiki/Universal_life_insurancehttp://en.wikipedia.org/wiki/Variable_universal_life_insurancehttp://en.wikipedia.org/wiki/Variable_universal_life_insurancehttp://toggletoc%28%29/http://en.wikipedia.org/wiki/Life_insurance#Overviewhttp://en.wikipedia.org/wiki/Life_insurance#Parties_to_contracthttp://en.wikipedia.org/wiki/Life_insurance#Contract_termshttp://en.wikipedia.org/wiki/Life_insurance#Costs.2C_insurability.2C_and_underwritinghttp://en.wikipedia.org/wiki/Life_insurance#Death_proceedshttp://en.wikipedia.org/wiki/Life_insurance#Insurance_vs_Assurancehttp://en.wikipedia.org/wiki/Life_insurance#Types_of_life_insurancehttp://en.wikipedia.org/wiki/Deathhttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Beneficiaryhttp://en.wikipedia.org/wiki/Illnesshttp://en.wikipedia.org/wiki/Protectionhttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Whole_life_insurancehttp://en.wikipedia.org/wiki/Universal_life_insurancehttp://en.wikipedia.org/wiki/Universal_life_insurancehttp://en.wikipedia.org/wiki/Variable_universal_life_insurancehttp://toggletoc%28%29/http://en.wikipedia.org/wiki/Life_insurance#Overviewhttp://en.wikipedia.org/wiki/Life_insurance#Parties_to_contracthttp://en.wikipedia.org/wiki/Life_insurance#Contract_termshttp://en.wikipedia.org/wiki/Life_insurance#Costs.2C_insurability.2C_and_underwritinghttp://en.wikipedia.org/wiki/Life_insurance#Death_proceedshttp://en.wikipedia.org/wiki/Life_insurance#Insurance_vs_Assurancehttp://en.wikipedia.org/wiki/Life_insurance#Types_of_life_insurancehttp://en.wikipedia.org/wiki/Insurance


2/17


3/17

that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirementprevents people from benefiting from the purchase of purely speculative policies on people theyexpect to die. With no insurable interest requirement, the risk that a purchaser would murder theCQV for insurance proceeds would be great. In at least one case, an insurance company whichsold a policy to a purchaser with no insurable interest (who later murdered the CQV for the

proceeds), was found liable in court for contributing to thewrongful death of the victim (LibertyNational Life v. Weldon, 267 Ala.171 (1957)).

[edit] Contract terms

Special provisions may apply, such as suicide clauses wherein the policy becomes null if theinsured commits suicide within a specified time (usually two years after the purchase date; somestates provide a statutory one-year suicide clause). Any misrepresentations by the insured on theapplication is also grounds for nullification. Most US states specify that the contestability periodcannot be longer than two years; only if the insured dies within this period will the insurer have alegal right to contest the claim on the basis of misrepresentation and request additional

information before deciding to pay or deny the claim.

The face amount on the policy is the initial amount that the policy will pay at the death of theinsured or when the policy matures, although the actual death benefit can provide for greater orlesser than the face amount. The policy matures when the insured dies or reaches a specified age(such as 100 years old).

[edit] Costs, insurability, and underwriting

The insurer (the life insurance company) calculates the policy prices with intent to fund claims tobe paid and administrative costs, and to make a profit. The cost of insurance is determined using

mortality tables calculated byactuaries. Actuaries are professionals who employ actuarialscience, which is based in mathematics (primarily probability and statistics). Mortality tables arestatistically-based tables showing expected annual mortality rates. It is possible to derive lifeexpectancy estimates from these mortality assumptions. Such estimates can be important intaxation regulation.[1][2]

The three main variables in a mortality table have been age, gender, and use oftobacco. Morerecently in the US, preferred class specific tables were introduced. The mortality tables provide abaseline for the cost of insurance. In practice, these mortality tables are used in conjunction withthe health and family history of the individual applying for a policy in order to determinepremiums and insurability. Mortality tables currently in use by life insurance companies in the

United States are individually modified by each company using pooled industry experiencestudies as a starting point. In the 1980s and 90's the SOA 1975-80 Basic Select & Ultimate tableswere the typical reference points, while the 2001 VBT and 2001 CSO tables were publishedmore recently. The newer tables include separate mortality tables forsmokers and non-smokersand the CSO tables include separate tables for preferred classes. [3]

Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25will die during the first year of coverage after underwriting.[2] Mortality approximately doubles
http://en.wikipedia.org/wiki/Wrongful_deathhttp://en.wikipedia.org/wiki/Wrongful_deathhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=3http://en.wikipedia.org/wiki/Suicidehttp://en.wikipedia.org/wiki/Maturity_(finance)http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=4http://en.wikipedia.org/wiki/Actuaryhttp://en.wikipedia.org/wiki/Actuaryhttp://en.wikipedia.org/wiki/Actuaryhttp://en.wikipedia.org/wiki/Life_insurance#cite_note-0http://en.wikipedia.org/wiki/Life_insurance#cite_note-1http://en.wikipedia.org/wiki/Tobaccohttp://en.wikipedia.org/wiki/Tobaccohttp://en.wikipedia.org/wiki/Smokinghttp://en.wikipedia.org/wiki/Life_insurance#cite_note-2http://www.actuary.org/life/cso/appendix_a_jun02.xlshttp://www.actuary.org/life/cso/appendix_a_jun02.xlshttp://en.wikipedia.org/wiki/Wrongful_deathhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=3http://en.wikipedia.org/wiki/Suicidehttp://en.wikipedia.org/wiki/Maturity_(finance)http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=4http://en.wikipedia.org/wiki/Actuaryhttp://en.wikipedia.org/wiki/Life_insurance#cite_note-0http://en.wikipedia.org/wiki/Life_insurance#cite_note-1http://en.wikipedia.org/wiki/Tobaccohttp://en.wikipedia.org/wiki/Smokinghttp://en.wikipedia.org/wiki/Life_insurance#cite_note-2http://www.actuary.org/life/cso/appendix_a_jun02.xls


4/17

for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at age 65.[3]Compare this with the US populationmale mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health orsmoking status).[4]

The mortality of underwritten persons rises much more quickly than the general population. Atthe end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year.Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all ofaverage health, a life insurance company would have to collect approximately $50 a year fromeach of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deathsin each year x $100,000 payout per death = $35 per policy). Administrative and salescommissions need to be accounted for in order for this to make business sense. A 10 year policyfor a 25 year old non-smoking male person with preferred medical history may get offers as lowas $90 per year for a $100,000 policy in the competitive US life insurance market.

The insurance company receives the premiums from the policy owner and invests them to create

a pool of money from which it can pay claims and finance the insurance company's operations.Contrary to popular belief, the majority of the money that insurance companies make comesdirectly from premiums paid, as money gained through investment of premiums can never, ineven the most ideal market conditions, vest enough money per year to pay out claims.[citation needed]

Rates charged for life insurance increase with the insurer's age because, statistically, people aremore likely to die as they get older.

Given that adverse selection can have a negative impact on the insurer's financial situation, theinsurer investigates each proposed insured individual unless the policy is below a company-established minimum amount, beginning with the application process. Group Insurance policiesare an exception.

This investigation and resulting evaluation of the risk is termedunderwriting.Health andlifestyle questions are asked. Certain responses or information received may merit furtherinvestigation. Life insurance companies in the United States support the Medical InformationBureau (MIB) [4], which is a clearinghouse of information on persons who have applied for lifeinsurance with participating companies in the last seven years. As part of the application, theinsurer receives permission to obtain information from the proposed insured's physicians.[5]

Underwriters will determine the purpose of insurance. The most common is to protect theowner's family or financial interests in the event of the insurer's demise. Other purposes includeestate planning or, in the case of cash-value contracts, investment for retirement planning. Bankloans or buy-sell provisions of business agreements are another acceptable purpose.

Life insurance companies are never required by law to underwrite or to provide coverage toanyone, with the exception ofCivil Rights Act compliance requirements. Insurance companiesalone determine insurability, and some people, for their own health or lifestyle reasons, aredeemed uninsurable. The policy can be declined (turned down) or rated.[citation needed] Ratingincreases the premiums to provide for additional risks relative to the particular insured.[citation needed]
http://www.actuary.org/life/cso/appendix_a_jun02.xlshttp://www.actuary.org/life/cso/appendix_a_jun02.xlshttp://www.cdc.gov/nchs/data/nvsr/nvsr52/nvsr52_14.pdfhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Group_Insurancehttp://en.wikipedia.org/wiki/Underwritinghttp://en.wikipedia.org/wiki/Underwritinghttp://en.wikipedia.org/wiki/Medical_Underwritinghttp://en.wikipedia.org/wiki/Medical_Underwritinghttp://en.wikipedia.org/wiki/Life_insurance#cite_note-3http://en.wikipedia.org/wiki/Life_insurance#cite_note-4http://en.wikipedia.org/wiki/Civil_Rights_Acthttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://www.actuary.org/life/cso/appendix_a_jun02.xlshttp://www.cdc.gov/nchs/data/nvsr/nvsr52/nvsr52_14.pdfhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Group_Insurancehttp://en.wikipedia.org/wiki/Underwritinghttp://en.wikipedia.org/wiki/Medical_Underwritinghttp://en.wikipedia.org/wiki/Life_insurance#cite_note-3http://en.wikipedia.org/wiki/Life_insurance#cite_note-4http://en.wikipedia.org/wiki/Civil_Rights_Acthttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_needed


5/17

Many companies use four general health categories for those evaluated for a life insurancepolicy. These categories are Preferred Best, Preferred, Standard, and Tobacco.[citation needed]

Preferred Best is reserved only for the healthiest individuals in the general population. Thismeans, for instance, that the proposed insured has no adverse medical history, is not undermedication for any condition, and his family (immediate and extended) have no history of early

cancer,diabetes, or other conditions.[5]Preferred means that the proposed insured is currentlyunder medication for a medical condition and has a family history of particular illnesses.[citationneeded] Most people are in the Standard category. [citation needed] Profession, travel, and lifestyle factorinto whether the proposed insured will be granted a policy, and which category the insured falls.For example, a person who would otherwise be classified as Preferred Best may be denied apolicy if he or she travels to a high risk country. [citation needed] Underwriting practices can vary frominsurer to insurer which provide for more competitive offers in certain circumstances.

[edit] Death proceeds

Upon the insured's death, the insurer requires acceptable proof of death before it pays the claim.

The normal minimum proof required is a death certificate and the insurer's claim formcompleted, signed (and typicallynotarized).[citation needed] If the insured's death is suspicious and thepolicy amount is large, the insurer may investigate the circumstances surrounding the deathbefore deciding whether it has an obligation to pay the claim.

Proceeds from the policy may be paid as a lump sum or as an annuity, which is paid over time inregular recurring payments for either a specified period orfor a beneficiary's lifetime.[citation needed]

[edit] Insurance vs Assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In general,

in these jurisdictions "insurance" refers to providing cover for an event that might happen (fire,theft, flood, etc.), while "assurance" is the provision of cover for an event that is certain tohappen. "Insurance" is the generally accepted term, however, people using this description areliable to be corrected. In the United States both forms of coverage are called "insurance",principally due to many companies offering both types of policy, and rather than refer tothemselves using both insurance and assurance titles, they instead use just one.

[edit] Types of life insurance

Life insurance may be divided into two basic classes temporary and permanent or followingsubclasses - term, universal, whole life and endowment life insurance.

[edit] Temporary Term Insurance

Term assurance provides life insurance coverage for a specified term of years in exchange for a specifiedpremium. The policy does not accumulate cash value. Term is generally considered "pure" insurance,where the premium buys protection in the event of death and nothing else.

There are three key factors to be considered in term insurance:
http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Cancerhttp://en.wikipedia.org/wiki/Cancerhttp://en.wikipedia.org/wiki/Diabeteshttp://www.lifeinsure.com/lifeinsurance/Insurance-Rating-Classifications.asphttp://www.lifeinsure.com/lifeinsurance/Insurance-Rating-Classifications.asphttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=5http://en.wikipedia.org/wiki/Death_certificatehttp://en.wikipedia.org/wiki/Notary_publichttp://en.wikipedia.org/wiki/Notary_publichttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Annuity_(financial_contracts)http://en.wikipedia.org/wiki/Annuity_(financial_contracts)http://en.wikipedia.org/wiki/Life_annuityhttp://en.wikipedia.org/wiki/Life_annuityhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=6http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=7http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=8http://en.wikipedia.org/wiki/Premiumhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Cancerhttp://en.wikipedia.org/wiki/Diabeteshttp://www.lifeinsure.com/lifeinsurance/Insurance-Rating-Classifications.asphttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=5http://en.wikipedia.org/wiki/Death_certificatehttp://en.wikipedia.org/wiki/Notary_publichttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Annuity_(financial_contracts)http://en.wikipedia.org/wiki/Life_annuityhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=6http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=7http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=8http://en.wikipedia.org/wiki/Premium


6/17

1. Face amount (protection or death benefit),2. Premium to be paid (cost to the insured), and3. Length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these

three parameters. The face amount can remain constant or decline. The term can be for one ormore years. The premium can remain level or increase. A common type of term is called annualrenewable term. It is a one year policy but the insurance company guarantees it will issue apolicy of equal or lesser amount without regard to the insurability of the insured and with apremium set for the insured's age at that time. Another common type of term insurance ismortgage insurance, which is usually a level premium, declining face value policy. The faceamount is intended to equal the amount of the mortgage on the policy owners residence so themortgage will be paid if the insured dies.

A policy holder insures his life for a specified term. If he dies before that specified term is up, hisestate or named beneficiary receives a payout. If he does not die before the term is up, he

receives nothing. In the past these policies would almost always exclude suicide. However, aftera number of court judgments against the industry, payouts do occur on death by suicide(presumably except for in the unlikely case that it can be shown that the suicide was just tobenefit from the policy). Generally, if an insured person commits suicide within the first twopolicy years, the insurer will return the premiums paid. However, a death benefit will usually bepaid if the suicide occurs after the two year period.

[edit] Permanent Life Insurance

Permanent life insuranceis life insurance that remains in force (in-line) until the policy matures(pays out), unless the owner fails to pay the premium when due (the policy expires OR policies

lapse). The policy cannot be canceled by the insurer for any reason except fraud in theapplication, and that cancellation must occur within a period of time defined by law (usually twoyears). Permanent insurance builds a cash value that reduces the amount at risk to the insurancecompany and thus the insurance expense over time. This means that a policy with a milliondollar face value can be relatively expensive to a 70 year old. The owner can access the money inthe cash value by withdrawing money, borrowing the cash value, or surrendering the policy andreceiving the surrender value.

The four basic types of permanent insurance are whole life, universal life, limited pay andendowment.

[edit] Whole life coverage

Whole life insurance provides for a level premium, and a cash value table included in the policyguaranteed by the company. The primary advantages of whole life are guaranteed death benefits,guaranteed cash values, fixed and known annual premiums, and mortality and expense chargeswill not reduce the cash value shown in the policy. The primary disadvantages of whole life arepremium inflexibility, and the internal rate of return in the policy may not be competitive withother savings alternatives. Also, the cash values are generally kept by the insurance company at
http://en.wikipedia.org/wiki/Mortgage_insurancehttp://en.wikipedia.org/wiki/Mortgage_insurancehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=9http://en.wikipedia.org/wiki/Permanent_life_insurancehttp://en.wikipedia.org/wiki/Permanent_life_insurancehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=10http://en.wikipedia.org/wiki/Whole_life_insurancehttp://en.wikipedia.org/wiki/Mortgage_insurancehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=9http://en.wikipedia.org/wiki/Permanent_life_insurancehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=10http://en.wikipedia.org/wiki/Whole_life_insurance


7/17

the time of death, the death benefit only to the beneficiaries. Riders are available that can allowone to increase the death benefit by paying additional premium. The death benefit can also beincreased through the use of policy dividends. Dividends cannot be guaranteed and may behigher or lower than historical rates over time. Premiums are much higher than term insurance inthe short-term, but cumulative premiums are roughly equal if policies are kept in force until

average life expectancy.

Cash value can be accessed at any time through policy "loans". Since these loans decrease thedeath benefit if not paid back, payback is optional. Cash values are not paid to the beneficiaryupon the death of the insured; the beneficiary receives the death benefit only. If the dividendoption: Paid up additions is elected, dividend cash values will purchase additional death benefitwhich will increase the death benefit of the policy to the named beneficiary.

[edit] Universal life coverage

Universal life insurance (UL) is a relatively new insurance product intended to provide

permanent insurance coverage with greater flexibility in premium payment and the potential fora higher internal rate of return. There are several types of universal life insurance policies whichinclude "interest sensitive" (also known as "traditional fixed universal life insurance"), variableuniversal life insurance, and equity indexed universal life insurance.

A universal life insurance policy includes a cash account. Premiums increase the cash account.Interest is paid within the policy (credited) on the account at a rate specified by the company.Mortality charges and administrative costs are then charged against (reduce) the cash account.The surrender value of the policy is the amount remaining in the cash account less applicablesurrender charges, if any.

With all life insurance, there are basically two functions that make it work. There's a mortalityfunction and a cash function. The mortality function would be the classical notion of pooling riskwhere the premiums paid by everybody else would cover the death benefit for the one or twowho will die for a given period of time. The cash function inherent in all life insurance says thatif a person is to reach age 95 to 100 (the age varies depending on state and company), then thepolicy matures and endows the face value of the policy.

Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age 95,then the mortality function alone will not be able to cover the cash function. So in order to coverthe cash function, a minimum rate of investment return on the premiums will be required in theevent that a policy matures.

Universal life insurance addresses the perceived disadvantages of whole life. Premiums areflexible. Depending on how interest is credited, the internal rate of return can be higher becauseit moves with prevailing interest rates (interest-sensitive) or the financial markets (EquityIndexed Universal Life and Variable Universal Life). Mortality costs and administrative chargesare known. And cash value may be considered more easily attainable because the owner candiscontinue premiums if the cash value allows it. And universal life has a more flexible deathbenefit because the owner can select one of two death benefit options, Option A and Option B.
http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=11http://en.wikipedia.org/wiki/Universal_life_insurancehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=11http://en.wikipedia.org/wiki/Universal_life_insurance


8/17

Option A pays the face amount at death as it's designed to have the cash value equal the deathbenefit at maturity (usually at age 95 or 100). With each premium payment, the policy owner isreducing the cost of insurance until the cash value reaches the face amount upon maturity.

Option B pays the face amount plus the cash value, as it's designed to increase the net death

benefit as cash values accumulate. Option B offers the benefit of an increasing death benefitevery year that the policy stays in force. The drawback to option B is that because the cash valueis accumulated "on top of" the death benefit, the cost of insurance never decreases as premiumpayments are made. Thus, as the insured gets older, the policy owner is faced with an everincreasing cost of insurance (it costs more money to provide the same initial face amount ofinsurance as the insured gets older).

[edit] Limited-pay

Another type of permanent insurance isLimited-pay life insurance, in which all the premiumsare paid over a specified period after which no additional premiums are due to keep the policy in

force. Common limited pay periods include 10-year, 20-year, and paid-up at age 65.

[edit] Endowments

Main article:Endowment policy

Endowments are policies in which the cash value built up inside the policy, equals the deathbenefit (face amount) at a certain age. The age this commences is known as the endowment age.Endowments are considerably more expensive (in terms of annual premiums) than either wholelife or universal life because the premium paying period is shortened and the endowment date isearlier.

In the United States, the Technical Corrections Act of 1988tightened the rules on tax shelters(creating modified endowments). These follow tax rules asannuities and IRAs do.

Endowment Insurance is paid out whether the insured lives or dies, after a specific period (e.g.15 years) or a specific age (e.g. 65).

[edit] Accidental Death

Accidental death is a limited life insurance that is designed to cover the insured when they passaway due to an accident. Accidents include anything from an injury, but do not typically cover

any deaths resulting from health problems or suicide. Because they only cover accidents, thesepolicies are much less expensive than other life insurances.

It is also very commonly offered as "accidental death and dismemberment insurance", alsoknown as anAD&D policy. In anAD&D policy, benefits are available not only for accidentaldeath, but also for loss of limbs or bodily functions such as sight and hearing, etc.
http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=12http://en.wikipedia.org/w/index.php?title=Limited-pay_life_insurance&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Limited-pay_life_insurance&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=13http://en.wikipedia.org/wiki/Endowment_policyhttp://en.wikipedia.org/wiki/Endowment_policyhttp://en.wikipedia.org/w/index.php?title=Technical_Corrections_Act_of_1988&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Technical_Corrections_Act_of_1988&action=edit&redlink=1http://en.wikipedia.org/wiki/Endowment_policyhttp://en.wikipedia.org/wiki/Annuity_(US_financial_products)http://en.wikipedia.org/wiki/Annuity_(US_financial_products)http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=14http://en.wikipedia.org/wiki/Accidental_death_and_dismemberment_insurancehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=12http://en.wikipedia.org/w/index.php?title=Limited-pay_life_insurance&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=13http://en.wikipedia.org/wiki/Endowment_policyhttp://en.wikipedia.org/wiki/Endowment_policyhttp://en.wikipedia.org/w/index.php?title=Technical_Corrections_Act_of_1988&action=edit&redlink=1http://en.wikipedia.org/wiki/Endowment_policyhttp://en.wikipedia.org/wiki/Annuity_(US_financial_products)http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=14http://en.wikipedia.org/wiki/Accidental_death_and_dismemberment_insurance


9/17

Accidental death andAD&D policies very rarely pay a benefit; either the cause of death is notcovered, or the coverage is not maintained after the accident until death occurs. To be aware ofwhat coverage they have, an insured should always review their policy for what it covers andwhat it excludes. Often, it does not cover an insured who puts themselves at risk in activitiessuch as: parachuting, flying an airplane, professional sports, or involvement in a war (military or

not). Also, some insurers will exclude death and injury caused by proximate causes due to (butnot limited to) racing on wheels and mountaineering.

Accidental death benefits can also be added to a standard life insurance policy as a rider. If thisrider is purchased, the policy will generally pay double the face amount if the insured dies due toan accident. This used to be commonly referred to as a double indemnity coverage. In somecases, some companies may even offer a triple indemnity cover.

[edit] Related Life Insurance Products

Riders are modifications to the insurance policy added at the same time the policy is issued.

These riders change the basic policy to provide some feature desired by the policy owner. Acommon rider is accidental death, which used to be commonly referred to as "double indemnity",which pays twice the amount of the policy face value if death results from accidental causes, as ifboth a full coverage policy and an accidental death policy were in effect on the insured. Anothercommon rider is premium waiver, which waives future premiums if the insured becomesdisabled.

Joint life insurance is either a term or permanent policy insuring two or more lives with theproceeds payable on the first death or second death.

Survivorship life: is a whole life policy insuring two lives with the proceeds payable on the

second (later) death.

Single premium whole life: is a policy with only one premium which is payable at the time thepolicy is issued.

Modified whole life: is a whole life policy that charges smaller premiums for a specified periodof time after which the premiums increase for the remainder of the policy.

Group life insurance: is term insurance covering a group of people, usually employees of acompany or members of a union or association. Individual proof of insurability is not normally aconsideration in the underwriting. Rather, the underwriter considers the size and turnover of the

group, and the financial strength of the group. Contract provisions will attempt to exclude thepossibility of adverse selection. Group life insurance often has a provision that a member exitingthe group has the right to buy individual insurance coverage.

Senior and preneed products: Insurance companies have in recent years developed products tooffer to niche markets, most notably targeting the senior market to address needs of an agingpopulation. Many companies offer policies tailored to the needs of senior applicants. These areoften low to moderate face value whole life insurance policies, to allow a senior citizen
http://en.wikipedia.org/wiki/Double_indemnityhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=15http://en.wikipedia.org/wiki/Double_indemnityhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=15


10/17

purchasing insurance at an older issue age an opportunity to buy affordable insurance. This mayalso be marketed as final expense insurance, and an agent or company may suggest (but notrequire) that the policy proceeds could be used for end-of-life expenses.

Preneed (or prepaid) insurance policies: are whole life policies that, although available at any

age, are usually offered to older applicants as well. This type of insurance is designedspecifically to coverfuneralexpenses when the insured person dies. In many cases, the applicantsigns a prefunded funeral arrangement with a funeral home at the time the policy is applied for.The death proceeds are then guaranteed to be directed first to the funeral services provider forpayment of services rendered. Most contracts dictate that any excess proceeds will go either tothe insured's estate or a designated beneficiary.

[edit] Investment policies

With-profits policies:

Main article: With-profits policy

Some policies allow the policyholder to participate in the profits of the insurance company theseare with-profits policies. Other policies have no rights to participate in the profits of thecompany, these are non-profitpolicies.

With-profits policies are used as a form ofcollective investmentto achieve capital growth. Otherpolicies offer a guaranteed return not dependent on the company's underlying investmentperformance; these are often referred to as without-profitpolicies which may be construed as amisnomer.

Investment Bonds

Main article:Insurance bond

Pensions: Pensions are a form of life assurance. However, whilst basic life assurance,permanenthealth insuranceand non-pensions annuity business includes an amount ofmortality ormorbidityriskfor the insurer, for pensions there is a longevity risk.

A pension fund will be built up throughout a person's working life. When the person retires, thepension will become in payment, and at some stage the pensioner will buy an annuity contract,which will guarantee a certain pay-out each month until death.

[edit] Annuities

An annuity is a contract with an insurance company whereby the insured pays an initial premiumor premiums into a tax-deferred account, which pays out a sum at pre-determined intervals.There are two periods: the accumulation (when payments are paid into the account) and the
http://en.wikipedia.org/wiki/Funeralhttp://en.wikipedia.org/wiki/Funeralhttp://en.wikipedia.org/wiki/Funeral_homehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=16http://en.wikipedia.org/wiki/With-profits_policyhttp://en.wikipedia.org/wiki/With-profits_policyhttp://en.wikipedia.org/wiki/Collective_investmenthttp://en.wikipedia.org/wiki/Collective_investmenthttp://en.wikipedia.org/wiki/Insurance_bondhttp://en.wikipedia.org/wiki/Permanent_health_insurancehttp://en.wikipedia.org/wiki/Permanent_health_insurancehttp://en.wikipedia.org/wiki/Permanent_health_insurancehttp://en.wikipedia.org/w/index.php?title=Mortality_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Mortality_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Morbidity_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Morbidity_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Morbidity_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Longevity_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=17http://en.wikipedia.org/wiki/Funeralhttp://en.wikipedia.org/wiki/Funeral_homehttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=16http://en.wikipedia.org/wiki/With-profits_policyhttp://en.wikipedia.org/wiki/With-profits_policyhttp://en.wikipedia.org/wiki/Collective_investmenthttp://en.wikipedia.org/wiki/Insurance_bondhttp://en.wikipedia.org/wiki/Permanent_health_insurancehttp://en.wikipedia.org/wiki/Permanent_health_insurancehttp://en.wikipedia.org/w/index.php?title=Mortality_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Morbidity_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Morbidity_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Longevity_risk&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=17


11/17

annuitization (when the insurance company pays out). IRS rules restrict how you take money outof an annuity. Distributions may be taxable and/or penalized.

[edit] Pension Term Assurance

Although available before April 2006, from this datepension term assurancebecame widelyavailable in the UK. Most UK product providers adopted the name "life insurance with taxrelief" for the product.Pension term assuranceis effectively normal term life assurance with taxrelief on the premiums. All premiums are paid net of basic rate tax at 22%, and higher rate taxpayers can gain an extra 18% tax relief via their tax return. Although not suitable for all, PTAbriefly became one of the most common forms of life assurance sold in the UK until theChancellor, Gordon Brown, announced the withdrawal of the scheme in his pre-budgetannouncement on 6 December 2006. The tax relief ceased to be available to new policiestransacted after 6 December 2006, however, existing policies have been allowed to enjoy taxrelief so far.

[edit] History

Main article:History of insurance

Insurance began as a way of reducing the risk of traders, as early as 5000 BC in China and 4500BC inBabylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost ofmembers' funeral expenses and helped survivors monetarily. Modern life insurance started in17th century England, originally as insurance for traders[7] : merchants, ship owners andunderwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's ofLondon.

The first insurance company in the United Stateswas formed in Charleston, South Carolinain1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late1760s. ThePresbyterian Synods in Philadelphia andNew Yorkcreated the Corporation forRelief 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 twodozen life insurance companies were started, but fewer than half a dozen survived.

Prior to the American Civil War, many insurance companies in the United States insured thelives of slaves for their owners. In response to bills passed in California in 2001 and inIllinois in2003, the companies have been required to search their records for such policies.New York Lifefor example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year

period in the 1840s; they added that their trustees voted to end the sale of such policies 15 yearsbefore the Emancipation Proclamation.

[edit] Market trends

Life insurance premiums written in 2005
http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=21http://en.wikipedia.org/wiki/Pension_term_assurancehttp://en.wikipedia.org/wiki/Pension_term_assurancehttp://en.wikipedia.org/wiki/Pension_term_assurancehttp://en.wikipedia.org/wiki/Pension_term_assurancehttp://en.wikipedia.org/wiki/Pension_term_assurancehttp://en.wikipedia.org/wiki/Gordon_Brownhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=22http://en.wikipedia.org/wiki/History_of_insurancehttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Babylonhttp://en.wikipedia.org/wiki/Babylonhttp://en.wikipedia.org/wiki/Englandhttp://en.wikipedia.org/wiki/Englandhttp://en.wikipedia.org/wiki/Life_insurance#cite_note-6http://en.wikipedia.org/wiki/Lloyd's_of_Londonhttp://en.wikipedia.org/wiki/Lloyd's_of_Londonhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Charleston,_South_Carolinahttp://en.wikipedia.org/wiki/Charleston,_South_Carolinahttp://en.wikipedia.org/wiki/Presbyterianhttp://en.wikipedia.org/wiki/Presbyterianhttp://en.wikipedia.org/wiki/Philadelphiahttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/Episcopal_Church_in_the_United_States_of_Americahttp://en.wikipedia.org/wiki/American_Civil_Warhttp://en.wikipedia.org/wiki/Slave_insurance_in_the_United_Stateshttp://en.wikipedia.org/wiki/Slave_insurance_in_the_United_Stateshttp://en.wikipedia.org/wiki/Californiahttp://en.wikipedia.org/wiki/Illinoishttp://en.wikipedia.org/wiki/Illinoishttp://en.wikipedia.org/wiki/New_York_Life_Insurance_Companyhttp://en.wikipedia.org/wiki/Emancipation_Proclamationhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=23http://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=21http://en.wikipedia.org/wiki/Pension_term_assurancehttp://en.wikipedia.org/wiki/Pension_term_assurancehttp://en.wikipedia.org/wiki/Gordon_Brownhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=22http://en.wikipedia.org/wiki/History_of_insurancehttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Babylonhttp://en.wikipedia.org/wiki/Englandhttp://en.wikipedia.org/wiki/Life_insurance#cite_note-6http://en.wikipedia.org/wiki/Lloyd's_of_Londonhttp://en.wikipedia.org/wiki/Lloyd's_of_Londonhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Charleston,_South_Carolinahttp://en.wikipedia.org/wiki/Presbyterianhttp://en.wikipedia.org/wiki/Philadelphiahttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/Episcopal_Church_in_the_United_States_of_Americahttp://en.wikipedia.org/wiki/American_Civil_Warhttp://en.wikipedia.org/wiki/Slave_insurance_in_the_United_Stateshttp://en.wikipedia.org/wiki/Slave_insurance_in_the_United_Stateshttp://en.wikipedia.org/wiki/Californiahttp://en.wikipedia.org/wiki/Illinoishttp://en.wikipedia.org/wiki/New_York_Life_Insurance_Companyhttp://en.wikipedia.org/wiki/Emancipation_Proclamationhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=23


12/17

According to a study by Swiss Re, the EUwas the largest market for life insurance premiumswritten in 2005 followed by the USA and Japan.

[edit] Stranger Originated Life Insurance

Stranger Originated Life Insurance orSTOLI is a life insurance policy that is held or financed bya person who has no relationship to the insured person. Generally, the purpose of life insurance isto provide peace of mind by assuring that financial loss or hardship will be lessened oreliminated in the event of the insured person's death. STOLI has often been used as aninvestment technique whereby investors will encourage someone (usually an elderly person) topurchase life insurance and name the investors as the beneficiary of the policy. This underminesthe primary purpose of life insurance as the investors have no financial loss that would occur ifthe insured person were to die. In some jurisdictions, there are laws to discourage or preventSTOLI.

[edit] CriticismAlthough some aspects of the application process (such as underwriting and insurable interestprovisions) make it difficult, life insurance policies have been used in cases of exploitation andfraud. In the case of life insurance, there is a motivation to purchase a life insurance policy,particularly if the face value is substantial, and then kill the insured. Usually, the larger the claim,and/or the more serious the incident, the larger and more intense will be the number ofinvestigative layers, consisting in police and insurer investigation, eventually also loss adjustershired by the insurers to work independently.[8]

The television seriesForensic Fileshas included episodes that feature this scenario. There was

also a documented case in 2006, where two elderly women are accused of taking in homelessmen and assisting them. As part of their assistance, they took out life insurance on the men. Afterthe contestability period ended on the policies (most life contracts have a standard contestabilityperiod of two years), the women are alleged to have had the men killed via hit-and-run carcrashes.[9]

Recently, viatical settlements have created problems for life insurance carriers. A viaticalsettlement involves the purchase of a life insurance policy from an elderly or terminally ill policyholder. The policy holder sells the policy (including the right to name the beneficiary) to apurchaser for a price discounted from the policy value. The seller has cash in hand, and thepurchaser will realize a profit when the seller dies and the proceeds are delivered to the

purchaser. In the meantime, the purchaser continues to pay the premiums. Although both partieshave reached an agreeable settlement, insurers are troubled by this trend. Insurers calculate theirrates with the assumption that a certain portion of policy holders will seek to redeem the cashvalue of their insurance policies before death. They also expect that a certain portion will stoppaying premiums and forfeit their policies. However, viatical settlements ensure that suchpolicies will with absolute certainty be paid out. Some purchasers, in order to take advantage ofthe potentially large profits, have even actively sought to collude with uninsured elderly and
http://en.wikipedia.org/wiki/Swiss_Rehttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=24http://en.wikipedia.org/wiki/STOLIhttp://en.wikipedia.org/wiki/STOLIhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=25http://en.wikipedia.org/wiki/Loss_adjusterhttp://en.wikipedia.org/wiki/Life_insurance#cite_note-7http://en.wikipedia.org/wiki/Television_serieshttp://en.wikipedia.org/wiki/Forensic_Fileshttp://en.wikipedia.org/wiki/Forensic_Fileshttp://en.wikipedia.org/wiki/Forensic_Fileshttp://en.wikipedia.org/wiki/Life_insurance#cite_note-8http://en.wikipedia.org/wiki/Viatical_settlementhttp://en.wikipedia.org/wiki/Swiss_Rehttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=24http://en.wikipedia.org/wiki/STOLIhttp://en.wikipedia.org/w/index.php?title=Life_insurance&action=edit&section=25http://en.wikipedia.org/wiki/Loss_adjusterhttp://en.wikipedia.org/wiki/Life_insurance#cite_note-7http://en.wikipedia.org/wiki/Television_serieshttp://en.wikipedia.org/wiki/Forensic_Fileshttp://en.wikipedia.org/wiki/Life_insurance#cite_note-8http://en.wikipedia.org/wiki/Viatical_settlement


13/17

terminally ill patients, and created policies that would have not otherwise been purchased.Likewise, these policies are guaranteed losses from the insurers' perspective

Term InsurancePolicy

Whole Life Policy

Endowment Policy

Money Back Policy

Annuities And Pension

Most of the products offered by Indian life insurers are developed and structuredaround these "basic" policies and are usually an extension or a combination of thesepolicies. So, what are these policies and how do they differ from each other?

Term Insurance Policy

A term insurance policy is a pure risk cover for a specified period of time. What thismeans is that the sum assured is payable only if the policyholder dies within the policyterm. For instance, if a person buys Rs 2 lakh policy for 15-years, his family is entitled to

the money if he dies within that 15-year period. What if he survives the 15-year period? Well, then he is not entitled to any payment; the

insurance company keeps the entire premium paid during the 15-year period. So, there is no element of savings or investment in such a policy. It is a 100 per cent risk

cover. It simply means that a person pays a certain premium to protect his family againsthis sudden death. He forfeits the amount if he outlives the period of the policy. Thisexplains why the Term Insurance Policy comes at the lowest cost.

Whole Life Policy

As the name suggests, a Whole Life Policy is an insurance cover against death,irrespective of when it happens.

Under this plan, the policyholder pays regular premiums until his death, following whichthe money is handed over to his family.
http://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Termhttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Termhttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Wholehttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#endowmenthttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Moneyhttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Annuitieshttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#tophttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Termhttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Termhttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Wholehttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#endowmenthttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Moneyhttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#Annuities


14/17

This policy, however, fails to address the additional needs of the insured during hispost-retirement years. It doesn't take into account a person's increasing needs either.While the insured buys the policy at a young age, his requirements increase over time.By the time he dies, the value of the sum assured is too low to meet his family's needs.As a result of these drawbacks, insurance firms now offer either a modified Whole Life

Policy or combine in with another type of policy

Endowment Policy

Combining risk cover with financial savings, endowment policies is the most popularpolicies in the world of life insurance.

In an Endowment Policy, the sum assured is payable even if the insured survives thepolicy term.

If the insured dies during the tenure of the policy, the insurance firm has to pay the sumassured just as any other pure risk cover.

A pure endowment policy is also a form of financial saving, whereby if the personcovered remains alive beyond the tenure of the policy, he gets back the sum assuredwith some other investment benefits.

In addition to the basic policy, insurers offer various benefits such as doubleendowment and marriage/ education endowment plans. The cost of such a policy is

slightly higher but worth its value.

Money Back Policy

These policies are structured to provide sums required as anticipated expenses(marriage, education, etc) over a stipulated period of time. With inflation becoming a bigissue, companies have realized that sometimes the money value of the policy is eroded.That is why with-profit policies are also being introduced to offset some of the losses

incurred on account of inflation. A portion of the sum assured is payable at regular intervals. On survival the remainder of

the sum assured is payable. In case of death, the full sum assured is payable to the insured. The premium is payable for a particular period of time.
http://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#tophttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#tophttp://www.kotaklifeinsurance.com/omkm3/insuranceguide/typeoflife.htm#top


15/17

Annuities And Pension

In an annuity, the insurer agrees to pay the insured a stipulated sum of moneyperiodically. The purpose of an annuity is to protect against risk as well as providemoney in the form of pension at regular intervals.

Over the years, insurers have added various features to basic insurance policies inorder to address specific needs of a cross section of people.

Images

Endowment policy


16/17

anuuties


17/17

Term assurence

keyman info 2

Documents