Life Insurance Lecture Notes PDF

CF Life AInsurance www.proschoolonline.com Life Insurance: Context Is unique amongst Insurance policies in that every policy will pay out if in force Risk is taken by both parties Insurer risk is pay-ou...

CF Life AInsurance www.proschoolonline.com Life Insurance: Context Is unique amongst Insurance policies in that every policy will pay out if in force Risk is taken by both parties Insurer risk is pay-out within a short while of policy issuance Policy-holder risk is outliving the policy or live a long time and pay premiums 1. Term 2. Traditional 3. Non-traditional 4. Joint-life Is for a term E.g., Provide whole life Allow more Cover more than 20 years benefit regardless flexibility and one insurer Original form of of when one dies unbundling Used for business insurance Used as means of Allows tax- buy-sell or for Used to cover risk providing an deferred estate planning of during working inheritance or a investment couples years source of cash flow opportunities (akin to mutual funds) www.proschoolonline.com www.proschoolonline.co m 1. Term Insurance Fixed Term: Used to cover a period (term) when loss of life is a risk Typically, till one reaches 60 or 70 years Post this age, premiums become exorbitant (ref image) Post this age, Term Insurance is rarely renewed, as reached retirement age and thus no loss in income or child has started working so parent’s risk of support income has passed Decreasing term: Used to cover outstanding debt (e.g., home loans or similar) Premiums are fixed but less than than Fixed Term Has a decreasing death benefit that roughly matches amortization schedule of loan www.proschoolonline.com www.proschoolonline.co m 2. Traditional Permanent policies Insurance Co. creates a cash value from premiums that can generates conservative returns Three types of traditional policies are available Whole Life Limited / Modified Life Endowment Protects for whole life 1.Limited Life are like On completion, the Endow at a specific Whole life, but with Policy holder will age, e.g. 100 or older fewer, larger premiums receive cash proceeds Initial premiums are 2.Modified Life equal to death value much higher and are combines term and These are used to be converted to cash whole life. popular as savings value after policy Used to cover vehicles, but have expenses are paid children (term) then become less popular switches to whole. nowadays www.proschoolonline.com www.proschoolonline.co m 3. Non-Traditional Permanent policies Allow more flexibility than traditional policies as well as unbundling Provide access to tax-deferred investment opportunities (akin to mutual funds) Universal Life Variable Life Variable Universal Flexible / adjustable Are fixed and bundled Flexible + unbundled premiums, that can be Allows the policy- Combines the flexible skipped occasionally if holder to select high- premium approach cash value is sufficient return investment with the option to Unbundles mortality vehicles for cash value invest in high-return charges, expense At the cost of foregoing vehicles charges, interest rates the cash value Guarantees only guarantee mortality charges www.proschoolonline.com www.proschoolonline.co m 4. Joint Life Cover more than one insurer Can be structured as either whole life or universal life policies First to die policy Second to die policy Covers 2 or more individuals Covers two people Pays death benefit when the first Pays death benefit on death of the person covered dies second person (survivorship policy) Suitable for business buy-sell Suitable for Estate planning of a agreements couple on 2nd death Cheaper than two single policies Cheaper than two single policies www.proschoolonline.com www.proschoolonline.co m Key concepts of individual life insurance Entire contract clause states entire policy along with attached application constitutes the contract and any changes must be in writing / signed by the company (waiver clause) Ownership rights three entities (policyholder, insured, beneficiary) of which the policy- holder has all policy rights. Owner can assign rights (Absolute = All, Collateral = Some) to another person, e.g., Collateral to a bank as security for a loan Grace period typically 30 or 31 days from due date of premium. If paid within this period, policy will not lapse. In case of death during this period, death benefit is adjusted. Contestable period The initial 1 or 2 years during which an insurer can contest death proceeds arising from misstatement or misrepresentation (i.e., disclosures). Thereafter insurer cannot deny a claim on these grounds, except in case of blatant fraud. Misstatement of age should the insurer misstate his or her age, the insurer will adjust the death benefit accordingly based on premium provided for the correct age. www.proschoolonline.com www.proschoolonline.co m Key concepts of individual life insurance Reinstatement allows policy to be reinstated on clearing of past dues and proof of insurability any time post lapse to even up to 7 years in some cases. Nonforfeiture options Cash value polices have this for situations where policyholder no longer wants to pay premiums. A nonforfeiture table provided by Insurer shows amounts available for each policy year that can be used to adjust policy Policy loan allows policy-holder to borrow against Cash Value. Unpaid loans or interest are deducted from proceeds on death, or if large enough, can cause policy to lapse with tax implications. Interest rates charged by the Insurer similar to any loan. Suicide/ Aviation / War exclusions special exclusions for Suicide (if within 2 years of policy start, only premiums with interest are returnable), Aviation accidents (historically excluded in all cases) and War (military and civilian death are excluded during war times). www.proschoolonline.com www.proschoolonline.co m Key concepts of individual life insurance Beneficiary the entity ( or entities) designated to receive the proceeds. A policy can and should have Primary as well as Contingent beneficiaries (for instances when Primary is dead or unwilling to accept proceeds). Most cases a beneficiary can be revoked by policy owner, however an Irrevocable beneficiary is also possible (e.g. ex-spouse) Beneficiary payments can be made basis either the per capita or per stirpes rule and case should be taken to prevent undesirable distribution. For e.g., if beneficiaries are 2 primary + 2 children and 1 primary dies before Insured Case 1: per capita rule will divide equally. I.e. Surviving primary + children get 33% each Case 2: per stirpes rule (by line of descent) will divide by class, i.e. 50% to surviving primary and remaining 50% split between the 2 children of the deceased Conversion clause allows the policyholder to convert the term insurance into a cash value. This is usually done to convert term into a more suitable option. Clauses relating to types of cash value as well as period or insurer age apply. www.proschoolonline.com www.proschoolonline.co m Key concepts of individual life insurance Dividends some policies pay dividends and are called participating. These arise when the Insurance company has a surplus profit. The Board declares a dividend, which can be availed by the policyholder in 5 ways (cash, left to accumulate, offset against premium payments, purchase paid-up additions or purchase 1 year term insurance Common disaster states that should insured and sole primary beneficiary die together, proceeds directly and automatically move to secondary beneficiary Settlement options cash is the most common way of setting a policy. Alternatives are covered under the Annuity chapter Riders are marketing aids used by the Insurer and work like endorsements. Examples include Return of premium on survival, Inclusion of spouse or children, Waiver of premium on disability, Accidental death multiplier, Early benefit for terminal or critical illness (pre-death) www.proschoolonline.com www.proschoolonline.co m Income based method: Human Life Value (HLV) Accounts for working life of client, but limited to fixed expenses, doesn’t factor uncertainty Estimate future average annual earnings Step 1 E.g. 50,000 Subtract taxes, premiums and living expenses (= PMT) Step 2 E.g. 50,000 – 20,000 = 30,000 Estimate number of earning years till retirement (n) Step 3 E.g. n = 25 Determine appropriate discount rate (I/Yr) Step 4 E.g. 4% Calculate PV of payment stream as an annuity due (PVAD) Step 5 PVAD = 487,409 www.proschoolonline.com www.proschoolonline.co m Needs based method (L.I.F.E.) Personalized need-based approach – more thought but takes longer to compute Determine if Life insurance is needed to pay off debt Liability E.g. Mortgage, Education loan, Car loan, Credit card balances Income Determine if insurance is a replacement for Income replacement Income can be calculated via HLV method or Retention method Provide liquidity to cover cost of last rites, bequests, emergency Final expenses expenses on death etc Education Like income replacement, estimate future cost of education funding Estimate future cost of college then discount to PV www.proschoolonline.com www.proschoolonline.co m Annuities The flip-side of Life insurance. Protect against risk of living too long Insurance companies offer Annuities, since it also is based on mortality factors About annuities Types of Annuities A contract from an Insurance Co. 1.Immediate: Payments within 1 month Buyer deposits money and Insurance 2.Deferred: Payments at a future date Co. returns a stream of payments 3.Fixed: Fixed and level payments Goal is to spread invested capital and 4.Variable: Depend on market returns earned interest over the life of the 5.Indexed: Usually fixed + variable annuitant (i.e. receiver) (market index) Actuaries and mortality factors are used to determine amount of each periodic payment (based on age and sometime gender etc) www.proschoolonline.com www.proschoolonline.co m Ways of measuring index for Indexed Annuities Participation rate: Sets the % that is linked to the stock market. E.g. 90% participation rate means that if the stock market increased by 10% in a index interval (e.g. 1, 5, 7 or even 10 years) then the annuity account value would increase by 9% in that interval (i.e. 90%*10%) Change in the market is measured in a number of ways Percentage change: Difference in end and beginning of Index Interval. Ignores all points between. Ratchet method / Point to Point: Locks in the gain on an end of year basis Spread method: Subtracts a fixed % (usually 2 or 3%) from the percentage change over an Index Interval. E.g. if % change over 3 years is 30%, then 28% is credited. Downside protection If market falls in an index interval, the account remains unchanged from its start point. i.e. the annuity owner did not lose any money due to market loss www.proschoolonline.com www.proschoolonline.co m Key concepts of Annuities Irrevocable once payments begin, the annuity becomes irrevocable Inflation adjusted even a 4% inflation halves purchasing power in just 18 years. One should look for inflation-adjusted annuity schemes to cover this risk Premium payments are the terms governing how the money is deposited into the annuity. Can be single, fixed or flexible schedules. Annuitize the start of a steady flow of payments made to the beneficiary from the accumulated annuity contract. No further deposits can be made to annuity. Payments the series of payments made to the owner after the contract is executed (immediate) or at some point in the future (deferred) Single/Joint/ Joint and last survivor annuity payments made to a single person / payments made till death of first person / payments made till death of 2nd person www.proschoolonline.com www.proschoolonline.co m Key concepts of Annuities Settlement and Pay outs Period certain annuity payments continue for a minimum number of years. If the annuitant precedes the period certain, remaining funds go to the beneficiary Lump sum most common form of settlement chosen by beneficiaries Lifetime income beneficiaries spread settlement over a period. However, on their death, payments stop irrespective of money remaining in account. There is no recourse Single payments made to a single person Joint made to two people till death of first person Joint and last survivor annuity payments till death of 2nd person. May remain level for both or reduced to 0.5 on death of primary annuitant unless survivor option is there www.proschoolonline.com www.proschoolonline.co m  CF LIFE INSURANCE A IN INDIA www.proschoolonline.com Life insurance evolution in India Oriental Life established in Kolkata Amendment act (got rid of Principal 1818 Agencies) 1950 Enactment of British insurance Act Nationalization of Life Insurance, LIC formed 1870 and absorbs 154 Indian, 16 non-Indian and 1956 75 provident societies 3 more companies start (Bombay Mutual, 1871-97 Oriental, Empire) Recommendation committee set up (under 1993 R.N. Malhotra) 1st statutory measure (Indian Life assurance 1912 companies Act) IRDAI constituted based on committee Indian Insurance Company Act enacted (to 1999 recommendations 1928 allow government to collect insured data) IRDAI opens market to FDI Insurance Act 2000 1938 www.proschoolonline.com Income Sources for Insurance companies ⮚Insurance companies mostly generate revenue in three ways: Income from Income from Unpaid claims on underwriting investing premiums lapsed policies (=Premiums) Premiums are fixed based Policies are usually long Lapses occur when on risk of each policy term (e.g., 10-15 years) people either stop paying Premiums are collected Premiums thus invested premiums (i.e. abandon) over time and aggregate in long term instruments or the policy expires with Claims are received and There are Low-risk no claim. settled out of premiums instruments (i.e., low risk Total premium collected Net revenue (i.e. total low return instruments) against this policy = premiums less total Interest from these Lapsed policy income claims paid) = investments = Investment Underwriting Income income www.proschoolonline.com Premium and its components ⮚Premium has three associated terms Pure (or net) Load Gross rate premium Premium that is Premium that is meant to Premium that is finally calculated based on cover internal expenses charged to the policy actuarial studies of the insurer applicant Is the amount needed to Is the amount needed to Gross premium = Gross pay for losses and loss- pay for the Insurer’s sales rate x number of related expenses effort, overheads, profit exposed units margin etc. www.proschoolonline.com How Insurance Companies fix the gross premium rate Rate fixing (also called insurance pricing) is the determination of what rates, or premiums, is to be charged. It is also the process of establishing rates for reinsurance or other risk transfer mechanisms. Expected future Life insurance Based on this payments are actuaries determine probability, expected discounted back to the the probability of value of the loss start of the coverage death in any given year payment is determined period Summation of all the Loading for expenses Net single premium is Present values of is added to determine converted to premium future payment is used the gross premiums instalments to determine the Net Single Premium www.proschoolonline.com Factors in fixation of premium & Rate making ⮚ The process of premium fixation involves various 1.Mortality Table considerations including selling goals, competition, legal restrictions and estimating future costs related to the transfer of risk. Such costs include the amount of claims and expenses of their settlement, operational and 4. Age, Factors in 2. administrative expenses, and the cost of capital. Medical determining Guaranteed condition Benefits the rate ⮚ Insurers face a problem in setting fair and adequate premiums. Since the premium pays for insurance coverage in the immediate future, actual losses and 3. Adverse expenses are not known when the premium is collected. Selection www.proschoolonline.com Factor 1: Mortality 1. MORTALITY TABLES AND ACTUARIAL VALUATION ⮚ A mortality table (life table or actuarial table) shows the rate of deaths likely to occur in a defined population during a selected time interval. ⮚ It shows the probability of a person's death before his next birthday, based on his current age. ⮚ Thus, a mortality table gives a probability of the number of people who are expected to die per 1,000 living in any given year. ⮚ They typically cover from birth of a person through his age 100, in one-year increments. www.proschoolonline.com Factor 2: Age & health Younger people have lower premiums (less chance of dying young, 1. Age likelihood of paying many premiums over their life) 2. Current Health Status Insurers determine the current health state of the individual 3. Medical History History of serious illnesses increase the premium 4. Death Benefit & Term Higher premium for larger sum assured, or shorter terms. 5. Gender Males have higher premium (in general) than women of same age 6. Smoking & Drinking Higher premiums for smoking or drinking Dangerous occupation (e.g., shipping, mining, fishing) have higher 7. Occupation premiums Factor 3 and 4 3. RATES OF GUARANTEED BENEFITS 4. ADVERSE SELECTION ⮚ Insurer often provide a Guaranteed Benefit plans for ⮚ ‘Adverse selection’ refers to insurance firm's acceptance of applicants who have concealed policy holders to attract risk adverse investors with information about their actual condition. Life insurance + guaranteed pay-outs ⮚ In such situations, the insurer, with less information, is ⮚ In a traditional policy, the Bonus is variable, whereas at a disadvantage to the applicant in determining the a Guaranteed policy offers a Fixed rate of return. correct premium. ⮚ The plans that come with such options usually charge ⮚ As the risk is not factored at the time of sale of the a higher premium than the other non-guaranteed policy, this adverse selection leads to faulty determination of premiums and loss to the insurance plans. company. ⮚ Therefore, the returns after adjusting for the costs on ⮚ Truth is, the insurance company cannot possibly know account of the guarantee, are low in such plans. every potential buyers health profile. Therefore, before ⮚ The higher the return promised, more shall be the the sale, the company enforces detailed questionnaires followed by a very detailed underwriting process. premium charged & vice verse Distribution of Benefits ⮚ All the premiums collected from the policyholders get accumulated in the corpus of the insurance company. A large part of this is invested by the company in government secured debt instruments and a small part is invested in equities. ⮚ Based on earnings from these investments, valuation of the assets and liabilities of the insurance company, and the claims paid, the insurance company distributes the profits to ‘with-profits’ policyholders. This is termed a bonus. Types of Bonuses in an Insurance Policy Types of Bonuses Simple Compound Terminal/ Final/ Reversionary Reversionary Cash Bonus Interim Bonus Loyalty Bonus Persistency Survival Bonus Bonus Bonus Bonus www.proschoolonline.com Loans Eligibility Against Life Insurance Policies Insurance companies place conditions for disbursing the loan, some of which are: 1. Only available against 2. A three-year waiting 3. The loan amount is 80% to traditional life insurance period before approving a 90% of the surrender value policies, as the guaranteed loan, to check if policyholder (traditional plans) or the policy return is used as a has been regular in paying corpus value at the time of collateral. premiums or not. application (ULIP) 5. The policy holder must 4. The interest rates are 6. The policy is assigned to continue paying the generally lower than those the insurance company as a premiums even after availing charged on personal loans security till the loan is repaid. the loan. www.proschoolonline.com Group Insurance Scheme Group Term Insurance Scheme ⮚ Provides coverage to a large group of people under a single policy. ⮚ Owner of the policy is the employer / organization, and policy covers all the members / employees of the organization. ⮚ It provides financial security to the dependent families in the absence of the employee. Although the employees may have their own individual insurance plans, yet a group term insurance policy is beneficial overall. ⮚ Several group insurance schemes additionally offer covers for outstanding loans to borrowers, while others offer benefits with critical illness and disability. Such a policy does not entitle the employee to any proceeds (sum assured) upon surviving the term but provides the payout of lump sum proceeds in the event of demise. Who Pays the Premium? ⮚ Some companies absorb the entire cost of the policy as a benefit to its employees. Others collected by the employer, it can be a deduction from the salary where the contribution may either be full premium or partial premium. ⮚ A person normally remains covered if he continues to work for a certain employer, unlike in an individual insurance policy where the insurer often has the right to reject the policyholder’s policy renewal, depending on the risk profile. Employees’ Deposit Linked Insurance (EDLI) Scheme EDLI Scheme ⮚ Employees can purchase this scheme to cover all the current members / employees of the organization. ⮚ In the case of death of an employee, it provides a lumsum to the nominated depended (i.e., spouse, unmarried daughter or a male child up to 25 years of age). The exact amount depends on the last 12 months salary. ⮚ Several EDLI schemes also offer cover for outstanding loans to employees and benefits for critical illness and disability. ⮚ EDLI schemes do not provide any proceeds (sum assured) upon surviving the term. ⮚ Policy covers employees only during their service. It cannot be renewed by an individual after exit. Who Pays the Premium? ⮚ Some companies absorb the entire cost of the policy as a benefit to its employees. ⮚ Others collect a portion from the employee. This is usually deducted from the salary Payout calculation ▪ 30 x Average of last 12 month’s salary of the Employee (capped at Rs. 15,000 p.m.) + Bonus Amount (Rs. 2,50,000). ▪ Therefore, the maximum payout under EDLI is 30 x 15,000 + 250,000 = 700,000 ⮚ Form 5 IF must be filled by the nominee after the death of the member and signed and certified by the employer. Employees’ Deposit Linked Insurance (EDLI) Scheme SALIENT FEATURES OF THE SCHEME ARE: 1. all active members of 2. There is no exclusion for 3. There is no minimum 4. age, education, gender Employee Provident Fund any member service required etc. don’t affect eligibility are automatically covered 6. Employer contributes 7. Effective 15th February 8. The maximum average 0.5% of monthly salary up 9. Average monthly salary is 2018, the payout is to a maximum of Rs. 75 per monthly salary is capped at calculated as Basic + between Rs. 2,50,000 and month. No fee is deducted Rs. 15,000. Dearness Allowance. Rs. 7,00,000. from the employee’s salary. 11. Benefits are 10. Covers the person 12. Pay out to nominees, transferable with any job irrespective of them being family members or the legal change to the new in India or abroad. heirs. employer www.proschoolonline.com Group Gratuity Scheme Background ⮚ Gratuity Act, 1972 mandates that employers with at least 10 employees must pay gratuity to employees who have completed 5 years of employment. The amount is linked to last drawn salary x years of service, up to a maximum cap. ⮚ It is paid at time of employee exit, retirement, or due to death or total disability whilst employed ⮚ Organizations therefore need to create reserves to meet gratuity liability based on tenure of workforce Group Gratuity Schemes ⮚ Are offered by insurance companies to organizations, to meet this future liability ⮚ Premiums received from the employer are invested in different equity and debt funds to provide market linked returns over a long term. ⮚ The corpus, thus created, is used by the employer to make claim payments for gratuity when employees retire or leave. ⮚ The premiums paid by the employer are considered as a business expense, allowing it to reduce taxable business income. ⮚ At the end of each financial year most insurers review the employee data for changes in salaries, exits and new appointments. By this, they revalue the liability based on such changes Role of Insurance ⮚ Since likelihood of employees leaving or facing life-threatening situations deals with uncertainty, insurance can underwrite this like any other risk. Unit Linked Insurance Plan (ULIP) Background ⮚ Provide protection, investment and income-tax benefits (subject to lock-in period) ⮚ A portion of the premium is invested in market-linked funds, while the rest is used to provide life insurance coverage. Features ⮚ do not guarantee cash values. Instead, the value depends on the market price of the units held under the policy at the time of redemption/maturity. ⮚ As financial needs of the investor change over time he can vary his insurance coverage and the investment mix. He may also top-up his investments, make withdrawals and switch funds ⮚ Premiums paid for ULIPs are eligible for tax deduction under Section 80C of the Income Tax Act, 1961 upto a maximum of Rs. 1,50,000. However, such plans must be kept in force for a period of 5 years to claim deduction ⮚ under section 10(10D) of the Income Tax Act, if the premium paid on the policy is up to 10% of the sum assured during the entire term of the policy, the amount received on maturity is exempt from tax. Critique ⮚ the premium of ULIPs remains constant throughout the life of the policy, but the cost of insurance cover increases year by year as one gets older. ⮚ Hence a larger share of the premium gets assigned to life cover, and residual amount for investment reduces over time ULIP – Investment options & payouts ⮚ ULIP investments are subject to the capital markets risk and any such risks are borne by the policyholder. Assets include Money Switch Equity Debt Hybrid Market Option Upon Policy If surrendered during lock-in period of 5 years, the insurer pays the surrender value after Surrender: deducting all the applicable charges from the fund value. If surrendered after lock-in period, but before the maturity date, the insurer pays the fund value (i.e., NAV (on the surrender date) * number of units held. Upon Maturity: The fund value as derived by multiplying the NAV (on the maturity date) by the number of units held is paid to the policyholder. Upon death of If during the policy term, the nominee gets the higher of the Sum Assured or the Fund Value Policyholder: as a death benefit. E.g., if fund value is lower than the sum-assured, then the sum assured will be paid. Contingency Planning ⮚ Key features: The premiums payable can be a The policy tenure can be for 10 years lump sum (i.e. single premium) or and above whereby dependent The maturity amount of a paid frequently (i.e. recurring). The children from just born to a policy can be chosen based amount payable will depend on the maximum of age of 25, with certain on personal requirements. chosen sum assured and the insurer. exceptions, are covered. Money-back child life insurance In ULIPs, the policyholder plans offer a segmented payout can withdraw partial method, which can both be in a amounts to cover financial lump sum or in yearly instalments. difficulties. This rider enables the policy to continue Applies to a child education plan. If the without any breaks and passes the financial ⮚ Waiver of premium: policyholder (the parent) dies within a burden of the premium to the insurer. This stipulated period, the insurance company ensures the maturity benefit set for a waives off all future premiums until the certain age remains intact as planned, in maturity of the policy. addition to the death benefit paid.  Policy Revival Schemes Ordinary: Pay the arrears in one go Revival Special: Re-initiate the policy by calculating a new premium (as per policyholder age). Ignores arrears. Revival of non-linked policies within 5 years and unit linked policies within 3 years of first unpaid Instalment Arrears under ordinary revival are converted to instalments. These are paif alongside the regular (old) premiums, e.g. quarterly, annuals revival The insured person can take a policy loan to pay for arrears. The loan amount is adjusted in premiums. Loan revival Until the revival date, the amount of loan is calculated as if the policy is within a forced condition. Reinstatement is the process by which the insurer puts back into force a policy that has either been Reinstatement terminated because of non-payment of premiums or falls under one of the non-forfeiture provisions. The insured will have to submit proof of continued insurability, and pay all arrears and revival charges Policy Surrender & Policy Assignment ⮚ Surrender = exit from policy before its maturity, usually ⮚ Assignment - transfer of the right, title and interest after premiums have been paid for 3 continuous years of the policy from one person (assignor) to another ⮚ Surrender Value= Policyholder received some part of the (assignee). total accumulated bonus and premiums paid ⮚ Governed by Section 38 of the Insurance Laws ⮚ Guaranteed surrender value: (Amendment) Act, 2015 ▪ guarantees a fixed percentage of paid premiums depending on the number of years the policy was ⮚ Executed by endorsement of original policy, or continued; through a separate deed of assignment. The first ▪ Value is the total premiums paid less any Extra Premium assignment can be made only by the policyholder. /Rider Premium * applicable Guarantee % less any survival benefits already paid. ⮚ An assignment can neither be cancelled nor can the ⮚ Special surrender value: policy be reverted to the assignor unless the ▪ In this case, the surrender value includes sum assured, assignee reassigns the policy. The assignee is not bonuses and policy term. No surrender value is entitled to increase the death benefit. available on Rider premiums, if any. Policy Claims Is paid in full (e.g., Endowment, Whole Life) if the policy has been At continued properly. Payout is tax-free maturity In case of money-back plans that have periodic payouts, maturity payout is sum assured less periodic payment made. is payable if policy premiums are paid up-to-date or the death (or On death terminal/critical illness in some cases) occurs within the grace period. Payment can be lump sum or converted to an annuity, favouring the nominee or legal heir (in absence of nominee) Sections 107 and 108 of the Indian Evidence Act, 1872 state that Presumed individuals unheard of for seven years, are presumed to be dead. dead Insurers require a court decree to this effect (from the nominee) but can sometime approve claim based on strong circumstantial evidence. Claims: Documents required on Death ▪ Letter from beneficiary intimating about the death ▪ Claim form by the nominee ▪ Certificate of burial or cremation ▪ Certificate from the doctor/physician ▪ Certificate from the hospital ▪ Employer’s certificate ▪ in case of death by accident, Certified court copies of police report like First Information Report (FIR), Inquest Report, Post-Mortem Report, Final Report. ▪ Death certificate issued by municipal authorities etc. ▪ Others as required by the Insurer www.proschoolonline.com