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SALIENT POINTS ON LIFE INSURANCE IC-33 SYLLABUS

  1. Who is the regulator for insurance industry in India? – IRDA
  2. Which is the secondary burden of risk – setting aside reserves to meet potential losses of future?
  3. Risk transfer thro risk pooling is Insurance.
  4. Insurance pays when? -loss of life or asset.
  5. One of the disadvantages of insurance – low yields. Inflation and rate of interest to affect savings in insurance maturity benefits.
  1. Advantages of insurance – security, savings, and tax benefits.
  2. Who devised HLV concept? – prof. hubener
  3. Why young people are charged less premium? – Premium is related to mortality. Lesser the age lesser the risk.
  4. In a valid contract element deals with premium is – consideration.

9a. Pressure applied thro criminal means – coercion.

  1. The contracts act came into existence in – 1872.

10a. Uncertainty and level or extent of damage is two components of Risk.

  1. Who cannot sign a contract? – minor, mentally instable and people with legal bar.
  2. Who is not having insurable interest? –Ans: cousin, uncle, brother, sister, close friend, neighbor etc.
  3. An individual with aggressive risk profile chooses wealth accumulation.
  4. Greater the investment horizon larger the returns.
  5. Insurance is the only contingency product.
  6. Inflation means raise in prices due to change in economy over a period of time.
  7. Higher the premium paid, higher the compensation.
  8. Term insurance can be bought both as main policy and rider.
  9. A term policy can be converted into whole life policy.
  10. An individual who needs insurance with low budget can opt for term plan.
  11. Money back plan is a kind of endowment plan which gives money at frequent intervals. Installments given earlier are not deducted if death occurs in between.
  12. Allocation of funds over a period of time is called inter temporal allocation.

22a. a person normally saves for immediate needs, contingencies and future.

  1. In a traditional plan rate of return is not easy to ascertain. So also bonus calculation and surrender value. In short it’s not transparent.
  2. Universal life policy was introduced in USA, in the year 1977.
  3. All universal life policies are termed in India as variable insurance plans.
  4. Ulip is a kind of variable plan.
  5. In ulip investment risk is borne by investor not by insurer.
  6. Allocation of funds is investor’s choice.
  7. Changing of funds is risk. It’s called switching.
  8. Only Educated, risk taking and market knowing people prefer ulips.
  9. In ulip in case of death insurance amount depends on minimum guaranteed or fund value whichever is higher.
  10. Risk of early death cannot be covered by taking retirement plan.
  11. Amount of annuity payable depends upon duration of payments.

In an ordinary annuity equal cash flows at equal time intervals for a specific time.

  1. In a medical policy 30 days is allowed as grace time for renewal.
  2. Paying policy premium before grace period is renewal. Nonpayment of premium within grace time is known as lapse.
  3. Paying premium on lapsed policies is revival.
  4. To revive one has to pay reinstatement charges, premium dues and interest thereon.
  5. Orgy, spl, installment and loan cum revival are 4 ways available to revive a policy.
  6. general Insurance contracts are indemnity contracts. Life insurance contracts are value contracts.
  7. if moral hazard aspect is not looked into it may result in ‘adverse selection ‘.
  8. primary care center is the place where one goes for initial treatment.
  9. Network hospitals give treatment. They have signed MOUs with insurers.
  10. Cashless means bills paid direct by Company to hospitals.
  11. Tpa means third party administrator.
  12. Portability means changing policy from one Company to another without losing benefits.
  13. Domiciliary treatment can be given when a person cannot be moved from house after 3 days of suffering either due to immobility or want of bed in hospital.
  14. Key man insurance is connected to business profitability.
  15. Mortgage redemption insurance is connected to housing loan.
  16. MRI is an example of decreasing term plan.
  17. a policy taken under mwp cannot be attached in court. Safe from creditors. No loan. Can’t be assigned.
  18. in mwp policies the beneficiaries are wife, major children or all. Money is paid through trustee.
  19. insurance cost gives HSA / mode rebates. Advisor is not supposed to give any rebate.
  20. withdrawing from the plan is surrender.
  21. loan can be paid max 90% based on surrender value.
  22. higher the interest rate assumed, lower the premium.
  23. Book value is the exact amount paid to buy an asset by Insurance company.
  24. Application to buy a policy is called proposal form. Underwriter reads and assesses the risk.
  25. Information given in pro form is material facts.
  26. Increased risky behavior after purchase of policy is called moral hazard.
  27. Information not disclosed in p/ form is breach of utmost good faith. May result in making the policy contract null and void if detected within 2 years.
  28. A ration card is a non-std age proof.
  29. A policy holder can return the document within 15 days from the time of receiving the document.
  30. Policy document is an evidence of contract.
  31. Policy document has to be signed and stamped.
  32. The first part of policy document is schedule.
  33. Standard provisions are terms conditions of the particular plan common to all.
  34. Specific provision is when a life insured is issued a policy with some restrictive clause imposed.
  35. If premiums are not paid for 3 continuous years surrender value will not accrue.
  36. If premiums are not paid even within grace time policy gets lapsed.
  37. In life insurance 31days/ one month is the grace time allowed for renewal.
  38. If a person dies during grace time death claim will be settled after deducting premium due for the year.
  39. Alterations are allowed in a policy if it does not affect the risk.
  40. Underwriter sees only risk before accepting the premium. He is not in charge of claims.
  41. If a person has more than one adverse factor numerical rating system is adopted.
  42. A STD life is fit one as per mortality rate. Preferred risk means accepted at lower premium.
  43. Substandard are charged with extra premiums.
  44. Declined life will not be issued any policy.
  45. If rider benefit option is given in absolutely assigned policy benefits goes to assignee not the policy holder. It’s better to go for conditional assignment.
  46. Death of a person within 3 years of taking a policy is known as ‘early death’.
  47. Money back amounts paid in installments are called survival benefits.
  48. Advisor represents Insurance Company and broker the client.
  49. An advisor should show license on demand, tell commission when enquired. Premium amount should be told in advance to proposer.
  50. Telemarketing is an example of direct mktg.
  51. Agents license is valid for 3 years. If terminated cannot work as advisor for 5 years. (To write exam again)
  52. Policy selling is both art and science.
  53. Natural market means friends and relatives. Centre of influence Drs, lawyers auditors etc. and immediate group means colleagues.
  54. One who is well qualified to buy a policy is a prospect.
  55. Need based analysis makes advisor easier to give a solution and make the proposer sign the form.
  56. alpaca has to be applied when an objection is raised by proposer.
  57. reliability, empathy and responsiveness are all advisors service quality.
  58. ethical behavior helps to build trust.
  59. punctual, appropriate and confident makes an advisor successful.
  60. IGMS means integrated grievance management system. It’s a repository of complaints made to IRDA by customers.
  61. above 20 lacs and up to 1 cr cases are heard by state consumer commission.
  62. A shop keeper need not advise about best product. Failing to do so is not a valid consumer complaint.
  63. insurance ombudsman is the right choice to make insurance related complaints.
  64. ombudsman offices are located in 12 places.
  65. Complaint has to be given in writing. No fees charged.
  66. he will give his decision in 30 days.
  67. It has to be carried out in 15 days.
  68. Disputed case can be extended up to. 90 days. His final award is binding on insurer and not on policy holder.
  69. ombudsman will entertain cases within one year after refusal by Company.
  70. rejected cases of con forums, courts will not be taken up by Ombudsman.
  71. So also one has to exhaust methods of redressal in complaint desk and crm. No one can directly go to ombudsman without settling internally.
  72. Regulator for banks –RBI. Regulator for shares –SEBI.
  73. pay means pay as you go.
  74. 80-c limit is 1. 5 lacs for life insurance premium.
  75. 80-d gives 20k and 30k tax benefits to ordy and senior citizens respectively.
  76. All payments from insurance are exempted under 10, 10-d except pensions. (annuity)
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However commutation can be availed under 10, 10-d.

  1. GIC is the only reinsurer in India.
  2. III conducts exam and license is by IRDA.
  3. LIRM means Indian institute of risk management.
  4. TAC means tariff advisory committee. – decides premium of gen insurance. Detoxification means allowing gen insurance companies to decide on premium based on income and expenditure and claim settling trend.
  5. Lick- life insurance council.
  6. mortality is related to age. Actuaries are premium calculators. They submit profit and loss account and functioning of an Insurance co.
  7. Actuaries are premium and bonus calculators.
  8. Banc assurance means insurance through banks. Only inter mediaries.
  9. Tele marketing is an example of direct Marketing by Insurance company.
  10. Advisor is close to Company (principal). Broker to customer.
  11. Surveyor/ loss assessors are attached to fix or assess the worth of a property.
  12. IMSA – insurance market place standards association has issued guidelines to all to conduct business in honest way.
  13. MDRT – million dollar round table consists of several leading advisors of 76 countries.
  14. death during grace period will give s. an after deduction of premiums / loan due. In med claim in grace period, no medical bills are payable. However on renewals prior to grace time entitles continuity of benefits.
  15. Postmortem, inquest reports are asked in addition to normal forms required to process of a death claim in case of death due to accident, murder, suicide etc.
  16. Children are not breadwinners so risk commencing age is deferred.
  17. accident benefit riders are given 18-70.
  18. Riders s. a. Put together cannot exceed 100% of main policy s. a…
  19. Premiums of riders put together should not exceed 30% of main policy s annualized premium.
  20. Normally 30 days are given for settling a death claim. 180 days with enquiry if it’s early death.
  21. Early death is 3 years from doc of policy.
  22. Suicide cases are not given death claim up to 1 year from doc of policy. However 80% of premium paid is returned.
  23. Even in moral hazard cases cost can refund premiums paid after deducting admin charges.
  24. assignment cancels all nominations except when assigned to Insurance company.
  25. Mwp policies cannot be assigned as per sec 6 of mwp act, 1874.
  26. Paid up value is calculated based on terms saved against the total term.
  27. Paid up value multiplied by SVF gives surrender value.
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134 loans can be decided based on surrender value.

  1. Maximum 90%can be given as loan on surrender value.
  2. Interest not paid on loan, if exceeds sv (Surrender Value) insurance cost will issue notice (30 days) and policy will be fore closed.
  3. To avail non-forfeiture clause insured can surrender or make the policy paid-up.
  4. Higher the investment horizon (TIM) higher the returns.
  5. As age increases risk increases.
  6. People of young age and one who are recently employed should take a cover.
  7. aggressive risk profile people prefer mf/shares.
  8. SEBI is market regulator; RBI is regulator of financial institutes.
  9. Share is kind of wealth accumulation product.
  10. missing man claim can be made after 7 years as per Indian evidence act.
  11. Missing man claim is possible only with a court decree for presumption of death.
  12. Indemnity bond has to be submitted, While taking the claim amount.
  13. coercion means threatening with criminal intention.
  14. Material facts not disclosed are known as breach of utmost good faith. Insurance cost may invoke sec 45. (2 years.)to make the document null and void.
  15. Proximate cause is generally taken in case of giving rider benefits (ADB in case of death)
  16. Mediclaim policies are given 20k and 30k exemption. under sec 80-d.
  17. All payments received from Insurance cost are exempted under 10, 10-d except pension scheme (annuities)
  18. One third commutation received in deferred annuity is exempted under 10, 10-d.
  19. Insurance covers loss of income due to death of bread winner; pension compensates stoppage of salary after retirement.
  20. In betting there is definitely one loser and one winner but in insurance policy holder gets both death and maturity benefits and Insurance companies collect premiums to make it possible.
  21. The principal compliance officer is appointed to monitor anti money laundering.
  22. 50k is the limit one can remit in cash in counters. Premium 50k and above should be by cheque or DDs or thro bank cards.
  23. Insurance companies act – 1912.
  24. Insurance act of India – 1938.
  25. Nationalization of life insurance companies – 1956.
  26. General insurance business nationalization act – 1972.
  27. Malhothra committee -1993.
  28. IRDA act _ 1999.
  29. Formation of IRDA – 2000.
  30. Indian contracts act – 1872.
  31. Married women’s property act – 1874.
  32. Missing man – Indian evidence act.
  33. Prevention of money laundering act – 2002
  34. Consumer protection act –1986
  35. Sec39 – nomination.
  36. Sec 38- assignments.
  37. Income tax act sec 10, 10-d – exemption of income from insurance.
  38. 80-c – it exemption for premium paid up to 1. 5 lacs.
  39. Sec 45 – gives indisputability clause power to Insurance Company.
  40. Turnaround time fixed for complaints – 10 days.
  41. Free look in – 15 days.
  42. Acceptance of ombudsman’s reply-15.
  43. Submission of claim forms -15 days.
  44. Waiting period in mediclaim -30 days.
  45. Grace period in mediclaim -30 days.
  46. Copy of pro form to be returned to Policy Holder – 30 days.
  47. Normal death claim -30 days.
  48. Ombudsman enquiry -30 days.
  49. Grace time in life insurance premium – 31 days/ 1 month.
  50. Enquiry in case of death claim – 180 days.
  51. Suicide – 1 year.
  52. WP in medical for certain diseases – 1 year.
  53. Insurance is not for making profit.
  54. Insurance will not prevent happening of risk but make good the loss to some extent.
  55. Insurance compensates in case of economic loss.
  56. IRDAI is the monitor and keeps vigil over all insurance activities in India.
  57. No policy can be surrendered within 3 years.
  58. lock in period in ULIP is 5 years.
  59. Missing man can be declared as dead on ‘presumption of death’ by a valid court decree after 7 years as per Indian evidence act.
  60. However an indemnity bond has to be executed as in the case of lost original bonds to indemnify Insurance Company in case the missing person reports later
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