Scribd Logo
Upload

Welcome to Scribd!

  • Types of Insurance

    Uploaded by

    Aadhitya Narayanan
    19 views27 pages

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    19 views27 pages

    Types of Insurance

    Uploaded by

    Aadhitya Narayanan

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 27

    Types of Insurance

    Dr. Ruchir Singh


    Assistant Professor in Law
    Bennett University
    Introduction
    • The flow chart describes the
    total cover of insurance which
    varies from corpus and
    properties, living and non-
    living, chattels and all
    belongings, movable and
    immovable extending to even
    various limbs of the body.
    Continued…
    Definition of a Life Insurance Contract
    On the lines of Section 2(11) of Insurance Act, 1938“Life
    Insurance Business” means the business of effecting contracts of
    insurance on human life, including any contract whereby the payment is
    assured on death (except death by accident only) and the happening of
    any contingency dependent on human life, and any contract which is
    subject to payment of premiums for a term dependent on human life and
    shall be deemed to include –

    (a) the granting of disability and accident benefits, if so provided in the


    contract of insurance;
    Continued…
    (c) the granting of super-annuation allowances and annuities payable out
    of any fund applicable solely to the relief and maintenance of persons
    engaged or who have been engaged in any particular profession, trade or
    employment or of the dependents of such persons.

    There is no statutory definition of “the Life Insurance” but it may


    be defined as “a contract in which the insurer, in consideration of a
    certain premium, either in a lump sum or in periodical payments, in
    return agrees to pay to the assured, or to the person for whose benefit
    Continued…
    • In Dalby v. London and India Life Assurance Company(1884), the
    term ‘life insurance’ is defined as a ‘contract to pay a certain sum of
    money on the death of a person in consideration of the due payment of
    a certain annuity for his life calculated according to the probable
    duration of life’.

    In modern times, Life Insurance has taken many forms called as ‘Plans’
    or ‘Policies’. Some of the important among them are:
    Continued…
    • Whole life insurance – This is the original form of insurance. Under
    this policy, the assured agrees to pay fixed premiums periodically
    throughout his life. The policy amount is payable on the death of the
    assured to his legal representatives, assignee or nominees. This is
    intended for the benefit of the members of the family of the assured
    after his death.

    • Endowment insurance – Under this policy, the assured agrees to pay


    fixed premiums periodically, not throughout his life but for a term of
    years or until he attains a particular age say 50 or 55 years. The policy
    Continued…
    • Annuity insurance – Under this policy, the insurer undertakes to pay
    a certain fixed sum as annuity by monthly payment either after the
    expiration of the specified period or earlier if death occurs to the
    assured.

    ✓An example of an immediate annuity is when an individual pays a


    single premium, say 200,000 Rupees, to an insurance company and
    receives monthly payments, say 5,000 Rupees, for a fixed time period
    afterward. The payout amount for immediate annuities depends on
    market conditions and interest rates.
    Continued…
    • Terms insurance – Under this policy, the insurer agrees to pay the
    amount only in the event of the assured dropping before a certain time
    or age. This type is frequently adopted as collateral security for loan. It
    also provides a right to continue from term to term on payment of the
    required premium.

    ✓Term insurance is a life insurance product, which offers financial


    coverage to the policyholder for a specific time period. In case of
    death of the insured individual during the policy term, the death
    benefit is paid by the company to the beneficiary.
    Continued…
    • Group insurance – This is a joint life policy on lives of group of
    persons, usually the employees under the same employer, under one
    policy. Employees Insurance Corporation is engaged in that type of
    business.

    • Children’s insurance – In this type, insurance is taken on the lives of


    children, who are not major. In these policies, risk on the life of the
    insured child will begin only when the child attains a specified age.
    The time gap between the date of the commencement of the policy and
    the commencement of risk is called ‘deferment period’. There is no
    Continued…
    • Unit Linked Insurance Plan-
    Unit Linked Insurance Plan (ULIP) is a mix of insurance along with
    investment. From a ULIP, the goal is to provide wealth creation along
    with life cover where the insurance company puts a portion of your
    investment towards life insurance and rest into a fund that is based on
    equity or debt or both and matches with your long-term goals. These
    goals could be retirement planning, children’s education or another
    important event you may wish to save for.
    Continued…
    ✓Under a ULIP, the insurance company puts a portion of the investment
    towards life insurance and the remainder into a mutual fund based on
    equity or debt or both and aligns with the investor’s long-term loans.

    ✓Individuals opting for the ULIP are required to make regular premium
    payments. A part of the premiums are directed towards the insurance
    cover while the other remaining one is pooled with assets from the
    other policyholders and invested in bonds, equities, or a combination
    of both.
    Continued…
    • Lock-in-period of ULIP

    One of the changes brought about by the Insurance Regulatory and


    Development Authority of India (IRDAI) in the year 2010 as regards
    ULIPs, was to increase the lock in a period from 3 years to 5 years.
    However, insurance being a long-term product, as an investor you may
    not really reap the benefits of the policy unless you hold it for the entire
    term of the policy which can range from 10 to 15 years.
    Continued…
    • Latest Updates

    ✓The CBDT has issued guidelines for the calculation of taxable income
    if the annual premium of ULIP is more than Rs 2.5 lakh.

    ✓In the Budget of 2021the government had announced that proceeds


    from ULIP shall be taxable if the annual premium exceeds Rs 2.5 lakh
    in any year of the term of the policy.

    ✓Premium paid on ULIPs is eligible for a deduction under Section 80C


    up to a maximum of Rs 1.5 lakhs during a year. Further, the amount
    ULIPs v. Mutual
    Funds
    Life Insurance Policies as Properties
    A policy of Life Insurance is a movable property and it is also an
    actionable claim, the transfer of which is regulated by Section 38 of the
    Insurance Act, 1938 –

    • The General Clauses Act, 1897 defines in Section 3(36); the term
    ‘Movable Property’ shall mean property of every description except
    immovable property,

    • Whereas section 3(26) of the same Act defines ‘Immovable property’


    as to include land, benefits to arise out of land and things attached to
    the earth, or permanently fastened to anything attached to the earth’.
    Continued…
    • The mere deposit of a policy will not create any charge in favour of
    the person with whom it is deposited. Where, therefore, a policy is
    offered as security for loan, a written instrument in the nature of an
    assignment will be necessary. A loan within the surrender value of the
    policy is an investment approved under Section 27A of the Insurance
    Act, 1938.

    • The ‘assignment’ of a Life Insurance policy means the act of


    transferring the rights of property in the policy from one person to
    another. The person who transfers his right is called the ‘assignor’ and
    Types of General Insurance
    General Insurance is majorly classified into the following types:

    1. Health Insurance

    2. Motor Insurance

    3. Travel Insurance

    4. Property Insurance

    5. Commercial Insurance

    6. Asset Insurance

    7. Pet Insurance
    Continued…
    1. Health Insurance

    As the name says, this type of insurance covers the expenses incurred
    due to any illness or medical emergency. There are various types
    of health insurance available based on their coverage:

    • Individual Health Insurance: Covers one policyholder.

    • Family Floater Health Insurance: Covers the complete family under a


    single policy.

    • Group Health Insurance: Covers the employees of an organization.


    Continued…
    2. Motor Insurance

    If you own a vehicle, you will know that motor insurance is mandatory
    in India. The policy ensures that the vehicle has complete protection
    against physical damage from natural or artificial calamities and third-
    party liabilities arising from the insured vehicle.

    Based on the type of vehicle they cover, Motor Insurance is broadly


    categorized into:

    • Car Insurance
    Continued…
    3. Travel Insurance

    Travel Insurance provides financial protection to you and your


    family when you are visiting any place in the country or abroad. It
    covers emergencies like loss of baggage, loss of passport,
    hijacking, medical emergencies, delayed flights, accidental deaths,
    adventure sports etc.

    The major types of travel insurance are:

    • Domestic Travel Insurance: For travel within the country


    Continued…
    Continued…
    4. Property Insurance
    Another category of insurance is Property Insurance. A Property
    Insurance Policy provides financial reimbursement to the owner/renter
    of a building and its contents. It also covers damage caused to anyone
    other than the owner/renter if that person is injured on the property.
    Some products available in the market under property insurance include:
    • Home Insurance: Provides financial coverage in case of any
    significant damage to the insured home due to any reason like fire,
    theft, flood, storm etc.

    • Shop Insurance: Covers the shop property and contents inside.


    • Burglary Insurance: Covers any loss or damage due to unlawful
    breaking and entering of insured premises.
    Continued…
    5. Commercial Insurance

    A Commercial Lines Insurance policy ensures that the business


    does not face any financial burden because of any financial and business
    risks. Apart from covering the damages to the property or employee
    injury, it also covers public or employer liability.

    The policy is offered to commercial and business entities like


    large corporate houses, SMEs, and MSME industries.
    Continued…
    6. Asset Insurance
    There is no denying the fact that modern-day devices are making our
    lives simpler, richer and smarter. However, in case of any damage, they
    are usually expensive to be repaired. As the name suggests, Asset
    Insurance provides financial coverage to your assets like Mobile TVs,
    and other appliances or electronics.

    7. Pet Insurance
    The much-needed insurance cover for your furry babies because they
    Continued…
    8. Bite-Size Insurance
    Bite-size Insurance, also known as small-ticket insurance/sachet
    insurance, is a non-comprehensive plan which focuses on specific
    needs. They are available at a lower premium and can be availed
    without documentation/tests. Since these insurance plans are specific,
    they have limited but focused coverage. In fact, Bite-Size Insurance is a
    category and not a type. It is unrestricted across all categories like
    health, travel, property etc.
    Difference between General and Life Insurance

    You might also like