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CH.1 INTRODUCTION
Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or 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 lump sums). 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, the predominant form simply specifies a lump sum to be paid on the insured's demise. The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

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Life insurance is a very popular form of insurance. It insures life of an individual and gives financial protection to the members of the family of the policyholder. It is popular among all sections of the society in western countries, life insurance is a normal feature of individual personal life and this business is carried on by private companies too. In India, this business has been nationalized since 1956. Life insurance is different from other types of insurance in various ways. It not only gives protection but it is a compulsory method of savings/ it promote saving as well as investment. Protection is given to family members in case of premature death of policy holder and in case of survival of the policyholder; he is given a lump sum after a fixed period. Besides there are other concerns about taking care of children and their future and about creating wealth that most individual cherish. Life insurance is generally designed to address such needs.

DEFINITION:
Life insurance may be defined as a type of insurance company whereby the insurer, in consideration of premium paid in periodical installments, undertakes to pay an annuity or a certain sum of money either on the death of insured or on the expiry of certain number of years.

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HISTORY
Insurance began as a way of reducing the risk of traders, as early as 2000 BC in China and 1750 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in 17th century England, originally as insurance for traders:[ merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London. The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief 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 two dozen 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 the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies.

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New York Life for 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 years before the Emancipation Proclamation.

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CH.2 METHODOLGY
Design of study

1. Objectives of the study The attempt has been made to achieve following objectives: To know various policy available in the market for the customer. To know why insurance is important in todays uncertain life.

2. Scope of Study The following has been covered under the project: Types of insurance policy Benefit of taking a policy Usage & Procedure of taking a policy

3. Limitations I have restricted my project only on Life insurance product I have restricted my project of some of the Insurance companies in India.

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4. Methodology Primary study has been undertaken on micro level basis on focusing only a few insurance companies. Secondary data is collected by undertaking extensive library research as well as from various websites and books.

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CH.3 ANALYSIS
Function of Insurance
The functions of Insurance can be bifurcated into two parts: 1. Primary Functions 2. Secondary Functions 3. Other Functions

(A)The

primary

functions

of

insurance

include

the

following:

1.Provide Protection: The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others. 2. Collective bearing of risk: Insurance is a device to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid.

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3. Provide Certainty: Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain.

(B)The

secondary

functions

of

insurance

include

the

following:
1. Prevention of Losses: Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc Prevention of losses cause lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and better protection to the insured. 2. Small capital to cover larger risks: Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty.

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3. Contributes towards the development of larger industries: Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.

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Principle of Insurance
1. GENERAL CONTRACT: Since life insurance contract is a sort of contract it is governed by the Indian contract act. According to section 10 of Indian contract act, 1872 a valid contract must have the following essentialities: a) Offer and acceptance. b) Legal consideration. c) Competent to make contract. d) Free consent.

2. INSURABLE INTEREST: The insured must have as insurable interest in life to be insured for valid contract. Insurable interest arises out of pecuniary relationship that exists between the policy holder and the life assured. Insurable interest in life insurance may be divided into 2 categories: (A) (B) insurable interest in own life, and Insurable interest in others life.

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The latter can be sub-divided into 2 classes: (i) (ii) Where proof is not required, and Where proof is required.

3. UTMOST GOOD FAITH: The life insurance requires that the principal of utmost good faith should be preserved by both the parties. The principal of utmost good faith says that both the parties propose [insured] and insurer must be of the same mind at the time of contract because only then the risk may be correctly ascertained. They must make full and true disclosure of the facts material to risk.

4. WARRANTIES: Warranties are integral part of contracti.e.they form the bases of the contract between the propose and the insurer and if any statement wheather material or non material, is untrue the contract shall be null and void and the premium paid by him may be forfeited by the insurer.

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5. PROXIMATE CAUSE: The efficient or effective cause loss is called PROXIMATE CAUSE. It is the real and actual case of loss. If the cause of loss is insured the insurer will pay. In LIFE INSURANCE. The doctrine of CAUSA PROXIMA is not applied because the insurer bound to pay the amount of insurance whatever may be the reason of death. It may be natural or unnatural. Hence this principal is not of much partial importance with life insurance.

6. ASSIGNMENT AND NOMINATION: Life insurance policy can be assigned freely for a legal consideration or love and affection. Notice of assignment must be given to the insurer who will acknowledge the assignment. THE holder of life insurance policy on his own; may either at the time of effecting the policy or at any subsequent time before the policy matures, nominate person or persons to whom the money secured by the policy should be paid in event of his death. Nomination can be cancelled before the maturity, but a notice should be served to this effect.

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7. RETURN OF PREMIUM: In the ordinary course premium once paid cannot be refunded. But in following cases the premium paid are returnable. On account of mispresentation or breach of warranty, the insured in absence of any express condition to contrary, can claim return of premium paid. Where insured is guilty of fraud in obtaining policy, he will fail in his claim to the sum assured. He cannot ask for return of premium because he will have to allege his own fraud to succeed in his claim.

8. OTHER FEATURES: Life Insurance policies have the following additional features: i. It is an Aleatory Contract. ii. A Unilateral contract. iii. A conditional contract. iv. A Contract of Adhesion and v. Not a contract of Indemnity.

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BENEFITS OF LIFE INSURANCE

1) Life insurance gives monetory protection to policy holder and his family members in case of premature death.

2) It reduces tensions and provides peaceful life to policy holder.

3) Life insurance acts as a social security measure.

4) It serves as a provision for old age.

5) Life insurance is useful as an ideal method of compulsory saving for old age.

6) It is useful for meeting certain expenses like marriage and education of children.

7) Life insurance policy is useful for securing temporary loan for meeting unexpected expenses.

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8) The benefit of profitable investment are available in life insurance as LIC gives attractive bonus to policyholders.

9) It also gives protection and safety to policy holders, raises rate of capital formation and contributes for economic development.

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LIFE INSURANCE PRODUCT

The life Insurance products are in the form of life policies. The following are the different kinds of life insurance policies and their uses: 1. WHOLE-LIFE POLICY: Whole Life Insurance, or Whole of Life Assurance (in the Commonwealth), is a life insurance policy that remains in force for the insured's whole life and requires (in most cases) premiums to be paid every year.

Whole life insurance provides guaranteed insurance protection for the entire life of the insured, otherwise known as permanent coverage. These policies carry a "cash value" component that grows tax deferred at a contractually guaranteed amount (usually a low interest rate) until the contract is surrendered. The premiums are usually level for the life of the insured and the death benefit is guaranteed for the insured's lifetime. Under the whole life policy the sum injured becomes payable to the beneficiary only after the death of the insured. The policy remains in force throughout the life of the insured and he has to pay premium

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regularly till his death. This policy does not give protection to him but only to his family members. Whole life policies are issued with lower rate of insurance premium.The whole life policies may be limited payment whole life policies or convertible whole-life policies may be limited payment whole life policies or convertible whole-life policy.

2. ENDOWMENT POLICY: Under this policy, the sum assured becomes payable after the expiry of a specified period or after death of assured whichever is earlier. Premium is to be paid ill the maturity of the policy. Endowment policy is convenient when an individual desires to enjoy fruits of his savings during his life time. His policy is useful for policy holder as well as his dependents. All useful benefits of life insurance available to his policy.

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3. WITH OR WITHOUT PROFIT POLICY: Under with profit policy policyholder is paid sum assured plus a share in profits earned by insurance company every year. In case of without profit policy, a share in the profits is not given but rate of premium is less in case of without profit policies. LIC gives handsome bonus to its policyholders by way of profits.

4. JOINT LIFE POLICY: This policy taken on life of two persons. Amount becomes payable to survivor after death of other party. Such policy can be taken for any amount. It is useful for both partners and gives them safety and security. Joint life policy is suitable when both partners are employed and have capacity to pay premium regularly.

5. DOUBLE ACCIDENT POLICY: Policy gives special protection in case of death of policy holder due to accident. In this case if insured expires by accident. Survivor get double amount of the policy.

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6. ANNUITY POLICY: Under this policy amount of policy is paid in form of annuitiesfor specified number of years or till death of assured. It is like pension payment arrangement through life insurance. Such policy is useful to those who prefer regular income in their old age. They are relieved from botheration of keeping money safely.

7. GROUP INSURANCE POLICY: It can be taken on lives of members of a family or of employees of a business concern. Joint Stock Companies prefer such type of policies for their employees. Companies pay premium. If any insured employee dies while in service, insured amount becomes payable o relative of employees.

8. CONVERTIBLE WHOLE LIFE POLICY: In the beginning, a whole life policy is taken but a provision is made in policy itself to convert the same into an endowment policy after fixed period period is usually for 5 years. For a whole life policy rate of premium is much less but it increases when it is converted into an endowment policy.

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9. JANTA POLICY: LIC introduced this policy with a view to popularize message of insurance among poor section of society. Under this scheme only endowment policy can be taken. This policy is issued for such period that it should not mature after age of 60 years.

10. JEEVAN SATHI POLICY: This policy can be taken by married couple only. Under this husband and wife can insure their lives by a single policy. Unique feature of this policy is that it matures twice i.e. if one of them dies before expiry of this policy period sum insured is payable to survival.

11. JEEVAN-MITRA POLICY: It is taken up by a single person. If he dies before maturity then sum assured is paid to nominee. However, if he survives till maturity a single sum assured is paid to him.

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PROCEDURE OF TAKING OUT A LIFE INSURANCE POLICY

1. SUBMISSION OF PROPOSAL FORM: The first step in the procedure of taking out a policy is to submit a proposal form to the LIC authorities. A person who desires to take life insurance policy has to submit a completed proposal form for the consideration of LIC. A proposal is a written request made to the insurance cover to benefit. For this printed proposal forms are available. Information must be given correctly, clearly and in good faith in the proposal form. All details regarding occupation, family, background, age, health, and hectare required to be given properly in the proposal form.

2. SUBMISSION OF PROOF OF AGE: He has also to give an authentic proof of his age. For this birth certificate school living certificate or horoscope is adequate. The claim of the policy will not be accepted unless the age is verified and approved by the insurance company. Information about the age is also necessary for fixing the rate of premium and for fixing the maturity

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date of the policy. Premium rate increases along with the age and amount of policy.

3. MEDICAL EXAMINATION: For life insurance, the propose has to get himself examined medically form the approved doctor of the insurance company. LIC arranges for medical examination if necessary in order to decide the premium and final acceptance of the proposal medical examination is taken after the receipt of the proposal form. Medical examination must be conducted by the doctor, who is on the panel of LIC. In India, for a policy up to Rs 15,000 medical examination is not required.

4. SCRUTINY OF PROPOSAL: The proposal form and the medical report are examined by the officers of the LIC. This is necessary before the final approval of proposal. The decision as regard the acceptance of the proposal and the rate of premium is taken to the basis of the proposal form, the report of the agent and the medical report of the applicant.

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5. ACCEPTANCE OF PROPOSAL: If the medical report is favorable, the proposal is generally accepted and the decision is communicated to concerned party. He is also to pay the first premium immediately. The risk is accepted by the insurance company from his date of the receipt of the first premium.

6. PAYMENT OF FIRST PREMIUM AND ISSUE OF POLICY: The insured will pay the first premium after the receipt of communication from the LIC Office. In many cases, the propose has to pay in advance the amount equal to first premium along with the proposal form. The amount is kept as a deposit by the LIC and adjusts after the proposal is accepted. The policy comes in force with the payment of the first premium. The regularly policy document is sent to the police holder in due course. This policy contains insurance contract and all details of the policy holder including his name, age, address, occupation, the amount of the policy, the name of nominee, manner of payment of premium and terms and conditions of insurance contract.

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PARTIES TO CONTRACT

There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it. However, "insurable interest" is required to limit an unrelated party from taking life insurance on, for example, Jane or Joe. Also, most companies allow the Payer and Owner to be different, e. g., a grandparent paying premiums for a policy on a child, owned by a grandchild. The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.

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In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold 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 the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).

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Contract terms

Special provisions may apply, such as suicide clauses wherein the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the application is also grounds for nullification. Most US states specify that the contestability period cannot be longer than two years; only if the insured dies within this period will the insurer have a legal 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 the insured or when the policy matures, although the actual death benefit can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old).

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TYPES OF LIFE INSURANCE

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

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1. Term Insurance:
Term assurance provides life insurance coverage for a specified term of years in exchange for a specified premium. 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: 1. Face amount (protection or death benefit), 2. Premium to be paid (cost to the insured), and 3. 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 or more years. The premium can remain level or increase. Common types of term insurance include Level, Annual Renewable and Mortgage insurance."

Level Term policy has the premium fixed for a period of time longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long term planning and asset

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management because premiums remain consistent year to year and can be budgeted long term. At the end of the term, some policies contain a renewal or conversion option. Guaranteed Renewal, the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Some companies however do not guarantee renewal, and require proof of insurability to mitigate their risk and decline renewing higher risk clients (for instance those that may be terminal). Renewal that requires proof of insurability often includes a conversion options that allows the insured to convert the term program to a permanent one that the insurance company makes available. This can force clients into a more expensive permanent program because of anti selection if they need to continue coverage. Renewal and conversion options can be very important when selecting a program. Annual renewable term is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount

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is intended to equal the amount of the mortgage on the policy owners residence so the mortgage 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 (with the exception of suicide see below), his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. However, in some European countries (notably Serbia), insurance policy is such that the policy holder receives the amount he has insured himself to, or the amount he has paid to the insurance company in the past years. Suicide used to be excluded from ALL insurance policies,however, after a 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 to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if the suicide occurs after the two year period.

2. Permanent Life Insurance:

Permanent life insurance is 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

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policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value. The four basic types of permanent insurance are whole life, universal life, limited pay and endowment. a. Whole life coverage: Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed 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 charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Also, the cash values are generally kept by the insurance company at the time of death, the

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death benefit only to the beneficiaries. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates over time. Premiums are much higher than term insurance in the 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" and are received "income-tax free". Since these loans decrease the death benefit if not paid back, payback is optional. Cash values support the death benefit so only the death benefit is paid out. Dividends can be utilized in many ways. First, if Paid up additions is elected, dividend cash values will purchase additional death benefit which will increase the death benefit of the policy to the named beneficiary. Another alternative is to opt in for 'reduced premiums' on some policies. This reduces the owed premiums by the unguaranteed dividends amount. A third option allows the owner to take the dividends as they are paid out. (Although some policies provide

other/different/less options than these - it depends on the company for some cases)

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b. 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 for greater growth of cash values. There are several types of universal life insurance policies which include "interest sensitive" (also known as "traditional fixed universal life insurance"), variable universal life (VUL), guaranteed death benefit, and equity indexed universal life insurance. A universal life insurance policy includes a cash value. Premiums increase the cash values, but the cost of insurance (along with any other charges assessed by the insurance company) reduces cash values. However, with the exception of VUL, interest is credited on cash values at a rate specified by the company and may also increase cash values. With VUL, cash values will ebb and flow relative to the performance of the investment subaccounts the policy owner has chosen. The surrender value of the policy is the amount payable to the policyowner after applicable surrender charges, if any. Universal life insurance addresses the perceived disadvantages of whole life namely that premiums and death benefit are fixed. With universal life, both the premiums and death benefit are flexible.

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Except with regards to guaranteed death benefit universal life, this flexibility comes at a price: reduced guarantees. Depending on how interest is credited, the internal rate of return can be higher because it moves with prevailing interest rates (interestsensitive) or the financial markets (Equity Indexed Universal Life and Variable Universal Life). Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it. Flexible death benefit means the policy owner can choose to decrease the death benefit. The death benefit could also be increased by the policy owner but that would (typically) require that the insured go through new underwriting. Another example of flexible death benefit is the ability to choose option A or option B death benefits - and to be able to change those options during the life of the insured. Option A is often referred to as a level death benefit. Generally speaking, the death benefit will remain level for the life of the insured and premiums are expected to be lower than policies with an Option B death benefit. Option B pays the face amount plus the cash value. If cash values grow over time, so would the death benefit which is payable to the insured's

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beneficiaries. If cash values decline, the death benefit would also decline. Presumably option B death benefit policies require greater premium than option A policies.

c. Limited-pay:
Another type of permanent insurance is Limited-pay life insurance, in which all the premiums are 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.

d. Endowments:
Main article: Endowment policy Endowments are policies in which the cash value built up inside the policy, equals the death benefit (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 whole life or universal life because the premium paying period is shortened and the endowment date is earlier. In the United States, the Technical Corrections Act of 1988 tightened the rules on tax shelters (creating modified endowments). These follow tax rules as annuities and IRAs do.

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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). 3. Accidental Death: Accidental death is a limited life insurance that is designed to cover the insured when they pass away 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, these policies are much less expensive than other life insurances. It is also very commonly offered as "accidental death and dismemberment insurance", also known as an AD&D policy. In an AD&D policy, benefits are available not only for accidental death, but also for loss of limbs or bodily functions such as sight and hearing, etc. Accidental death and AD&D policies very rarely pay a benefit; either the cause of death is not covered, or the coverage is not maintained after the accident until death occurs. To be aware of what coverage they have, an insured should always review their policy for what it covers and what it excludes. Often, it does not cover an insured who puts themselves at risk in activities such as: parachuting, flying an airplane, professional sports, or involvement in a war (military or not).

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Also, some insurers will exclude death and injury caused by proximate causes due to (but not limited to) racing on wheels and mountaineering. Accidental death benefits can also be added to a standard life insurance policy as a rider. If this rider is purchased, the policy will generally pay double the face amount if the insured dies due to an accident. This used to be commonly referred to as a double indemnity coverage. In some cases, some companies may even offer a triple indemnity cover.

4. 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. A common 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 if both a full coverage policy and an accidental death policy were in effect on the insured. Another common rider is premium waiver, which waives future premiums if the insured becomes disabled.

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Joint life insurance: is either a term or permanent policy insuring two or more lives with the proceeds payable on the first death or second deazth. 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 the policy is issued. Modified whole life: is a whole life policy that charges smaller premiums for a specified period of 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 a company or members of a union or association. Individual proof of insurability is not normally a consideration 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 the possibility of adverse selection. Group life insurance often has a provision that a member exiting the group has the right to buy individual insurance coverage. Senior and preneed products: Insurance companies have in recent years developed products to offer to niche markets,

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most notably targeting the senior market to address needs of an aging population. Many companies offer policies tailored to the needs of senior applicants. These are often low to moderate face value whole life insurance policies, to allow a senior citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance. This may also be marketed as final expense insurance, and an agent or company may suggest (but not require) 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 designed specifically to cover funeral expenses when the insured person dies. In many cases, the applicant signs 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 for payment of services rendered.

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USAGE
Term life insurance is a pure death benefit, its primary use is to provide coverage of financial responsibilities, for the insured. Such responsibilities may include, but are not limited to, consumer debt, dependent care, college education for dependents, funeral costs, and mortgages. Term life insurance is generally chosen in favor of permanent life insurance because it is usually much less expensive (depending on the length of the term) Many financial advisors or other experts commonly recommend term life insurance as a means to cover potential expenses until such time that there are sufficient funds available from savings to protect those whom the insurance coverage was intended to protect. For example, an individual might choose to obtain a policy whose term expires near his or her retirement age based on the premise that, by the time the individual retires, he or she would have amassed sufficient funds in retirement savings to provide financial security for their dependents.

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Level term life insurance

Much more common than annual renewable term insurance is guaranteed level premium term life insurance, where the premium is guaranteed to be the same for a given period of years. The most common terms are 10, 15, 20, and 30 years. In this form, the premium paid each year remains the same for the duration of the contract. This cost is based on the summed cost of each year's annual renewable term rates, with a time value of money adjustment made by the insurer. Thus, the longer the term the premium is level for, the higher the premium, because the older, more expensive to insure years are averaged into the premium. Most level term programs include a renewal option and allow the insured to renew for a maximum guaranteed rate if the insured period needs to be extended. It is important to note that the renewal may or may not be guaranteed and the insured should review their contract to see if evidence of insurability is required to renew the policy. Typically this clause is invoked only if the health of the insured deteriorates significantly during the term, and poor health would prevent them from being able to provide proof of insurability.

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TYPES
There are several types of whole life insurance policies. New York State defines six traditional forms: non-participating (aka "non par"), participating, indeterminate premium, economic, limited pay, and single premium A newer type is known generally as interest sensitive whole life. Other jurisdictions may classify them differently, and not all companies offer all types. There are as many types of insurance policies as can be written in their contracts while staying within the law's guidelines.

a. Non-Participating:
All values related to the policy (death benefits, cash surrender values, premiums) are usually determined at policy issue, for the life of the contract, and usually cannot be altered after issue. This means that the insurance company assumes all risk of future performance versus the actuaries' estimates. If future claims are underestimated, the insurance company makes up the difference. On the other hand, if the actuaries' estimates on future death claims are high, the insurance company will retain the difference.

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b. Participating:
In a participating policy (also par in the USA, and known as a

with-profits policy in the Commonwealth), the insurance company

shares the excess profits (variously called dividends or refunds in the USA, bonus in the Commonwealth) with the policyholder. Typically these refunds are not taxable because they are considered an overcharge of premium. The greater the overcharge by the company, the greater the refund/dividend. For a mutual life insurance company, participation also implies a degree of ownership of the mutuality.

c. Indeterminate Premium:
Similar to non-participating, except that the premium may vary year to year. However, the premium will never exceed the maximum premium guaranteed in the policy.

d. Economic:
A blending of participating and term life insurance, wherein a part of the dividends is used to purchase additional term insurance. This can generally yield a higher death benefit, at a cost to long term cash value. In some policy years the dividends may be below projections, causing the death benefit in those years to decrease.

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e. Limited Pay:
Similar to a participating policy, but instead of paying annual premiums for life, they are only due for a certain number of years, such as 20. The policy may also be set up to be fully paid up at a certain age, such as 65 or 80. The policy itself continues for the life of the insured. These policies would typically cost more up front, since the insurance company needs to build up sufficient cash value within the policy during the payment years to fund the policy for the remainder of the insured's life.

f. Single Premium:
A form of limited pay, where the pay period is a single large payment up front. These policies typically have fees during early policy years should the policyholder cash it in.

g. Interest Sensitive:
This type is fairly new, and is also known as either excess

interest or current assumption whole life. The policies are a mixture of

traditional whole life and universal life. Instead of using dividends to augment guaranteed cash value accumulation, the interest on the policy's cash value varies with current market conditions. Like whole

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life, death benefit remains constant for life. Like universal life, the premium payment might vary, but not above the maximum premium guaranteed within the policy.

h. Requirements:
Whole life insurance typically requires that the owner pay premiums for the life of the policy. There are some arrangements that let the policy be "paid up", which means that no further payments are ever required, in as few as 5 years, or with even a single large premium. Typically if the payor doesn't make a large premium payment at the outset of the life insurance contract, then he is not allowed to begin making them later in the contract life. However, some whole life contracts offer a rider to the policy which allows for a one time, or occasional, large additional premium payment to be made as long as a minimal extra payment is made on a regular schedule. In contrast, Universal life insurance generally allows more flexibility in premium payment.

i. Guarantees:
The company generally will guarantee that the policy's cash values will increase regardless of the performance of the company or its experience with death claims (again compared to universal life

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insurance and variable universal life insurance which can increase the costs and decrease the cash values of the policy).

j. Liquidity:
Cash values are considered liquid enough to be used for investment capital, but only if the owner is financially healthy enough to continue making premium payments (Single premium whole life policies avoid the risk of the insured failing to make premium payments and are liquid enough to be used as collateral. Single premium policies require that the insured pay a one time premium that tends to be lower than the split payments. Because these policies are fully paid at inception, they have no financial risk and are liquid and secure enough to be used as collateral under the insurance clause of collateral assignment.). Cash value access is tax free up to the point of total premiums paid, and the rest may be accessed tax free in the form of policy loans. If the policy lapses, taxes would be due on outstanding loans. If the insured dies, death benefit is reduced by the amount of any outstanding loan balance. Internal rates of return for participating policies may be much worse than universal life and interest-sensitive whole life (whose cash values are invested in the money market and bonds) because their cash

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values are invested in the life insurance company and its general account, which may be in real estate and the stock market. Variable universal life insurance may outperform whole life because the owner can direct investments in sub-accounts that may do better. If an owner desires a conservative position for his cash values, par whole life is indicated.

k. Permanent life insurance:

Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value. This is compared with Term life insurance where insurance is purchased for a specified period (typically a year, or for level periods such as 5, 10, 15, 20 even 25 and 30 years) where a death benefit is only paid to the beneficiary if the insured dies during the specified period. Permanent life insurance originally was offered as a fixed premium fixed return product known as whole life insurance also known as cash surrender life insurance. This offered consumers guaranteed cash value accumulation and a consistent premium. Consumers later wanted

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more flexibility which was offered in the form of universal life insurance. Universal life insurance allows consumers flexibility in when premiums are to be paid and the amount that they would be. Universal life policies also allowed consumers to permanently withdraw cash from the policy without the interest associated with the loan provisions in whole life policies. Universal life policies retained the fixed investment performance of whole life policies. Variable life insurance follows the mold of whole or universal life, but it shifts the investment risk to the consumer along with the potential for greater returns. Variable universal life insurance combines this with the flexibility in premium structure of universal life to create the most free form option for consumers to manage their own money (at their own risk). Variable universal life insurance policies are considered more favorable to other permanent life insurance alternatives due to the favorable tax treatment of all permanent life insurance policies and their potential for greater returns than other permanent life insurance products.

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l. Payout likelihood:
Because permanent life insurance programs are designed to be permanent and pay a death benefit, the cost of insurance is considerably higher than term insurance. Term insurance is referred to as pure death benefit with no cash accumulation vehicle tied to it. Because of this, permanent premiums remain 8 to 10 times more expensive than term premiums for the same coverage.Most people are drawn to term insurance for the low cost and the ability to invest the difference in separate financial products. Doing so has a potential drawback in some cases because all term policies eventually expire and the client would then have to pay a higher premium based on his attained age or he may not be able to qualify for a new policy at that point. In these situations, money earned from investments may not measure up to the coverage the policy would have provided.

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Conclusion
Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used in cases of exploitation and fraud. 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 of investigative lawyers, consisting in police and insurer investigation, eventually also loss adjusters hired by the insurers to work independently. The television series Forensic Files has included episodes that feature this scenario. There was also a documented case in 2006, where two elderly women are accused of taking in homeless men and assisting them. As part of their assistance, they took out life insurance on the men. After the contestability period ended on the policies (most life contracts have a standard contestability period of two years), the women are alleged to have had the men killed via hit-and-run car crashes.

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Recently, viatical settlements have created problems for life insurance carriers. A viatical settlement involves the purchase of a life insurance policy from an elderly or terminally ill policy holder. The policy holder sells the policy (including the right to name the beneficiary) to a purchaser for a price discounted from the policy value. The seller has cash in hand, and the purchaser 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 parties have reached an agreeable

settlement, insurers are troubled by this trend. Insurers calculate their rates with the assumption that a certain portion of policy holders will seek to redeem the cash value of their insurance policies before death. They also expect that a certain portion will stop paying premiums and forfeit their policies. However, viatical settlements ensure that such policies will with absolute certainty be paid out. Some purchasers, in order to take advantage of the potentially large profits, have even actively sought to collude with uninsured elderly and terminally ill patients, and created policies that would have not otherwise been purchased. Likewise, these policies are guaranteed losses from the insurers' perspective.

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BIBLIOGRAPHY
Websites
1. www.wikipedia.com 2. http://www.google.co.in/imgres?imgurl=http://www.jrfin.com/types_ of_life_insurance.jpeg&imgrefurl=http://www.jrfin.com/types-of-lifeinsurance

Books Referred
Insurance Product & Services by Indian Institute of Insurance & Finance