Whole life insurance:

A PROJECT REPORT ON
A

STUDY ON WHOLE LIFE INSURANCE AT

ING LIFE INSURANCE.

A Project report submitted in partial fulfillment for the Award of the Post Graduate Diploma in Management: PGPM

Submitted by SUSHMA.K (109Q1M2441) UNDER THE GUIDANCE OF RAGUNATH VIDYA SALES MANAGER ING LIFE INSURANCE PUNJAGUTTA.

SUJANA SCHOOL OF BUSINESS (MOU to JNTU) MADAPUR.

Whole life insurance:

ACKNOWLEDGEMENT

I would like to express my gratitude for all the people, who extended unending support at all stages of the project.

This report is a product of not only my sincere efforts but also the guidance and morale support given by the management of ING LIFE INSURANCE , PUNJAGUTTA. I express my sincere gratitude to my guide Mr.RAGUNATH VIDYA, In charge Training, and all the executives at ING LIFE INSURANCE , Hyderabad for sparing their valuable time in giving the valuable information and suggestions all through, for the successful completion of the project.

I would like to express my gratitude to Director of our institution (2 nd shift), my internal guides, in SUJANA SCHOOL OF BUSINESS faculty for their cooperation and valuable Suggestions during the study processed.

SUSHMA.K

Whole life insurance:

DECLARATION I hereby declare that this project entitled A PROJECT ON WHOLE LIFE INSURANCE has been prepared by me is a original work submitted to SUJANA SCHOOL OF BUSINESS towards partial fulfillment of the requirement for the award of PGDM.

I am very grateful to Mr. RAGUNATH VIDYA (Sales Manager) of ING LIFE INSURANCE LTD for ever-lasting cordial support and continuous endeavor to bring the best project work.

I am thankful to all the staff members of ING LIFE INSURANCE for their kind cooperation and timely support in completion of this project work

I am thankful to all the faculty members of PGPM , for their valuable support in the completion of this project work.

SUSHMA

INDEX: 1 Introduction.
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2 History. 3 Types: 3.1 Non-Participating, 3.2 Participating, 3.3 Indeterminate Premium, 3.4 Economic, 3.5 Limited Pay, 3.6 Single Premium, 3.7 Interest Sensitive. 4 Requirements. 5 Guarantees 6 Liquidity. 7 References. 8 External links. 9 Term Vs Whole Life Insurance Plan.

Introduction: 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 4

Whole life insurance:

life and requires (in most cases) premiums to be paid every year into the policy. Traditional Whole Life Insurance Traditional whole life insurance, also known as ordinary life or straight life, is a type of permanent (cash value) insurance that provides coverage for your entire life. This kind of policy is sometimes described as plain vanilla insurance. You pay a fixed amount, known as a level premium, each payment period (monthly, quarterly, semiannually, or annually), and a guaranteed death benefit goes to your beneficiary when you die. Your premium amount is guaranteed to remain level for as long as you live, even if the insurance company's costs rise. When you reach old age, your premium will not increase over the amount you paid when you started the policy. How a traditional life insurance policy works The insurance company calculates level premiums sufficient to pay the cost of your insurance coverage (mortality costs) to the end of your life. In the policy's early years, the level premiums are higher than the mortality costs. The difference between the mortality costs and the level premiums is placed into a cash reserve account known as the cash value. In later years, as mortality costs rise due to your advancing age, your level premiums are lower than the mortality costs, and your policy draws on the cash value to help pay the insurance costs. As the cash value accumulates over the years, the amount of your actual insurance coverage is reduced by an equal amount. For example:- if you buy a $100,000 policy at age 30. Since you have no cash value in the beginning, you are paying for $100,000 of insurance coverage. If you have $10,000 of cash value by age 40, you'll then be 5

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paying for $90,000 of coverage. Your cash value will continue to rise, and the amount of insurance coverage will continue to fall. If you continue to keep up your premium payments, your cash value will eventually grow to an amount equal to your policy's death benefit. In fact, if you happen to live to the policy's maturity date (generally age 95 or 100), the company will pay the accumulated cash value (by then equal to the death benefit) to you. But if you die at any time before you reach the maturity date, your beneficiary receives the full, guaranteed death benefit, no matter what the amount of your cash value at the time of your death. History: All life insurance was originally term insurance. However, because term life insurance only pays a claim upon death within the stated term, a number of term insurance policy holders became upset over the idea that they could be paying premiums for 20 or 30 years and then wind up with nothing to show for it. In response to market pressures, actuaries conceived of an insurance policy with level premium payments that were higher than traditional term insurance contracts. These contracts would offer a "cash value", which was designed to be a cash reserve that would build up against the known claim the death benefit. These policies would also credit interest to the cash value account and upon maturity of the contract (usually at age 95 or 100), the cash value would equal the death benefit. By guaranteeing the death benefit, the policy owner was assured that insurance coverage would be in force when the insured died. Types: 6

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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. 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. 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 therefund/dividend. For a mutual life insurance company, participation also implies a degree of ownership of the mutuality. 7

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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. 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. 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. 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. 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 8

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

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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 interestsensitive whole life (whose cash values are invested in the money market and bonds) because their cash values are invested in the life insurance company and its general account, which may be in real estate and the stock market. However, universal life policies run a much greater risk, and are in actually designed to lapse. 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. References: 10

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1.

^ "Life Insurance Basics It's Not As Bad As You Think". David C. Lewis, RFA. March 2008. Retrieved 2008-09-24. ^ "Basic Types of Policies". New York State Insurance Department. Retrieved 2007-01-15. ^ Alexander B. Grannis, Chair. "The Feeling's Not Mutual". New York State Assembly. Retrieved 2007-01-15. ^ "A Guide to Life Insurance". The Association of British Insurers. Archived from the original on 2006-12-10. Retrieved 2007-01-16. ^ "glossary". Life and Health Insurance Foundation for Education. Retrieved 2007-01-15. ^ Florida Life and Health Study Manual, 12 edition ^ "Whole Life Insurance". The Asset Protection Book. Archived from the original on 2007-01-14. Retrieved 2007-01-17. Chart Comparing Different Types of Life Insurance Learn About Life Insurance Insurance. Information Institute Life Insurance Learning Center. The Life and Health Insurance Foundation for Education. A History of Life Insurance in the United States through World War I. Illinois Department of Financial & Professional Regulation, Division of Insurance, Slavery Era Policies Report August 2004. Code of Ethics, National Association of Insurance and Financial Advisors.

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External links:

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Types of insurances .

HealthAccidental death and dismemberment insurance Dental insurance Disability insurance Total p

LifePermanent life insurance Term life insurance Universal life insurance Variable universal life i Types of insurance

BusinessBond insurance Directors and officers liability insurance Errors and omissions insurance Fide

ResidentialContents insurance Earthquake insurance Flood insurance Home insurance Landlords insura

History of insurance Casualty insurance Crime insurance Crop insurance Group insurance L Other insurance Weather insurance Workers' compensation Insurance policy and law Insurance policy Insurance law Health Insurance Portability and Accountability Act

Term Vs. Whole Life Insurance: Should I Choose Term Insurance or Whole Life Insurance? With the rates for Term Life insurance being at all time lows; many financial and insurance experts agree that Term Life Insurance is a good choice for most individuals. Before we discuss why that may be the case, lets take a moment to review the differences between Term Insurance, and the most popular form of Permanent Life insurance, Whole Life. Term Life insurance is a death benefit only life insurance policy that you purchase for a set length of time, usually either 10, 20 or 30 years. If you die anytime during the term, your chosen beneficiary receives the full amount of the death benefit. However if you die even one day after the term, your family doesnt receive a dime. So when purchasing a Term Life insurance policy, it is important that you not only 12

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determine the apropos benefit amount, you must carefully figure out the length of the term. Whole Life insurance on the other hand is what is referred to as Permanent Life insurance. There is no term limit and it remains in effect until the day you die, so long as your premiums and other policy obligations continue to be met. In addition such permanent life insurance policies have a cash value. There are other forms of Permanent Life insurance such as Universal Life, and Variable life but for the sake of this comparison we will restrict our discussion to Whole Life, as the differences between Whole Life and the others are subtle.

Bottom of Form Whole Life insurance policies are much more expensive then Term Life insurance polices. This is mainly because with a Whole Life policy, a portion of your monthly premium is invested in a tax-deferred account or savings plan. Thus, the policies build equity and funds for retirement. However, many financial analysts say that Life Insurance may not be the best investment for retirement savings. They suggest that people purchase a Term Life policy, and invest the difference in monthly premiums in some other Tax deferred savings plan, which often have greater yields. There are those who feel that at least with Whole Life, you are getting something besides the insurance. In other words, with a term policy, suppose you outlive 13

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the term? You just paid tens of thousands of dollars for nothing. To try to make up for this disparity between Term and Whole life, many insurance companies have recently introduced a product called Return of Premium insurance. Return of premium life insurance is exactly like Term Life insurance with an added bonus. At the end of the term, you receive the entire amount of premiums paid over the life of the term. So if you buy a 30-year Return of Premium life insurance policy and you a have been paying annual premiums of $1,000, if you're still alive after the thirty years you'd receive $30,000 back from the insurance company. Such Return of Premium life insurance policies cost more than standard term policies, but many people find them attractive for their nothing to lose scenario. But again, savvy financial advisors point out that one could conceivably invest the difference between the cost of standard Term Life and premium return, and see a return of more then the give back over the length of the term. In summary, for most people a Term Policy is a good idea, but that is not to say that there arent some people for whom a Whole Life policy would make more sense. Its best to discuss your needs and life circumstances with an insurance professional, who can help design the Life Insurance product that is best for you. Ing whole life plan: 1. New fulfilling life plan it is a combination of term and endorwment plan which has level premium and covers whole life till death.

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