TYPES OF INSURANCE

TYPES OF INSURANCE

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 TYPES OF INSURANCE

CHAPTER 1: INTRODUCTION TO INSURANCE

1.1 Introduction:-

Insurance is a special type of contract between an insurance company and its client in which the
insurance company agrees that on the happening of certain events the insurance company will
either make payment to its client or meet certain costs.

For example, in a car insurance policy, the insurance company agrees that if the car is damaged,
the insurance company will pay the cost of repairing it. Under an income protection policy, the
insurance company agrees that if its client is unable to work, the insurance company will pay its
client an agreed amount.

The reason we call an insurance policy a special type of contract is because there are certain
characteristics that relate to an insurance policy that do not relate to most other contracts. In
particular, an insurance policy is a contract of utmost good faith. This means that the insurance
company and the insured person have certain very important obligations that do not exist in
normal contracts. These include the duty of disclosure and the duty not to make any false
statements in relation to a claim. This duty of good faith is why insurance companies can refuse
to pay your claim if you have not told the insurance company all material information when you
applied for or renewed the insurance. Some of the obligations that exist in an insurance contract
can be very onerous on the insured person, and so over the years, the government has regulated
the insurance industry. This is considered under the regulation tab.

The special nature of the insurance contract also places very important obligations on the
insurance company. The insurance company has to act in good faith, and a failure to do so can
expose the insurance company to special types of damages. In addition, because many insurance
policies are contracts to provide comfort in stressful times, a failure by an insurance company to
honour its obligations can result in general damages being awarded by the Courts.

Because an insurance policy is a type of contract, it is important to remember that the duties of
the insurance company and the insured person are largely contained within that contract, often
called a policy. So before jumping to conclusions about what the insurance company should or
should not do, or what your obligations might or might not be, it is important to first read your

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insurance contract or policy. Ask the insurance company for a copy of the policy if one has not
been provided to you, and read the policy carefully. Avoid generalizations. Whilst many
insurance policies are similar, none are exactly the same, and slightly different words in an
insurance policy may have different meanings. Many people express opinions about insurance
policies or what should or should not be covered without actually reading the policy, and that
must be avoided.

As well as the insurance contract itself, the law (called common law by lawyers) imposes all
kinds of special obligations on insurers and insureds, and so when considering an insurance
contract, it is important to do so in the context of the common law obligations that are imposed
upon insurance companies.

Definition

Coverage by contract whereby one party undertakes to indemnify or guarantee another against
loss by a specified contingency or perilan agreement in which a person makes regular payments
to a company and the company promises to pay money if the person is injured or dies, or to pay
money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen

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1.2 History of insurance

Insurance is a form of risk management, primarily used to hedge against the risk of a contingent
loss. In essence, insurance is simply the equitable transfer of a risk of a loss, from one entity to
another, in exchange for a premium.

Gambling transactions also hedge against risk, but it

offers the possibility of either a loss or a gain. Gambling
creates losers and winners, whereas in insurance offers
financial support sufficient to replace loss, not to create
pure gain. Gamblers can continue spending, buying more
risk than they can afford, but insurance buyers can only
spend up to the limit of what carriers would accept to insure; their loss is limited to the amount
of the premium.

Gamblers, by creating new risk transfer, are risk seekers. Insurance buyers are risk avoiders,
creating risk transfer in terms of their need to reduce exposure to large losses.

Early methods of transferring or distributing risk were practiced by Chinese traders as early as
the 3rd millennia BC. These merchants travelling treacherous river rapids would cleverly
distribute their wares across many vessels to spread the loss due to any single vessel's capsizing.

Modern profit insurance manifested in Babylon almost 2000 years B.C., in a contract of loan of
trading capital to travelling merchants. The contract contained a clause that the risk of loss due
to robbery in transit was borne by the party providing the loan. In consideration for bearing this
risk, the lender calculated interest on the loan at an exceptionally high rate.

The Greeks and Romans introduced the origins of health and life insurance to us around 600
AD, when they organized guilds / benevolent societies (such as sodalitates, collegia and military
societies) which afforded members certain benefits, such as proper burial rites, or a financial
contribution towards burial costs (funeraticium) or travelling expenses of members of the army.
In exchange for this benefit, members of the society made regular contributions to it.

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 TYPES OF INSURANCE

During this time, Achaemenian (Iranian) monarchs were the first to 'insure' their people to some
extent, formalizing the process by registration thereof at court. In accordance with tradition,
during Norouz - the beginning of the Iranian New Year - the heads of different ethnic groups
presented gifts to the monarch. The purpose of these gifts was to ensure (insure) that whenever
the gift-giver was in trouble, the monarch (and the court) would help him. In return, whenever
the giver was in trouble or needed finance, the court would check the gift's registration, and
could even - if the amount exceeded 10,000 Derrik - double that in return.

All these instances gave effect to the concept of mutual assistance in case of loss, but the actual
concept of mutual assistance came to the fore in guilds and similar associations and societies
which existed in Europe and England during the middle-ages.

These associations afforded members (or their dependents) assistance in case of loss caused by
perils such as fire, shipwreck, theft, sickness or death. Originally, the extent of the assistance was
determined by the actual need of the member who suffered the loss, eventually, however, he
would be assisted to the extent of his actual loss. In many of these guilds individual members,
and not merely the guild itself, were under a legal duty to assist those members who suffered a
loss. Once provision was made for the latter to have a corresponding legal right to claim such
assistance, the development towards proper mutual insurance was completed.

Separate insurance contracts (i.e. insurance policies not bundled with loans or other kinds of
contracts) were invented in Genoa in the 14th century, as were insurance pools backed by

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 TYPES OF INSURANCE

pledges of landed estates. These new insurance contracts allowed insurance to be separated from
investment, a separation of roles that first proved useful in marine insurance. Insurance became
far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

1.3 Features of insurance

1. Sharing of Risk:

Insurance is a device to share the financial losses which might befall on an individual or his
family on the happening of a specified event. The event may be death of a bread-winner to the
family in the case of life insurance, marine-perils in marine insurance, fire in fire insurance and
other certain events in general insurance, e.g., theft in burglary insurance, accident in motor
insurance, etc. The loss arising nom these events if insured are shared by all the insured in the
form of premium.

2. Co-operative Device:

The most important feature of every insurance plan is the co-operation of large number of
persons who, in effect, agree to share the financial loss arising due to a particular risk which is
insured. Such a group of persons may be brought together voluntarily or through publicity or
through solicitation of the agents.

An insurer would be unable to compensate all the losses from his own capital. So, by insuring or
underwriting a large number of persons, he is able to pay the amount of loss. Like all cooperative
devices, there is no compulsion here on anybody to purchase the insurance policy.

3. Value of Risk:

The risk is evaluated before insuring to charge the amount of share of an insured, herein called,
consideration or premium. There are several methods of evaluation of risks. If there is
expectation of more loss, higher premium may be charged. So, the probability of loss is
calculated at the time of insurance.

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 TYPES OF INSURANCE

4. Payment at Contingency:

The payment is made at a certain contingency insured. If the contingency occurs, payment is
made. Since the life insurance contract is a contract of certainty, because the contingency, the
death or the expiry of term, will certainly occur, the payment is certain. In other insurance
contracts, the contingency is the fire or the marine perils etc., may or may not occur. So, if the
contingency occurs, payment is made, otherwise no amount is given to the policy-holder.

Similarly, in certain types of life policies, payment is not certain due to uncertainty of a particular
contingency within a particular period. For example, in term-insurance then, payment is made
only when death of the assured occurs within the specified term, may be one or two years.
Similarly, in Pure Endowment payment is made only at the survival of the insured at the expiry
of the period.

5. Amount of Payment:

The amount of payment depends upon the value of loss occurred due to the particular insured
risk provided insurance is there up to that amount. In life insurance, the purpose is not to make
good the financial loss suffered. The insurer promises to pay a fixed sum on the happening of an
event.

If the event or the contingency takes place, the payment does fall due if the policy is valid and in
force at the time of the event, like property insurance, the dependents will not be required to
prove the occurring of loss and the amount of loss. It is immaterial in life insurance what was the
amount of loss at the time of contingency. But in the property and general insurances, the amount
of loss as well as the happening of loss, are required to be proved.

6. Large Number of Insured Persons

To spread the loss immediately, smoothly and cheaply, large number of persons should be
insured. The co-operation of a small number of persons may also be insurance but it will be
limited to smaller area. The cost of insurance to each member may be higher. So, it may be
unmarketable.

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Therefore, to make the insurance cheaper, it is essential to insure large number of persons or
property because the lesser would be cost of insurance and so, the lower would be premium. In
past years, tariff associations or mutual fire insurance associations were found to share the loss at
cheaper rate. In order to function successfully, the insurance should be joined by a large number
of persons.

7. Insurance is not a gambling:

The insurance serves indirectly to increase the productivity of the community by eliminating
worry and increasing initiative. The uncertainty is changed into certainty by insuring property
and life because the insurer promises to pay a definite sum at damage or death.

From a family and business point of view all lives possess an economic value which may at any
time be snuffed out by death, and it is as reasonable to ensure against the loss of this value as it is
to protect oneself against the loss of property. In the absence of insurance, the property owners
could at best practice only some form of self-insurance, which may not give him absolute
certainty.

1.4 PRINCIPLES OF INSURANCE

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UTMOST GOOD FAITH

Both the parties i.e. the insured and the insurer should a good faith towards each other.

The insurer must provide the insured complete, correct and clear information of subject
matter.

The insurer must provide the insured complete, correct and clear information regarding
terms and condition of the contract.

This principle is application to all contract of insurance i.e. life, fire and marine
insurance.

UNSURABLE INTEREST
The insured must have interest in the subject matter of insurance.
Life insurance it refers to life insured.
In marine insurance it is enough if the insurable interest exists only at the time of
occurrence of loss.
In fire and general insurance it must be present at the time of taking policy and also at the
time of occurrence of loss.
The owner of the party is said to have insurable interest as long as he is the owner of the
it.

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1.5 Insurance Regulatory and Development Authority

(IRDA) is an autonomous
apex statutory body which regulates
and develops the insurance
industry in India. It was constituted
by a parliament of India act called
Insurance Regulatory and
Development Authority Act,
1999 and duly passed by the
government of India.

The agency operates from its

headquarters atHadrabad,
Andhra Pradesh where it shifted from delhiin 2001.

IRDA batted for a hike in the foreign direct investment (FDI) limit to 49 per cent in the insurance
sector from the erstwhile 26 per cent. The FDI limit in insurance sector was raised to 49% in July
2013.

1.5.1 Duties, Powers and Functions of IRDA

The duties, powers and functions of IRDA have been specified under Section 14 of IRDA
Act, 1999. The IRDA Authority has the duty to promote, regulate and ensure orderly growth of
the insurance and re-insurance businesses across India, subject to the provisions of this Act and
any other additional law that is being enforced.

Without prejudice to the generality of the provisions contained in sub-section (1) of IRDA Act,
the powers and functions of the Authority shall include:

Issuing a certificate of registration to the applicant as well as modify, renew, withdraw,

suspend or cancel any such registration that is deemed unfit.

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Protecting the interests of the policyholders in matters concerning assigning of insurance

policy, nomination by policyholders, settlement of insurance claim, insurable interest,
surrender value of policy and other terms and conditions based on contracts of insurance.

Specifying requisite qualifications, practical training and code of conduct for insurance
intermediaries, insurance brokers and agents.

Specifying the code of conduct for surveyors and loss assessors.

Promotion of efficiency in the conduct of insurance business.

Promoting and regulating professional organizations connected with the insurance and re-
insurance business across India.

Levying fees, commission and other charges for carrying out the purposes of this Act.

Calling for data or information from, undertaking inspection of, conducting enquiries and
investigations, conducting audit of the insurers, intermediaries, insurance intermediaries
and other organizations connected with the insurance business.

Under section 64U of the Insurance Act, 1938 (4 of 1938), controlling and regulation of
the rates, advantages, terms and conditions etc. that may be offered by insurers (or
Insurance Companies) in respect of general insurance business not so controlled and
regulated by the Tariff Advisory Committee.

Specifying the manner and form in which books of account shall be maintained and
statement of accounts, financial statements etc. shall be rendered by insurers and other
insurance intermediaries.

Keeping a tab, exercising control and regulating investment of funds by insurance

companies.

Regulating the maintenance of margin of solvency by the Insurers.

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Adjudication of disputes between insurers and intermediaries or insurance intermediaries,

hospitals, healthcare organizations or with customers.

To effectively supervise the functioning of the Tariff Advisory Committee. Exercising

any such other powers that ma1.

CHAPTER-2: TYPES OF INSURANCE

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There are two types of insurance industry in India i.e. Life Insurance and Non-life insurance or
General Insurance. Both are divided into further parts which are explain in next chapter in detail

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may
give rise to claims are known as perils. An insurance policy will set out in detail which perils are

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covered by the policy and which are not. Below are non-exhaustive lists of the many different
types of insurance that exist. A single policy may cover risks in one or more of the categories set
out below. For example, vehicle insurance would typically cover both the property risk (theft or
damage to the vehicle) and the liability risk (legal claims arising from an accident). A home
insurance policy in the United States typically includes coverage for damage to the home and the
owner's belongings, certain legal claims against the owner, and even a small amount of coverage
for medical expenses of guests who are injured on the owner's property.

Business insurance can take a number of different forms, such as the various kinds of
professional liability insurance, also called professional indemnity (PI), which are discussed
below under that name; and the business owner's policy (BOP), which packages into one policy
many of the kinds of coverage that a business owner needs, in a way analogous to how
homeowners' insurance packages the coverages that a homeowner needs.

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2.1 Life Insurance

2.1.1 Introduction:-

A life insurance policy is a contract with an insurance company. In exchange for premiums
(payments), the insurance company provides a lump-sum payment, known as a death
benefit, to beneficiaries in the event of the insured's
death.

Typically, life insurance is chosen based on the

needs and goals of the owner. Term life insurance
generally provides protection for a set period of
time, while permanent insurance, such as whole
and universal life, provides lifetime coverage. It's
important to note that death benefits from all types of
life insurance are generally income tax-free.1

There are many varieties of life insurance. Some of the more common types are discussed below.

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2.1.2 Types of Life Insurance:-

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1. TRADITIONAL LIFE INSURANCE

A.Term life insurance

Term life insurance is designed to provide financial protection for a

specific period of time, such as 10 or 20 years. Typically,
premiums are level and guaranteed for that time. After that
period, policies may offer continued coverage,
usually at a
substantially
higher
premium
rate. Term
life

insurance is generally a less costly option than

permanent life insurance.

Needs it helps
meet: Term life
insurance proceeds are
most often used to replace lost potential
income during working years. This can
provide a general safety net for your
beneficiaries and can also help
ensure the family's financial goals
will still be metgoals like paying off a mortgage, keeping a business running, and
paying for college.

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One of the most commonly used policies is term life insurance. Term insurance can help protect
your beneficiaries against financial loss resulting from your death; it pays the face amount of the
policy, but only provides protection for a definite, but limited, amount of time. Term policies do
not build cash values and the maximum term period is usually 30 years. Term policies are useful
when there is a limited time needed for protection and when the dollars available for coverage
are limited. The premiums for these types of policies are significantly lower than the costs for
whole life. They also (initially) provide more insurance protection per dollar spent than any form
of permanent policies. Unfortunately, the cost of premiums increases as the policy owner gets
older and as the end of the specified term nears-

for example, because you think your earnings will rise significantly in the future - consider going
with annual renewable term.

Level premium term lets you lock in the premium for that period; the annual premium is
guaranteed never to change, from the first year to the last. That can be a smart way to insulate
you from any premium increases. It's like the peace of mind you get from a fixed-rate mortgage
compared to an adjustable-rate one.

Features of term insurance:-

Convertibility of Term Life Insurance:-

In most term life insurance policies, the policy offers convertibility from the original term
life insurance policy into an individual universal, whole life term, or annual renewable
insurance policy. This can be applied in most if not all of the United States. This
convertibility provides the facility for the person who is being insured to change from the
original term life insurance policy into a policy that will last for a long-term basis, such
as an individual whole life insurance policy or an annual renewable life insurance policy.
Find out more regarding term life insurance by visiting.

Decreased Term of Term Life Insurance:-

Term life insurance is always available with a decreasing term. The good part about
decreasing term life insurance is that the premium will always remain the same even

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when the face value is reducing every year. This is actually a good choice for term life
insurance when compared to other life insurance policies. If you live through the entire
term of the life insurance, this may not benefit you however because the value will
continue to drop until your death or until the term ends.

Changes in Premium for Term Life Insurance :-

The premium of your term life insurance policy may either increase or decrease based on
your proposed earnings, tenancy, disbursals and mortality. The state authority actually has
the right to increase or decrease your premium up to a predefined level. It is a good thing
that the premium level may be changed based on your insurance policy.

Term Life Insurance Policies are Renewable :-

Term life insurance policies are renewable, no matter how many years they are initially
taken out for. These renewable term life insurance policies make it possible for the
insured person to carry on with their current policy with all of the benefits. Once the term
life insurance benefits expire, you can usually renew the same policy with the same
premiums and rates.

Term Life Insurance Rider Facilities

Term life insurance policies provide term rider facilities for children and for spouses. It is
important that you get a term rider facility for any child who is not yet eighteen years old.
Riders for your spouse are usually available for as many as a twenty year period as well.
Term rider facilities are typically available for an additional premium on top of whatever
premium you are already paying for your term life insurance. Learn more about term life
insurance by checking out.

Term rider facilities will convert your insurance to individual whole life insurance to take
care of your spouse and your child. The term life insurance concept is outstanding
security for your entire family if you are looking for a short term alternative. Term life
insurance is an excellent product because it is quite flexible in nature, and for this reason,

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term life insurance has always been viewed as one of the best options for life insurance
coverage.

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b.Whole life Insurance

Introduction:-
Whole life insurance is a type of permanent life insurance designed to provide lifetime coverage.
Because of the lifetime coverage period, whole life usually has higher premiums than term life.
Policy premiums are typically fixed, and, unlike term, whole life has a cash value, which
functions as a savings component and may accumulate tax-deferred over time.
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.

With whole life payments, part of your premium is applied toward the insurance portion of your
policy, another part of your premium goes toward administrative expenses and the balance of
your premium goes toward the investment, or cash, portion of your policy. The interest you
accumulate through the investment portion of your policy is tax-free until you withdraw it (if that
is allowed under the terms of your policy). Any withdrawal you make will typically be tax free
up to your basis in the policy. Your basis is the amount of premiums you have paid into the
policy minus any prior dividends paid or previous withdrawals. Any amounts withdrawn above
your basis may be taxed as ordinary income. As you might expect, given their permanent
protection, these policies tend to have a much higher initial premium than other types of life
insurance. But, the cash build up in the policy can be used toward premium payments, provided
cash is available. This is known as a participating whole life policy, which combines the benefits
of permanent life insurance protection with a savings component, and provides the policy owner
some additional payment flexibility.

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Types of whole life insurance

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Whole Life Guaranteed Insurance

The Whole Life Guaranteed policy builds cash value you can borrow against, pays
benefits directly to your loved ones, and also provides you a choice of benefit amounts
specific to your budget, and needs.

If you are between the ages of 45 and 85, Whole Life Guaranteed insurance can provide
up to $20,000 in death benefitsan affordable premium that never increases. And, the
Whole Life Guaranteed policy is available without a physical exam or health questions.

This policy contains a graded death benefit, meaning that for death due to natural causes
(any cause other than accidental) during the first two years, your beneficiary will receive
all premiums you paid, plus 20 percent. After the two years, the full benefit is paid for
death due to all causes.

Whole Life Express Insurance

Our Whole Life Express policy helps you take care of the loved ones you leave behind.
Whole Life Express insurance appeals to those who seek reasonably priced coverage in
smaller benefit amounts to cover final burial expenses and any outstanding debts. Whole
Life Express locks in your premiums so they do not increase with age. Premiums for this
policy are generally lower than for our Whole Life Guaranteed policy. You must answer
health questions to determine eligibility, but you are not required to take a physical exam.
And, your policy cannot be canceled for any reason, as long as you make the premium
payments.

Childrens Whole Life Insurance

Our whole life insurance policy for children (Childrens Whole Life) is designed to cover
costs associated with the unexpected loss of a child. In addition, Childrens Whole Life
insurance can help protect a childs future insurability.

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 TYPES OF INSURANCE

Childrens Whole Life is similar to Whole Life Guaranteed, but is only available from
ages 14 days to 25 years. You may select death benefit amounts of Childrens Whole Life
insurance from $5,000 to $30,000.

Our Childrens Whole Life insurance coverage can be increased to up to $150,000 later in
life. This option is available regardless of changes in health, which helps provide your
children or grandchildren protection against future unknowns.

As the cash value of the policy grows with your child, this policy can start them down a
financially responsible road at a young age.

Choosing Whole Life Insurance

With the help of our Whole Life Insurance resources and one of our local agents, you
can find the policy that matches your requirements. Whether the best solution is whole
life, universal life, or term life insurance, we can help you provide for your family.

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c. ENDOWMENT PLAN

Introduction:-
Endowment plan is a combination of insurance and investment. In term plan which is a pure
insurance there is no maturity benefit. It means if a person dies during the term of policy then
only his beneficiaries will get some money otherwise at maturity, at the end of the term there is
no benefit. In endowment
because as I said it is a
combination of insurance
and investment it means if
during the term of policy
that life assured dies in
such case beneficiaries will
get the benefits. Benefits
are sum assured under the
policy and also if there is bonus or guaranteed returns or something that will also be paid to the
beneficiaries. However if the person survives throughout the term of policy at the time of
maturity whatever sum assured plus other benefits in form of interim bonus or vested bonus that
will be paid to the person himself who has bought the policy.

Types of endowment plan

Unit-linked endowment
This is a fixed term saving plan with an opportunity of life coverage. In this plan your
savings can be invested in market shares thus the return you get from this completely
depends upon on the performance of your investment. If you are ready to play with the
market risks then this is the best option.

Full endowments

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In Full Endowment plan at the start of policy you will be assured with basic sumwhich is
also equal to death benefit. However the amount you get at the end of maturity depends
on the annual growth rate. Actually your premium amount will be pooled into companies
or some other investment and each year a bonus is added into your credit. Thus final
amount paid to you will be usually higher than the assured fund.

Low cost endowment

In this endowment plan the anticipated future growth rate of the amount will meet the
target amount and the guaranteed life insurance element. In case of death, this target
amount will be paid as the minimum assured sum. Usually Low Cost Endowment plan is
used to pay off a mortgage and this is the major advantage of this policy. However
investor may increase the premium amount to collect the enough money to clear their
mortgage.

Unitised with profit endowment

This is a form of profit endowment where the value of units is calculated annually and
this value is guaranteed in order to form a minimum return amount. This guaranteed sum
remains unaffected from the market risks thus giving you relief. However the guaranteed
amount is less than the actual value but if you want to escape from the volatility of
market this is a safe investment.

Nonprofit endowment
As the name suggests this plan does not add any bonus for the amount you pay as no sum
is invested in shares. If you are looking for a policy to pay off your mortgage then this
will not help you but, if you need only life coverage then you can opt for it.

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Universal life insurance

Universal life insurance is another type of permanent life insurance designed to provide lifetime
coverage. Unlike whole life insurance, universal life insurance policies are flexible and may
allow you to raise or lower your premium or coverage amounts throughout your lifetime. Like
whole life insurance, universal life also has a tax-deferred savings component, which may build
wealth over time. Additionally, due to its lifetime coverage, universal life typically has higher
premiums than term.

Needs it helps meet: Universal life insurance is most often used as a flexible estate planning
strategy to help preserve wealth to be transferred to beneficiaries. Another common use is long
term income replacement, where the need extends beyond working years. Some universal life
insurance product designs focus on providing both death benefit coverage and building cash
value while others focus on providing guaranteed death benefit coverage.

Variable life insurance

A third main type of permanent life insurance, variable life insurance, offers life insurance
protection for the duration of your life with more investment options, including equities. Its
structure is like that of universal life, but the value of your policy can go up or down with the
value of the underlying investment choices.

After a particularly brutal bear market, like the most recent one, these types of policies look
extremely unattractive.

"You can end up in a double negative situation, where your investments are losing money and the
cash value is being eroded by premium payments. Without adding more money on top, the policy
could lapse," says Fox.

"You do have permanent coverage for the rest of your life, as long as you keep the policy with an
adequate amount of cash value in it. Then it can stay in force for the rest of your lifetime. You
have to consistently monitor it and review it to make sure that it is still on track and a healthy
plan," he says.

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CHAPTER 3:5 REASONS WHY LIFE INSURANCE IS

IMPORTANT

Income replacement :-
If you and your spouse or partner relies on two incomes, then what would happen if one
of you suddenly wasn't there to contribute to the monthly expenses? A life insurance
policy provides money to replace your lost income so that your loved one can maintain
his/her standard of living.

Final expense :-
It is a fact of life: nobody lives forever. When you die, your loved ones will already have
to deal with the fact that you're gone. Do you really want them to worry about how they
will pay for your final expenses, such as burial or cremation costs, medical bills, and
other unpaid debts? If the answer is no, then you need a life insurance policy to cover or
offset these final costs.

College funding :-
Parents want the best for their kids and that includes a good education. However,
schooling is expensive, and it is not likely to go down anytime soon. A permanent life
insurance policy can ensure that your child or children will have an opportunity to pursue
higher education -- even if you don't live long enough to see them graduate. If you die,
the death benefit of your policy can be invested and potentially earn enough money to
pay for your child's education. Investing the benefit does involve some risk, and returns
are not guaranteed, but chances are the investment will provide at least some assistance in
funding your child's future.

Safeguarding your mortgage :-

Whether you live with a spouse or alone, if you die someone still has to pay your
mortgage. A term life insurance policy can be used to cover the outstanding balance on
your home and ensure that your spouse or significant other is not out on the street when

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 TYPES OF INSURANCE

you are gone. Just make sure to select a term for your policy that is the same as the term
of your mortgage to avoid a gap in coverage.

Protecting your business :-

A life insurance policy taken out on a key employee or business partner can ensure that
your business has money to get back on its feet in case that key employee or business
partner dies. Also, if a business partner has a large amount of debt and passes away, it is
possible that his creditors will try to take over his ownership in your company. A life
insurance policy can cover the costs of paying off the creditors and ensure that you
remaining in control of your company.

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 TYPES OF INSURANCE

CHAPTER-4:NON-LIFE INSURANCE

4.1 MOTOR INSURANCE

4.1.1

Introduction:-

Motor insurance (also known as vehicle / car / auto insurance) is insurance purchased for cars,
trucks, and other road vehicles. Its primary objective is to provide protection against physical
damage resulting from traffic collisions and against liability that could also arise there-from.

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 TYPES OF INSURANCE

Motor insurance in India covers for the loss or damage caused to the automobile or its parts due
to natural and man-made calamities. It provides accident cover for individual owners of the
vehicle while driving and also for passengers and third party legal liability.

4.1.2 Why Motor Insurance?

Motor Insurance (Third Party) is compulsory on purchase of new vehicles whether

acquired for commercial or private usage as per Motor Vehicle Act in India. One can be
penalized for driving without a valid cover.

An accident can happen to anyone even if the driver of the car is not at fault. This may
result into a lot of damages caused in person as well as to the car. Motor Insurance turns
to be very beneficial under such circumstances.

If the driver is liable for an accident which results in bodily injuries to a third party, then
the expenses have to be borne by the owner of the car? In such a case third party motor
insurance saves from a devastating financial blow.

Cars are an expensive investment for an individual. An accident can turn this investment
into a huge loss as well. Hence it is important to have motor insurance.

It also helps to cover for damages caused other than an accident like fire, theft, etc.

4.1.3 What is covered in Motor Insurance?

Motor Insurance covers:

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 TYPES OF INSURANCE

Accident caused by external means.

Man made calamities, such as Explosion, Burglary, Theft, Riots & Strikes, Malicious
Acts, Terrorism, etc.

Natural calamities like Earthquakes, Fire, Floods, Typhoons, Hurricanes, Storms,

Cyclones, Lightning, etc.

While in Transit by rail/road, air or waterway.

Third party legal liability

Cover for an owner driver in case of death

4.1.4 What is not covered in Motor Insurance?

Normal wear and tear of the vehicle due to usage

Loss or damage due to depreciation of vehicle

Electrical / Mechanical breakdown

Wear and tear of consumables like tires and tubes

Loss or damage incurred outside the geographical area

Loss or damage caused as result of driving under intoxication (DUI) (alcohol/drugs)

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 TYPES OF INSURANCE

Loss or damage caused to the vehicle by a unauthorized person without valid driving
license

Loss or damage due to nuclear risks

Vehicle being used otherwise than in accordance with restrictions as to use.

Loss/Damage attributable to War/Mutiny/Nuclear risks

Damages caused due to speed testing/ racing

Known or deliberate accidental damage

4.1.5 Types of motor insurance

Car Insurance policy can be broadly classified as follows:

Private Car Insurance: It is compulsory for all the new cars to have a motor-car
insurance. It is insurance for vehicles not used for commercial purposes. The amount of
premium depends on the make and value of the car, state where the car is registered and
the year of manufacture.

Two Wheeler Insurance : It covers accidental insurance for the drivers of the Two
wheeler vehicle.

Commercial Vehicle Insurance: It provides cover for all the vehicles which are not used
for personal purposes, goods carrying vehicles like the Trucks, Tempos and HMVs.

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 TYPES OF INSURANCE

Third Party Insurance Policy: This type of policy only covers the third person who has
been damaged or injured in an accident where the owner is accountable. It covers the
insured person's liability to third parties' loss caused by an accident involving the auto
vehicle of the insured. This refers to the minimum risks that are to be covered under the
Auto Vehicles Act 1938 (Act Liability). It doesn't cover the expenses, damage, theft or
injuries of the owner. This type of plan is made compulsory by the law of India.

Comprehensive Insurance Policy: This type of plan has a wider scope and covers all
the above mentioned liability along with the insured person's damage, theft, expenses and
injuries in result of an accident of the auto vehicle. This type of policy can be extended to
increase benefits as an additional feature.

Liability only policy: It covers third party liability for bodily injuries and/or death and
property damage. Personal accident cover for owner driver is also included.

4.1.6 Important Terms:

NCB (No Claim Bonus): No claim bonus is a special discount given for every claim-free
year. This therefore reduces the premium in succeeding years. It can be accumulated over
a period of insurance. NCB starts with 20% and goes up to 50%. In case of claim, NCB
becomes nil. The NCB accumulated on an old car can be transferred on a new car.

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 TYPES OF INSURANCE

IDV: IDV means Insured's Declared Value. It is the value of the vehicle, which is arrived
at by adjusting the current manufacturer's listed selling price of the vehicle with
depreciation percentage as prescribed in the Tariff.

Roll over cases : When an individual, shifts his insurance premiums from one insurance
company to another, then it is known as roll over.

Road side assistance: Roadside Assistance provides additional services such as towing,
flat tire change, locksmith service and battery jump-start to customers. This service can
be opted for by paying an extra premium if it is not included with the existing insurance
policy.

Voluntary deductible: Deductible is the portion of the claim that an individual has to
bare and is not paid by the insurance company. Voluntary deductible is the amount the
insured is ready to bare in case a claim is made. It is an out of pocket expense. Higher
discounts on premiums are given to individuals for choosing higher deductibles.

Total loss: When damage is caused to an automobile to such a great extent, that the repair
costs are higher than the depreciated value of the vehicle or even if it is stolen, then it is
termed as total loss.

Partial loss: The repairable losses occurred due to an insurable cause are known as
partial losses. Thefts of certain parts or accessories are also termed as partial loss.
Accessories are covered only in private cars.

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 TYPES OF INSURANCE

4.2 FIRE INSURANCE

4.2.1 Introduction:-

Fire insurance is a form of property insurance which protects

people
from the costs incurred by fires. When
a structure is covered by this type of

insurance,
the ins uranc
e policy will pay out in the event that the structure is damaged or destroyed by fire. Some
standard property insurance policies include fire coverage in their coverage, while in other cases,
it may need to be purchased separately.

Depending on the terms of the policy, fire insurance may pay out the actual value of the property
after the fire, or it may pay out the replacement value. In a replacement value policy, the
structure will be replaced in the event of a fire, whether it has depreciated or appreciated: in other
words, if homeowners purchase a home and the value increases, as long as it is covered by a
replacement value policy, the insurance company will replace it. An actual cash value policy
covers the structure, less depreciation. Most accounts come with coverage limits which may need
to be adjusted as property values rise and fall.

4.2.2 DEFINITION OF FIRE INSURANCE:

Fire insurance is specialized form of insurance beyond property insurance and is designed to
cover the cost of replacement reconstruction or repair beyond what is concerned by the property

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 TYPES OF INSURANCE

insurance policy. Policies cover damage to the building itself and may also cover damage to
nearby structures personal property and expenses associated with not being able to live in or use
the property if it is damaged.

Homeowners and property owners may consider fire insurance in addition to a property
insurance policy if the property contains valuable items. A best practice would be to document
the property and its related contents, which makes identifying the value of items damaged or
lost much easier after a fire has taken place. A fire insurance policy may contain exclusions
based on the cause of the fire, such as not covering fires caused by wars.

1. Valued policy

When the agreed value of the subject matter is mentioned in the policy is named as valued
policy. This value may not necessarily be the actual value of the property. In the event of toss
by fire the insurer pays the admitted value of the property.

2. Unvalued policy

An unvalued policy in one in which the value of the subject matter is not declared at the time of
policy taken. But in case of loss the value is computed by assessment. This is also called an
open policy.

3. Specific policy

In case of specific policy, the property is insured for a definite sum. If there is loss, the stated
amount will have to be paid to the policyholder. But the actual value of the subject matter is not
considered in this respect. For examples if a policy is taken for Rupees 20,000 upon a building
whose actual value is Rs.1, 00,000 and afire occurs causing the amount of loss Rs.20, 000. The
insurance company will pay the whole amount of loss of Rs.20, 000 irrespective of the fact that
the building was insured for one-fifth of its value.

4. Average policy

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 TYPES OF INSURANCE

An average policy is one which contains the average clause. This clause required the insurance
company to pay only that portion of the loss which is borne by the insured amount to the actual
value of the subject matter of the insurance. For example a value of the property is Rs.1,
00,000. It is insured for Rs.60, 000 (60% of the total value) and the amount of loss is Rs.60,
000. The insurance company will not pay Rs.60, 000 to the policyholder but will pay Rs.36,
000 (60% of Rs.60, 000).

5. Floating policy

A floating policy is that which covers the fluctuating risk of several goods lying in different
localities for supply to various markets. Such a policy is usually taken out under one sum and
one premium by the businessman whose goods are lying at docks and warehouses.

6. Stock declaration policy

This policy is taken for covering the stock where great fluctuations in the value can happen
throughout the contract period. On such policy 75% of the premium has to be deposited in
advance. The maximum liability of insurance company is specified in the policy by the insured.
At the end of year the average stock and final premium is calculated.

7. Loss of profit policy

Such type of policy covers the loss of profit which sustains as a result of fire. This policy is also
known as consequential loss policy.

8. Standard fire policy

This policy is issued for compensation of all direct loss or damage caused by lighting and
burning. Such policy also covers damages by earthquake, hair flood, explosion, cyclone and
riot.

9. Reinstatement policy

Under this policy insurance company pays more than the actual value of the property destroyed
by fire in order to cover the cost of replacement of the said property. It is also called as

39
 TYPES OF INSURANCE

Replacement Policy. This type of policy is not very common in these days.

10. Schedule Policy

A schedule policy is one which insures many properties under collective terms and conditions,
Details of the properties and their respective rates of premium are listed in one policy only for
the convenience of the insured.

11. Sprinkler leakage policy

This type of policy covers the loss of building as a result of the damage by he

Leakage of liquid or water.

12. Excess policy

This policy is issued for the stock of merchandise whose value is constantly fluctuating. In such
case it is not suitable to take one policy for certain sum. So the insured takes an ordinary policy
for minimum value of the stock and excess policy for excess value of the stock. The actual
value of the stock will be reported periodically

13. Maximum value with Discount policy

Under this policy one third discount of the premium paid is refundable to the insured at the
maturity of the policy. This policy covers the risk for maximum amount.

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 TYPES OF INSURANCE

4.3 Health Insurance

Health insurance is a type of insurance coverage that covers the cost of an insured individual's
medical and surgical expenses. Depending on the type of health insurance coverage, either the
insured pays costs out-of-pocket and is then reimbursed, or the insurer makes payments directly
to the provider.

In health insurance terminology, the "provider"

is a clinic, hospital, doctor, laboratory, health
care practitioner, or pharmacy. The "insured" is the
owner of the health insurance policy; the
person with the health insurance coverage.

In countries without universal health care coverage, such as the USA, health insurance is
commonly included in employer benefit packages and seen as an employment perk.

Is health insurance coverage a human right or another product one can buy?

In some countries, such as the United Kingdom or Canada, health care coverage is provided by
the state and is seen as every citizen's right - it is classed along with public education, the police,
firefighters, street lighting, and public road networks, as a part of a public service for the nation.

In other countries, such as the USA, health insurance coverage is seen somewhat differently -
with the exception of some groups, such as elderly and/or disabled people, veterans and some
others, it is the individual's responsibility to be insured. More recently, the Obama
Administration has introduced laws making it mandatory for everybody to have health insurance,
and there are penalties for those who fail to have a policy of some kind.

Everybody at some time in their life, and often on many occasions, will need some kind of
medical attention and treatment. When medical care is required, ideally the patient should be
able to concentrate on getting better, rather than wondering whether he/she has got the resources

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 TYPES OF INSURANCE

to pay for all the bills. This view is becoming more commonly held in nearly all the developed
nations.

4.3.1 Two broad types of health insurance or health coverage

Broadly speaking there are two types of health insurance:

Private health insurance

The CDC (Centers for Disease Control and Prevention) says that the US health care
system is heavily reliant on private health insurance. 58% of Americans have some kind
of private health insurance coverage.

Public (government) health insurance

For this type to be called insurance, premiums need to be collected, even though the
coverage is provided by the state. Therefore, the National Health Service (NHS) in the
United Kingdom is not a type of health insurance - even though it provides free medical
services for its citizens, it does not collect premiums - it is a type of universal health
coverage.

Examples of public health insurance in the USA is Medicare, which is a national federal
social insurance program for people aged 65+ years as well as disabled people, and
Medicaid which is funded jointly by the federal government and individual states (and
run by individual states), SCHIP which is aimed at children and families who cannot
afford private insurance, but to not qualify for Medicaid. Other public health insurance
programs in the USA include TRICARE, the Veterans Health Administration, and the
Indian Health Service.

4.3.2 The five main types of health insurance plans in the USA

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 TYPES OF INSURANCE

There are five main kinds of health insurance plans, with indemnity plans at one end, and HMOs
(health maintenance organization) at the other end of the spectrum. POS (point-of-service plans)
and PPOs (preferred provider organizations) include a combination of features from indemnity
plans and HMOs; however, they are usually seen as managed care plans.

In 2003, the US Congress introduced a new option, the HSA (Health Savings Account), which is
a combination of HMO/PPO/Indemnity and a savings account which has tax-benefits.

Understanding the differences between different kinds of plans is useful and extremely important
when you are considering choosing one for yourself, your family, or employees. However, as
plans evolve and add more details and take others away, there is more overlap and their
distinctions become progressively blurred. The majority of fee-for-service plans (indemnity
plans) use managed care techniques to control costs and to ensure there are enough resources to
pay for appropriate care. Similarly, many managed care plans have adopted fee-for-service
characteristics.

4.3.3 What are managed care plans?

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 TYPES OF INSURANCE

Managed care plans are health insurance plans that have a contract with health care providers
and medical facilities to provide medical care at special prices
(lower costs). These providers form the plan's network. The
network will have rules, which stipulate how
much of the care the plan will pay for.

Restrictive plans usually cost the "insured" less,

while flexible ones are more expensive. HMOs
will typically only pay for care if you use one
of the providers in their network. A primary care doctor (general practitioner) coordinates most
of the patient's care. PPOs will cover more of the costs if the insured selects a provider within
their network, but will also pay up some of the money for providers outside the network. POS
plans allow the insured to choose between an HMO or a PPO each time care is required.

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 TYPES OF INSURANCE

4.4 Marine Insurance

4.4.1 INTRODUCTION:-

'Marine

Insurance is a contract whereby the insurer or

underwriter undertakes to indemnify the assured in
the manner and to the extent thereby agreed, against
marine losses, that is to say, losses incidental to
marine adventure.'

The instrument in which the contract of marine insurance is recorded is called a policy. The
insurer in marine insurance is known as the underwriter and the person who is thereby
indemnified is called the insured.

4.4.2 Type of Marine Policies

A policy of insurance may e of the following types:-

Time Policy which covers the risk up to a stated amount for a fixed time;

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 TYPES OF INSURANCE

A Valued Policy, i.e. a policy which specifies the agreed valued of the subject matter
insured;

Mixed Policy which covers voyages between specified places within a specified time.

Floating Policy which describes the insurance in general terms and leaves the name of the
ship or ships or other particulars to be defined by subsequent disclosures;

Open Policy which does not specify the value of the subject matter insured, which has,
therefore, to be ascertained subsequently at the time the claim arises; and

Voyage Policy which covers a particular voyage.

4.4.3 Why marine insurance?

Most marine cargo shipments arrive at their destinations without an issue, and its easy to think
that insurance is a discretionary cost in the logistical process. However, time and time again we
hear in the news that the unexpected does indeed happen. If a vessel is lost at sea and your cargo
cant be salvaged, insurance cover will help protect you from financial and commercial loss.

Marine insurance is complex and needs to navigate legal principles from a number of legislative
areas - domestic and international law to begin with, but also maritime law. Marine insurance
experts stay abreast of these areas and know the intricacies of marine commerce and its many
clauses, helping clients to risk manage their shipments and to have peace of mind in their daily
operations.

A marine cargo policy is usually an annual policy tailored to suit the shippers needs. They range
from basic protection against loss of goods through to more comprehensive policies which
protect against loss of sales and provide for goods to be shipped as replacements. Marine
insurance can also be taken out on a shipment-by-shipment basis

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 TYPES OF INSURANCE

4.4.4 Who needs marine insurance?

No matter what business you are in, chances are you will be shipping or receiving goods as part
of your value chain. Marine insurance covers the process of moving cargo by sea, road, rail and
air, as well as any storage the goods may
require in between. As such, it is of vital
interest for a broad range of businesses.

Manufacturers - importing raw

materials and distributing finished
goods.

Wholesalers - importing stock and

distributing sales.
Primary producers - exporting products like beef, lamb, fish and cotton etc.

Miners - exporting coal, iron ore or bauxite

Retailers - importing stock and moving sales, purchases and stock transfers.

Repairers - importing spare parts and sending customers' goods.

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 TYPES OF INSURANCE

4.4.5 Types of marine insurance

Cargo Insurance:

Cargo insurance caters specifically to the cargo of the ship and also pertains to the belongings of
a ships voyagers.

Hull Insurance:

Hull insurance mainly caters to the torso and hull of the vessel along with all the articles and
pieces of furniture in the ship. This type of marine insurance is mainly taken out by the owner of
the ship in order to avoid any loss to the ship in case of any mishaps occurring.

Liability Insurance:

Liability insurance is that type of marine insurance where compensation is sought to be provided
to any liability occurring on account of a ship crashing or colliding and on account of any other
induced attacks.

Freight Insurance:

Freight insurance offers and provides protection to merchant vessels corporations which stand a
chance of losing money in the form of freight in case the cargo is lost due to the ship meeting
with an accident. This type of marine insurance solves the problem of companies losing money
because of a few unprecedented events and accidents occurring.

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 TYPES OF INSURANCE

4.4.6 Types of marine insurance policies

Voyage Policy:

A voyage policy is that kind of marine insurance policy which is valid for a particular voyage.

Time Policy:

A marine insurance policy which is valid for a specified time period generally valid for a year
is classified as a time policy.

Mixed Policy:

A marine insurance policy which offers a client the benefit of both time and voyage policy is
recognized as a mixed policy.

Open (or) Un-valued Policy:

In this type of marine insurance policy, the value of the cargo and consignment is not put down
in the policy beforehand. Therefore reimbursement is done only after the loss to the cargo and
consignment is inspected and valued.

Valued Policy:

A valued marine insurance policy is the opposite of an open marine insurance policy. In this type
of policy, the value of the cargo and consignment is ascertained and is mentioned in the policy
document beforehand thus making clear about the value of the reimbursements in case of any
loss to the cargo and consignment.

Port Risk Policy:

This kind of marine insurance policy is taken out in order to ensure the safety of the ship while it
is stationed in a port.

Wager Policy:

A wager policy is one where there are no fixed terms of reimbursements mentioned. If the
insurance company finds the damages worth the claim then the reimbursements are provided,

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 TYPES OF INSURANCE

else there is no compensation offered. Also, it has to be noted that a wager policy is not a written
insurance policy and as such is not valid in a court of law.

Floating Policy:

A marine insurance policy where only the amount of claim is specified and all other details are
omitted till the time the ship embarks on its journey, is known as floating policy. For clients who
undertake frequent trips of cargo transportation through waters, this is the most ideal and feasible
marine insurance policy.

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 TYPES OF INSURANCE

CHAPTER 5: INDEMNITY PLANS

5.1 Introduction:-
The insured can choose any doctor he/she wants. The doctor, hospital or the insured submits a
claim for reimbursement to the health insurance company.

It is important to remember that, like any insurance plan, the insured will only be reimbursed
according to what is listed and mentioned in the Benefit Summary. It is important to read the
Summary carefully and understand all that is printed, even the "small print". Most indemnity
plans claim to cover "the vast majority of procedures".

5.2 COINSURANCE
While indemnity plans do not pay for all of the medical and surgical services, they typically pay
for at least 80% of the customary and usual costs, while the insured is liable for the remaining 20

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 TYPES OF INSURANCE

or so percent. The insured is also liable for any excess charges, e.g. if the provider charges more
than what is considered as a reasonable and customary fee. Look at the example below:

5.2.1 Example of Coinsurance and excess charges

You see a doctor for "diabetes care"

The insurer deems that the customary fee for this type of diabetes care is $200.

The insurance company pays $160 (80%), while the insured (you) is expected to pay for
the rest ($40).

However, if the provider bills you for $250, you will have to pay for those extra $50.

So, you will have to pay $40 + $50 = $90.

Deductibles

The amount of covered expenses the insured has to pay before the reimbursement system kicks
in and starts covering medical costs. The deductible total may range from $100 to $300 per
person annually, or from $500 to $1,000 annually for a whole family.

Out-of-pocket maximum - as soon as the insured's covered expenses reach a certain amount
during a 12-month period, the plan will cover all usual and customary fees from then on. The
insured has to remember that any charges above what are considered as usual and customary by
the insurance company will have to be paid for by the insured.

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 TYPES OF INSURANCE

Lifetime limit

If the insured has a lifetime limit of $2 million, it means the insurance company will only cover
costs up to $2 million during that person's lifetime. Ideally, one should have a lifetime limit of at
least $2 million.

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 TYPES OF INSURANCE

CHAPTER 6: PPOS& HSAS

(Preferred Provider Organization)

6.1 Introduction:-

A PPO is in many ways similar to an indemnity plan - the insured can see any doctor whenever
they like. The Preferred Provider Organization gets together with health care providers, health
professionals and laboratories and negotiates preferential prices. The
providers that come to agreed deals with the PPO then
become part of its network.

Copayments - when the insured visits a doctor who

is within the PPOs network, they make a copayment
(pay a fixed amount). When the doctor is not in
the network, the PPO will still pay for some of
the fees, usually at least 70%, and the insured has to cover the balance, which is known as the
coinsurance, plus the copayment.

Deductibles - the insured may have to cover a certain amount of the expenses before the PPO
can reimburse. As with indemnity plans, deductibles might range from up to $300 per year per
person or $500 to $1,000 per whole family. When deductibles are high, premiums tend to be
comparatively low.

Self-referrals - an attractive part of PPOs for many people. You can see the doctor of your
choosing, including specialists not included in the insurer's network, without having to be
referred to them by a primary care physician, for example.

6.2 What are POS Plans (Point-of-Service Plans)?

A POS Plan is like a hybrid of an HMO and a PPO. The insured can chose to either have a
general practitioner coordinate their care, or opt to go directly to the "point-of-service".

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 TYPES OF INSURANCE

When the insured requires medical care, there are usually two or three different choices, and they
depend on what type of POS Plan is in place:

Through a primary care physician - similar to an HMO plan. The insured is just required
to make a copayment.

PPO network provider services - the insured can receive care from a PPO provider that is
within the PPO's network. The insured will have to make a copayment, and may also be
liable for coinsurance (e.g. the insurer pays 80% of the bill and the insured the remaining
20%).

Services from non-network providers - some of the medical expenses will be reimbursed.
It is important that the insured reads the Benefit Summary carefully, where who pays for
what, and how much, should be clearly laid out. There will usually be a copayment and a
higher coinsurance charge.

Deductibles - as with the other plans, the insured may be liable for the first $100 to $300 in
medical costs, while each family may have deductibles of $500 to $1,000 per year. The higher
the deductibles, the lower the premiums tend to be.

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 TYPES OF INSURANCE

6.3 HSAs (Health Savings Accounts)

6.3.1 Introduction:-

These are tax-free savings accounts aimed at building up coverage for future medical expenses.
Only patients with a high-deductible plan and currently have no other insurance plans are
eligible.

This type of plan is useful for those who are seeking some kind of protection, do not envisage
having any or many ongoing medical costs, and would like to be ready for an emergency or
catastrophic healthcare cost. Small businesses may find HSAs a useful alternative to the more
traditional health plans on the market.

People can enter an HSA plan through their employer if such a plan is available through the
company, or individually (in some states). The HSA plan needs to be paired with an existing
health plan with an annual deductible of over $1,100 for individuals and $2,200 for families.
There is a limit on total out-of-pocket costs, including copayments and deductibles.
Limits can vary as time goes by. Even though deductibles tend to be much higher than
in other plans, some of them do offer full coverage, while others offer nearly full
coverage (with a small copayment for preventive care).

In general, health plans with high-deductibles have cheaper

premiums; however, out-of-pocket costs are much higher. To
compensate for that, the insured can contribute a certain amount of money to a
tax-advantaged account - the amount as well as the details of tax benefits vary from year to year.
The contributions can be used to reduce the insured taxable income. If payments are made by an
employer on behalf of an employee, they are tax free. The money in the HSA plan can be used at
any time for approved medical expenses.

An HSA plan can also act as a top-up for expenses the other paired plan does not cover, such as
hearing aids. If the money is not being used, it can be invested; any investment growth is tax
free, as long as the account holder only uses the money for medical expenses.

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 TYPES OF INSURANCE

6.4 How health care coverage insurance systems exist in other countries.

Australia - has a combination of a public health system, called Medicare, and private health
insurance organizations. Medicare provides free universal access to hospital care, as well as
subsidized non-hospital medical treatment.

Canada - has a publicly funded universal healthcare system, which is nearly all free at the point
of use. Most of the public health services are provided by private organizations. Approximately
27.6% of Canadian citizen's health care requirements are received through the private sector.
Private health insurance is used to cover services that Medicare does not provide for, such as
optometry, dentistry and prescription medications. Three-quarters of all Canadians have some
type of supplementary private health coverage - many get this as a job perk.

A report issued in May 2012 by researchers from the Universities of Toronto and British
Columbia found that about 10% of Canadians are not able to take their prescription drugs as
directed because they cannot afford it.

France -The French public health insurance program was established in 1945 and its coverage
for its affiliates have undergone many changes since then.

All working French citizens have to contribute from a portion of their salaries to a not-for-profit
health insurance fund, which mutualizes the illness risk, and reimburses patients at different
rates. Insured people's spouses and offspring are eligible to be covered in the same policies. Each
fund is financially autonomous, and is used to pay for medical expenses at pre-arranged prices.
Recent reforms have harmonized many prices and benefits provided by different insurance funds.

Germany - this country has Europe's longest-standing universal healthcare system, which started
during the last 20 years of the 19th century. 85% of German citizens are covered by a basic
health insurance policy which the state provides - this provides "a standard level of coverage".
15% have chosen private health insurance plans. WHO (World Health Organization) says 77% of
Germany's health care system is state-funded while 23% comes from the private sector.

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Japan - the country has an Employees Health Insurance and a National Health Insurance system.
The National Health insurance is aimed at those who are not eligible for Employees Health
Insurance. Even though the country also has private health insurance, everybody in Japan,
including foreigners with a one-year visa must be enrolled in an Employees Health Insurance
plan or National Health Insurance.

United Kingdom - the NHS (National Health Service) provides free medical and hospital care
and subsidized or free prescription medications to all its citizens. The NHS is a publicly funded
universal healthcare system, which is not really an insurance system as no premiums are
collected and costs are not charged at patient level. Nevertheless, the NHS achieves the same aim
as insurance in spreading financial1 risk arising from ill-health. All NHS costs are met directly
from general taxation.

UK - The UK also has private health care which is paid for mainly by private insurance. Less
than 8% of the country's population has any private health insurance. The largest private health
insurance companies in the United Kingdom are BUPA, AXA, Aviva, GROUPME Healthcare,
Preheat, and WPA.

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CHAPTER 7: INTERNATIONAL LIFE INSURANCE FOR

EXPATRIATES

Expat Financial is one of the few independent international life insurance brokerage sources in
the world. We cater to individuals living outside the country that they hold a passport in, who
want to buy life or accidental death and dismemberment (AD&D) plans. But we also cover
certain local nationals where conditions and regulations permit, especially if they live outside
North America and Western Europe. Coverage is available from $100,000 to $1Million in USD
& up to 5 Million in Pounds Sterling. TFG Global or our associates can search the marketplace
to provide quotations on a no-charge and no-obligation basis from well known, financially secure
and reputable insurance companies. We can also help expatriates decide on the right amount of
protection based on their unique circumstances.

The minimum life insurance amount that we can obtain quotes on is $500,000 or equivalent.
We are not able to obtain cover for citizens who currently reside in the USA.

Once the customer is ready to proceed with the protection, we forward the necessary forms and
arrange for the necessary medical tests and examinations, if required. Premiums are payable
directly to the insurance company of your choice for your protection, which you can pay by
check, wire or credit card.

Expat Life Insurance

The insurance companies we access can insure a person of

almost any nationality almost anywhere in the world as per plan terms
& conditions. Benefits can be payable tax free, but contact your accountant for check your local
tax rules.

Many corporations and small business owners use expatriate life insurance plans to protect
investors, clear loans, buy-out deceased business partners etc.

We also have special insurance plans for United Kingdom Expatriates!

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Many other plans are also available upon request. Premium may differ depending on your health
and location. If you would like a personal life insurance quote or you require more information,
please go to the Expat Quote Form or you can use our Contact Page.

Note: Some of the products and services described or advertised on this site may not be available
to residents of certain jurisdictions, depending on regulatory constraints, including Canada and
the U.S. Please contact Expat Financial for more information about your specific jurisdiction.
The above coverage is NOT available to residents in British Columbia

7.1 International & expatriate life insurance options.

Typically our international life insurance policies can be taken on the following terms.

Level Term Assurance

Premiums are fixed for the duration of the insurance term and a payment will only be made if a death
occurs during the insurance period. Taken out for a fixed term, level term insurance can be a useful way
to provide security for dependents up to a certain age.

Whole of Life Cover

Normally the most expensive type of life insurance, these policies run for life of the policy holder and
will pay out on their death. This type of insurance can be used by expats to help pay estate inheritance
taxes.

Decreasing Term Assurance

As the name suggests, life cover decreases during the insurance term reducing the cash payout the longer
the term runs. Can be useful for the expat wishing to secure the payment of a reducing debt if they die
during the term. Less expensive than level term insurance.

Annually Reviewable Policies.

These policies are reviewed annually and can be cheap initially but will become more expensive as the
policy holder's age increases.

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CHAPTER 8: WELCOME TO IGI (INTERNATIONAL

GENERAL
INSURANCE)
International General Insurance Holdings Limited (IGIH) is registered in the
Dubai International Financial Centre (DIFC) with operations in Bermuda, the
United Kingdom, Jordan and Malaysia.

The IGI Group commenced operations in March 2002 and has evolved as a
major participant within its specialized lines of business. The Group
underwrites a worldwide portfolio of energy, property, marine, construction
and engineering, financial institutions, general aviation, casualty, ports &
terminals, political violence and non-proportional reinsurance treaty business with the main
geographical focus on the Afro Asian markets.

IGI Bermuda is a class 3B (re)insurer regulated by the Bermuda Monetary

Authority (BMA) and is the principal underwriting entity for the Group with
the Jordan office (IGI Underwriting Company Limited Amman) providing all
management, underwriting and operational functions.

IGI Bermuda is rated A-(Excellent) with a stable outlook By A.M. Best

Company.

IGIH has two subsidiary companies in the UK, International General Insurance
Co. (UK) Ltd. and North Star Underwriting Limited (a specialist marine
underwriting agency) both based in London and regulated by the United
Kingdom Financial Services Authority (FSA).

The Group also has a subsidiary company in Labuan, Malaysia registered as a

second tier reinsurer and is regulated by the Labuan Financial Services

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Authority (LFSA). This operation is supported by a branch office in Kuala

Lumpur providing marketing services.

The Group also has a marketing and underwriting office in Dubai based in the
DIFC and regulated by the Dubai Financial Services Authority (DFSA).

CONCLUSION

Insurance is a form is risk management in which the insured transfers the cost of potential
loss to another entity in exchange for monetary compensation known as the premium.

Insurance works by pooling risks. Because the number of insured individuals is so large,
insurance companies can use statistical analysis to project what their actual losses will be
within the given class. This allows the insurance companies to operate profitably and at
the same time pay for claims that may arise.

Underwriting is the process of evaluating the risk to be insured. This is done by the
insurer when determining how likely it is that the loss will occur, how much the loss
could be and then using this information to determine how much you should pay to insure
against the risk.

The insurance contract is a legal document that spells out the coverage, features,
conditions and limitations of an insurance policy.

Property and casualty insurance is insurance that protects against property losses to your
business, home, or car and/or against legal liability that may result from injury or damage
to the property of others. This type of insurance can protect a person or a business with an
interest in the insured physical property against losses.

An auto insurance policy typically covers you and your spouse, relatives who live in your
home and other licensed drivers to whom you give permission to drive your car.

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 TYPES OF INSURANCE

Homeowners insurance typically covers the dwelling (the structure), personal property
and contents, and some forms of personal liability. The policy may cover direct and
consequential loss resulting from damage to the property itself, loss or damage to
personal property, and liability for unintentional acts arising out of the non-business, non-
automobile activities of the insured and members of that insured's household.

Health insurance is a type of insurance that pays for medical expenses in exchange for
premiums. The way it works is that you pay your monthly or annual premium and the
insurance policy contracts healthcare providers and hospitals to provide benefits to its
members at a discounted rate.

An indemnity plan, sometimes called a fee-for-service plan, is a type of insurance that

reimburses you according to a schedule for medical expenses, regardless of who provides
the service.

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BIBLIOGRAPHY

WWW.IRDA.COM
WWW.WIIPIDIA.COM
BOOK

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