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Investing in Insurance

Questions Answered (9)

i AM 30YRS OLD... MARRIED.. I WANT TO RETIRE AT THE AGE OF 50YRS WHICH IS THE BEST PENSION PLAN

Yashish Dahiya

CEO & Co-Founder
Policybazaar.com

At your age, you should ideally buy a ULIP plan. This will help you build a handsome corpus amount.Difference between a normal ULIP plan and a plan specific for pension is the withdrawal at the time of maturity. For a normal plan, the return is paid out at maturity. This is all tax free and can then be utilized to buy annuity. For a pension plan, it is about discipline. At maturity, only one- third of the amount can be withdrawn and rest two-third needs to be put under annuity of the same insurer or any other insurer of your choice. Breaking this structure makes the withdrawal amount accountable for tax.

Hi, I want to know investing in ULIP or Term and MF. Which option is best one ?

Yashish Dahiya

CEO & Co-Founder
Policybazaar.com

This is a long debate actually and various investment advisors will have different things to say. You might also get a feeling that people chose the side in which they are. However, facts will help us deal with the question in a better way.Unit Linked Insurance PlansULIPs basically are very much like fund operated investment tools in which charges are deducted for operational matters and rest goes as investment in various funds. Every ULIP thus has a cost linked with it.-Essentially they have insurance/ Life cover linked with it.-They provide transparency and flexibility as compared to other investment options in insurance segment-Triple tax benefit structure is applicable. -Initial tax is saved under 80 C. so premium paid upto 1 lakh can save upto 30K depending on tax bracket.-The final amount at maturity is tax free under section 10(10D). Thus the income is tax free for self as well as the nominee. -The whole investment amount does not bear any service tax other than the mortality charge.Mutual Funds Term PlanMutual funds are again market linked products maintained by fund managers helping with investments in right instruments, thus helping in balancing risk.Like UIIP, MFs too has cost attached. Term plan added brings additional cost.-Life cover is provided by the term cover (mortality cost turns out to be cheaper for a healthy, young, non smoker individual)-Transparent product. All costs are declared.-80C is provided by specific schemes only. These schemes have a lock in for 3 years essentially. Cost structure work differently for these schemes and are on a higher side.-Long term/ short term capital gain taxes are applicable.-Other than these tax saving ones, lock in is not applicableHere, you can clearly see that ULIP has higher cost in the initial 4 years post which MF plus term takes over. *Please note that term cover will have a constant life cover of 5 lakhs here throughout these 20 years whereas ULIP product has 5 Lakhs or Fund value whichever is higher paid out. Hence, in later years life cover of ULIP has decreased. There are few ULIPs (Typre II Ulip) which has a constant life cover too. I have not taken those while calculating here.* Also note that tax saving has not been taken into consideration while showing the illustration. ULIPs will come out to be much more attractive in that case. You can simply deduct the tax saving from the premium you pay to get a glimpse of what that offers. The return is tax free as well.Another fact to note is, ULIPs have a lock in for 5 years. The regulator beliefs the risk to be too high, in case policyholder opts out of the policy in the initial 5 years. Thus the restriction is in place. Market trend shows the same. In Mutual fund there is no such restriction. This enables the policyholder to opt out any time he wishes to. However, someone who does not track market that often, this can turn out to be a very risky business.In my opinion, the most valuable point offered by ULIPs is investment discipline. You know that you have to pay premium by due date in order to avoid policy from getting lapsed. This will make you pay these premiums. Thus a regularized saving is ensured. Thus, a big corpus amount by the end. In Mutual funds there is no such restriction. You can rater opt for Systematic investment plans so as to get into a habit. Still, there are no penalties in case you opt out. So to summarize, one should look up to investing in ULIPs if they belong to any of these categories:-They have tax savings to do under 80 -They plan to invest longer than 10 years.

Tell me about whole life term insurence for a spouse with health insurance & accidental insurance

Yashish Dahiya

CEO & Co-Founder
Policybazaar.com

Whole life Insurance provides life cover till a defined age (generally 85 years or 99 years) and the money paid as a premium is invested in company funds. If there is any bonus earned by the company, the same is paid. This translates into income as well.You can buy it for your spouse. These policies allow few riders as well and thus very well customizable. Most common riders are:-Waiver of Premium Rider (WoP)(Waives off premium in cases of death, policy continues to run and pays to the nominee)-Term Plus rider (Provides additional life cover at nominal cost)-Accidental death benefit rider (ADB) (Provides additional cover in the event of accidental death)-Critical Illness rider (CI) (Pays fixed amount for treatment/support on getting diagnosed with one of the listed critical illnesses)If you want to purchase a whole life insurance, you have choices amongst Bharti Axa eAjeevan Sampatti , Edelweiss Tokio Cash Income

Is there any policy with which I can plan for my retirement?

Yashish Dahiya

CEO & Co-Founder
Policybazaar.com

Now being a defense person, you are provided good medical coverage and support at military hospitals. However, this may often not be sufficient for your case. The problem is that not all insurance companies would offer medical insurance to defense personnel, however, you should get individual (or family floaters) for your non defense family members (parents, children, spouse). If you are personally not part of the insurance cover, then the companies would offer this protection. You should also look at investing your money into multiple investment tools, these could be investment insurance products or could even look at non insurance alternatives for investment mediums. Look at long term investments that can help you with financial needs on different stages of life (marriage, birth of children, children education and retirement). It is critical that this is started as early as possible. Long term investment of monies can gives some really good returns which make life a lot easier in the times to come.Is there any policy with which I can plan for my retirement? You have not mentioned your age, family and financial status. Hence it will be difficult to pin point on a plan. However, I will talk of a thumb rule. If you are less than 40, get a ULIP plan. You have options of ULIP pension plan by HDFC and ICICI etc. You could also buy online ULIP plans with low cost structures so that the return is maximum. The amount you thus get at maturity can be then utilized to buy annuity products. These will serve as pension to you. You can assume 7% rate for calculation purposes of your annuity. If you are above 40 years, go for a mix. Get a traditional guaranteed structure product for half the amount you plan to invest. Plans like Reliance Super Endowment and HDFC Sanchay will help you with their flexible structure in opting for a product which can suit your retirement age. These allow policy for a range starting 15 years to 30 years. The much needed life cover will be an add on for you.Mix this with HDFC Personal pension plus. This product will give you ULIP mix along with a mix of guarantee on capital paid. IS LIC good for long term insurance?In my opinion the real question here should be based not on a company, but on particular products. Every company has some great products, some good products, some not so good products and some bad products. Insurance products have evolved over the years and now every company has good products, especially if you are willing to invest for the a long period of time. For investment/insurance policies, if you are willing to invest for a long term, then there are some very good new ULIP policies that have been launched recently (Aviva, Max Life have launched) which give returns which are comparable and often can beat Mutual Funds and at the same time give you the added advantage of insurance cover.Now LIC products have recently been on the more expensive side when compared to the returns they give. However, a lot of customers still prefer LIC due to the fact that LIC is perceived to be more stable as a company and a brand since. Now in this aspect, I always suggest to customers that if you are willing to pay a little extra premium for having mental peace for the next 23-30 years of your policy period, then LIC is definitely an option for you to explore. Many customers are vary of buying insurance from private players since they are not convinced that these players would be around 20-30 years from now. Now while this ideally shouldnt be a concern for the customer, since IRDA does make rules that ensure that customers are taken care of incase any company does want to exit, it is a call which each customer must make for themselves. LIC does have good stable products which may not necessarily give you the best returns in the market, but do offer you good returns.

If I have health insurance, is there a need to take personal accidental insurance?

Yashish Dahiya

CEO & Co-Founder
Policybazaar.com

Personal Accident insurance is a product which should definitely be part of your insurance portfolio regardless of whether you have a health insurance or not. It is a product which covers a very different need. A health insurance will give you good medical expense coverage in the event you need to be hospitalized for certain diseases and illnesses. PA cover would provide you with a lump sum payment in the event of an temporary or permanent total or partial disability due to an accident or injury. While there are certain portions of these products which may over lap, most of the benefits of a PA insurance are independent on medical insurance. There are many companies which offer these products online and depending on the sum assured chosen and the profile of the customer, the policy may be issued instantly online. Some PA insurance policies also provide a cover for legal expenses, transportation expenses and give a payout in event of death. So as you can see, a PA policy has aspects of health and life insurance along with its own properties and can be bought with no medical tests (as it does not offer payout for illness or disease). So all in all, please consider buying a good personal accident cover for yourself.

I need to take an insurance policy for my parents. The age of my dad is 59 and mom is 51. Please suggest me insurance that can cover preexisting condition with less duration and having critical illness cover with low premium.

Yashish Dahiya

CEO & Co-Founder
Policybazaar.com

incase your parents have a pre existing condition, then the products you should consider would be Religare Care, and L

How much insurance do I insure me and my family for?

Yashish Dahiya

CEO & Co-Founder
Policybazaar.com

Since you have not provided any information about your age, income and family details, I would unfortunately not be able to give you a customized recommendation. I can however give you a broad rule of thumb you should follow.There are 4 basic products which should be part of your overall insurance portfolio. They are: Term Insurance: This is a risk only cover for your life. There are no returns associated with this product, however, it offers you a huge sum assured at very nominal premiums (if bought online). Ideally, the amount of insurance required should be calculated on the following rule. Your annual income into 10, plus any outstanding loans/debts. For eg, if you annual income is Rs. 15 lakhs and you have a 50 lakh home loan still outstanding (which isnt secured), then you should have (15 X 10) 50 = Rs. 200 lakhs (Rs. 2 crores) as your term insurance amount. If you dont have any home loan, car loan, educational loan etc, then in the example above a Rs. 1.5 cr cover would be sufficient. This for a 30 year old healthy non smoker male, can come at a premium of as low as Rs. 7-8 thousand a year. This product should ideally be bought for each earning member of the family. Health Insurance: Assuming you have a spouse and 2 children, then you should look at buying a family floater of approximately Rs. 10 lakhs minimum to cover your entire family. There are many options available from Religare, Max Bupa, Apollo Munich, HDFC, Reliance, L

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Vijay Sinha

Bajaj Allianz Life Insurance

(31 Oct- 11:00hrs)

How can you secure your future with insurance?

Previous Transcripts » Insurance Guide
Upcoming Chats » How can you secure your future with insurance?

Which of the following diseases is excluded from Health Insurance Policy?

First heart attack

Cancer

Kidney failure

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FAQs

Q.
Whom should I insure?

Income producer- If you are the major earning member of your family, you need to insure yourself first. Working spouse - If your spouse is also earning then both of you could take an insurance cover in a joint-life policy. It is a good option for working couple since it could serve as a low-cost policy covering both of them. Children - If you have children you could buy an insurance policy in their names. This would also help your children to receive a certain amount of money when they opt for higher education. Partner/Key-person in the organization: If you have a working partner in your firm or a key-person(s) in the organization, your firm/organization could buy life insurance for them.

Q.
On what basis is claim paid?

In indemnity policies, the upper limit of a claim is the sum assured and this usually applies for the period of the policy. Certain policies, however, allow for reinstatement of the Sum Insured by payment of proportionate premium for the remaining period of the policy. The actual claim will be the actual extent of financial loss as validated by documents like bills. If the property is underinsured, the insured shall bear a rateable proportion of the loss. There can be more than one claim in the policy period but the sum assured is usually the limit for the policy period unless reinstated. Nowadays health insurance policies - which cover hospitalisation costs - have also a cashless settlement of claims. That is, you don't have to pay for the treatment at the hospital and then make a claim for reimbursement of the expenses. The insurance company has a service provider called the third party administrator (TPA) health services, who liaises with the hospitals and directly makes the payment for your treatment as per the terms of your policy and coverage.

Q.
What are the various types of insurances?

The insurance sector is classified into Life and Non-life or General insurance Under Life insurance, an individual's life is covered. In simple terms, the insured's nominee will receive a certain amount of money from the insurance company if the insured individual dies within a specified time. Under General Insurance, everything is covered. Thus, an individual could insure himself for his health, property, vehicle, travel, office, shop, education and even pets.

Q.
Why should one insure ?

One of the main reasons one should insure is to protect one's belongings and assets against financial loss. When one has earned and accumulated property, protecting it is prudent. The law also requires us to be insured against some liabilities. That is, in case we should cause a loss to another person, that person is entitled to compensation. To ensure that we can afford to pay that compensation, the law requires us to buy liability insurance so that the responsibility of paying the compensation is transferred to an insurance company.

Q.
Should I buy a life insurance policy even if my employer has insured me in a group insurance scheme?

It is always sensible to buy an individual life insurance policy because a. The amount of insurance covered by your company may not be a very large cover b. If your employer decides to cut cost then you may no longer be covered c. If you quit the company then you may no longer be insured d. Age also plays a role. The premium goes high as you start getting older.

Q.
What is an Insurance Repository?

An Insurance Repository is a facility to help policy holders buy and keep insurance policies in electronic form, rather than as a paper document. Insurance Repositories, like Share Depositories or Mutual Fund Transfer Agencies, will hold electronic records of insurance policies issued to individuals and such policies are called "electronic policies" or "e Policies".

Q.
What are the documents required to open an eIA Account?

ID Proof: • AADHAR CARD or • PAN Card Address Proof: A copy of any one of the following documents should be submitted as proof of address; the original of the relevant address proof should be produced for verification by the Insurance Repository: I. Ration Card II. Passport III. Aadhar letter IV. Voter ID card V. Driving license VI. Bank Passbook (not more than 6 months old) VII. Verified copies of a) Electricity bills (not more than 6 months old), b) Residence Telephone bills (not more than 6 months old) and c) Registered Lease and License agreement / Agreement for sale. VIII.Self‐declaration by High Court and Supreme Court judges, giving the new address in respect of their own accounts. IX. Identity card/document with address, issued by a) Central/State Government and its Departments, b) Statutory/Regulatory Authorities, c) Public Sector Undertakings, d) Scheduled Commercial Banks, e) Public Financial Institutions, f) Colleges affiliated to universities; and g) Professional Bodies such as ICAI, ICWAI, Bar Council etc. to their Members.

Q.
I am healthy. Why should I take health insurance?

Insurance cover is always available for uncertain event; once we suffer from any disease it is difficult to take coverage for such disease. Life is full of uncertainties we do not know when we will be suffer from diseases and accident so, it is better to take health insurance when we are healthy. When we are healthy we have number of choices available and we can choose the best and affordable plan for us.

Q.
Why do different people have different premiums ?

The premium is calculated on the extent and nature of the cover you want. A higher sum insured means a higher rate of premium. Similarly a higher risk will be charged a higher premium. An example of this is that an older person will have to pay a higher premium for health insurance for the same sum insured. Sometimes the risk is higher depending on the location of risks - for example in motor insurance in areas where accidents are higher. So the premium will vary according to the nature and severity of the risk. If I buy a policy and don't make a claim, it is a loss. So, why should I buy insurance? General insurance is not meant to be for savings or investment returns. It is meant for protection. What you pay for is the protection against a risk. To approach it as something from which returns should be obtained is not the correct approach as there is a price to pay for protecting a property worth lakhs for a few hundred rupees.

Q.
I want to save tax and plan for my 1-year old child's higher education. Which is the good insurance policy for this?

Generally, you will find people opting for a child's insurance policy in such cases. However, this is not a very good choice. The returns from an insurance policy are usually poor as compared to pure investment products as they have higher charge-structure. Second, they offer very little diversification. Third, the flexibility to change is also quite low. Therefore, the normal moneyback, endowment, or ULIP type of an insurance policy is preferably avoidable. To cover for any unfortunate eventuality, you should ideally be buying a term insurance policy. This takes care of the 'protection aspect'. To get good returns with tax saving, presently the PPF (8% assured and tax free returns, 15-year lock-in) and ELSS funds (100% equity, 3-year lock-in) are the best tax saving products. Since your time horizon is long and assuming you have a reasonable risk appetite, you can invest about 50% money each in PPF and ELSS. This will give you tax saving under Section 80C. Further, it will also help you to create wealth for your child's higher education 16-18 years later.

Q.
Can I take two policies and get claims under both of them?

In case of an indemnity cover (one that seeks to compensate the actual loss )--for instance, a policy that covers property, if there are two policies in vogue, the loss shall be shared by both the policies. In no case can an insured get more than the actual pecuniary loss he or she has incurred. On the other hand, in respect of benefit policies like the Personal Accident policy, where a fixed compensation is paid, no matter what the actual loss is , one may obtain more than one policy.

Q.
Why do I need Insurance?

You need insurance for Family that is financially dependent on you: If you have a family that is financially dependent on you, then you definitely need to insure yourself. The most common reason to buy life insurance is it provide protection to your family incase of any unforeseen events. The life insurance proceeds can be used to support your family members with the expenses. Loans or liabilities: It is very important to insure yourself if you have taken a loan or mortgaged your assets. It not only provides peace of mind but also a steady source of income for your family Compulsory saving-cum-investment: A life insurance policy could be used as a compulsory saving-cum-investment avenue. Proceeds from the insurance policy could be used to fund future expenses such as child's higher education or retirement funds or even a well-deserved holiday. Partner in a firm or Self-employed: It is highly needed by people who are partners in a firm or have their own proprietor firms. Life insurance can be a critical component for specialized business applications - such as funding a buy-sell agreement. The proceeds of a life insurance policy could be used to provide cash for the purchase of a deceased owner's interest in the business or to pay off business liabilities. Other than the RBI Bonds, insurance products are the only other investment products that guarantee yields over a range of time - from 5 years to 25 years. Insurance companies offer single premium investment products as well as regular investment-cum-insurance products that guarantee high yields over a period. Source: SBI Life Insurance

Q.
What should I do if I lose/misplace my insurance policy?

If you misplace your policy then you can ask for a duplicate document from the insurance company. However, you will receive a duplicate policy only after paying the necessary fees coupled with executing an indemnity bond. The verification process will be conducted by the insurance company and you need to carry a premium receipt and an identity card.

Q.
What coverage available under health insurance plan?

Hospitalization expenses for treatment of disease and accident for min of 24 hrs, pre and post hospitalization expenses generally upto 30 days are paid max upto sum assured. Hospitalization expense includes Room Rent, Medicine Expenses, Doctor Fees, Diagnostic Expenses and other medical expenses related to treatment. Expenses which are not paid by insurance company are registration charges, service charges/ nursing care chares, personal expenses such as telephone, fax, refreshment etc., taxes levied by government from time to time and other expenses which are not related to treatment.

Q.
How much should I insure for?

The amount you insure for is called the sum assured. Normally a policy should cover the value of the asset - either the market value while insuring, or the cost of replacing the asset should it be lost or destroyed. The premium will depend on the sum assured.

Q.
What is general insurance?

Insuring anything other than human life is called general insurance. Examples are insuring property like house and belongings against fire and theft or vehicles against accidental damage or theft. Injury due to accident or hospitalisation for illness and surgery can also be insured. Your liabilities to others arising out of the law can also be insured and is compulsory in some cases like motor third party insurance.

Q.
Why should I buy life insurance?

Life Insurance provides you and your family with protection against all the risks involved, moreover providing you an opportunity to grow your investments. It could be viewed as a long-term investment to provide for your child's future expenses or your expenses, post retirement. Source: SBI Life Insurance

Q.
Is it compulsory to issue policies in only electronic form? (i.e. is dematerialization of insurance policies compulsory, as in the case of shares?)

No, it is not (yet) compulsory to issue insurance policies only in electronic form. Policy holders can choose the form in which they want their policies issued - paper or electronic.

Q.
Should I take Life Insurance?

A person who have dependents (especially if they are the primary provider) or significant debts that outweigh ones assets, then you need insurance to ensure that your dependents are looked after if something happens to you. However, buying life insurance doesn't make sense for everyone. If you have no dependents and enough assets to cover your debts, survivor living expenses, outstanding life goals and the cost of dying (funeral, estate lawyer's fees, etc.), then insurance is an unnecessary cost for you.

Q.
Can anyone become or set up an Insurance Repository?

No, only entities approved by Insurance Regulatory and Development Authority (IRDA) can become an Insurance Repository. Insurance Companies cannot set up an Insurance Repository on their own nor can they hold more than 10% stake in any Insurance Repository.

Q.
What type of insurances should I have?

To ensure you are safe, you should ensure that you have Health insurance, - Life insurance, Accident Insurance, Automobile insurance, - Home insurance

Q.
What kinds of policies are there?

Most general insurance policies are annual - that is, they last for one year. Some policies are given for longer periods - like fire insurance for residences - and some for shorter periods - like insurance for goods transportation or for emergency medical treatment during foreign travel.

Q.
What is Grace Period?

It is a provision given to the policy holders to pay premium in the next 15-30 days since he fails to pay it before due date. This period of 15-30 days is called as grace period.

Q.
What do I need to pay to maintain electronic policies in my e IA? And what is the fee for converting my existing paper polices into electronic policies?

All the services provided by Insurance Repositories are absolutely FREE of charge to policy holders. Policy holders need not pay anything extra to buy an electronic policy or to convert an existing paper policy into electronic form. Similarly they need not pay anything to avail of any services from the Insurance Repository, including online premium payment and services at the respective online portal.

Q.
How much sum assured I should take?

There are two methods of deciding the sum assured which is human life value and need based analysis. One should use need based analysis method for deciding sum assured. In need based analysis method we should add survivors living expenses, future value of outstanding life goals, outstanding debt, cost of dying (funeral, estate lawyer's fees, etc.) and subtracts saleable investments, and insurance already available. The difference is the sum assured required.

Glossary

Abstract

A brief history of title to land

Accelerated death benefit

A percentage of the policy?s face amount, discounted for interest, that can be paid to the insured prior to death, under specified circumstances. This is in lieu of a traditional policy that pays beneficiaries after the insured?s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.

Accident & Accidental Death Benefit

In the context of life insurance, accident or accidental death is defined as a sudden and unforeseen happening that causes disability or death of the policyholder.

Accident and health insurance

Coverage for acci-dental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.

Accidental death benefit

An endorsement that pays the beneficiary an additional benefit if the insured dies from an accident.

Accidental Death Insurance

Accidental Death Insurance provides coverage in the event of death due to accidental injuries, but not illness. In the event of death, payment is made to the insured's beneficiary. And most of these covers provide for cases for bodily injury (e.g., the loss of a limb), where the insured receives a specificed sum.

Accounts receivable (debtors) insurance

Indemnifies for losses that are due to an inability to collect from open commercial account debtors because records have been destroyed by an insured peril.

Accumulation Period

The time interval between the commencement of the policy and the time when benefits are paid out. It is established by the insured.

Activities of daily living

Activities-such as eating, bathing, toileting, dressing, and continence-that trig-ger payment in a long-term care insurance policy, if at least some of them cannot be performed by the insured.

Acts of god

Perils that cannot reasonably be guarded against, such as floods and earthquakes.

Actual cash value

A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.

Actual loss ratio

The ratio of losses incurred to premiums earned actually experienced in a given line of insurance activity in a previous time period.

Actuarial cost assumptions

Assumptions about rates of investment earnings, mortality, turnover, salpatterns, probable expenses, and distribution or actual ages at which employees are likely to retire.

Actuarial Cost Method

A method that determines contributions that would be made under an insurance plan.

Actuary

An insurance professional skilled in the analysis, evaluation, and management of statistical information. Evaluates insurance firms? reserves, determines rates and rating methods, and determines other business and financial risks.

AD&D

Accidental Death and Dismemberment Benefits

Additional insureds

Persons who have an insurable interest in the property/person covered in a policy and who are covered against the losses outlined in the policy. They usually receive less coverage than the pri-mary named insured.

Additional living expenses

Extra charges covered by homeowners policies over and above the policy-holder?s customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.

Adjustable Life Insurance

A facility allowing a life insurance policy owner to change the insurance plan, increase or decrease the premium and make changes in the protection period.

Adjuster

An individual employed by a property/cas-ualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyhold-ers, and receive a portion of a claims settlement. Inde-pendent adjusters are independent contractors who adjust claims for different insurance companies.

Admitted company

An insurance company licensed and authorized to do business in a particular state or country.

Adverse selection

The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all. In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance. works best when risk is shared among large numbers of policyholders.

Affinity sales

Selling insurance through groups such as professional and business associations.

Affirmative warranty

An agreement between an insurance company and an agent, granting the agent authority to write insurance from that company. It specifies the duties, rights, and obligations of both parties.

After Tax Rupees

This refers to the disposable income that the policy holder has in his hands after paying all tax dues during a particular financial year under the Income Tax Act.

Age Limits

The maximum and minimum ages above or below which an insurance company will not accept applications for insurance from or will not renew a policy with a person.

Agent

Insurance is sold by two types of agents: inde-pendent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.

Agent (Life Advisor)

A representative of an insurance company authorized to sell insurance policies.

Aggregate deductible

A type of deductible that applies for an entire year in which the insured absorbs all losses until the deductible level is reached, at which point the insurer pays for all loses over the specified amount.

Aggregate limits

A yearly limit, rather than a ?per occurrence? limit. Once an insurance company has paid up to the limit, it will pay no more during that year.

Aleatory contract

A legal contract in which the outcome depends on an uncertain event. Insurance contracts are aleatory in nature.

All-risk agreement

A property or liability insur-ance contract in which all risks of loss are covered except those specifically excluded; also called ?open perils policy.?

Alternative dispute resolution (ADR)

Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.

Alternative markets

Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance, are also a form of self-insurance.

Ancillary charges

In hospital insurance, covered charges other than room and board.

Annual statement

Summary of an insurer?s or rein-surer?s financial operations for a particular year, including a balance sheet.

Annual-premium annuity

An annuity whose purchase price is paid in annual installments.

Annuitant

: An individual receiving benefits under an annuity.

Annuity Certain

An insurance contract that provides an annuity for a certain number of years, irrespective of whether the insured is alive or dead.

Annuity Consideration

The payment that an annuitant makes for an annuity.

Annuity units

A measure used in valuing a variable annuity during the time it is being paid to the annui-tant. Each unit?s value fluctuates with the performance of an investment portfolio.

Apportionment

The dividing of a loss proportion-ately among two or more insurers that cover the same loss.

Appraisal

A survey to determine a property?s insura-ble value, or the amount of a loss.

Arbitration

Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.

Arson

The deliberate setting of a fire

Assessable policy

A policy subject to additional charges, or assessments, on all policyholders in the company.

Asset-backed securities

Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.

Assign

To use life insurance policy benefits as collat-eral for a loan.

Assignee

Assignee is the person to whom the title, rights and benefits under a life policy are assigned.

Assignor

Assignor is the policyholder who transfers the title, beneficial interest and rights under the policy to another individual.

Asymmetric information

An insured?s knowledge of likely losses that is unavailable to insurers.

Attained Age

It is your current age.Your attained age is one of the factors life insurance companies use to determine your premiums. As the older you are, the probability of death during the period of insurance cover i.e life insurance risk increases and so does the premium. Higher the risk, higher the premium.

Authority

The Insurance Regulatory and Development authority, IRDA established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 is the regulator for the insurance sector.

Auto insurance premium

The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses.

Automatic coverage

An insurer agrees to cover accidents from all machinery of the same type as that specifically listed in the endorsement.

Automatic treaty

An agreement whereby the ceding company is required to cede some certain amounts of business and the reinsurer is required to accept them.

Average adjusters

A name applied to claims adjusters in the field of marine insurance.

Aviation insurance

Commercial airlines hold prop-erty insurance on aeroplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.

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