What is risk and why insurance is done?
Risk means that there is a possibility of loss or damage. It may or may not happen. Insurance is done against the contingency that it may happen. Insurance compensates the economic loss (though not fully).
Living too long is a risk?
Yes, living too long is as much as a risk as of dying too young. Death takes away income, old age reduces or takes away income. These risks are taken care off by life insurance. Annuity policies (Pension scheme) are available to take care of old age. Financial Independence during old age is an absolute necessity.
How insurance is social security tool?
When the breadwinner dies, the family income dies. The economic condition of the family is affected and unless some arrangements are available, the family is pushed to lower strata of society. Life insurance comes in handy to restore the situation to some extent. Poor people cost the nation by way of subsidies and doles and so on. Life insurance tends to reduce such costs. In this sense, life insurance is complimentary in the state's efforts in social management.
What is free cover limit?
The average sum assured of the group is called free cover limit of the group as a whole. The sum assured for the individual in the group is decided on a predetermined formula. The average sum assured is arrived at by dividing the total sum assured of the group by the number of members covered in the group.
What is "Simple Reversionary Bonus" ?
Under this system, bonus is declared as so many rupees per thousand sum assured and stands attached to the policy. This is payable along with insured amount as and when payable (i.e either on death or on maturity).
What is compounded Reversionary Bonus ?
Under this system, bonus declared for a particular year gets added to the sum assured and this figure is taken for calculation of bonus for the next year i.e. Bonus is also paid on the bonus additions to the sum assured.
Who is an Actuary in Insurance Company ?
An actuary is a technical person, who has passed specialised examinations conducted by Institute of Actuaries London or Actuarial Society of India. An Actuary in an insurance company determines the policies to be offered (plans of insurance) and the premium to be charged to the insuring public. He also advises the company about the policies to follow regarding investment of funds, deciding the bonus to be declared and so on.
Why consumer education is needed in Life Insurance ?
A consumer (Policyholder) is to be informed of the benefits of the product sold in detail. He should also be educated about his duties and precautions to be taken by him. Eg. If the premium is not paid with in the days of grace, the policy will lapse and the valuable protection of insurance will be lost. This is to be made clear. Similarly if there is no nomination or change of nomination is needed on account of previous nominee is dead or policy is reassigned, the agent should advise immediately the policyholder to act. Otherwise there will be delay and problem at the time of Death claim.
