Grand Mother-The Second Jewel

Grand Mother-The Second Jewel

This is the second Jewel in Elizabeth’s life.

The word signifies Love, Hard work, kindness, beauty, bed time stories and a woman of substance.

Grand Mother’s name is Susanne. Her husband died when she was really young. After that she brought up all her children on her own. This made her a tough woman. She loves everyone but cannot show that love.

She is fair lady with long grey hair. She always wears cotton saris nicely pressed. In her appearance she looks to be from royal family. You can imagine how beautiful she would have looked in her young age.

Elizabeth in her childhood always slept with grand mother hearing stories from her. These stories have created a base for the principles Elizabeth has in her life.

Elizabeth has a very special place for Susanne and will always love her.

We will hear some stories from Sussane and in some later posts.

Note: Please pour in your comments and suggestions to improve my writing and grammatical capabilities.

Disclaimer: This post is from point of view of Elizabeth, if anyone feels hurt or disrespected by any post please revert back, Elizabeth will try to correct her ways of expressing. This is her first attempt to writing.

Regards,

Eliz
(Motto of Life - Mast Raho)

Introduction to Insurance - Part 3

BASIC CONCEPTS

What is Premium?

Premium is the consideration that the policyholder has to pay in order to secure the benefits offered by the insurance policy. It can be looked upon as the price of the insurance policy. It can be one time payment or it has to be paid regularly over a period of time. A default in premium can endanger the continuance of the policy. If that happens, the policy will be treated as lapsed and the expected benefits will not be available.

The calculation of premium is a highly complex technical process, involving actuarial and statistical principles.

Loadings

Loadings can be made for covering administrative expenses, unexpected contingencies and fluctuations like an earthquake or accident or riots or epidemic, these can raise the number of deaths to a much higher level than normal so insurers for safety measure provide for such contingencies by loading the premium.

Bonus

The distribution of the valuation surplus to policyholders is done through the declaration of ‘Bonus’. Only policyholders who opt for ‘participating’ or ‘With profit’ policies would be entitled to bonus. Other policyholders who have ‘Non participating’ or ‘Without Profit’ policies would be paying a slightly lesser amount of premium for the same kind of insurance cover, because of the factor of ‘Bonus Loading’.

Sum Assured

In a life assurance policy (for example, whole life assurance or endowment assurance), the sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured.

Paid Up Value

Under this option, the sum assured is reduced to a sum which bears the same ratio to the full sum assured as the number of premiums actually paid bears to the total number originally stipulated in the policy.

For example, if the sum assured is rs. 10000 and the total number of premiums payable is 50 (i.e. term is 25 years and mode is half yearly) and the default occurs after 25 half yearly installments are paid, the policy acquires a paid up value of Rs. 5000, with effect from the date of 26th installment was due.

Assignment

A Life Insurance Policy is property. It represents rights. A life insurance policy forms the estate of the assured and can be sold, mortgaged, charged or gifted.

An assignment transfers the rights, title and interest of the assignor to the assignee.

Nomination

Nomination is a simple way to ensure easy payment of policy moneys in the case of a death claim. A nomination gives the nominee only the right to receive the policy moneys in the event of death of the life assured. A nominee does not have any right to the whole (or part) of the claim. He only has the right to give a valid discharge but has to hold the moneys (all of it) on behalf of those entitled to it.



Surrender

Surrender is a voluntary termination of the contract, by the policy holder. A policyholder can surrender the life insurance policy at any time before it becomes a claim. The amount payable on surrender is called the surrender value or cash value. The surrender value is usually a percentage of the premiums paid or a percentage of the paid up value.

LIFE INSURANCE PRODUCTS

Life insurance products are usually referred to as ‘plans’ of insurance. These plans have two basic elements. The elements are as follows:

Death Cover – Death Cover provides for the benefit being paid on the death of the insured person within specified period.

Survival Benefit – Survival benefit provides for the benefit being paid on survival of a specified period.

Now let’s discuss some of the life insurance plans.

Some of the basic life insurance policies are as follows:

Term Assurance – It provides only death cover. If the insured does not die within specified period, no payment is made under a Term Assurance Plan.

Pure Endowment – It provides only survival benefit. If the insured dies within the specified period, no payment is made under a Pure Endowment Plan.

Whole life policy – A term assurance plan with an unspecified period is called a ‘Whole Life Policy’ under which the sum assured is paid on death, whenever it occurs.

Annuities – A form of pension in which an insurance company makes a series of periodic payments to a person or his or her dependents over a number of years, in return for the money paid to the insurance company either lump sum or in installments.

All insurance plans are combinations of Term Assurance and pure endowment plan.

Endowment Assurance Plan – A combination of Term Assurance Plan and Pure Endowment plan is Endowment Assurance Plan. In this Sum assured is paid on survival of specified period or on earlier death.

Double Endowment Assurance Plan – A combination of A Term Assurance plan with a Pure Endowment of double the value is called a Double Endowment Assurance plan. In this plan the amount payable on survival is double the amount payable on death.

Money back Policy – In this policy say 20% of Sum Assured is given every 5 years and 40 % on 20 years. And full sum assured on death at any time within 20 years. This a combination of Term Assurance plan and four Pure Endowment plan.

Limited Payment Policy – In this type of policies premium are payable for a limited period or short period.

Single Premium Policy – In this type of policy premium is payable once.

Participating or With Profit policy – In this Policyholder can participate in profits of the insurance company.

Non Participating or Without Profit Policy - In this Policyholder cannot participate in profits of the insurance company. And the premium is also charged less.

Universal Life Policies - Universal Life Insurance is a flexible-premium, adjustable benefit life insurance policy that accumulates account value. The flexibility of this policy allows you to change the amount of insurance as per your needs for insurance change. Some changes require underwriting approval. As with all life insurance, the main purpose for buying a Universal Life insurance policy is the death protection provided to your loved ones at your death.
Variable Life policies - Variable life is one kind of permanent insurance that lets you target your premium to one or more separate investment funds. These could be fixed income investments, or stocks, bonds, or a money market fund. Depending on company policy, you can switch your investments two to five times per year. Unlike universal life, with variable life you can control the investment of your cash value.
Joint Life Policies – Two or more lives can be covered under one policy. Such policies generally cover married couple or partners. The sum assured is paid on the death of any of the insured persons during the term or at the end of the term.

Group Life Assurance – Group life assurance is a life assurance policy that covers a number of people, usually a group of employees or the members of a particular club or association.

Riders – A rider is a clause or condition that is added on to a basic policy providing an additional benefit, at the choice of the proposer. For example, a provision that in the event of death of the life assured by accident, the Sum assured would be double can be a rider on an Endowment policy.

CLAIMS

A claim is the demand that the insurer should redeem the promise made in the contract. The insurer has then to perform his part of the contract i.e settle the claim after satisfying himself that all the conditions and requirements for settlement of claim have been compiled. Different types of claims are as follows:

Maturity Claim – Under endowment type of policies, the sum assured is to be paid when the term of the policy is over. The date on which the term is complete, is the date of maturity and the settlement of the Sum assured on that date, is maturity claim.

Death Claim – This type of claim is given on the death of the assured.

Note: Please pour in your comments and suggestions to improve my writing and grammatical capabilities.

Disclaimer: This post is from point of view of Elizabeth, if anyone feels hurt or disrespected by any post please revert back, Elizabeth will try to correct her ways of expressing. This is her first attempt to writing.

Regards,

Eliz
(Motto of Life - Mast Raho)

The Unrealized Dreams

The Unrealized Dreams

Everyone has dreams, some of them you are able to realize and some of them are unrealized.

Some people get de-motivated by the unrealized dreams, and gets upset and try to blame someone or the other for the same.

Eliz thinks that try not to get upset of the unrealized dreams and try to change the perspective of you. One should divert all his energies into positive direction. Also try some simple things like changing your look, or wardrobe or talking to friends and family so that they can help in giving new perspective. Some of things Eliz herself has tried and was successful.

Quotation from Hariwanshcray Bachchan - "Man ka ho to bhala; na ho to usse bhi bhala; kyunki bhagwan ki marzi ka ho raha hai; aur bhagwan kisi ka bura nahi chahta hai"

Disclaimer: This post is from point of view of Elizabeth, if anyone feels hurt or disrespected by any post please revert back, Elizabeth will try to correct her ways of expressing. This is her first attempt to writing.

Regards,

Eliz

(Motto of Life - Mast Raho)

Lingo of the day

Hey All,
Good Morning!
Was not well yesterday so couldn't write.
Today's Lingo of the day - "Ek Number"
Heard from a puneite meaning "Excellent".

Regards,
Eliz

Introduction to Insurance - Part 2

Introduction to Insurance - Part 2

CLASSIFICATION OF INSURANCE

Generally insurance can be classified as follows:

1. Life
2. Non Life

Life insurance includes all risks related to the lives of human beings and General Insurance covers the rest.

General Insurance has three classifications

(a) Fire (dealing with all fire related risks)
(b) Marine (dealing with all transport related risks and ships)
(c) Miscellaneous (dealing with all others like liability, fidelity, motor, crop, personal accident etc.)

PRINCIPLES OF INSURANCE

There are some basic principles which apply to Insurance. The principles are as follows:

1. Utmost Good Faith – Most of the facts relating to health, habits, personal history, family history etc. which form the basis of the contract are known only to the proposer. The insurer cannot know them, if the proposer does not disclose them. The underwriter can ask for a medical report. Yet there may be certain aspects which may not be brought out even by the best medical examination. For example a person suffering from diabetes, blood pressure can hide this by certain medications from examining doctor. History of past sicknesses, operations, injuries can be suppressed. Some of this may affect the life expectancy of the proposer. This constitutes material information from the underwriter’s point of view.

Similarly in general insurance, an inspection of the premises may not disclose that the contents of the godown have been temporarily relocated. Non disclosure of such facts would put the insurer as well as the community of policyholders, at a disadvantage. The contract is unfair, because one of the parties to the contract is in a more advantageous position.

The duty of full disclosure is of both the parties. The insurer also needs to disclose facts.

In insurance contract in the event of failure to disclose material facts, the contract can be held to be void ab initio.

Every circumstance that would have a bearing on the judgment of prudent insure in fixing the premium or determining the acceptability of the proposal for insurance, is a material fact. Therefore, facts regarding age, height, weight, nature of occupation, smoking/drinking habits, medical history, surgeries, earlier insurances etc must be disclosed.

2. Insurable Interest – An insurance contract is different from the wagering contract because of the principle of Insurable Interest. A wager is a bet.

Insurable Interest means that the proposer must have a stake in the continuance of the subject insured and could suffer a loss, if the risk is not covered through insurance. Financial or pecuniary interest in the subject matter is insured. The insured must be in relationship with the subject of insurance, where he benefits from the well being and safety and would be prejudiced by its loss or damage.

Who can have insurable interest?
Ø A husband has insurable interest in life of his wife and vice-versa.
Ø An employer has insurable interest in his employee to the extent of the value of his services.
Ø An employee has insurable interest in the life of his employer to the extent of his remuneration for the period of his notice.
Ø A creditor has an insurable interest in the life of the debtor, to the extent of the debt.
Ø Partners have insurable interest in the lives of each other.
Ø A surety has an insurable interest in the life of his co surety to the extent of the debt and also on the life of principal debtor.
Ø A company has an insurable interest in the life of a key valuable employee.

3. Causa Proxima – It means that proximate not the remote cause will be taken as the cause of loss. The insurer is thus has to make good the loss of the insured that clearly and proximately results, whether directly or indirectly, from the event insured against in the policy. The burden of proof that the loss occurred on account of the proximate cause lies on the insured. An insurer would therefore be exempted from liability when the cause of loss falls within the exceptions of the policy.

4. Indemnity – Insurance is meant to compensate losses. It cannot be used to make profit. This is broadly the concept of Principle of Indemnity. The amount paid out as claim cannot exceed the amount of loss incurred. Insurance should place the insured in the same financial position after loss as he enjoyed before it, not better. There is a link between Principle of Indemnity and insurable interest. The amount of claim cannot exceed the extent of interest.

In case of Life insurance the insurable interest is assumed to be unlimited therefore the principle of indemnity does not apply.

Note:
Please pour in your comments and suggestions to improve my writing and grammatical capabilities.
In the Part 3 post we will keep learning about Insurance Basics Concepts and its type.

Disclaimer: This post is from point of view of Elizabeth, if anyone feels hurt or disrespected by any post please revert back, Elizabeth will try to correct her ways of expressing. This is her first attempt to writing.

Regards,

Eliz
(Motto of Life - Mast Raho)

Lingo of the day

Hey All,

Good Morning! :)

So let's start the day with a new kind of post in the blog. This will be called "Lingo of the day".

Lingo - "Chill Madi"
Eliz heard it from a bangalorean. This means 'Chill Maro" or "Take a Chill Pil".

Have a Good Day!

Regards,

Eliz

Introduction to Insurance - Part 1

Introduction to Insurance - Part 1

WHAT IS INSURANCE?

Let’s answer this question first.

What are the important things which a company has?

People, Machines etc.

These are assets to a company, because this carries value.

The business of insurance is related to the protection of the economic value of assets. Every asset has a value, and is valuable to the owner as he expects to derive benefits from the asset. The benefit can be an income or anything else.

Every asset is expected to last for a certain period of time during which it will perform. So the owner arranges for its substitute. However an asset can be lost earlier due to a fire or anything adverse. Insurance helps in reducing the effect of the adverse conditions.

For example a PC for a IT company is a valuable asset, as it helps in generating income by helping in software development process. The company knows it will perform for say 5 years. So the company arranges for its substitute at the end of 5 years so that benefits derived from it don’t stop. But let’s say a fire occurs so the PC gets destroyed. But the company was not prepared for this adverse situation. But if the PC was insured the insurance would have helped in reducing the effect of the adverse condition.

At the time of 9/11 also, insurance company helped people by giving compensation and reduced the effect of the adverse condition.

PURPOSE AND NEED OF INSURANCE

Before knowing the purpose and need of insurance, first we should understand the concept of risk.

Risk – Risk is the possibility of adverse results flowing from any occurrence. Uncertainty gives rise to risk and for risk to exist there should be two outcomes out of which one should be undesirable.

For example for an export company there is a risk of loss of goods during the time of shipping. There are two outcomes in this situation either the goods will reach the destination safely or they will get lost or destroyed.

One more concept to be understood is Perils. Perils are the events like fire, flood, earthquakes, breakdown etc which can cause accidental destruction.

Insurance is relevant to uncertainties. If there is no uncertainty about the event it cannot be insured.

For example a person is crossing the river and in his boat there is a whole. And it is certain he will drown. So the insurance of this event cannot be done.

But there can be 1 question in case of life, death is a certain event. But there is insurance for this. Why?

The insurance is done because the time of death is uncertain.

Only economic consequences are insured.

For example there is a family of four with one earning member. The earning member works hard to get the money flowing to meet the requirements of his family. They have plans to construct their own house in the next two years. Everything is going as per plan.

The various events which can upset these plans are:
ü Burglary
ü Death
ü Accidental Permanent disability
ü Sickness
ü Critical Illness

All this events are out of control of family and more in hands of destiny. All these events can erode the wealth of the family.

In order to reduce the effect of risk to which family is subjected and to safeguard their economic value insurance should be taken.

HOW INSURANCE WORKS?

Insurance is based on business of ‘Sharing’. The mechanism of Insurance is very simple. People who share the same risk come together and agree that if any one of us suffers from the loss, others will share the loss and make good to the person who has suffered from the loss.

For example all houses in salt lake are faced with the risk of burglary. So the people in salt lake come together and agree to share the loss and make good to the house who has suffered from the loss.

Another example can be in a village there are 200 houses. And there is a risk of earthquake over there. And from the past experiences it is known that 10% of houses get destroyed each year due to earthquake. And the loss suffered by each house is Rs. 10000. So the total loss suffered by the village is Rs 2 lac. So each house contributes Rs. 1000 and share the risk of loss to those 20 houses.

BUSINESS OF INSURANCE

Insurance companies are called as insurers. The business of insurance is to
1. Bring together persons with common insurance interests (sharing the same risks)
2. Collect the share or contribution (called premium) from all of them, and
3. Pay out compensations (called claims) to those who suffer.

Note:
Please pour in your comments and suggestions to improve my writing and grammatical capabilities.
In coming posts we will keep learning about Insurance basics.

Disclaimer: This post is from point of view of Elizabeth, if anyone feels hurt or disrespected by any post please revert back, Elizabeth will try to correct her ways of expressing. This is her first attempt to writing.

Regards,

Eliz
(Motto of Life - Mast Raho)