Insurance examinations - Tips on insurance awareness

8/10/2019 Insurance examinations - Tips on insurance awareness

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1 Insurance ExaminationsTips on insurance awareness by A. Gauri [email protected]

Insurance examinations

Tips on insurance awareness

raining handbook

Prepared by:

A. Gauri Sankar, Chennai 600042

[email protected]

24.12.2014
mailto:[email protected]:[email protected]:[email protected]


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01.What do you know by the history of insurance?

The idea of insurance was mooted out during 14thcentury

Marine insurance is the oldest form of insurance throughout the world

Fire insurance and life insurance were subsequently undertaken by insurers

Fire insurance originated in Germany during 16thcentury

Life insurance started in England during 16thcentury The first life that was insured was of Mr. William Gybbons on 18.6.1653

The first registered office of life was in England with the name Hand in Hand society in 1696

Life insurance was started during the year 1818 in Bengal Presidency The name of the company was Orient Life Assurance Company

Bombay Life Assurance Company was started in 1823

Triton insurance company was commenced for general insurance in 1850

During 1871, Bombay Mutual Life Assurance Society was established During 1874 Oriental Government Security Life Assurance Co Ltd was established

The first company which transacted general insurance business was the Indian Mercantile

insurance company limited

During 1912, in order to regulate insurance the Indian Life Assurance companies act wasformulated

During the year 1928, the Indian Insurance companies act was enacted

During 1938, there were 176 insurance companies in India

The image of insurance was tainted on account of frauds during 1920 and 1930

Insurance act was passed during 1938 245 Indian and foreign life insurers and provident societies were under one nationalized

corporation during 1956

Life Insurance Corporation was formed by an act of Parliament vide LIC act 1956

The initial capital for LIC was Rs. 5 crore During 1968, insurance act was amended to regulate investment and also set up of tariff

advisory committee

Non life insurance business/general insurance remained with private sector till 1972 There were 107 companies involved in the business of general operations

General Insurance business was nationalized in India as per General Insurance Business

(Nationalisation) act 1972 with effect from 1.1.1973 107 private insurance companies were amalgamated and grouped into four companies namely

National Insurance Company, New India Assurance Company, Oriental Insurance Company andUnited India Insurance Company

The above companies were the subsidiaries of General Insurance Company GIC Malhotra committee was formed during the year 1993 headed by former Finance Secretary and

RBI governor R N Malhotra

During the year 1999, IRDA act was passed and paved way for privatization of insurance sectorin India

During the year 2002, IRDA act and insurance act have been amended

02.What is the present level of insurance industry in India?

Insurance business in India can be classified into Life Insurance business and General Insurance

Business

LIC of India is taking care of life insurance business General Insurance Corporation of India namely GIC Limited is taking care of general insurance

business United India Insurance Company, Oriental Insurance Company, New India Assurance Company

and National Insurance Company are part and parcel of General Insurance Corporation of India

Insurance sector in India was liberalized in March 2000 by the formation of IRDA

IRDA means Insurance Regulatory and Development Authority As on 2,2.2011, there were 23 life insurance companies and 24 non life insurance companies in

the market.


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03.What are the concepts of Insurance?

Insurance business can be divided in four classes namely: Life Insurance, Fire insurance, Marineinsurance and Miscellaneous insurance

Life insurers transact life insurance business

General insurers transact the rest No composites are permitted as per law

04.

What are the specific principles of insurance?

The specific principles of insurance are uberrima fida(utmost good faith); insurable interest;

indemnity; proximate clause; subrogation

05.What are the benefits of life insurance?

The benefits of life insurance are protection against untimely death, saving for old age

encourage savings, initiates investment, credit worthiness, social security, tax benefits.

06.What are the objectives of nationalization of insurance industry?

To ensure general insurance business to the best advantage to the community

To promote competition in the economy To prevent monopoly growth and concentration of wealth

To spread the activities over geograp0hical frontiers

To innovate new products to suit the requirements of the di fferent sections of the population

To meet the social objectives by formulating policies for weaker sections

07.What are the major recommendations of Malhotra committee?

Insurance intermediaries

Surveyors

Product pricing Rural insurance

Regulation of insurance business Liberalisation

Investment Restructuring of general insurance

Detariffing

08.What do you mean by Insurance Institute of India?

Insurance Institute of India was established in 1955

The examinations conducted by Insurance Institute of India are The Inspectors examination (general insurance)

Certificate of insurance salesmanship (agents)

Licentiate, associate and fellowship

Pre recruitment test to insurance agents

09.Persons have insurance interest in which types of properties?

Persons who have insurance interest in different types of properties are as detailed below:

Immovable properties

Movable properties Business

Ships


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Commencement of risk

Cause proxima

Payment of premium

Right to contribution

Mitigation of loss

10.What are the different classifications of insurance?

Life insurance

Non life insurance namely fire insurance business, marine insurance business,miscellaneous insurance business

Retail insurance

Corporate insurance

Coinsurance Universal insurance

Direct insurance

Reinsurance

11.What are the various acts connected with insurance?

Indian contract act 1872

The Insurance company act 1938

General Insurance Business (Nationalisation) act 1972 Life Insurance act 1956

IRDA act 1999

Consumer protection act 1986

Foreign exchange maintenance act 1999 Motor vehicles act 1988

Marine Insurance act 1963

Married womens property act 1874

12.What do you mean by actuary?

Actuary is a technical expert who combines an understanding of the risks involved in insurance

He also understands the mathematical techniques to develop insurance products to managethese risks

He advises on pricing the insurance products He calculates the reserves to be held for meeting the financial risks of the insurance products

IRDA has made it compulsory for any life insurance company to appoint an actuary

Without actuary insurance companies cannot carry on their life insurance business

13.What are the essentials of a valid contract?

Offer and acceptance

Intention Consideration

Capacity of parties

Free consent

Lawful object Agreement not declared valid

Certain Legal formalities

14.What are the different kinds of contract?

Voidable contract Void agreement

Void contract


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Illegal agreement

Express contract

Implied contract

Executed contract

Executor contract

Unilateral contract

Bilateral contract

15.What are the various types of life insurance policies?

Term insurance

Whole life policy

Endowment

Health insurance Joint life policy

With profit

Without profit

Double accident benefit

Annuity policy

Policies for women

Pension insurance

Postal life insurance

Rural insurance plans Group life insurance

Insurance policies for children

Money back policy

Unit Linked Policy

16.What do you mean by term insurance?

Term insurance offers pure risk cover without any element of saving for a given term. No benefits are available to the policyholder till his death

17.What do you mean by whole life insurance? The premium is payable for the life time of the assured or for a lesser period.

Sum assured is payable only on the death of the assured

18.What do you mean by endowment plans? This is considered to be the most popular plan of life assurance.

It covers the life of the assured in the event of his early death

It also provides for repayment of a lump sum to the assured if he survives on the date ofmaturity

19.What do you mean by money back policy?

It provides life insurance cover

Periodical payments are also paid to the assured The policyholder need not wait to get the returns till the date of maturity

20.What do you mean by childrens assurance plan?

The life of a child can be covered from the age of 7. Once the child becomes a major he can continue the policy

21.What do you mean by Unit Linked Insurance Policy?

It is called as ULIP

It provides a combination of risk cover and investment

The dynamics of the capital market have a direct bearing on the performance of the ULIPs The investment risk is generally borne by the investor


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A wide range of funds are offered to suit ones investment objectives, risk profile and timehorizons

Different funds have different risk profiles

The potential for returns also varies from fund to fund

22.What are the common types of funds available under ULIP?

The common types of funds available under ULIP are equity funds; income, fixed interest andbond funds; cash funds and balanced funds

Equity funds primarily invested in company stocks with the general aim of capitalappreciation

The risk category in the case of equity funds is found to be medium to high

Income, fixed interest and bond fundsinvested in corporate bonds, government securities

and other fixed income instruments and the risk category is found to be medium Cash funds Sometimes known as money market funds; amount is invested in cash, bank

deposits and money market instruments. The risk category is found to be low

Balanced fundsCombination of equity investment with fixed interest instruments. The risk

category is found to be medium

23.What are different kinds of non life insurance products?

Personal accident insurance

Workmen compensation insurance

Fire Insurance Marine insurance

Motor insurance (Vehicle insurance)

Group Insurance

Health insurance

24.What are the different kinds of general insurance products?

Fire insurance Marine (cargo) insurance

Marine (hull) insurance

Motor insurance Aviation insurance

Engineering insurance Miscellaneous insurance

25.What are the different kinds of marine insurance policies?

Hull insurance

Cargo insurance Freight insurance

Liability insurance

26.What are the various classes of marine insurance policies? Voyage policies

Time policies

Mixed policies

Valued policies Unvalued policies

Floating policies Named policies

Single vessel and float policies

Currency policies

27.What are various classes of fire insurance policies?


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Valued policy

Valuable policy

Specific policy

Floating policy

Average policy

Excess policy

Declaration policy Adaptable policy

Maximum value with dissent policy

Reinstatement policy Comprehensive policy

Consequential loss policy

Sprinkler leakage policy

28.Paid up value:

Paid up value = (Number of years premium paid/policy term) x sum assured + (bonus/1000) x

sum assured

29.Surrender value:

Surrender value = (surrender value factor x paid up value)/100

30.What do you mean by group insurance?

It is a plan of insurance which provides life cover to a number of persons under single policycalled as master policy

The premium is found to be cheaper on account of low administration cost A number of group insurance schemes have been designed for various groups

The groups include employer-employee groups; associations of professionals (such as

doctors, lawyers, chartered accountants etc); members of cooperative banks; welfare funds;

credit societies and weaker sections of the society Individual lives are not assessed. A person will be covered so long as he remains eligible to

be the member of the group Double accident benefit is available payment of double the sum assured on death due to

accident without permanent disability benefit by payment of extra premium

31.What are different kinds of reinsurance?

The different types of reinsurance are:

Proportional form of reinsurance

Non proportional form of reinsurance Proportional form of reinsurance are:

Quota method

Share surplus form

Non proportional form of reinsurance are:

Excess of loss method

Excess of loss ratio method

Pools method of reinsurance Treaty method of reinsurance

32.What do you mean by DICGC and its objectives? DICGC means DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION

The objectives of DICGC are:

Provide insurance against the loss or part of bank deposits by participating banks and other

financial institutions Provide guarantee support to small scale borrowers by participating banks and other financia

institutions


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Provide credit guarantee support to the priority sectors agriculture, retain trade, smalbusiness, professional and self employed persons and education

DICGC provides two types of functions - deposit insurance function and credit guarantee

function

When it comes to deposit insurance function, DICGC provides compensation upto a

maximum amount of Rs. 1.00 lakhs per depositor per bank in the case of insolvency of the

bank

33.What are the important credit guarantee schemes operated by DICGC?

Small loans guarantee scheme 1971 Small loans (financial corporation) guarantee scheme 1971

Service Cooperative Societies guarantee scheme 1971

Small loans (small scale industries) guarantee scheme 1981

Small loans (cooperative banks) guarantee scheme 1984 Credit guarantee schemes for small borrowers

Credit guarantee scheme for small scale industries

34.What are the objectives of insurance legislations?

To fostering a sound, competitive and progressive insurance business

To monitor the activities of the insurance industry

To protect the interests of the policy holders by ensuring the insurers, intermediaries andsurveyors abide the rules and regulations

To promote and preserve high standards of professionalism in the conduct of insurancebusiness

To provide regulatory and fiscal infrastructure conducive to the development of insuranceindustry in the country

To coordinate investment and other activities of the insurers with the objectives of thenational economic policies

To provide the best treatments to policy holders of various insurance policies

To provide the best solutions to the insuring public

35.What do you mean by consumer protection and redressel agencies in India?

The consumer protection redressal agencies were established by the consumer protection

act in India Consumer Disputes Redressal forum functions under three capacities namely; District

consumer forum, state consumer forum and national consumer forum

36.What do you mean District consumer forum ?

It is set up by state governments in all districts in India. Each district forum is headed by a district judge with two other members

These forums have jurisdiction to entertain complaints and compensation claim does not

exceed Rs. 5 lakhs

37.What do you mean by unfair trade practices?

Falsely represent that the goods are of a particular standard, quality or grade

Falsely represent that the services are of a particular standard, quality or grade

Falsely represent any rebuilt, second hand, renovated, reconditioned or old goods as newgoods

Represent that the seller or supplier has sponsorship or approval which they do not have Making a false representation about the usefulness of any good or service

Giving public any warranty or guarantee of the performance efficacy or length of life ofproduct or any goods that is not based on adequate proper test

38.What do you mean by State consumer forum?


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It shall have the jurisdiction to entertain complaints where the value of goods an servicesand compensation if any claim exceeds Rs. 5 lakhs

It shall have the administrative control over all district forums within its jurisdiction in al

matters

39.What do you mean by National consumer forum?

It shall be headed by a judge of supreme court of India Consists of four other members

Has the jurisdiction to hear complaints where value of goods and services and compensations

if any claimed exceeds Rs. 2 lakhs and shall hear appeals against the orders of statecommissions.

40.What are the features of motor vehicles act?

Vehicle must be a motor vehicle Use must be in a public place

Insurance policy should be in force

Statutory contract between insurer and driver

Rights of third parties

Limitations of the third partys rights

41.What are the different kinds of fire insurance policies?

Loss and profit policy

Industrial all risk policy and fire reinstatement Declaration and floating policy

42.What are the different kinds of Marine (cargo) insurance policies?

Inland transit policy

Import and export marine policy

Special declaration policy Annual open policy

Special storage policy

Sellers contingency insurance

43.

What are the different kinds of Marine (Hull) insurance policies? Fishing vessels policy

Major fleets policy Inland vessels policy

Country crafts/motorized boats policies

Builders risk ship policy Ship breakage risks policies

Major/Sunday hulls

Vessels under erection cover

44.What are various classes of aviation insurance policies?

Aircraft comprehensive insurance

Legal liability for passengers

Legal liability of crews Loss of licence

Flight coupon (personal accident insurance) Third party liability for crews

45.What are various kinds of engineering insurance policies?

Machine cum erection and storage policy Machinery breakdown

Contractors all risks


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Contracts plant and machinery

Advanced loss of profit

Electronic equipment insurance

46.What are the different kinds of miscellaneous insurance policies?

Agricultural pumpsets

Householders comprehensive insurance Shopkeepers comprehensive insurance

Baggage insurance NTV

Coffee plantation insurance Neon signs insurance

Personal accident individual and group insurance

School childrens personal accident insurance

Fidelity guarantee individual Employees liability insurance

Medical practitioners professional indemnity insurance,

Burglary insurance (business premise)

Cash insurance

Product liability insurance

Bankers blanket insurance

Personal accident social scheme and hut insurance

Medical claim individual and group insurance

Overseas medical claim Boat and shipbuilders insurance

Bhavishya arogya

47.What are the requisite qualifications for a person to become one insurance sales person? Personal selling of insurance is a selling process and assisting a prospective buyer to buy a

product

The requisite qualifications for a person to become a sales person are: Should have the ability to persuade people to buy products of their choice

Should have good communication ability

Should possess knowledge about customers and their wants and desire and the productsoffered to satisfy them or not

Should know the socio psychological factors of customers Influence the buying behavior

Should understand various customers, their attitudes and behaviours Should have ability to recognize and handle them for successful salesmanship

Should follow AIDAS formula

AIDAS means A for attention; I for interest; D for desire; A for action and S for satisfaction

48.What are the qualities of one sales person?

Physical qualities

Social qualities Mental qualities

49.What are the skills of a salesman?

Interpersonal skills Communication skills

Organization skills

50.What are the characteristics and traits of salesman ?

Trustworthiness

Enthusiasm Empathy

Persistence


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Patience

Desire for self improvement

Motivation

51.What do you mean by an insurance agent?

Insurance business both life insurance and non life insurance is procured through individuals

called as agents Individuals who want to be insurance agents should

Obtain a license from the controller of insurance of the IRDA in India

After obtaining the license, he should have to enroll with the insurance company to beauthorized to work as an insurance agent

A well trained insurance agent can explain the details of various policies to the clients in

detail

52.What do you mean by corporate agency system? Corporate agency system was introduced in India during 2003

A bank can act as an agent on behalf of an insurance company

53.Who can become one corporate agent?

A firm

A company under the companies act

A banking company

A corresponding new bank

A regional rural bank A cooperative society including a cooperative bank

A panchayat

A local authority

A non government organization A micro lending finance organization

A non banking finance company

Any other organization that may be approved by IRDA

54.What do you mean by insurance broker?

Broker is person who helps in the development of business between one person and anotherperson

There are three categories of insurance brokers namely direct broker, composite brokerand reinsurance broker

55.What are the objectives of Life Insurance Corporation of India ?

Provide life insurance cover to insuring people in India and outside India

To create insurance awareness in rural areas in India To achieve growth in new insurance business

56.What are the subsidiaries of Life Insurance Corporation of India?

The LIC housing finance Limited LIC Mutual fund

LIC (Nepal) Limited

LIC(international )EC Bahrain

57.What do you know by the various public sector Non Life Insurance corporations

functioning in our country? General Insurance Corporation of India

National Insurance Company Limited

The New India assurance company limited

The oriental insurance company Limited United India insurance company

Employees state insurance corporation


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Deposit Insurance and credit guarantee corporation

Export credit guarantee corporation of India

Agricultural Insurance Company of India Limited

58.What are the different kinds of export credit insurance policies?

Standard policy

Small exporters policy Specific policies

Guarantee to banks

Special schemes

59.What are the different kinds of guarantees provided by ECGC ?

Packing credit guarantee

Export production finance guarantee Post shipment export credit guarantee

Export finance guarantee

Export performance guarantee

Export finance (overseas lending) guarantee

60.What are the different types of insurance risks?

Pure risk

Speculative risk

Static risk Dynamic risk

Subjective risk

Objective risk

Financial risk Business risk

Personal risk

Property risk Liability risk

Underwriting risk

Credit risk Market risk

Liquidity risk

61.How pure risks and speculative risks can be handled? Risk assessment

Risk sharing

Risk exploitation Risk monitoring

62.What are the various kinds of risk management strategies?

Risk avoidance Risk retention

Risk transfer

Risk reduction

Risk hedging Risk combination

Risk sharing

63.What to you mean by the risk management processes?

Risk identification and exposures to loss

Risk evaluation

Risk identification and exposures to loss consists of the following:


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Loss exposure check list method

Financial statement analysis

Flow charts

Contract analysis

Physical verification and inspection

Statistical analysis of past loss

64.What are the modern risk financing techniques?

Alternative risk transfer

Catastrophic bonds

65.What do you mean by alternative risk transfer?

Loss sensitive contracts

Finite insurance contract Captive insurers

Multi line insurance policies

Multi trigger insurance policies

Contingent financial arrangements

Structured debt instruments

66.What are the different types of CAT bonds as at present?

Surety bond

Judicial BONDS Public official bonds

Fidelity bonds

Retirement planning

Annuity

67.What do you mean by insurance?

Insurance is the contract between the insurer and policyholder

68.What are the risks faced by any human being?

Early death

Living too long Disabilities

Sickness

Unemployment

69.What are the benefits of life insurance? Life insurance is not only the best possible way for family protection

Insurance is the only way to safeguard against the unpredictable risks of the future. It isunavoidable

The terms of life are hard. The terms of insurance are easy

The value of human life is far greater than the value of property. Only insurance canpreserve it

Life insurance is not surpassed by any other savings or investment instrument, in terms ofsecurity, marketability, stability of value or liquidity

Insurance, including life insurance, is essential for the conservation of many businesses, just

as it is in the preservation of homes Life insurance enhances the existing standards of living

Life insurance helps people live financially solvent lives

Life insurance perpetuates life, liberty and the pursuit of happiness

Life insurance is a way of life

70.In what ways the risks can be managed?

Prevention of avoidance


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Retention

Transfer

71.Who can be insured?

Individual adults

Children (minors)

Two or more persons jointly under one policy

72.What can be the sum assured?

Some plans stipulate a minimum sum assured. There can be maximum limits also for sum assured as well as certain benefits, like accident

benefits

73.In what contingency would the sum assured be payable? In the case of death

On survival

74.When would the sum assured be payable?

On the contingency of happening

Some other dates

75.How would the sum assured be payable?

Could be in one lump sum In instalments

76.What would be the term (duration) of the policy?

This determines the period during which the specified event should occur for the sum assuredto be payable.

Some plans provide for benefits even beyond the term

77.When would the premium be payable?

Variations are in the frequency of payment (monthly, quarterly, half yearly or yearly) as well as

the period during which it is payable. Some plans provide for premiums to be paid for a period less than the return

78.Does the sum assured increases?

This can happen because of participation in surpluses and bonus additions Or because of guaranteed increases in sum assured

79.Does the sum assured reduce? This can also happen, if the plan is to meet reducing liabilities under a mortgage

80.Are there additional benefits?

These are also called supplementary benefits and may be provided by way of riders, in additionto the basic covers

81.What is a without profit policy and with profit policy?

Without profit or non participating policies are not entitled to bonuses, which are declared afteractuarial valuations.

With profit or participating policies pay a slightly higher premium for the right to participate inthe progress of the insurer.

With profit policies are popular because the bonuses are expected to be more than the extrapremium paid.

With profit policies, where the premium is payable for a limited period, will continue toparticipate even after the premiums have ceased


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82.What do you mean by joint life policies?

Two or more lives can be covered under one policy and such policies usually cover married

couples or parents.

The sum assured is paid on the death of any of the insured persons during the term or at theend of the term.

Some plans also provide payment of sum assured on the death of one life and the policy is

continued to cover the second life till maturity, without payment of further premium

83.What are the requirements in the case of joint life insurances?

A joint life declaration is necessary to create a joint interest in the policy In the case of partnership insurance, the partnership deed will be examined to ascertain the

nature of financial interest of each partner

Each life will be underwritten separately

Bonuses will accrue on the single basic sum assured only

84.What do you mean by a proposal?

A proposal is an application for an insurance cover.

When a proposal is received, the insurer will not grant the cover automatically.

The insurer will make a decision as to the admissibility of the proposer to the pool of

policyholders.

85.What do you mean by hazard?

The factors affecting the risk on the life of an individual are called as hazards and they can be

physical; occupational and moral.

86.What do you mean by physical hazards?

Physical hazards are age, sex, build, physical condition, physical impairments, persona

history, family history, increasing extra risk, occupational hazards and moral hazard

87.Explain the hazard related to age:

As age increases, the probability of death increases and these probabilities are built into themortality tables and thereby into the premium rates

The underwriter looks into the factor of aged mainly because of its relationship with other

factors. Certain risks increase with age.

Certain other risks decrease with age. For example, being overweight is a positive or favorable factor among children, while it may not

be so among older persons. Young persons who are underweight need closer scrutiny than elders who are underweight

88.Explain the hazard related to sex: Mortality of female lives is seen to be higher than male lives at younger ages, among the

poorer and uneducated sections.

One reason could be the lack of adequate care in maternity cases.

Underwriting considerations are also different in female cases.

89.What do you mean by the hazard related to physical condition?

The medical examination of reflexes, blood pressure, pulse rates, urine etc. provides data with

regard to the condition of important systems of the body

90.What do you mean by physical impairments? Blindness, deafness etc and other conditions which are not illnesses; however, degenerative e

hazards affecting the probabilities of death

Personal history This is important as pointers to the health as well as the life style of the

person

91.What do you mean by family history?


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This is looked to see whether there are factors that make the person susceptible to hereditaryillnesses.

Family history of early deaths of cardiac illnesses or diabetes, could be significant

Increasing extra risk is related to certain impairments or ailments like blood pressure ordiabetes or cancer, which are expected to get worse as days go by.

They do not have to, as modern medicine has ways of containing them. Similarly, some

impairments are expected to wear off as days go by. These are called decreasing extra risks

92.

What are occupational hazards arising out of ones job? The nature of the job or the place in which the job is done have effects on the worker.

Contact with and installation of fumes, excessive temperatures, etc affect health and life

spans.

Those on flight duties on aircrafts run a greater risk of death by accident. Those working in chemical factories are likely victims of various respiratory diseases.

Those working with high voltage electricity are susceptible to electrocution and burns.

The safety factor is important in heavy engineering factories, working at heights, working

with high speed machines, adventure sports and so on93.What do you mean by moral hazard?

Moral hazard refers to the intentions of the proposer.

If the proposal is being made because there is a genuine need for insurance, there is no moralhazard.

If the intention is to seek undue advantage through the use of insurance policy, there is somemoral hazard.

94.What do you mean by the policy document?

It is the document given to the insured once the contract is completed between the insured and

insurer95.What are the contents of the policy document?

The policy document contains the following:number of the policy, date of the policy, age

admitted, name of the policy holder, the address of the policyholder, premium amount, modeof premium amount, plan number, term in years, date of commencement of the policy, date of

maturity, name of the nominee, relationship with the policyholder

96.Which documents are accepted as proof of age?

Certified extract from the municipal records Certified of baptism

Certified extract from family bible if it contains of date of birth Certified extract from school or college records

Certified extract from service register or employer

Passport Identify cards issued by defence department in case of defence personnel

Marriage certificates issued by a Romans Catholic Church

97.What do you mean by days of grace? The policy stipulates that the premium has to be paid in the insurers office on the dates

specified therein.

These dates are called as due dates

98.How premium can be paid?

It can be paid by cash, cheque, demand draft, postal order, money order, bankers cheque. Nowadays electronic means of payment as well credit cards and debit cards are also acceptable

99.What is a grace period?

Premiums are to be paid on the due dates mentioned in the policy and insurers, however, allowa grace period for payment of premium.

Payment within the grace period is considered to be payment on time.


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The grace period would be one month, but not less than 30 days for yearly, half yearly orquarterly modes of premium and 15 days for monthly modes of premium.

Some insurers allow 30 days grace period for monthly modes also

100. What is salary savings scheme?

In the case of salary savings scheme, the premium amount is deducted by the employer from

out of the salaries payable to the employee. When there is delay in remitting the same to the office of the insurer, the delay is usually

condoned.

If the delays happen frequently, the salary savings scheme arrangement may be terminated

101. What is a default?

If the premium is not paid within days of grace, it is considered to be in default and the policy is

said to lapse. If the insured happens to die within the days of grace and the premium has not been paid, the

claim will be admitted in full and the premium for the current year will be deducted from the

claim amount

102. What do you mean by lapse?

A payment within the days of grace is deemed to be a payment on the due date and if the

premium is not received by the insurer, within the days of grace, there is a default on the partof the policyholder.

The insurer is entitled to say that the policy comes to an end. Such termination is called alapse.

No claims arise on the policy after a lapse and all premiums are forfeited

103. What do you mean by 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. Paid up value = (number of premiums paid x sum assured)/number of premiums payable

104. What do you mean by surrender value? Surrender value or cash value is made available normally when the policy has remained in force

for at least three years. This is so, because in the first year, most of the premium goes out in expenses and there is

little left for accumulation.

105. What do you mean by assignment?

Assignment transfers the rights, title and interest of the assignor to the assignee. Legal provisions for assignment of insurance policies are available in almost all the countr

The assignment can be done by an endorsement on the policy or by a separate deed.

When the assignment is made by an endorsement on the polity itself, no stamp duty is

necessary. Separate deeds have to be stamped

It must be signed by the transferor or his duly authorized agent

The signature must be attested by a witness

The assignment is effective as soon as it is executed It must be sent to the insurer along with a notice

The assignment is effective against the insurer only when the notice is delivered to theinsurer

Where there is more than one instrument of assignment, the priority of claims shall bedetermined by the order in which the notices are delivered to the insurer

106. What is meant by revival of the policy?

When a policy lapses, it benefits neither the insurer nor the insured.


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The insured loses the insurance risk cover for the full amount.

It signifies a reversal of the decision to arrange for the insurance cover and therefore, ,

exposes the policy holder adverse circumstances.

107. What are the requirements for revival of policies?

Arrears of outstanding premiums with interest to be paid

Proof of continued good health to be submitted A fee for reinstatement or revival, in the case of some insurers has to be paid

108.

What do you mean by nomination? It is a simple way to ensure easy payment of the policy moneys in the case of a death claim.

As per section 39 of the Insurance Act, 1938, the holder of a policy on his own life, may

nominate the person or persons to whom the money secured by the policy shall be paid in the

event of his death. This can be made at the time of proposal or at any time during the currency of the policy.

A person having a policy on the life of another cannot effect a nomination.

109. What are the the features of nomination?

Nomination can be done before the issue of the policy by mentioning in the proposal form or

by a letter giving details

It can also be issued after issue of the policy by an endorsement on the policy

Cannot be done by a separate deed

The holder of a policy on his own life : i.e. the life assured, alone can make nomination Policyholder retains full control and can deal with the policy without the consent of the

nominee

Need not be supported by a consideration

May be witnessed Notice is required to be given to the insurer

Nominee has no right to sue under the policy

It can be altered by the life assured during the currency of the policy by cancellation ofnomination or by an assignment

Where nominee is a minor, appointment of an appointee by the life assured only is required

Appointee can be appointed in the wording of the nomination No vested interest is created in favor of nominee

Nominees right is only to collect policy moneys on the death of the assured, when paid bythe insurer

If the nominee dies after the life assured and before settlement of the claim, the policymoneys would be payable to the heirs of the life assured

Creditors of the life assured can attach the policy moneys

110. What are the features of assignment?

Can be done only after issue of the policy by endorsement on policy

Can be done also by a separate deed on stamped paper

The absolute owner of the policy may be either proposer or the life assured or the absoluteassignee or conditional assignee to the extent of his interest, can make assignment

Policyholder loses control over the policy and assignee is the owner of the policy and can

deal with it

Must be supported by a consideration Must be witnessed

Notice is required to determine the priority between other assignees Assignee has right to sue under the policy

It cannot be cancelled by the assignor

When assignee is a minor, guardian is to be appointed

Guardian cannot be appointed in the wording of the assignment Assignee acquires interest

The assignee is entitled to deal with the policy and to receive the policy moneys


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If the assignee dies at any time, the policy moneys would be payable to the heirs of theassignee

Creditors of the life assured cannot attach the policy moneys unless the assignment is shown

to have been made to defraud the creditors

111. What do you mean by surrender of a policy?

A surrender is a voluntary termination of the contract by the policyholder A policyholder can surrender the life insurance policy before it becomes a claim

Surrenders are not allowed unless the policy has run for a minimum period of time, which

may vary from three to seven years. The amount payable by the insurer to the policyholder on surrender is called the surrender

value or cash value.

Surrender values are published and made known to policyholders by some insurers either as

part of the prospectus or by mention in the policy conditions

112. What is a surrender value?

It is usually a percentage of the premiums paid or a percentage of the paid up value.

The percentage increases as the duration of the policy increases

The surrender value on a policy will be more after 15 years compared to the surrender value

after ten years.

The percentage decreases as the original term of the policy increases

Between two policies of original term 20 and 30 years, both of which have been in force for

the same fifteen years, the surrender value on the former will be more than on the latter.

113. What do you mean by foreclosure?

Foreclosure means closure or writing off the policy before its actual maturity

When a loan is granted under a policy, the life assured has a choice to pay the interest orallow it to accumulate to be adjusted from the policy moneys payable when the claim arises.

This is possible only if the premiums are paid regularly and the policy remains in force.

In case of paid up policies, the surrender value will not grow as fast as the accumulatedinterest

The principal loan and accumulated interest could become more than the surrender value at

some time

114.

What do you mean by GIPSA? It is an association called as General Insurers (Public Sector) Association of India

It has its headquarters at New Delhi The chairperson is Shri G. Srinivasan and Shri G. Srinivasan is the chairman and managing

director of New India Assurance Company

The association has been formed by the four public sector non life insurance companies namelyNew India Assurance Company; Oriental Insurance Company, National Insurance Companyand United India Insurance Company

115. Whether a policyholder can have both paper and electronic policies? Policyholders have the option to choose the form in which they want their policies issued

paper or electronic

A policy can be bought or maintained in one form only

The policyholder cannot have the policy in both forms However, when a policyholder has more number of policies, he has the option keep some

policies in paper form and the remaining policies in electronic form

116. What do you mean by Annuity?

It is an agreement by an insurer to make periodic payments

The payments continue during the survival of the annuitant(s) or for a specified period

117. What do you mean by claim?


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It is a demand made by the insured or the insureds beneficiary for payment of the benefits asprovided by the policy

118. What is life insurance?

Life insurance is called as life assurance

It is a contract between an insured and an insurer

The insurer is the insurance policyholder The insurer is the company who had issued the insurance policy (e.g. Life Insurance

Corporation of India)

The insurer promises to pay a designated beneficiary a sum of money in exchange for apremium upon the death of the insured person

Depending upon the contract, other events such as terminal illness or critical illness may also

trigger payment

The policy holder typically pays a premium either regularly or as a lump sum Life policies are legal contracts and the terms of the contract describe the limitations of the

insured events

119. What is meant by general insurance?

General insurance is basically an insurance policy that protects the policyholder against the

losses and damages other than those covered by life insurance

The coverage period for most general insurance policies and plans is usually one year, wherebypremiums are normally paid on one time basis

120. What are some private sector insurance players?

Bajaj Allianz General Insurance

ICICI Lombard general insurance

IFFCO-Tokio General Insurance Reliance General Insurance

Royal Sundaram Alliance Insurance

TATA AIG General Insurance Cholamandam General Insurance

HDFC Ergo

121. What do you mean by coverage?

It is the range of protection that the policyholder is provided under an insurance policy

122. What do you mean by death benefit? The limit of insurance or the amount of benefit that will be paid in the event of the death of a

covered person

123. What do you mean by deductible?

The amount the policyholder has to pay out of pocket expenses before the insurance company

covers the remaining costs

124. What do you mean by exclusive?

The items which are not covered under the policy; however, are payable by the company as an

incentive

125. What do you mean by indemnity?

It is the restoration to the victim of a loss by payment, repair or replacement

126. What do you mean by insurable interest?

The interest in property such that loss or destruction of the property could cause a financial loss

127. What is called as Insurance settlement?

It is a payment on an insurance claim


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When a valid insurance claim is made, the insurer makes a payment to the policyholder andthis payment is called as the insurance settlement

128. What do you mean by lapse?

It is the termination of a policy due to failure to pay the required renewal premium

129. What do you mean by paid up value? When the policyholder stops paying the premiums; however, do not withdraw the money from

the policy the policy is required as paid up and the value that can be paid up under such policy

is called as paid up value

130. What do you mean by- peril?

It is the cause of the possible loss or damage

131. What do you mean by reinsurance?

It is an insurance that an insurance company buys for its own protection

The risk of loss is spread so a disproportionately large loss under a single policy does not fall on

one company

Reinsurance enables an insurance company to expand its capacity

It stabilizes its underwriting results

It finances its expanding volume

It secures catastrophic protection against stock losses

It also withdraws from a line of business or a geographical area within a specified time period

132. What is meant by renewal?

It is the automatic re-establishment of in-force status effected by the payment of another

premium

133. What do you mean by rider?

It is an optional feature that can be added to a policy The policyholder has to pay an additional premium to avail this benefit

134. What do you mean by subrogation? It is the right for an insurer to pursue a third party that caused an insurance loss to the insured

This is done as a means of recovering the amount of the claim paid to the insured for the loss

135. What do you mean by survival benefit? It is the amount payable at the end of specified durations

These amounts are fixed and predetermined

136. What do you mean by underwriting?

It is the process of selecting the risks for an insurance and determining as to what amount and

on what terms the insurance company has to accept the terms

Unlike a term insurance cover, in case the policyholder is alive, the amount will be paid to thepolicyholder on the maturity of the plan

137. What are the primary functions of an insurance?

The functions of an insurance can be divided into three categories namely primary functionssecondary functions and other functions

138. Which are the primary functions of an insurance?

Provides protection

Provides certainty

Distributes the risk

139. What are the secondary functions of an insurance?


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Protection of loss

Provides capital

Increases efficiency

Provides adequate financial cover

Helps in judging the viability of major projects

140. What are the miscellaneous functions of an insurance? It encourages savings

It promotes foreign trade

It checks inflation It provides social security

It provides credit facilities during emergent situations

141. What are the specific principles of insurance? Principle of cooperation

Principle of probability

Principle of insurable interest

Principle of utmost good faith

Principle of indemnity

Principle of subrogation

Principle of contribution

Principle of causa proxima

Principle of warranty Principle of mitigation of loss

Principle of assignment

142. Glossary of insurance terms:

AbandonmentThe insured relinquishes the ownership of the property, covered by the insurance

policy to the insurance company

Additional cover- An insurance policy extended to cover additional risk perils such as strikes,

riots and civil commotion etc., on payment of extra premium

Advolerem dutyDuty evaluated on percentage of cargo value

Affreightment- A contract for the carriage of goods by sea for payment expressed in bill of lading

Alien insurance An insurance company domiciled in another country

Annuitant The person who receives the annuity during whose life annuity is payable

Annuity consideration An annuitant making one of the regular periodic payments for an

annuity

ArbitrationA form of alternative dispute resolution where an unbiased person or panel gives an

opinion about quantum of loss

Arson The willful and malicious burning of the property often with criminal intent

AssessorThe person who estimates the value of goods for the purpose of apportioning the sumpayable by the underwriters to settle the claims. He is also called as the surveyor

Assignment An individuals personal interest in an insurance policy transferred legally toanother person


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Association captive It is a type of captive insurer owned by the members of a sponsoringorganization or group such as a trade association

AssuranceCover for an event that happens some time e.g. death

Award The decision in arbitration

BarratryIt is the wrongful act committed willfully by the master and/crew against the shipowner

BeachingVoluntary standing of a vessel

BonusThe amount added or allocated to the sum assured under a par life assurance policy

Burglary It is a theft committed by breaking into or out of the premises and the evidence ofbreaking is essential in order to claim insurance benefits

Blanket contractA contract of health insurance affording benefits, such as accidental death and

dismemberment for all of a class of persons not individual identified and it is used for such groupsas athletic teams, campers, travel policy for employees etc

Capital sum assuredIt is the sum insured for which cover is required under a personal accidentpolicy

Cession Amount of the insurance ceded to a reinsurer by risk underwriting company in a

reinsurance operation

Collective policyA policy arranged by several insurance companies to cover large risks as nosingle insurer would like to run the risk

ContributionWhere several insurers cover the same property against the same risks and theyshare the loss

Cover noteIt is the document that is issued provisionally pending issuance of insurance policy

Cross purchase planAn agreement that provides that upon a business owners death, survivingowners will purchase the deceaseds interest, often with funds from life insurance

Deferred annuityAn annuity plan in which the income benefits begin at some specified future

date

Disability income insuranceA health insurance plan providing periodic payments to replaceincome when the insured person is unable to work as a result of illness, injury and disease

Dismemberment insuranceA form of health insurance that provides payment in case of lossby bodily injury of one or more body members (such as hands or feet) or the sight of one or both

eyes

Earned premiumThe part of the total insurance policy premium which applies to the portion ofthe policy period which has already expired

Effective dateThe date on which the insurance under a policy begins

Ex-gratia paymentThe payment by an insurer made(out of grace) without any legal obligation

to do so


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ExcessThe fixed amount of loss borne by the policyholder. When Rs. 1000/- is considered asexcess, the first Rs. 1000 of claim has to be borne by the insured

ExclusionsThe hazards or perils not covered by a policy of insurance and the loss arising out ofthese exclusions is not paid by the insurers

Face amountThe amount of insurance provided by an insurance policy and it is also called assum assured

Facultative reinsuranceA type of reinsurance in which the reinsurer can accept or reject anyrisk presented by an insurance company seeking reinsurance

First party claimA demand made by a policyholder reorting an insured event directly to his

company

Fixed annuityAnnuity which guarantees a fixed amount for the periodic payments

Flat scheduleA type of schedule in group insurance under which everyone is insured for thesame benefits regardless of salary, position or other circumstances

Guaranteed term The insurance company cannot terminate the policy during the period ofcoverage under a life insurance policy

Immediate annuityAn annuity wherein payment begins immediately

Inchmaree clauseA clause included in marine insurance policy by which perils other than the

perils of the sea are covered

JettisonIt means throwing off some of the cargo from the ship to save the ship from sinking

Jewellers block insuranceBroad policies insuring the jewelers against all losses to their stock

in trade

Juvenile insuranceLife insurance policies written on the lives of children within specified age

limits

Key person insuranceInsurance designed to protect a business firm against the loss of incomeresulting from the death or disability of a key employee

Knock for knock agreementMutual agreement between insurance companies for simplifyingand reducing administrative costs of settling motor insurance claims

Lapsed policyA policy terminated because of non payment of premium

Level premiumA policy whereunder amount of premium remains unchanged during the entire

term of the policy

Limited payment policyLife assured pays the premium for a shorter duration than the term ofthe policy i.e. the premiums are limited

Loss adjusterA professional expert engaged by an insurer to establish the cause and amount ofa loss or damage

Limits of liabilityA sum fixed to be the maximum amount of the liability that an insurer maypay under a policy


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Marine perils The risks covered by a marine insurance policy

Material factThe information having objective reality that influences an insurer in granting or

not granting insurance coverage

Money insurance the cover for loss of money from premises, home or in transit to/from the

bank

Moral hazardA condition or characteristic by which an insured intends to profit from an insured

loss

Mortality tableA statistical table that indicates the probability of death and survival at each age

Net premiumThe portion of the premium rate which is designed to cover the benefits of thepolicy excluding the expenses, contingencies and profit

No claim bonusThe reduction allowed in a renewal premium if no claim was made during the

period of insurance

Open coverIt is a mechanism by which all the shipments are covered automatically

Optional renewal contractA contract of insurance in which the insurer reserves the right to

terminate that coverage at any anniversary or in some cases at any premium due date but doesnot have the right to terminate coverage between such dates

Package policyIt is a combination of two or more individual policies or coverages into a single

policy. A householders policy for example is a package combining property, liability and theftcoverages for the individual homeowner

Partial lossWhere the subject matter insured or goods are partly destroyed, there is partialloss. Partial loss may be particular average, general average or salvage charge

Particular average In ocean marine insurance, a loss (partial or total) which falls on one ormore property or interest being shipped as opposed to a general average

Plate glass insurance A kind of insurance which provides for losses caused by breakage of

glass

Professional indemnity It is a cover granted to professionals covering their legal liability for

any claims arising out of professional misconduct

Public liability insuranceA kind of insurance that offers protection to the insured against the

legal liability for accidental death of or bodily injury to third parties or damage to their property

arising from activities defined in the policy

Quota share reinsuranceIt is an automatic reinsurance whereby the ceding company is bound

to cede a fixed percentage of every risk written by it irrespective of the size or quality of the risk

Re-entry option An option in a renewable term life policy under which the policyholder is

guaranteed at the end of the term to be able to renew his or her coverage without evidence ofinsurability at a premium rate specified in the policy

Reciprocal insuranceIt is an insurance done by insurance company at a reciprocal exchange

That is to say the business is given to the reinsurer by insurance company and some business isplaced by reinsurer with main insurer on a reciprocal basis


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Renewal term insurance A term policy that can be renewed for another period withoutevidence of insurability

Running down clauseThe clause in an ocean marine hull policy which covers damage done toanother ship by collision and other property damage caused by collision

SalvageRecovery made by an insurance company by the sale of property which has been takenover from the insured as part of loss settlement and it can be the remains of damaged vehicle orany other property

Schedule rating Adjusting the premium on the basis of physical conditions which affect theprobability of loss

Self insurance Protecting against losses by settling aside own money instead of usingconventional insurance

Sickness insuranceA form of health insurance providing benefits for loss resulting from illness

or disease

Single premiumPayment of the entire premium in one instalment at the time of purchasing the

policy

Sprinkler leakage insuranceA kind of insurance cover to provide for the damage caused byaccidental flow of water from a sprinkler

Standard risk Person who, according to a companys underwriting standards, is entitled to

insurance protection without extra rating or special restrictions

Substandard risk Person who is considered as under average or impaired insurance risk

because of physical condition, family or personal history of disease, occupation

Sue and labour clause It is a marine insurance clause that requires the policyholder in the

event of loss to take all necessary means to save the property from further loss and recover fromothers who caused the loss. The insurer agrees to pay the costs, even if they exceed the policy

limits of liability

Suicide clauseA clause included in the life insurance policy which provides for non payment ofsum assured in case of assured commits suicide

Temporary total disablementDisablement suffered following an accident for a specified periodof time

Third partyAny person other than the two parties signing an insurance contract

TortA civil wrong other than a breach of contract for which a court of law will afford legal relief

e.g. harming another by an act of negligence while driving an auto

Total disabilityAs illness or injury that prevents an insured continuously performing every dutypertaining to his occupation or from engaging in any other type of work for remuneration

Total lossLoss of all the insured property under a given policy, a loss involving the maximumamount for which policy is liable

Travel accident policy A limited contract covering only accident while an insured person istravelling


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2 I E i ti Ti i b A G i S k 51@ il

Treaty An agreement between a reinsurer and a ceding insurer setting forth details of thereinsurance agreement

Uberrima fideiUtmost good faith; a duty to disclose all material facts

Uninsurable riskThat which is not acceptable for insurance due to excessive risk

Valued policyA policy under which an agreed sum is paid to the insured in the event of totaloss without deductions for wear and tear

Variable annuity An annuity where the investment results of a life insurance companysseparate account for the variation in the benefits

Voluntary excessA proposer for insurance agrees to bear a percentage of fixed amount for anyloss generally to reduce the premium such as Es. 2000 excess for car insurance

Warehouse to warehouse clause A clause included in the marine insurance policy which

covers the risks from the originating warehouse to the terminating warehouse

Warranty A statement by the insured on the literal truth of which the insurance contract

depends

Waiver of premiumOne of the provisions under an insurance policy where, during a period ofcontinuous total disability lasting for specified period of time, the insured is relieved of premium

payments falling due during that time

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ish you all the best

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