Course Name- Personal Finance and Wealth Management

Course Code: UGAECC-304(B)

Topic – Insurance Planning

Model Institute of
Engineering & Technology
MEANING OF INSURANCE

 Insurance is a financial arrangement designed to protect individuals or entities

from financial loss.

 It works through a contract between an individual or organization (the insured)

and an insurance company (the insurer), where the insurer agrees to compensate
for specific losses, damages, illness, or death in exchange for a premium paid by
the insured.
Key Elements of Insurance

1. Premium: The amount the insured pays regularly to maintain the insurance policy.

2. Policy: A legal contract that outlines the terms and conditions of the insurance agreement.

3. Coverage: Specifies the types of losses that the insurer will compensate.

4. Claim: The formal request made by the insured to the insurer for compensation of a covered
loss.

5. Deductible: The amount the insured must pay out-of-pocket before the insurer covers the
remaining costs.
PRINCIPLES OF INSURANCE
TYPES OF INSURANCE

Life

Professional
Health
Liability
Types of
Insurance

Credit Life Property

LIFE INSURANCE

 Life insurance is a financial contract where an individual pays regular premiums to an insurance
company in exchange for a sum of money (death benefit) to be paid to their beneficiaries upon their
death.
 It provides financial security and support to loved ones in the event of the policyholder’s passing,
helping cover expenses like funeral costs, debts, and living expenses.
 Life insurance comes in various forms, including term life, whole life, and universal life policies,
offering different features and benefits to policyholders.
 How does life insurance work?

 Purchase policy: Individuals first need to buy the life insurance policy.
 Pay premiums: The insured needs to pay regular premiums to the insurer.
 Risk assessment: Insurer evaluates factors like age, health, and lifestyle.
 Activate policy: Approved policy becomes active, offering coverage.
 Policyholder's demise: If the policyholder dies, beneficiaries file a claim.
 Claim approval: Valid claims are processed by the insurer.
 Beneficiary payout: Tax-free death benefit is paid to beneficiaries.
Understanding how life insurance works with an
example

 Life insurance plans offer financial protection to your family in case of your untimely death.
 For example, a 30- year-old policyholder buys a 20-year life insurance plan with a sum insured of Rs.
1 crore and pays annual life insurance premiums of Rs. 15,000. If the policyholder dies during the
term, their family receives Rs. 1 crore, ensuring financial stability.
 If the policyholder survives the term, they may receive maturity benefits, depending on the policy
type.
 By regularly paying life insurance premiums, the policyholder ensures their family is financially
secure, whether through the death cover or maturity benefits upon completing the term.
 Key features and benefits of Life Insurance
policies
 Secure your family's future: Ensure financial protection for your family in case of your untimely demise through plans offering whole
life coverage.
 Get assured income benefits: Get income benefits after policy maturity either as lump sum or in the form of monthly payouts.
 Enjoy flexible premium payment options: You can choose from higher or lower premium payment options and flexible cash value
components, as per your convenience.
 Get extensive critical illness coverage: Along with life cover, get coverage for medical expenses incurred for up to 55 chronic and
terminal illnesses.
 Get return of premium benefit: If no claim is made during the policy tenure, you will receive the total premiums paid towards the
policy at maturity.
 Enhance policy coverage with add-ons: Opt for add-on coverage to enhance the coverage of the policy. Get Critical IIIness cover and
Accidental Death Benefit. You can add Accidental Total Permanent Disability Benefit, and Waiver of Premium Benefit riders as well.
 Get tax benefits: Get tax exemptions on premiums paid for life insurance policies as per the provisions of the applicable Income Tax
laws.
 Factors that affect Life Insurance Premium

 Age: Age is a key determinant. Premiums tend to increase as you get older since mortality risk rises
with age. Younger individuals typically pay lower premiums.
 Health: Your health status significantly influences premiums. Better health often results in lower
premiums, while pre-existing medical conditions or unhealthy habits can lead to higher costs.
 Coverage amount: The amount of coverage you choose directly affects premiums. Higher coverage
means higher premiums because it represents a greater financial risk for the insurer.
 Policy type: The type of policy you select, such as term life or whole life, impacts premiums.
Permanent policies like whole life usually have higher premiums than term policies.
 Lifestyle: Risky behaviors like smoking or dangerous hobbies can increase premiums due to higher
mortality risk associated with these activities.
Who needs life insurance?

 Parents: Ensure financial security for children's upbringing, education, and future.
 Spouses: Protect surviving partner from financial strain upon the other's death.
 Debt holders: Cover outstanding loans or mortgages to prevent burdening family with debt.
 Business owners: Secure business continuity and buy-sell agreements, ensuring a smooth transition.
 Single individuals: Cover end-of-life expenses and potentially leave a legacy or charitable donation.
 Elderly parents: Provide for dependent parents’ care and expenses, easing their financial burden
 TYPES OF LIFE INSURANCE

 Term Insurance: It is the simplest type of life insurance that provides financial safety to the insureds’ family in
case of the untimely demise. Depending on your income and liabilities, you can select an adequate sum assured
under this type of life insurance plan to safeguard the financial interest of your loved ones.
 ULIP: A Unit Linked Insurance Plan or ULIP is a unique form of life insurance. It provides life cover while also
allowing you to invest money in market-linked instruments. By investing in ULIPs, you get the benefits of
market linked returns over the long term, life cover, income tax savings, and flexibility to switch between funds.
The life insurance quotes will enable you to determine the amount required for financial security and investment
purposes, so that you can divide it efficiently.
 Retirement Plans: These plans are life insurance products that provide financial security for your retirement
days. These life insurance plans help you invest money during the working years and create a corpus that you can
use as a whole or in parts to fund your retired life. You can think of investing in retirement plans as a disciplined
way to plan for the golden years of life.
 TYPES OF LIFE INSURANCE (contd..)

 Child Plans: Child insurance plans, commonly known as saving life insurance plans, are designed to help you secure your child’s
future. Along with life cover, your child receives the benefit of pay-outs at different milestones during the educational journey under
these life insurance plans. Investing in child plans shields your child's future against unfortunate events like death or critical illnesses.
 Savings and Income Plans: As life insurance products, these plans can help you instill the habit of disciplined savings to ensure
steady returns in the form of monthly income or a lumpsum amount. Alongside, these life insurance plans provide various other
benefits, including death benefits, tax benefits, terminal illness benefits, to name a few. Check the life insurance quotes and details
before making investment decisions, so you can allocate your money in the right places.

 Group Insurance Plans: These life insurance plans are meant for organizations or groups to provide life cover to the employees or
group members, respectively. Through group insurance plans, the employers tend to take care of the financial security of their
employees’ family, thus motivating them to work harder to maintain high-performing businesses. Keeping this cover in mind, you can
check the life insurance quotes for additional financial security for your loved ones.
 TYPES OF LIFE INSURANCE
(contd..)
 Whole Life Plan: A whole life plan is type of a life insurance plan which provides life cover benefit
till the age 100 years. Many consider this as a term plan with a policy term that extends for the entire
life of the insured individual. So, in this term plan variant, the death benefit is paid out to the nominee
if the insured individual dies at any time before attaining the age of 100 years. A whole life plan
typically does not offer maturity benefit to the insured individual if they attain the age of 100 years.
 Endowment Plan: An endowment plan is a type of life insurance plan that combines the benefit of
life cover along with long-term savings benefits. So primarily, an endowment plan ensures that the
policy beneficiary received additional protection in the case of the insured individual’s untimely
demise while the plan is in force. Additionally, this life insurance plan also provides maturity benefits
through accrued savings if the insured individual survives the policy term.
Points to consider before buying life insurance
policy

 Assess your needs and determine how much coverage you require.
 Consider the type of policy that best fits your needs and budget.
 Evaluate the financial strength and reputation of the insurance company.
 Review policy terms and conditions, including exclusions and premium payment options.
Understand the policy’s riders and add-ons that can provide additional coverage.
 Compare policies and rates from different insurance providers.
 Check if you qualify for any discounts or incentives.
 Disclose all pertinent information about your health and lifestyle to the insurance provider
honestly.
 HEALTH INSURANCE

 Health insurance is a financial safety net that helps cover your medical expenses if you get sick or injured. By paying a
premium, you receive coverage for a variety of healthcare needs. including hospital stays, daycare procedures, and
treatment for critical illnesses. This means you won't have to worry about paying large medical bills out of pocket.

 Many health insurance plans offer additional benefits like free medical check-ups and cashless hospitalization, allowing
you to get the care you need without upfront payments at certain hospitals. These features ensure that you can focus on
your health and recovery, while your Insurance takes care of the financial aspects.

 One of the advantages of health insurance is the tax benefit under Section 80 D of the Income Tax Act. You can claim a
deduction on the premium paid for yourself, your family, and even your parents. This helps you reduce your taxable
income while ensuring financial protection for medical needs.
MEDICAL INSURANCE

 Medical insurance, also known as health insurance, is a type of insurance policy that covers
medical expenses for illness or injury.
 Medical insurance plans offer coverage for hospitalization expenses, pre-and post-
hospitalization expenses, and other medical expenses.
 There are different types of medical insurance policies available, such as individual, family,
senior citizen, and group medical Insurance plans.
 It is important to note that medical insurance are used interchangeably, but health insurance
covers preventive care, whereas medical insurance covers medical expenses due to an illness
or injury
FEATURES OF HEALTH INSURANCE PLANS
Features Specifications
Premium Starts Rs. 15/day
Sum insured(medical coverage) Rs. 5 to 15 lakh
Cashless treatment 10,000 + hospitals
Pre and post- hospitalization expenses Covered
Tax benefits Included
Ambulance expenses Included
Pre-existing diseases Covered (as per terms and conditions)
Day-care procedures Upto 527 day care treatments
OPD Cover covered
ICU charges covered
Maternity cover Covered (depending upon the plan you chose)
AYUSH Treatment Covered (depending upon the plan you chose)
DIFFERENCE BETWEEN HEALTH INSURANCE and MEDICAL
INSURANCE

Basis of Distinction Health Insurance Medical Insurance

Scope of Coverage Health insurance covers both preventive care and Medical insurance covers expenses related to
medical treatment. This includes regular check-ups, accidents or illnesses including hospitalization,
screening tests. vaccinations, as well as diagnostic tests, surgeries, and medication.
hospitalization expenses and medical procedures
Number of claims There is usually a limit on the number of claims per Medical insurance may have a limit on the total value
year. of claims or a limit on the number of days of
hospitalization.
Premium Health insurance comes at a higher premium than Medical insurance policy premiums depend on the
medical insurance as it covers a broader range of policy coverage and whether it is an individual family
services. The premium depends on the age, health or group policy.
condition, and coverage required
Sum Insured Depends on the health insurance coverage chosen. For medical insurance too, the coverage amount
depends on the policy chosen

Add-on covers Available Available

TYPES OF HEALTH INSURANCE PLANS

 Individual health insurance policy : Only the Individual/insured person under the Individual health insurance
plan can avail of the benefits and can claim the sum assured under the policy
 Family floater health Insurance policy: You can cover all your family members with a family health insurance
policy under a single plan. The sum insured under the chosen plan applies to all the insured family members in
the policy. One member or multiple people in the active policy year can use this policy.
 Group/employee medical insurance: Employee or Group Health Insurance policies cover your employees'
expenses against unforeseen medical emergencies. The premium of group mediclaim policy is generally lower
than average and offers comprehensive coverage for medical expenses.
 Senior citizen health insurance policy: Individuals 60 years and above can avail a medical insurance for senior
citizens plan designed to cover medical care expenses. Such or as a rider to an already existing policy.
TYPES OF HEALTH INSURANCE PLANS (contd..)

 Maternity health insurance: Maternity Insurance provides complete health and maternity care coverage to
expecting mothers and their newborn babies. From hospitalization of the pregnant lady to normal or C-section
delivery fees and newborn vaccination, this plan covers all
 medical expenses.
 Cancer insurance plan: Cancer insurance plans cover the medical expenses for cancer treatment. It covers
chemotherapy. diagnosis costs, and other related expenses. These plans come at a higher premium because of the
risk coverage, Some health insurance policy also come with cancer add-on cover at slightly higher premium.
Health insurance for parents: Parents health insurance is essential for securing medical coverage, safeguarding
against high healthcare costs , and ensuring timely access to treatments: which ultimately promotes peace of
mind and family well-being
 HEALTH INSURANCE BUYING CHECK LIST

 Co-payment: You should choose a health insurance pian with no co-payment. This way, you won't incur any out-
of- pocket expenses for each claim. Review the policy documents to check for any co-payment terms before
purchasing.
 Health check-up benefit Select a health insurance plan with annual free preventive health check-ups. This benefit
covers yearly exams. Verify policy benefits for preventive check-up facilities before purchasing.
 Grace period: Choose a health insurance policy with a maximum grace period for more renewal time. Check
policy wardings for the exact grace period.
 Restore benefits Choose a health insurance plan with 100% restore benefits. This feature fully restores your sum
Insured after it's exhausted following a claim. Verify the availability of this benefit in the policy documents.
 HEALTH INSURANCE BUYING CHECK LIST (contd..)

 Waiting period: The waiting period refers to the duration before the policyholder can claim benefits for specific medical conditions.
Ensure you understand the waiting periods for pre-existing diseases, maternity benefits, and specific treatments. Choosing a policy with a
shorter waiting period can provide quicker access to coverage.
 No Claim Bonus: No Claim Bonus (NCB) is a reward given by insurers for not fling any claims during a policy year. This bonus
usually results in a discount on the renewal premium or an increase in the sum insured. Look for policies that offer a significant. NCB to
maximise your, benefits over time.
 Sub limits: Sub-limits are the maximum amounts that insurers will pay for certain treatments or services within your policy. It’s essential
to review these limits for critical areas like hospitalization, surgeries, and room rent. Choosing a plan with higher sub-limits ensures
adequate coverage without financial strain during medical emergencies.
 Network hospitals: Network hospitals are those that have tie- up with your insurer, allowing for cashless treatment. Check the list of
network hospitals and their specialties. Ensuring access to quality healthcare providers within your locality can enhance your overall
experience and expedite the claims process.
PROPERTY INSURANCE

 Property Insurance (previously known as Fire

Insurance) is used to cover damage to a
property
 The property can be buildings, machineries,
stock, etc.
 It is designed to cover the cost of
replacement, reconstruction or repair what is
covered by the property insurance policy.
Risks covered under Property Insurance

• Fire, explosion/implosion.
• Impact damage caused due to rail/road vehicle or animal by direct contact.
• Riot, malicious damage and terrorism.
• Bursting and/or overflowing of water tanks, apparatus and pipes.
• Storm, cyclone, typhoon, tempest, hurricane, tornado, flood, inundation
and earthquake.
Damages Not Covered in Property Insurance

 While property insurance provides extensive coverage, your property insurance policy may not include certain
damages and events. Exclusions can vary between insurance companies, but standard exclusions may consist
of:
 Terrorism Acts: Damages resulting from acts of terrorism may not be covered by property insurance.
 Military Attack or Civil War: Your policy might not include losses arising from military attacks or civil wars.
 Willful Destruction: Damage intentionally caused by the property owner or occupants may not be covered.
 Property Wear and Tear: Normal wear and tear of the property over time is typically not covered.
 Non-Occupancy: Certain damages may not be covered if the property remains unoccupied for an extended period
without notification to the insurer.
 Infestations and Minor Damages: Damages caused by termites and other minor internal issues may not be included
in the policy
Deductibles

 For Water and Earthquake related risks, 5% of the claim assessment amount
 For other risks, 1% of the claim assessment amount
 No claim to be made under ₹ 5,000/-
Property Insurance Contract

 An agreement whereby one party in return for a consideration (premium payment)

undertakes to indemnify the other party against financial loss which the latter may sustain
by reason of certain defined subject-matter being damaged by the perils as mentioned up to
an agreed amount (sum insured).
 The party responsible to indemnify the loss is called the insurer.
 The party who is to be indemnified is called the insured.
 The defined subject matter is termed as property insured.
 The document containing the terms and conditions is known as the policy document.
 Methodologies for determining the value of as
asset

 Original cost: Every new asset has original cost at which it has been acquired and is at least relevant during the first
year of its insurance. For older assets, the original cost has no relevance to its value for insurance purposes since it is
subject to depreciation due to its age and also appreciation in value due to inflation.
 Book value or Depreciated value: Book value or the Depreciated value of a property has no relation to insurable
value except in the case of new assets in its first year of insurance.

In the subsequent years, the book value continues to be brought down by depreciation, and such it does not represent

the market value or the value of a similar new property.

 Market value This is determined by the amount at which an asset of the same age and condition can be bought or
sold. This value takes into account both depreciation due to age and appreciation due to inflation.

For determining the sum insured for buildings, apart from excluding the value of land and plinth, the present cost of
Methodologies for determining the value of as
asset (contd..)

 Reinstatement value: This means the value of similar new property/assets. In fire insurance, the principle of
indemnity can be modified in the case of a building, machinery and other fixed assets whereby, subject to the
sum insured representing the value of a similar new property, it can be insured under the ‘Reinstatement Value’
clause.
In the case of reinstatement value policy, the basis of loss settlement is the value of the new property without
taking any depreciation into account.

This type of insurance enables the owner to replace his property without any financial strain on his own
resources

and is quite commonly taken by industrialists and building owners.

 Replacement value: Replacement value is the actual cost to replace an item or structure at its pre-loss condition.
This may not be the market value of the item and is typically distinguished from the actual cash value payment
which includes a deduction for depreciation.
 BASIS OF SUM INSURED-
PROPERTY
Property Sum
Insured
 Buildings Plant, Machinery and Accessories
Market Value or Reinstatement Value
Fixture, Furniture & Fittings Electrical
Installation
 Other contents like household effects and
contents in shops, etc. Properties whose market
Market value or Ag reed value
value cannot be ascertained e.g. works of Art,
manuscripts, obsolete machinery, heritage
buildings etc.
BASIS OF SUM INSURED - STOCKS
RAW MA TERIAL SUM INSURED
Raw Material  Market Value, i.e. the cost at which the insured
can purchase it in the market to replace the
damaged raw material.

 Market Value, i.e. the cost of raw materials

Semi-Finished Goods
including the expenses incurred up to the stage it
has been processed.

 Market Value, i.e. the cost of raw materials plus all

Finished Goods
the overhead expenses incurred till it reaches the
finished goods stage. Selling price which includes
the profit cannot be the sum insured.
Documents Required for Filing a Home Insurance
Claim
• Claim Form (duly filled)
• Policy document
• Police FIR (for burglary claims) and police investigation report
• Fire brigade report (if applicable)
• Proof of house ownership or rent agreement (for tenants)
• Policyholder contact details
• Loss details
Note:
• Valuation reports
You may be required to furnish additional documentation based on
• Bills and invoices
the type of claim filed.
• Repair estimates
It’s a good idea to have a copy of your policy, policy number, and
• Proof of Rent (alternate accommodation)
evidence of identification and residence in case they're required.
• Legal documents (if any)
 Property Insurance Claim- Process

1. The policyholder informs the insurer

 The first thing you as a policyholder need to do is inform the insurance company about the event that has occurred. Whether it is a
burglary, theft, or any other natural calamity. At this juncture, you need to provide important information related to your policy as
well as the event that has occurred.

2. The insurance company corroborates the claim.

 After the insurer has been informed of the claim, they will corroborate all the facts provided by the policyholder. Once the claim’s
authenticity has been validated, it will be forwarded by the insurer to its claims department.

3. The insurance company appoints a surveyor

 Now that the claim has been forwarded to the claims department and registered, the next step is the appointment of a surveyor within
the next 48 hours. For the uninitiated, the surveyor is an insurance intermediary licensed by the IRDAI (Insurance Regulatory and
Development Authority of India) to investigate claims. A surveyor manages, quantifies, validates, and deals with losses arising from
any contingency. #
Property Insurance Claim-Process (contd..)

4. The surveyor carries out the inspection

 Now, the surveyor steps in to carry out their duties. To support their inspection, you as a policyholder must provide all relevant
information to them. The more evidence you have to support your claim, the better it can be for substantiating the claim.
 Based on all the information provided, the surveyor will create a report and submit it to the insurance company within a
specified number of days. The time taken might depend on the situation and other factors, such as the severity of the event that
has occurred. Ideally, it might take 7-15 days.

5. The insurance company processes the claim

 The insurer will use the report prepared by the surveyor to settle your claim. They will decide whether your claim will be
approved or rejected. Usually, after the report has been submitted, the insurance company may take around 7-10 days to settle
the claim.
 You can also take forward the claim on your home insurance policy online. The claim forms can also be availed on our site. You
can choose from different claim forms based on the item or insured property that has been damaged. The documents needed for
the claim may also differ based on it.
Tips for Home Insurance Claims

 Follow these tips to expedite your home insurance claims:

• Read your insurance document thoroughly to understand the inclusions and exclusions, as well as what is
claimable and what is not.
• Obtain approval before temporary repairs and keep records for potential reimbursement.
• Streamline the claiming process by organizing and securely storing any required documents, such as
receipts and bills for household items.
• When valuing your household belongings, provide exact details.
• Follow up with your insurance provider on a regular basis after filing a claim.
• To avoid bureaucratic delays, properly fill out your claims form with all necessary facts.