UNIT 3 INSURANCE LAW

TITLE AND CLAIMS IN LIFE INSURANCE

A life insurance contract provides both survival and death benefits. Hence it is important to
ascertain the ownership title to the contract at all stages of benefit payment. While usually
the title to the insurance contract is held by the Policyholder, where the policy has been
assigned, the title to the contract passes on to the Assignee and therefore the Assignee
assumes the right to receive all survival and death benefits under the contract.

In case of a benefit payable on death, the title to the contract passes on to the Assignee or
nominee as the case may be. As discussed earlier, where a policy is assigned, the nomination
is treated as cancelled and accordingly, the death benefits become payable to the Assignee.
The title to the contract is always determined based on the policy records as available with
the Insurer.

There are policies taken by the parent/legal guardian covering the life of a minor child where
the benefits are intended to be passed on to the child when the child attains the age of
majority. These are typically termed ‘juvenile’ policies. In these policies, the parent/ legal
guardian holds the title to the policy on behalf of the minor child till the child attains the age
of majority. The policy provisions are designed in a manner such that the title to the policy
automatically vests in the life assured, upon the child attaining the age of majority.

CLAIM

A claim under a life insurance contract is triggered by the happening of one or more of the
events covered under the insurance contract. Claims can be survival claims and death claim.
While a death claim arises only upon the death of the life assured, survival claims can be
caused by one or more events. Examples of events triggering survival claims are:

(a) Maturity of the policy;

(b) Surrender of the policy either by the policyholder or Assignee;

(c) An instalment payable upon reaching the milestone under a

money-back policy;

(d) Critical illnesses covered under the policy as a rider benefit;

For payment of a survival claim, the Insurer has to ascertain that the event has occurred as
per the conditions stipulated in the policy. Maturity claims, money-back instalment claims
are easier to be established as they are based on dates and positive action by the
policyholder.

Critical illness claims are ascertained based on the medical and other records provided by
the policyholder in support of his claim.
In most cases, a claim is disputed by the Insurer on the basis of such claim not meeting the
policy conditions, there are times where the insurer
has ascertained that the death claim is payable but is unable to settle the same due to
conflicting claims or insufficiency of proof of title of the rightful claimant. This happens
under the following circumstances:

Absence of nomination by the policyholder;

Registration of an assignment;

Multiple claimants with conflicting claims with insufficient proof of title;

Where the claimant has approached the Court for settlement of property disputes including
insurance claims;

Circumstances where it is impossible for the Insurer to obtain a satisfactory discharge from
the claimant.

(1) Where in respect of any policy of life insurance maturing for payment an insurer is of
opinion that by reason of conflicting claims to or insufficiency of proof of title to the amount
secured thereby or for any other adequate reason it is impossible otherwise for the insurer
to obtain a satisfactory discharge for the payment of such amount, the insurer may, apply to
pay the amount into the Court within the jurisdiction of which is situated the place at which
such amount is payable under the terms of the policy or otherwise.

(2) A receipt granted by the Court for any such payment shall be a satisfactory discharge to
the insurer for the payment of such amount.

An application for permission to make a payment into Court under this section, shall be
made by a petition verified by an affidavit signed by a principal officer of the insurer setting
forth the following particulars, namely:

the name of the insured person and his address;

if the insured person is deceased, the date and place of his death;

the nature of the policy and the amount secured by it;

the name and address of each claimant so far as is known to the insurer with details of every
notice of claim received;

the reasons why in the opinion of the insurer satisfactory discharge cannot be obtained for
the payment of the amount; and

the address at which the insurer may be served with notice of any proceeding relating to
disposal of the amount paid into Court.
If it appears to the Court that a satisfactory discharge for the payment of the amount cannot
otherwise be obtained by the insurer it shall
allow the amount to be paid into Court and shall invest the amount in Government
securities pending its disposal.

Claims procedure in respect of a life insurance policy

A life insurance policy shall state the primary documents which are normally required to be
submitted by a claimant in support of a claim.

A life insurance company, upon receiving a claim, shall process the claim without delay. Any
queries or requirement of additional documents, to the extent possible, shall be raised all
at once, within a period of 15 days of the receipt of the claim.

A claim under a life policy shall be paid or be disputed giving all the relevant reasons, within
30 days from the date of receipt of all relevant papers and clarifications required.

However, where the circumstances of a claim warrant an investigation in the opinion of the
insurance company, it shall initiate and complete such investigation at the earliest. Where in
the opinion of the insurance company the circumstances of a claim warrant an investigation,
it shall initiate and complete such investigation at the earliest, in any case not later than 6
months from the time of lodging the claim.

Subject to the provisions of section 47 of the Act, where a claim is ready for payment but the
payment cannot be made due to any reasons of a proper identification of the payee, the life
insurer shall hold the amount for the benefit of the payee.

LIFE INSURANCE PRODUCTS

Pure protection plans;

Protection + savings plans;

Pure savings and pension plans;

PURE PROTECTION INSURANCE

A pure protection plan is a simple risk cover insurance product where the sum assured
becomes payable upon the happening of the risk event during the term of the policy

Term Insurance plan

A term insurance plan provides a pure risk cover where the sum assured becomes payable
upon death of the life assured during the term of the policy. Since there is only a risk cover,
the premiums are usually low and affordable and the policy assures a financial security to
the family members upon death of the life assured. The term of the policy is fixed and where
the life assured survives the full term, no amount is payable.
The benefit arising to the insurance company in such case is the income out of the premiums
invested during the term.

Health Insurance plan

A health insurance plan provides a pure risk cover where the sum assured becomes payable
upon the life assured being diagnosed of certain identified illness during the term of the
policy. Health insurance is also popularly known as Medical Insurance or Medi-claim that
covers medical expenses including hospitalization expenses. The type and amount of health
insurance depends upon the scope of illnesses covered and the extent of expenses required
to be covered. Health insurance benefits are also available as riders in group insurance plans

While life is very uncertain, a person may not stay healthy & fit throughout their life.
Therefore it is prudent to have health cover at every stage of life. If a major illness like heart
failure is diagnosed & the funds for treatment cannot be immediately arranged. It may
lead to loss of life. If the family resorts to costly personal loans fortreatment & the life of the
person cannot be saved then the family could incur huge debts. Having health insurance
cover can help to overcome this problem. The age of a person at the time of taking the
health cover is very vital. Usually health plans are annually renewable policies, the cost will
increase as the person gets older, regardless of the age of the policyholder when the policy
commences.

Some of the critical illnesses that are usually covered under a health insurance plan are.

Blindness

Stroke

Major organ transplant

Kidney failure

Heart attack

Coma

The list of illnesses differs between various health plans of different insurance companies
and the premium would also differ according to the illnesses covered.

PROTECTION + SAVINGS INSURANCE

Life insurance is usually a long term contract and thus is used world over as an effective
investment instrument. In Protection + Savings insurance products, in addition to getting a
pure term insurance cover, the policyholder is also able to leverage long term savings. Life
insurance plans are an excellent choice for providing for Protection needs, Long term goals
such like children’s education and marriage, retirement and others.
Endowment Insurance

An endowment insurance offers death cover if the life insured dies during the term of the
policy and also offers a Survival benefit if the life insured survives until the maturity of the
policy.

If the life insured survives the entire term of the plan, then a specified amount is paid to
him/her on maturity of the plan

If the life insured dies before the maturity of the plan, then the death cover benefit is paid to
the nominee/beneficiary

Savings element: After deducting the death cover charges & administration charges from the
premium, the remaining amount is invested by the insurance company. Some Insurance
Companies distribute returns earned back to the life insured in the form of bonuses.

Whole of Life Insurance

Whole Life Insurance policy is a type of permanent life insurance that provides coverage for
your entire life.

Unlike term life insurance, which only covers you for a specific period, whole life insurance
lasts for your entire life. As long as you continue to pay the premiums, your beneficiaries will
receive a death benefit when you pass away.

You pay regular premiums, typically monthly or annually. These premiums stay the same
throughout your life, making it predictable.

A portion of your premiums goes into a cash value account that grows over time. This cash
value is like a savings component that builds up slowly. You can borrow against it or even
withdraw it if needed, although doing so can reduce the death benefit.

Cash value is the portion of a permanent life insurance policy that accumulates over time
and earns interest. It's also known as surrender value or policy value.

Your beneficiaries are guaranteed to receive a payout, known as the death benefit, when
you pass away. This amount is specified in your policy.

Whole life insurance is typically more expensive than term life insurance because it provides
lifelong coverage and has a cash value component.

Death benefit and a savings element, with fixed premiums and lifelong protection.

Unit Linked Insurance Plan

Unit Linked Insurance Plan (ULIP) combines life insurance with investment options.
A portion of your premium goes toward the insurance part, while the rest is invested in
various financial instruments like stocks, bonds, or mutual funds, depending on the options
you choose.

You pay regular premiums (monthly, quarterly, or annually). These premiums are divided
into two parts: one part goes toward the insurance coverage, and the other part is invested
according to your chosen plan.

ULIPs allow you to choose how your investment is allocated. You can select from various
funds with different risk levels and potential returns, such as equity funds (which invest in
stocks), debt funds (which invest in bonds), or balanced funds (which mix both).

ULIPs provide a mix of insurance coverage and investment opportunities, giving you the
chance to grow your money while being protected by life insurance.

The significant difference between a protection + savings plan and a ULIP is that the
investment risk in a ULIP is borne by the policyholder (similar to a Mutual Fund), whereas
the risk is borne by the Insurance company in the other case.

LIC’s Market Plus

ICICI Prudential LifeTime Classic

SBI Life – Smart Wealth Assure

Bajaj Allianz Life Goal Assure

Pure Savings V. Pure Protection]

Pure Savings Plans
● Focus on accumulating savings over time.
● Primarily designed to build cash value through savings or investment.
● May offer interest or investment returns based on the plan type (e.g.,
fixed deposits, mutual funds).
● Pay out a lump sum upon maturity if the insured survives the policy
term.
● Fixed deposits, savings bonds, or certain types of endowment policies.

Pure Protection Plans

● Focus on providing financial protection against unforeseen events, primarily death.
● These plans do not accumulate savings or investment value; they are solely for risk
coverage.
● Pay a lump sum to beneficiaries upon the insured's death during the policy term
● Generally have lower premiums compared to savings plans for the same coverage amount.
● Term life insurance and certain types of pure life insurance.
● Pure Savings Plans: Emphasize saving and accumulating funds over time with a focus on
future financial goals.
● Pure Protection Plans: Emphasize risk coverage and providing a death benefit without cash
value accumulation.

IRDA (Protection of Policy holders’ Interest) Regulations, 2002

 the name of the plan governing the policy, its terms and conditions; whether it is
participating in profits or not;
 the basis of participation in profits such as cash bonus, deferred bonus, simple or
compound
 the benefits payable and the contingencies upon which these are payable and the
other terms and conditions of the insurance contract; the details of the riders
attaching to the main policy;
 the date of commencement of risk and the date of maturity or date(s) on which the
benefits are payable;
 the premiums payable, periodicity of payment, grace period allowed for payment of
the premium, the date the last instalment of premium, the implication of
discontinuing the payment of an instalment(s) of premium and also the provisions of
a guaranteed surrender value.
 the age at entry and whether the same has been admitted;
 the provisions for nomination, assignment,
 any special clauses or conditions, such as, first pregnancy clause, suicide clause etc.;
and
 the address of the insurer to which all communications in respect of the policy shall
be sent;
 the documents that are normally required to be submitted by a claimant in support
of a claim under the policy.
 The Policy contract is approved by the IRDA. The IRDA has advised that the language
of the policy contract should be simple, unambiguous, clear and consistent for better
understanding of common man.

● Term Life Insurance

● Level Term Life Insurance
● Decreasing Term Life Insurance
● Convertible Term Life Insurance
● Renewable Term Life Insurance
● Whole Life Insurance
● Universal Life Insurance
● Variable Life Insurance (VLI)
● Indexed Universal Life Insurance (IUL)
● Guaranteed Universal Life Insurance (GUL)
● Survivorship Life Insurance
● Accelerated Death Benefit Rider
● Waiver of Premium Rider
● Accidental Death Benefit Rider