Insurance Awareness Short Bullet Points (Part-4)

Hello friends ,These are some Important short bullet points asked in previous year Insurance exams. These points will be useful for all upcoming Insurance exams including LIC AAO which is scheduled to take place in the month of March.

 

 

• Basic elements of Life Insurance – The two basic elements of life insurance are Risk coverage (i.e. Term Insurance) and savings for the future (i.e. Pure Endowment)

 

• Term Insurance – Term Insurance covers “Risk”and Risk means “Death”. Here a lump sum amount is payable only if death occurs during a selected period. If the insured survives till the end of the selected period, nothing becomes payable.

 

• Nomination – Nomination is an act by which thepolicy holder authorizes or gives consent to another person to receive the money from the policy. The person authorized by the policy holder is called Nominee.

 

• Assignment – Assignment means legal transfer of right from one person to another. It can be transferred for various reasons. The original policy holder is called the assignor and the person to whom it will be transferred is called the assignee. Assignment can be of two types Conditional & Absolute.

 

• Money Back Plan – Money back life insurance plan provides for periodic payments during its tenure, it gives back money to policyholder at different points in time.

The investments done are similar to endowment plans. Money back policy will give you a fixed percentage of the sum assured after 4 or 5 years.

For example- If the policy is of 20 years, then company will pay 15% after every 4 years and the remaining 40% on maturity with accumulated bonus. The policy terms and payback schemes is different for different company.

• Insurance Repository – An Insurance Repository is a facility to help policy holders buy and keep insurance policies in electronic form, rather than as a paper document.Insurance Repositories will hold electronic records of insurance policies issued to individuals and such policies are called “electronic policies” or “e-Policies”, e.g. CDSL Insurance Repository Limited.

 

 

• Wavier of Premium – Waiver of premium is an additional clause in an insurance policy which waves the premium of policyholder for the time he is seriously ill or disabled. This feature is however optional and available at an extra cost.

 

 

• Mortality Charge – Mortality Charge is the amount charged every year by the insurer to provide the life cover to the policyholder on the life of the Life Insured. It is also called as Cost of Insurance.

It is the actual cost of insurance by the life insurance company. It is usually deducted with other charges in the policy, before investing your money. Mortality is dependent on the sum at risk. It is calculated per thousand of sum at risk. Higher the sum at risk, higher is the charge. 

 

• Agent – A person who islicensed by state to sell Insurance is known as agent. The Agents serve as an intermediary between the insurance company and the insured.

 

• Captive Agent– Agent sell Insurance of a specific Company.

 

• Independent Agent– Agent who works independently and sells Insurance of many companies.

 

• Insurance broker – An insurance broker is aspecialist in insurance and risk management. Brokers act on behalf of their clients and provide advice in the interests of their clients. The insurance Company is not responsible for because the broker represents the insurance client, not the company.

 

• Utmost Good faith – It is one of the principle on which Insurance works.

It means –

(1) Both the parties i.e. insured and the insurer should a good faith towards each other.

(2) The insurer must provide the insured complete, correct and clear information of subject matter.

(3) The insurer must provide the insured complete, correct and clear information regarding terms and conditions of the contract.

(4) This principle is applicable to all contracts of insurance i.e. life, fire and marine insurance.

Posted by - Nikhil Yadav