o
Insurers in case of critical illness riders
specify terms & condition along with exclusions.
o
Benefit of the rider will not be payable under
such terms condition.
o
Waiver of premium (WOP)
§
Waives future premiums of policy holder in event of disability.
§
Insurance company always specifies the product
with which this rider is
§
Available
§
WOP rider comes with the exclusions & terms
condition.
o
Some other riders offered by some insurance
companies are
§
Hospital care rider plan fixes an amount on a
daily basis in event of hospitalization
§
The rider fixes an amount at the time when the
policy is taken.
§
An insurance company may pay the actual cost for
the treatment.
§
Amount may be paid for the number of days
insured is hospitalized.
§
Amount is irrespective of actual amount spent in
hospitalization.
§
Amount is additional amount paid apart from lump
sum that maybe paid for surgery and/or critical illness.
§
The rider is similar to the individual policy
mentioned above.
o
Guaranteed insurability rider gives insured
right to increase cover in response to life events which are (a) marriage, (b)
child birth etc.
Ø
Benefits of riders
o
Additional cover
o
nominal cover
o
customization – as per preference of customer
o
flexibility
o
an per the IRDA regulations issued in april 2002
and amended in October 2002:
§
the premium on all riders relating to health or
critical illnesses, in case of term or group insurance products shall not
exceed 100% of the premium of the base policy;
§
the premium on all the other riders put together
should not exceed 30% of the premium on the base policy; and
§
the benefits arising under each of the riders
shall not exceed the sum insured under the base policy.
Ø
Annuities
o
Annuities are a reverse of life insurance.
o
In life insurance insurer starts paying on the
death of the insured whereas in annuity insurer stops paying upon death of
annuitant.
o
Annuity is a series of regular payments from an
annuity provider to an annuitant,
Ø
Annuity can either be immediate or deferred.
o
Immediate annuities become payable (vest)
immediately after they have been purchased with a lump sum,
o
Payments commence monthly, quarterly,
half-yearly as per option exercised by policyholder.
o
Deferred annuities are paid for in advance.
o
The annuity purchase price may be a lump sum
paid at commencement before the annuity is due to vest (be paid).
o
Deferred annuities may bought by paying
instalments over a series of years
before vesting date.
Ø
Life annuity the annuitant keeps receiving
annuity payment from the insurance company throughout their lifetime.
Ø
Life annuities (immediate and deferred) are often bought with money that is tied to
pension purchase and which cannot be used for any other purpose.
Ø
Guaranteed period annuity is for a minimum fixed
number of years
o
If the annuitant dies during the selected term
instalments for remaining part will be paid to the beneficiaries.
o
If the annuitant is still alive after the
guaranteed period has elapsed the payments are continued until his death
Ø
In joint life last survivor annuity where
annuitants are husband and wife, regardless of who dies first the surviving spouse
continues to receive annuity payment.
Ø
In life annuity with return of purchase price
the annuitant receives
Ø
Regular annuity payments during their lifetime.
Ø
On their death, the original purchase p rice is
returned to the nominee/beneficiary.
Ø
In increasing annuity the annuity increase every
year by a fixed percentage or in line with an agreed inflation index.
Ø
Pensions.
o
Pension plans are savings and investment plans
tied to the provision of pension benefits for individuals and their dependants.
o
Pension plans have two phases:
§
Accumulation phase
§
Annuity phase
o
In accumulation phase the individual makes
regular or lump sum contributions,
o
In annuity phase the insurance company makes
regular payments to the annuitant.
o
An individual can comm8ute a third of accumulated
fund tax-free.
o
Two thirds of the commuted has to be used to buy
an annuity.
o
Contributions made in a retirement plan qualify
for deduction from taxable income.
o
The regular annuity received by the annuitant is
taxable.
o
Commutation is receiving regular/periodic
annuity payment the individual can make
a lump sum withdrawal of up to a third of the accumulated fund.
o
As per IRDA norms which came into effect from 1
september 2010, all unit-linked pension plans require insurance to guarantee
minimum 4.5% returns (if all premiums are paid), and no partial withdrawals
will be allowed during the accumulation period.
o
Tax and inflation implications for financial
products.
o
Premium paid up to a specified limit for health
insurance plans qualifies for deduction from taxable income.
o
Contributions made towards a retirement plan quality for tax.
o
The regular pension received by an individual is
taxable.
o
The finance bill 2011 a decision has been taken
to implement the new direct tax code (DTC)
from 1 april 2012
o
This may bring in modifications in the existing
tax treatment on all life insurance policies, at which time it will be
necessary to be conversant with such changes before being licensed as an agent.
Ø
Prioritizing needs and applying financial
products to needs
o
Health plans provide for costs incurred in event
of hospitalization of the family income provider or any other family member.
o
Even though retirement is further from other
financial goals, individuals should not give less priority to this goal;
o
One can start with a lower amount and increase
contributions over a period of time for retirement planning.
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