Page 157 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes Annuities are also an important means of insurance and are based on the same fundamental
principles. Both utilize and compute the probabilities of death and survival as reflected
through mortality tables. Both pay the public from the common fund created through
pooling of resources during better days.

8.8 Keywords

Annuity: Annuity is a contract where the annuitant agrees to pay to insurer, a certain amount
either in a lump sum or spread over a period of few years and the insurer in return agrees to pay
to the annuitant a certain sum every year, either so long as the annuitant is alive or for such
period as may be determined by the contract of annuity.
Life Insurance: In legal terms, life insurance is a contract the policy owner and the insurer, where
the latter agrees to reimburse the occurrence of the insured individual’s death or other event
such as terminal illness or critical illness.

Mortality Rate: A mortality rate refers to the number of deaths in a specified population during
a known period of time.

Pure Endowment: In pure endowment, the sum assured is paid only in case the assured survives
to the end of the term.
Rider: It is a provision of an insurance policy that is purchased separately from the basic policy
and that provides additional benefits at additional cost.
Savings: Savings is accumulation of funds for a specific purpose in the future.

Term Assurance: In term assurance, the sum assured is paid only in case of death of the assured
within the term of the contract and nothing is paid in case of survival to end of the term.

8.9 Review Questions

1. Define life insurance. Explain the meaning of life insurance in brief.
2. Discuss the factors on which the need levels of individuals in Life Insurance depend on
naturally.

3. Briefly explain when the principle of risk sharing works.
4. Is life insurance a scientific concept? Explain in detail.
5. Why was there a need to classify the insurance policies?

6. Write short notes on term insurance and pure endowment.
7. What do you understand by the term annuity? Explain the need of annuity contracts in
brief.
8. What is group insurance? Discuss its features.
9. Write a short note on the concept of riders.
10. Differentiate between annuity contract and life insurance policies.

11. Write a detailed note on mortality tables.
12. Discuss the role of LIC in the life insurance segment in insurance industry in India.

152 LOVELY PROFESSIONAL UNIVERSITY