sagar d. parab Roll INTRODUCTION We live in a risky world. Forces, largely outside our control, that makes threats our financial well being, constantly surround us. Thus, some of us will experience the premature and dreadful death of a beloved family member; others will experience the loss or destruction of their property from natural disasters. Still others will experience poor health from cancer, heart attacks, and other diseases. In addition, some of us will be totally and permanently disabled from a crippling automobile accident or a catastrophic illness. Finally, others will experience the traumatic effects of a liability lawsuit. They're all built into the working of the Universe, waiting to happen. Therefore Risk is pervasive conditions of human existence. It has a simple meaning in every day usage but sometime it has a specialized connotation when used in particular fields. Definition of Risk Risk is defined as "a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for". Thus risk is a combination of circumstances, and in this combination there is 1. SAGAR DIPAK PARAB
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sagar d. parab Roll no. 25.
INTRODUCTION
We live in a risky world. Forces, largely outside our control, that makes threats
our financial well being, constantly surround us. Thus, some of us will experience the
premature and dreadful death of a beloved family member; others will experience the loss
or destruction of their property from natural disasters. Still others will experience poor
health from cancer, heart attacks, and other diseases. In addition, some of us will be
totally and permanently disabled from a crippling automobile accident or a catastrophic
illness. Finally, others will experience the traumatic effects of a liability lawsuit. They're
all built into the working of the Universe, waiting to happen. Therefore Risk is pervasive
conditions of human existence. It has a simple meaning in every day usage but sometime
it has a specialized connotation when used in particular fields.
Definition of Risk
Risk is defined as "a condition in which there is a possibility of an adverse
deviation from a desired outcome that is expected or hoped for". Thus risk is a
combination of circumstances, and in this combination there is possibility of loss. An
adverse even is possible and it has a probability from a zero to one. This it is neither
possible nor definite. We may or may not be able to measure the degree of risk but the
probability of the adverse outcome must be between zero and one. The undesirable even
is known as deviation.
A pure & perfect technique for handling risk is by insurance. For most
individuals, this is the most practical method for handling a major risk. First, risk transfer
is used since a pure risk is transferred to the insurer. Second, the pooling technique is
used to spread the losses of the few over the entire group so that average loss is
substituted for actual loss. Finally, the risk may be reduced by application of the law of
large numbers, whereby an insurer can predict future loss experience with some accuracy.
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INSURANCE
The insurance is related to the protection of the economic value of assets. Every
asset has a value. The asset would have been created through the efforts of the owner, in
the expectation that, either through the income generated there from or some other
output, some of his needs would be met. In the case of a motorcar, it provides comfort
and convenience in transportation. There is no direct income. There is a normally
expected lifetime for the asset during which time it is expected to perform. The owner,
aware of this, can so manage his affairs that by the end of that lifetime, a substitute is
made available to ensure that the value or income is not lost. However, if the asset gets
lost earlier, being destroyed or made non-functional, through an accident or other
unfortunate event, the owner and those deriving benefits there from suffer. Insurance is a
mechanism that helps to reduce such adverse consequences.
Insurance is a contract between two parties - the insurer (the insurance company)
and the insured (the person or entity seeking the cover) - wherein the insurer agrees to
pay the insured for financial losses arising out of any unforeseen events in return for a
regular payment of "premium". These unforeseen events are defined as "risk" and that is
why insurance is called a risk cover. Hence, insurance is essentially the means to
financially compensate for losses that life throws at people - corporate and otherwise.
Insurance Companies are active in the field of Life, Health & General Insurance.
The major part of insurance business is life insurance, the operation of which depends on
the law of the morality.
Why Insurance?
The entire effort of human life is to proceed from uncertainty to certainty. The
rigmarole of life proceeds with first acquiring the wherewithal to earn a living and then
striving for its betterment and ensuring that the comfort and pleasure derived from a
physical commodity or a human being continues. It is at the latter stage that the
mechanism of insurance comes in play.
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The concept of insurance is in essence related to the protection of the economic
value of assets. Every asset whether physical or in form of a human being has a value.
The asset is built up in the expectation that, either through the income generated there
from or some other output, some needs of the individual would be met. For example, In
the case of an industry its production is sold and income generated. In the case of a
vehicle, it provides comfort and convenience in transportation.
However there is a normally expected life cycle for every asset during which time
it is expected to perform its assigned role. So, a prudent individual can manage his affairs
so that by the end of that life cycle, a substitute is in place to ensure continued
benefit/comfort. However, if due to an accident or other unfortunate event, the asset gets
destroyed or made non- functional earlier, the person deriving benefits therefore suffer.
Insurance is the mechanism that helps to soften the impact of such adverse consequences
by providing for some monetary substitution to face such unforeseen circumstance.
The need of insurance arises from the chances of an accidental occurrence
destroying or making an asset non-functional. Such loss producing eventualities are
called perils e.g. fire, floods, breakdowns, lightning, earthquakes, etc however, it has to
be remembered that what is being talked about is only a probability of a loss. The
protection of Insurance is against a contingency that may or may not happen.
Life Insurance
Life Insurance is a contract between person and a life insurance company, which
provides your beneficiary with a pre-determined amount in case of your death during the
contract term.
Buying insurance is extremely useful if you are the principal earning member in
the family. In case of your unfortunate premature demise, your family can remain
financially secure because of the life insurance policy that you have purchased.
The primary purpose of life insurance is therefore protection of the family in the
event of death. Today, insurance is also seen as a tool to plan effectively for your future
years, your retirement, and for your children's future needs. Today, the market offers
insurance plans that not just cover your life and but at the same time grow your wealth
too.
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5 ROLE OF LIFE INSURANCE
Role 1: Life insurance as "Investment"
Insurance is an attractive option for investment. While most people recognize the
risk hedging and tax saving potential of insurance, many are not aware of its advantages
as an investment option as well. Insurance products yield more compared to regular
investment options, and this is besides the added incentives (read bonuses) offered by
insurers.
You cannot compare an insurance product with other investment schemes for the
simple reason that it offers financial protection from risks, something that is missing in
non-insurance products. In fact, the premium you pay for an insurance policy is an
investment against risk. Thus, before comparing with other schemes, you must accept
that a part of the total amount invested in life insurance goes towards providing for the
risk cover, while the rest is used for savings.
In life insurance, unlike non-life products, you get maturity benefits on survival at
the end of the term. In other words, if you take a life insurance policy for 20 years and
survive the term, the amount invested as premium in the policy will come back to you
with added returns. In the unfortunate event of death within the tenure of the policy, the
family of the deceased will receive the sum assured.
Now, let us compare insurance as an investment options. If you invest Rs 10,000
in PPF, your money grows to Rs 10,950 at 9.5 per cent interest over a year. But in this
case, the access to your funds will be limited. One can withdraw 50 per cent of the initial
deposit only after 4 years.
The same amount of Rs 10,000 can give you an insurance cover of up to
approximately Rs 5-12 lakh (depending upon the plan, age and medical condition of the
life insured, etc) and this amount can become immediately available to the nominee of
the policyholder on death.
Thus insurance is a unique investment avenue that delivers sound returns in addition to
protection.
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Role 2: Life insurance as "Risk cover"
First and foremost, insurance is about risk cover and protection - financial
protection, to be more precise - to help outlast life's unpredictable losses. Designed to
safeguard against losses suffered on account of any unforeseen event, insurance provides
you with that unique sense of security that no other form of investment provides. By
buying life insurance, you buy peace of mind and are prepared to face any financial
demand that would hit the family in case of an untimely demise.
To provide such protection, insurance firms collect contributions from many
people who face the same risk. A loss claim is paid out of the total premium collected by
the insurance companies, who act as trustees to the monies.
Insurance also provides a safeguard in the case of accidents or a drop in income
after retirement. An accident or disability can be devastating, and an insurance policy can
lend timely support to the family in such times. It also comes as a great help when you
retire, in case no untoward incident happens during the term of the policy.
With the entry of private sector players in insurance, you have a wide range of
products and services to choose from. Further, many of these can be further customized
to fit individual/group specific needs. Considering the amount you have to pay now, it's
worth buying some extra sleep.
Role 3: Life insurance as "Tax planning"
Insurance serves as an excellent tax saving mechanism too. The Government of
India has offered tax incentives to life insurance products in order to facilitate the flow of
funds into productive assets. Under Section 88 of Income Tax Act 1961, an individual is
entitled to a rebate of 20 per cent on the annual premium payable on his/her life and life
of his/her children or adult children. The rebate is deductible from tax payable by the
individual or a Hindu Undivided Family. This rebate is can be availed upto a maximum
of Rs 12,000 on payment of yearly premium of Rs 60,000. By paying Rs 60,000 a year,
you can buy anything upwards of Rs 10 lakh in sum assured. (Depending upon the age of
the insured and term of the policy) This means that you get an Rs 12,000 tax benefit. The
rebate is deductible from the tax payable by an individual or a Hindu Undivided Family.
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Role 4: Life insurance as "Financial Planning"
Most insurance plans available today have a built in savings element. Plans like
the Endowment Plan, Money back Plan, Child Advantage Plan, Preferred Retirement
Plans, etc allow you to meet your dual financial goals of life cover and Savings for the
future.
You may avail of a loan from the insurance company against certain plans. Your
policy could also be pledged as a collateral to raise funds from banks and other financial
institutions. In case of your unfortunate death the loans may be repaid from the proceeds
of the life insurance policy. Insurance promotes compulsory savings with regular
premium payments and helps build up a corpus of funds along with financial security for
the dependants in case of premature death. For your medical needs and that of your
family.
Hospitalization costs and quality healthcare is becoming increasingly expensive.
Without insurance, you can actually face a situation where you have withdrawn all your
money and borrowed to pay the medical bills. This can be provided with our Critical
Illness Benefit. Insurance provides you the option of covering yourself towards any
critical illnesses that can become extremely costly. Choosing this facility pays you a lump
sum upon diagnosis of certain diseases like cancer, kidney failure, heart attack, stroke,
coronary bypass, vital organ transplants, Alzheimer's disease, paralysis, etc.
Role 5:Role of Insurance as "Economic Development."
It reducing burden of Government in providing relief to the old citizens as well as
providing funds to Govt. for nation building activities. Direct investments made by
Insurance serve a twofold purpose. It acts as a major instrument for the mobilization of
savings of people, particularly from the middle and lower income groups. These savings
are channeled into investments for economic growth thereby creating employment. These
savings in turn go into the task of nation building.
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ABOUT SBI LIFE INSURANCE
Life is full of surprises, some pleasant and some not so pleasant. Our families and
we have to live with these uncertainties. Preparing for the uncertainties of life is what
Insurance is all about. Insurance is a tool, a solution for delegating the worries concerning
tomorrow onto a trustworthy institution so that you can start living today.
With SBI Life, you could smoothen the rough edges of life; make it a bit easier,
so you needn't worry about your children's education, or your family's future. Whether
you are looking for a safe investment vehicle with good returns or life cover with regular
returns in the future, all it needs is one small action on your part. Leave the rest to us and
SBI Life will take care of your near and dear ones, and most importantly you.
SBI Life Insurance is a joint venture between the State Bank of India and Cardif
SA of France. SBI Life Insurance is registered with an authorised capital of Rs 500 crore
and a paid up capital of Rs 350 crores. SBI owns 74% of the total capital and Cardif the
remaining 26%. SBI Life has already covered more than 8 lacs group lives with an
additional 2.5 lacs lives through individual policies. State Bank of India enjoys the largest
banking franchise in India. Along with its 7 Associate Banks, SBI Group has the
unrivalled strength of over 14,000 branches across the country, the largest in the world.
Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone’s
leading Bank. BNP is one of the oldest foreign banks with a presence in India dating back
to 1860. It has 9 branches in the metros and other major towns in the country. Cardif is a
vibrant insurance company specializing in personal lines such as long-term savings,
protection products, and creditor insurance. Cardif has also been a pioneer in the art of
selling insurance products through commercial banks in France and 29 more countries.
While sharing its aggressive plans, SBI Life also announced the infusion of
additional fresh capital of Rs. 75 crores to take its capital base up to its authorized share
capital limit of Rs. 500 crores. Speaking on the occasion, Mr. S. Krishnamurthy, MD
and CEO, SBI Life Insurance said, “The additional capital has been injected to maintain
stipulated solvency margins for the exponential new business growth and expanding
branch network” SBI Life Insurance’s mission is to emerge as the leading company
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offering a comprehensive range of Life Insurance and pension products at competitive
prices, ensuring high standards of customer service and world class operating efficiency.
The company plans to make the insurance buying process quick, simple, and based on
well-informed judgments. In 2004, SBI Life Insurance became the first company amongst
private insurance players to cover 30 lakh lives.
The company expects to carve a niche in the Indian insurance market through
extensive product innovation and aims to provide the highest standards of customer
service through a technological interface. To facilitate this, call centers have been already
installed and help lines will be installed and customers will have access to their accounts
through the Internet or through SBI branches. The company proposes to make available
ready liquidity to its Life Insurance policies by way of loans at SBI counters. This will
make Life Insurance a liquid asset in the financial portfolio of households.
SBI Life Insurance is uniquely placed as a pioneer to usher bancassurance into
India. The company hopes to extensively utilise the SBI Group as a platform for cross-
selling insurance products along with its numerous banking product packages such as
housing loans, personal loans, and credit cards. SBI’s access to over 100 million accounts
provides a vibrant base to build insurance selling across every region and economic strata
in the country.
Mission Statement: To emerge as the leading company offering a comprehensive range
of life insurance and pension products at competitive prices, ensuring high standards of
customer satisfaction and world class operating efficiency, and become a model life
insurance company in India in the post liberalization period
5 reasons to select SBI Life as people preferred insurance company.
Customer Satisfaction - many of their customers who have bought an insurance
policy with them have bought a second one!
Financially sound with over a 100 years of Banking experience, when people
trusted company with their money, why would they trust somebody else with their
protection needs.
Affordability
Easy to buy (accessibility)
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Trust & reliability.
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LIFE LONG PENSION
To make post retirement years truly golden, SBI Life introduces Lifelong Pensions a
unique Pension plan for retirement days.
Life expectancy is improving rapidly. People live longer. A person cannot work
throughout their life. You will have to retire from work. In the post retirement period you
have lot of time for yourself. You would like to do things you have not done while you
were working. You need to have a comprehensive plan to meet our post retirement
financial needs ensuring complete peace of mind.
Advantages of the plan:
A maximum of Rs. 1,00,000 p.a. paid as a contribution on a pension plan is fully
deductible from the taxable income (within the max. ceiling Rs. 1 lakh)
Minimum Guaranteed returns of 4% p.a. (compounded annually) on your
Personal Pension Account (till 31st March 2010) + Vested bonus.
It helps you to accumulate enough savings to meet the old age needs and look for
a reliable and enduring pension payment.
It is an extremely flexible plan:
Choice of the contribution amount you want depending on your premium
paying capacity
You may exercise the Top-up facility whenever by paying additional
amount to increase your retirement kitty, irrespective of contribution