A study on financial position of Life insurance

Topics: Insurance, Life insurance, Balance sheet Pages: 27 (4970 words) Published: March 7, 2014
 CHAPTER - I
1.1 Introduction Of Life Insurance
Marine insurance was the first in the world history of insurance. Fire insurance was a later development. After fire insurance, life insurance came into existence. Conventionally, insurance was considered as a cooperative form of distributing a certain risk over a group of persons who are exposed to it. But now it is taken as a contract or an agreement in which it is agreed that a certain amount of money would be paid as compensation in case the loss or destruction occurs due to certain risks. In return, the insured agrees to pay a certain amount as premium. People live in society. Society is full of risks and uncertainty. Insurance is a device providing financial compensation to those who suffer from misfortune. In other words, insurance is the best means for security to human life and property from various risks (Shrestha, 2001). It is a kind of investment, from which one gets return only when certain loss occurred from predetermined incidents (Singh, 2009). Moreover, life insurance encourages savings in the society because insured is paid back a lump sum amount with some bonus if he/she alive at the end of the period. Life insurance is a contract between an insured and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") in exchange for a premium, upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion. In Simple words, Life Insurance is transfer of a risk to the insurer. The risk assumed by the insurer is the risk of death of the insured. It is contract between Insured and Insurer to compensate financial based on sum assured and premium paid there in. Life-based contracts tend to fall into two major categories: Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. Investment policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life, and variable life policies.

Chart of Life insurance

1.2 History of life insurance
Insurance began as a way of reducing the risk to traders, as early as 2000 BC in China and 1750 BC in Babylon. An early form of life insurance dates to Ancient Rome; "burial clubs" covered the cost of members' funeral expenses and assisted survivors financially. Modern life insurance policies were established in the early 18th century. The first company to offer life insurance was the Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas Allen. The first plan of life insurance was that each member paid a fixed annual payment per share on from one to three shares with consideration to age of the members being twelve to fifty-five. At the end of the year a portion of the "amicable contribution" was divided among the wives and children of deceased members and it was in proportion to the amount of shares the heirs owned. The first life insurance policies were taken out in the early 18th century. The first company to offer life insurance was the Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas Allen. The first plan of life insurance was that each member paid a fixed annual payment per share on from one to three shares with...
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