Discuss the elements of life insurance.

Elements of Life Insurance
The previous section discussed the purpose, need and advantages of life insurance. This section discussed the elements of life insurance.

The two basic elements that all the individuals require from life insurance are the coverage of risk and savings for the future. It is necessary to understand the various elements of life Insurance. The following are the elements of life insurance: 

Premium - Premium is the amount of insurance payable by the policyholder. The price fixed for the premium depends on the sum assured, age and occupation of the policyholder. 

Grace period - Grace period is the days after the due date of the premium. Premium can be paid during the grace period. If the premium is paid as monthly instalments then seven or fifteen days of grace period is allowed to pay the premium. If the policyholder dies during the grace period without paying premium then the due amount will be deducted from the full amount of the policy. 

Proof of age - Date of birth is necessary as the rate of premium is decided on the basis of the age of the policyholder at entry. If date of birth is not provided at the entry level then it should be proved to the satisfaction of the insurance company at the time of claim.

Nomination and assignment - The policyholder can nominate anyone at any time as nominee during the period of the policy. The person designated as nominee will get the benefit of the policy if the policyholder dies. Nomination is made by an endorsement in the policy.

Assignment of a policy means the transfer of the policy to a third party. A life insurance policy can be assigned to any person at any time freely with or without consideration. But it should be in writing, witnessed and registered. Assignment can be made on an endorsement or on a separate signed instrument. The person who makes the assignment is called Assigner and the person to whom the policy is assigned is called as assignee. 

Surrender value - Persons unwilling to pay the premium can surrender the policy and ask for the surrender amount which is the cash value of the policy. Surrender amount depends on the type of policy and premium paid. Generally, it is one-third of the premium paid till date. A person can apply for a surrender amount only if the premium has been paid for minimum three years. 

Paid-up value - Policyholders who want to close the policy can convert their policy into paid-up policy. Paid-up value is equal to the premium paid and greater than the surrender amount. But the Paid-up value amount is payable only at the maturity of the policy. A policy can be converted into paid-up policy only after two years. 

Indisputable clause - Under the Insurance act 1950, no life insurance policy can be disputed after it has run for two years except in case of proof of age or fraud. 

Penalty - The life insurance policy is penalised for non-payment of premium, concealment of material facts, furnishing wrong information and so on. 

Revival of lapsed policies - If premium is not paid within the grace period, the policy lapses. But the policy can be revived within a period of five years from the due date of the first unpaid premium amount and before the maturity date.

Claims - Claims mean issue of the insured amount to the policyholder. Claims can be made at the middle of the policy term or on the maturity of the policy.