The Procedures of Affecting a Life Assurance 

1.Submission of proposal from
2.Submission of agent's report
3.Doctor's report
4.Certificate of age
5.Acceptnce of the proposal
6.Payment of the first premium

 How Life Assurance Policy Becomes Inactive

If owner fails to pay the premium,when its due or if owners submit any fraudment application,Life assurance policy become inactive and any such inactivation must occur within a period of time (usually 2 years) defined by law then only the insured can obtain one of the following remedies;
1.Obtain the paid up value
2.Obtain the surrender value.
Paid up value is use to purchase an amount of coverage where no further premiums are paid into it.Thus it becomes a paid up policy. In other words when a policy is taken out,it is taken out with an agreed sum assured.If you allow your policy to laps due to the stopping of premium payments,then the sum assured is reduced to give you a lower value the reduced sum assured  is paid up value.

Obtain the Surrender Value

The amount the policy holder will get you from the life insurance company If he decides to exit the policy before maturing.The insured can obtain certain % of payment (premium) paid by him up to the date of termination.In order to obtain surrender value,the policies which are taken for less than 10 years should have paid their premium continuously for 2 years and policies with more than 10 years  Should have paid their premium at least for 3 years.

Which Insurance Principles are not applied in life assurance?

•  Indemnity
• Contribution
• Subrogation  

What are the contents of a life assurance deed?

• Name of the insured and address
• Type of risk
• Value of the insurance and time duration
• Health condition of insured
• Personal habits
• Details about family 
• Occupation of the insured
• History of the insured
• Losses of history

What are the determinants of premium of a life assurance policy?

•  Risk of the occupation(job) and risk of life
• Value of insurance policy
• Time of maturity
• Age of insured
• Coverages
• Personal habits
• Current and past health.

        

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Dual Insurance, re-insurance and underwritting insurance

                                                              Dual  Insurance

If someone is taking two or  more insurance policies for the same property or an asset from two or more insurance companies that is considered as dual insurance 

But  in the event of damage, compensation is paid for the true damage only.

However in the case of  life insurance , s the principle of indemnity does not apply , compensation could be obtained under all the policies ( Face value )

Eg: If a motor vehicle worth Rs. 500000/= is  insured for the  same value with three insurance companies , the fully indemnity from the
insurance policies of  all three companies that could be obtained is only Rs. 500000/=

But this  will not apply to life insurance . Compensation could be obtained from all the companies up  to the face value.

                           Re-insurance
 
This is to insure the insurance policies in the possession of  the insurer with a local of foreign insurance company , with the knowledge of the insured.

In this case  the relevant premium is paid by the insurer. Re-insurance is done for  the purpose of minimizing the risk of the insurer.

Eg : The oil tanks of the Srilankan Petroleum Corporation are reinsured with the British " Loyld' s reinsurance by the Srilankan Insurance Corporation.

                       Underwritting Insurance

Underwritting  is insuring assets with a very high value with sveral insurers at the same time. Here under one policy several insurance companies under take the risk of it.Aeroplanes, Ships and large scale projects which have high values are insured in this manner.


                                  The cover note 

When an insurance company agrees  to undertake the risk, it will inform the insured the premium to be given . When the first premium is paid cover begins to continue . For an evidence of this the company sometimes issues a "Cover note " which is  a temporary document until the policy is being prepared . In this case of motor insurance a certificate of insurance is issued as evidence of cover in addition to the policy and any cover note
 

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Nature of Shares

Nature of shares and types of shares are given in a section 49 of  the companies act . The shares issued by the company accordingly are considered as a movable property, of the company.

By the company's Article of Association the following rights are conferred on the relevant shareholder who owns a share company .

-  The right to exercise one vote for one share at a vote taken for adopting a resolution .
- Right to have an equivalent quota in the profit payable by the company
- Right to have an equivalent quota in the distribution of excess assets in a liquidation .

Different types of shares

Different classes of shares can be issued by a company. The following are included among them.

- Ordinary Shares
- Preference Shares
- Special Shares
- Shares with voting rights
- Shares without voting rights

It would be seen that as per decision of the Board of Directors as indicated above, various rights , privileges and shares with liabilities could be issued as required by the company.

Shares issued accordingly could be of  the following nature.

- Ordinary / Equity shares
- Preference shares
- Special shares
- Shares with limited or conditional voting rights
- Redeemable shares

                                Ordinary / Equity shares

Equity shareholders will receive dividend and repayment  of capital after meeting the claims of preference shareholders. There will be no. of fixed rate of dividend to be paid to the equity shareholder and this may vary from year to year . This state of dividend is determined by the directors . Sometimes , in case of larger profits.

                             Preference shares

Capital stock which provides specific dividend, debit paid before any dividend are paid to ordinary shareholders which takes precedence over common stock in the event of liquidation. Preference shares represent partial ownership in a company but the shareholders do not enjoy any of the voting rights of  common shareholders.

                                   Deferred / Founders shares

There are issued to founders  of a company .They have special rights to get dividend . Deferred shareholders enjoy the right to all the profit left over after the payment of equity shares.  Usually companies avoid issuing such shares because they cause down on ordinary shareholders.

                               Non -  Voting Shares

Non- voting shares are, as there names implies , equity does not have vote even though it is entitled to share of profit. eg : Deferred shares , Preference shares. ( But they have guaranteed dividend ) and most Non - voting shares do not have guaranteed dividend.

                                    Golden shares

Shares with special voting rights that allow the holder to vote out other shareholders usually in restricted.circumstances . It may also give the shareholder  special rights . Common powers attached to the golden shares are :
                           Veto power : ability to  block any shareholder from acquiring more than in certain proposition of ordinary shares.
                            Power to block any take over.

                                        Types of Preference Shares

- Cumulative
- Non - Cumulative
- Participative 
- Redeemable or convertible

                          Cumulative Preference Shares

Preference shares on which dividend on acquire in the  extent the issues does not make timely the dividend payment

                               Non - Cumulative Preference shares

Preference shares which  unpaid  dividend do not acquire.

                                Participative Preference shares

Preferred stock which in addition to regular dividend also pays an additional dividend ( Participating  dividend ) when common stock dividend exceeds a specific amount.

                Cumulative Participating Preference shares

Shares  which are not cumulative of profit but also participate in the profit which is left over after equity shareholders are paid.

                          Redeemable Preference shares

Company issues redeemable  preference shares as for a specific time  period. These shares are issued when the company has some   growth and expansion  plans in mind . The shareholders can choose time to maturity  on these shares . At the end of stipulated they can choose to exchange the shares for either equity shares of for cash.

                      Non- Redeemable  Preference Shares

Company issues Non redeemable preference shares not for a specific period of time

                                                     

   

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