Life Insurance and Personal Lines: Products, Section 45, Revival and Human Life Value
Domain 2 covers life insurance products plus the personal lines bought by individuals - personal accident, home and travel. The exam checks whether you can compute a need, name the right product and quote the life-insurance rules on contestability, revival and nomination correctly.
Products and the need
- Term plan: pure risk cover, no maturity value, cheapest per lakh of cover.
- Endowment and money-back: cover plus survival benefits. Whole life: cover for the entire lifetime, maturing at death or a terminal age.
- ULIP: part of the premium buys units in a fund and the investment risk sits with the policyholder.
- Annuity: converts a lump sum into a lifetime pension - protection against living too long, not against dying early.
- Need is measured against human life value (HLV), the present value of the income the family would have received.
Rules you must quote correctly
- Section 45, Insurance Act 1938: after three years from issuance or revival, a policy cannot be called in question on the ground of misstatement or fraud; within three years the insurer may repudiate by written order.
- Free look: 30 days from receipt of the policy document to return it, for a refund of premium less proportionate risk and expenses.
- Revival: a lapsed policy can be revived within five years of the first unpaid premium with arrears, interest and fresh evidence of health.
- Nomination (Section 39) gives the right to receive the money; it does not make the nominee the owner of the policy.
Worked example
Age 30, income ₹6,00,000, self-maintenance ₹2,00,000, so ₹4,00,000 supports the family. Remaining working years 30; annuity factor at 8% ≈ 11.26. HLV ≈ ₹4,00,000 × 11.26 = ₹45,04,000. Existing savings and cover total ₹5,00,000, so the recommended term cover is about ₹40,00,000 - not the maximum a salesperson can push.
Traps
- Calling life insurance a contract of indemnity.
- Treating the nominee as the legal heir.
- Selling a long-lock-in ULIP to a 62-year-old who needs liquidity and cover - a suitability failure.