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An annuity is a periodical payment made in exchange for the remainder of a person's life or a specified period, with premiums based on longevity. Life insurance policies provide funds for dependents and are paid out at death. Learn about the classification of annuities based on commencement of income and number of lives covered, according to mode of payment and disposition of proceeds. Different types include single life annuity, multiple life annuity, level premium annuities, guaranteed minimum annuity, and retirement annuity policy. Policy conditions such as hull, cargo, freight clauses are also explained.
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WHAT IS ANNUITIES? • “An annuity is a periodical level payment made in exchange at the purchase money for the remainder of the life time of a person or for a specified period. The recipient is usually as an annuitant”. However, evidence of age is essential at the time of proposal. • The payment of annuity generally continues up to the life. so the premium rate is determined according to longevity. The amount premuim is higher at younger age and lower at advanced age.
ANNUITY CONTRACT Liquidates gradually the accumulated funds. It is taken for one’s own benefit. The payment stops at death. Premuim is calculatedon the basis of longevity of the annutant. LIFE INSURANCE POLICY It provides gradual accumulation of funds. It is generally for benefits of the dependents. In life insurance the payment is usually given at death. Premuim is based on the mortality of the policy-holder. DIFFERENCE B/W ANNUITY CONTRACT AND LIFE INSURANCE POLICY
CLASSIFICATION OF ANNUITIES • The annuities can be defined according to: • Commencement of income. • Number of lives covered. • Mode of payment of premuim. • Disposition of proceeds. • Special combination of annuities.
ANNUITIES ACCORDING TO COMMENCEMENT OF INCOME 1. IMMEDIATE ANNUITY: The immediate annuity commences immediately after the end of the first income period. For instance, if the annuity is to be paid annually, then the first instalment will be paid at the expiry of one year. 2. ANNUITY DUE: Under this annuity, the payment of instalment starts from the time of contract.
3. DEFERRED ANNUITY: In this annuity contract, the payment of annuity start after a deferment period or at the attainment by the annuitant of a specified age. The premium may be paid as a single premuim or in instalments.
CLASSIFICATION OF ANNUITY ACCORDING TO THE NUMBER OF LIVES • SINGLE LIFE ANNUITY: under this annuity one single person following is contractor. This annuity is most beneficial to those who have no dependent and want to use all this saving during his life time. • MULTIPLE LIFE ANNUITY: in this annuity more than one life is contracted. The annuity is also of two types: (a) joint life annuity, (B) last survivor.
CLASSIFICATION OF ANNUITIES ACCORDING TO MODE OF PREMIUM • LEVEL PREMIUM ANNUITIES: for availing the annuity, the annuitant can deposit some amounts periodically so that, at the end, he can get sufficient amount of annuity in equal instalments. • SINGLE PREMIUM ANNUITIES: The annuity in this case is purchased by payment of a single premium.
CLASSIFICATION ACCORDING TO THE DISPOSITION OF PROCEEDS • LIFE ANNUITY: This annuity offers a regular income to the annuitant throughout his life time. No payment is made after his death. • GUARANTEED MINIMUM ANNUITY: annuty payment up to a period is guaranteed by the insurer. The annuity may be of two types, (a)Immediate annuity with guaranteed payment, (b)deferred annuity with guaranteed payment. • TEMPORARY LIFE ANNUITY: under this plan, annuity payment cease at the end of a specified period or at the death whichever is earlier.
4. RETIREMENT ANNUITY POLICY: this annuity is useful employees at the time of retirement. This annuity is issued under the followimg condition: (a)the provision of life annuity to the individual in old age. (b)during the life of individual no sum other than the annuity to the individual shall be payable. (c)all annuities must be payable in india only. (d)the annuity payable shall not be capable of surrender, commutation or assignment.
POLICY CONDITION ??? • The old form of policy is even used today. In order to make the standard policy suitable for the different types of contract,suitable conditions are added to the policy. The conditions are inserted in the policy in the form of clauses like: hull, cargo,and freight.
HULL CLAUSES: These clauses are mainly framed with the insurances on vessels and incorporated in hull policies, the clauses may be pertaining to losses resulting from collision, standing, general average, etc. • CARGO CLAUSES: These clauses are used in the insurance of goods and incorporated in cargo policies. The clauses describe the nature, extent, and scope of the insurance and define comprehensive condition and restrictions. • FREIGHT CLAUSES: The clauses are framed in connection with the loss of freight due maritime perils which may be insured for a period.
DESCRIPTION OF THE CLAUSES • ASSIGNMENT CLAUSE: The clause of assignment is as below… as well as in his/their own name as for and in the name and names of all and every other person or persons to whom the same doth may or shall appertain, in part or in all doth make assurance… and cause … and them and every of them, to be insured. • LOST OR NOT LOST CLAUSE: the meaning of the clause is that the insurer insures the subject-matter irrespective of the fact that it has already been lost or not lost before the the issue of the policy.
3. AT AND FROM CLAUSE: This clause is applicable in voyage policies insuring hull and freight. It determines the time when the actual risk commences. 4. WAREHOUSE TO WAREHOUSE CLAUSE: underwriters are responsible for the risk commencing from the time of loading to the time of unloading the cargo. 5. DEVIATION TOUCH AND CLAUSES: The ship should not deviate from the course of the voyage described in the policy or where the course is not a specifically designated one, from the customary course. Any departure from the specified course or a customary course amont to deviation.
6. INCHMAREE CLAUSE: The clause protects the shipowners against losses to be included in claims by the assured. This clause is taken from an illustration of a steamer called ‘Inchmaree’. 7. RUNNING DOWN CLAUSES(R.D.C): This clause is also called collision clause and is included in hull policies. It provides that the underwriter agrees to take upon the liability of the owner of the ship for damage done by his vessel to another vessel on collision to the extent of three-fourths of liability.
8. SUE AND LABOUR CLAUSE: This clause reads as follows: “and in case of loss of misfortune it shall be lawful to the assured, their factors, servants and assingns to sue, labour and travel for in and about the defence, safeguards, and recovery of the said goods and merchandises and ship. 9. REINSURANCE CLAUSE: The reinsurance clause… “being a reinsurance and subject to the same clauses and condition as the original policy, and to pay as may be paid thereon”… The reinsurer is liable only for claims for which the original underwriter is liable.
10. MEMORANDUM CLAUSE: This clause is meant to provide a minimum limit to be underwriter’s liability regarding regarding claims for particular average by exempting him from such claims. 11. CONTINUATION CLAUSE: This clause refers that the vessel shall continue to be covered even after completion of voyage under the policy at a pro rato premium to her port of destination provided previous notice was not given. 12. INSTITUTE CARGO CLAUSES: These clauses are used to cover various types of general merchandise involving transit by sea.
