BUSINESS INSURANCE-BY.P.T.PATIL

PLAN TODAY FOR BETTER TOMORROW

Training Materials for Agents

&

Not for Private Circulation

PRESENTED BY:-P.T.PATIL DOLIC HUBLI III


Your business is unique.

Your business needs a business

insurance plan that fits your business.

Here we look at the preparations and

considerations necessary to properly

insure your business.

When considering what types of policies your

business needs, it can quickly become very

confusing to keep the terms straight. An easy

way around this dilemma is to keep in mind that

all business insurance and all policy types cover

one of four things: property, liability, people or

income.

Planning to Insure Your Business


Property: The property used in your business

such as the structure you do business in or the

vehicles used in your business need to be

protected.

Liability: No one is perfect, your business may

make a mistake and, especially if your business

is open to the public, there is always the chance

your business will be held liable for an injury or

error.

People: At the heart of every business are its

people. You and your officers, managers and

employees are the company's greatest assets

and must be protected.

Income: Without income the business does not

survive



Most home-based businesses will be sole

proprietorships or partnerships. As such, the law

sees you and your business as inseparable. If a

liability claim is successfully made against you

and your insurance isn't adequate, then you face

losing your personal assets, including your

home. It's one thing to lose money when a

business fails — it's quite another to lose your

family home because you failed to insure

yourself adequately.



Buy your tomorrows today

To Get

‘MILLION DOLLER’ Advice ? &

To Protect Your Business

Contact Our LIC Advisor



Want to Achieve your Financial Goals? Select an Advisor,not a product


TIME VALUE FOR MONEY

Making money is easy. Keeping it is the hard part



When it comes to financial planning,Life Insurance is your Life Jacket.



MARRIED WOMEN PROPERTY ACT

3 “S”

SAFETY

SECURITY

STABILITY



CREATION OF IRREVOCABLE TRUSTTHROUGH LIFE INSURANCE CALLED

MARRIED WOMEN PROPERTY ACT

INSURANCE


Financial Protection Solution

MWPPolicy

Provides

Flexibility to start

at any stage

Flexibility to start

at any stageDisputes settlementDisputes settlement

Estate Protection Estate Protection

Tax AdvantageTax Advantage

No changesin Lifestyle

No changesin Lifestyle

Protection against

Creditors

Protection against

Creditors


Income Protection

Professional

Indemnity

Income Protection

Estate building


Any Married can take a Life Insurance Policy on his own

life expressed on the face of it for the benefit his wife,(

his wife & children or any of them. Such a policy shall

ENSURE deemed to be trust for the beneficiaries so

expressed & shall Not ,so long as the object of the trust

remains, be subject to the control of the husband or his

creditors or form part oh his ESTATE

Under MWP, there will be 3 separate bodies namely

1) life assured 2) trustees 3) Beneficiaries

SECTION 6 OF M.W.P.ACT 1874 PROVIDES,


• Any Married Man (including widower or Divorce

(Not a Bachalor or Women) what is important that to

become eligible for taking this policy male member

should have once married and subsequent to this

his wife may have expired or divorced. It is not

necessary that wife should be alive as on taking the

policy.

• Male married proposers who are Non-resident of

India.

WHO CAN TAKE M.W.P.POLICY


Women, even if married and having her

independent income and estate can not

effect a policy on her own life. And also

male member who is unmarried or about

to be married through shortly after issue of

the policy can not take the policy under this

act

WHO CAN TAKE M.W.P.POLICY


1)Wife alone,

2)Any one or more children alone or the wife and

3)Any one or more children together. In above

definition, the word 'children' means children by

blood only of the proponent. However, if the

proposer is Hindu alone, then even adopted

children are also included in the definition of the

word of children.

4)Can provide with equal or unequal shares in policy

monies. If the proposer has more than one legally

married wives,All of them will take jointly as wife as

a class.

5)It is not necessary he should have a child in

existence on the date of proposal.

WHO CAN BE THE BENEFICIARY


Hence, Mohamedan Proposer have to

appoint beneficiaries by name only who are

living and existing at the time of proposal and

also must mention respective shares of the

different beneficiaries which may be equal or

specified unequal shares.

Provision of contingent or alternate

beneficiaries is available. But it is not available

for Mohamedan proposer.



The position in case of Muslim (Mohamedan) Proposer is as follows:-

• Under the Mohamedan law, a gift by way of trust subject to any condition can not be made in favoure of an unborn person.

• Similarly no provision can be made for the benefit of wife as a class or children as a class.

Mohamedan Proposer can not provide beneficiaries jointly or survivor or survivor of them i.e joint tenancy.

• Hence, Mohamedan Proposer have to appoint beneficiaries by name only who are

living and existing at the time of proposal and also must mention respective shares of

the different beneficiaries which may be equal or specified unequal shares.



Where appointment of more than one beneficiary is made under the policy, it may be made either as 'Joint tenant' or 'tenants-in -common'. On the

death of last surviving beneficiary, the entire policy money will be payable to the legal

heirs of such last survivor but not to all legal heirs of all deceased beneficiaries.



Benefits:

• When you purchase your Policy under

MWP act, you are making sure that the

claim amount be distributed among the

mentioned beneficiary equally or

unequally as specified by you.

• Please understand that you cannot

appoint a nominee under this policy,

since nominee is the person who is just

authorized to receive the amount but not

use it.

• You can appoint Specific beneficiary in

the form of your wife or Children or Joint

beneficiary with specific amounts.


Benefits:

• The Claim amount will be held as trust and this will not be added in your estate. So Your Creditors will not have any right on it.

• You can appoint Specific Trustees for claim proceeds which they will held for the benefit

of beneficiaries and if permitted by the trust deed use it as per instructions. • You can appoint any corporate or bank as

specific trustees. Thus if you want your claim proceeds to be

used for the benefit of your wife and children, then you can use this act for your benefit.


All plans where life assured and Proposer are same. Joint Life Endowment Assurance Plans like Plan 89 can not be allowed.

Policies financed through provident fund or DSOP fund can not be allowed, since these

polices will be required to be assigned to provident fund and DSOP.

Children Deferred Assurance Plans and Policies on the life of another can not be taken under this Act. All types of annuities plans are allowed provided life

assured and Proposer are same one.

PLANS UNDER WHICH MWP ACT POLICIES CAN BE ISSUED


APPOINTMENT OF TRUSTEES

The function of the trustee or trustees under MWP act policy is to receive policy money on

claim arising and carry out the objects of the trust. Where the beneficiaries are all majors,

the trustees will pay to the beneficiaries the claim amount received from the LIC unless they have been given specific

directions to the contrary by the person creating the trust.


Proposer may even appoint a corporate special trustee i.e a bank or an executor

and trustee co; instead of appointing individual as a trustee.

Where the beneficiaries are all minors, the trustees will hold the amount for the

benefit of the minors

Life assured can not be work as trustee,

since sec 6 of MWP act provides that policy shall not be subject to the control of

the husband.



Special trustees appointed under MWP act

policies would be in the position of trustees generally and would have all powers and be

subject to all the liabilities and duties of trustees as defined under the Indian trust act.

Where special trustees have not been appointed, the policy money at the time of

claim is payable strictly to the official trustee of the state where the policy is issued.



CANCELLATION OF APPOINTMENT OF EXISTING TRUSTEEOR APPOINTMENT OF NEW TRUSTEES

A trustee once appointed in the addendum to proposal or by way of the deed poll can not

be removed by the life assured, unless there is a specific power reserved to him therein.

Where revocation of the appointment of existing trustees and appointment of new trustees in their

places is desired , the assured will be required to execute a deed poll of revocation of old trustees and appointment of new trustees. The deed poll

will have to be stamped as per requisite stamp value of the state.

If original trustee have availed any loan under the policy and life assured seeks for

cancellation of existing trustees and appointment of new trustee, then alternate trustee or new

trustee may have to accept the old liability.


SETTLEMENT OF MATURITY / DEATH CLAIM

If payment is being made in favor of

beneficiaries and there are one or more than one minor beneficiaries, or all of them are

minor, payment may be made to the natural guardian/s OR Legal guardian by the court of

Law, of the beneficiaries.

Maturity claim and Death claim directly to

beneficiaries if the same are named major.

If the sole beneficiary dies, clearly their legal

heirs will not have any interest in the trust..

ALTERATIONS IN POLICY AND EXERCISE

OF OPTIONS UNDER THE POLICY


Where the alterations are beneficial to

the beneficiaries as a whole with

consent of life assured alone if

beneficiaries are minor trustees may

apply for alteration.

If beneficiaries are major then life assured

and beneficiaries can apply jointly for

alteration.


ASSIGNMENT AND NOMINATION

Assignment or Nomination by the assured is

not permissible.

A nomination by the beneficiary is also not

permissible.

The special trustees can assign the policy

but only by way of a mortgage with the

right of redemption reserved.

The special trustees can not assign the policy

absolutely.

The trustees can not nominate anyone to

receive the policy money.

LOAN UNDER THE POLICY


If life assured has given the powers to

trustees to raise loan from LIC only for the benefit of beneficiaries by filling the requisite addendum at the time of submitting the

proposal, then only loan can be raised.

Life assured can give wider powers to trustees to raise loan from LIC during the minority of the beneficiaries or even if the beneficiaries

If loan was granted to the beneficiaries

where no special trustees are appointed, the reassignment on repayment of loan would be in

favour of the beneficiaries.


SURRENDER OF THE POLICY

Surrender of the policy would be the four

party agreements between LIC, the life assured, the trustees, and all the beneficiaries who must be major and

competent to contract.

Application of surrender of policy, surrender discharge form must be signed by the

assured, beneficiaries, trustees jointly. The surrender value in such case must be paid over to trustees only.

when the beneficiary is minor, it can be

done only with the permission of the competent court.


REVOCATION OR CANCELLATION OF TRUST

A trust under 6 of MWP act is irrevocable in the sense that life assured alone can not

revoke the trust under the policy.

Where all beneficiaries are named, major, competent to contract and are of one mind, then with the consent of all beneficiaries, life assured

can revoke the trust.

The consent of alternative/ contingent

beneficiaries is required to be taken.


ISSUE OF DUPLICATE POLICY / LOSS OF POLICY DOCUMENT

Where the policy is lost at hands of

trustees, Or by the Life Assured or by the

Beneficiary the indemnity bond may be

executed by the respective parties.


DIVORCE OF WIFE AFTER ISSUE OF POLICY

If the wife is the beneficiary named in

the policy document the policy would

continue as a trust in favour of the

divorced wife and would not belong to

the assured in spite of divorce.

Hence, for entertaining any such

request, the divorce decree must be

called.


DEATH OF BENEFICIARY

On death of the one of the beneficiaries,

the trust will work for the surviving beneficiary/ beneficiaries.( but not for legal heirs of deceased beneficiaries )

The assured can not replace a beneficiary in

place of the deceased one.

The heirs can obtain legal evidence of title from court of law. Thereafter, he can execute a deed poll of release from the MWP TRUST


CHANGE OF BENEFICIARIES

It is not open to life assured to make any changes in the trust by deleting any

beneficiaries or by adding any new beneficiaries.

In case a beneficiaries is a minor (applicable for alternate beneficiaries),

no change of beneficiaries is allowed.


DEATH OF TRUSTTES

If the appointment of trustees was jointly

or survivors or survivors of them or as one trustee and an alternative trustee are

there, then there is no need to take any action.

The other or alternative trustees will come into operation.

If the trustee was sole trustees has died,

the assured may be suggested to have a

fresh trustee appointed.


CANCELLATION OF A PREVIOUS POLICY & CONVERTING THE SAME INTO MWP ACT POLICY IN LIEU OF FORMER ONE

It is possible to cancel the existing policy not

issued under the provisions of the act and in its place issue a fresh policy under the MWP act.


Eg:- TELGI - Took a policy under MWPA and now though he is arrested and property attatched, his

family enjoys same life style by surrender cash value of the policy


A Hindu Undivided Family (HUF) is the creation of

the Hindu Law; an HUF consists of all persons lineally descended from a common ancestor including their wives & unmarried daughters.

Sometimes HNI clients opine that in their absence a huge amount of wealth going to Their wife and/or

son may not be the best arrangement and may spoil them, so on and so forth. Another provision of

income tax that can come handy is the Hindu Undivided Family clause. An HUF created by the client or of which the HUF is a co-parecener (male)

/member (female) can propose life insurance on the life of any of its coparecener / members. The effect

is that the maturity/death proceeds do not go to any one individual but become a part of the HUF corpus thus benefiting the entire family and used for such

purposes as may be desired by the client, rather than being squandered away by 1or 2“black sheep”

HUF Insurance


Under KPI, a business can protect itself against economic setback in the event of death of its key

personnel; the business by having such risk management practices in place can attract better

talent, have the trust of creditors, bankers, vendors, clients etc. and can have a business continuation/succession plan in place. Under KPI, the

company/firm proposes insurance, pays premium while the life insured is the KP. Premiums paid

under KPI are allowed as expenditure under section 37(1) thereby helping the firm reduce its profits for

the year and thereby lowering taxes.Claim, if any, is payable to the firm as compensation/corpus to undertake necessary expenditure in

hiring and training a replacement of the KP, thereby allowing business continuity and free from

disruptions.

Key Person Insurance (KPI)


Partnership Insurance (PSI)

A firm has insurable interest in the life of its partners and can buy insurance on the lives of

partners. Like KPI, a partnership firm can protect itself against interruptions to business,

interference from family members and costly litigation in the event of unfortunate death

of a business partner. Again, premium paid by a firm for keeping a policy on the life of a partner in force, is deductible as business expenditure under

section 37(1) and claim, if any is payable tothe firm. HNI clients who are in business and in

arrangements such as partnerships can securetheir business, built with sweat and intellect; ensure that the business continues to exist For

future generations and carries their dream forward.Note: Only Term Insurance is permitted under KPI

and PSI.


Employer-Employee Insurance (EEI)

HNI clients, who are in business or in high ranking positions with organizations can consider arrangements to increase loyalty of their employees and in turn improve motivation and reduce turnover in this era of high aspirations of employees. Employer-Employee insurance arrangement permits a business to pay premiums for life insurance on the life of their employees (not necessarily KP) and allow the benefits to accrue to the employees. Unlike KPI or PSI above, EEI claim proceeds are payable to employee/their beneficiaries only and no benefit accrue to the employer. Due to this, the premiums paid on behalf of employees are treated as perquisite in the hands of the employees under section 17(2) and can in turn be claimed as deduction from income under section 80(c). Arrangements can be made where the employer is the Proposer (scheme A) or the employee (scheme B) itself is Proposer and Life Insured while the Employer is only the premium payor.Note:

All type of insurance plans can be pitched under EEI, including pension plans.


Living for the Moment, without a thought for

Tomorrow, is a foolish investment in the Future


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The authors do not claim it to be

accurate nor accept any responsibility for the same

Disclaimer:

PRESENTED BY:-P.T.PATIL DOLIC HUBLI IIICELL NO.9448133179

E-MAIL- [email protected]

Economy & Finance

BUSINESS INSURANCE-BY.P.T.PATIL