Life insurance
in India made its debut well over 100 years
ago.
In our country, which is one of the
most populated in the world, the prominence of
insurance is not as widely understood, as it
ought to be. What follows is an attempt to
acquaint readers with some of the concepts of
life insurance, with special reference to
LIC.
It should, however, be clearly
understood that the following content is by no
means an exhaustive description of the terms and
conditions of an LIC policy or its benefits or
privileges.
For more details, please
contact our branch or divisional office. Any LIC
Agent will be glad to help you choose the life
insurance plan to meet your needs and render
policy servicing.
Life insurance is a
contract that pledges payment of an amount to
the person assured (or his nominee) on the
happening of the event insured
against.
The contract is valid for
payment of the insured amount during:
- The date of maturity, or
- Specified dates at periodic intervals, or
- Unfortunate death, if it occurs earlier.
Among other things, the contract also
provides for the payment of premium periodically
to the Corporation by the policyholder. Life
insurance is universally acknowledged to be an
institution, which eliminates 'risk',
substituting certainty for uncertainty and comes
to the timely aid of the family in the
unfortunate event of death of the breadwinner.
By and large, life insurance is
civilisation's partial solution to the problems
caused by death. Life insurance, in short, is
concerned with two hazards that stand across the
life-path of every person:
- That of dying prematurely leaving a
dependent family to fend for itself.
- That of living till old age without visible
means of support.
A contract of insurance is
a contract of utmost good faith technically
known as uberrima fides. The doctrine of
disclosing all material facts is embodied in
this important principle, which applies to all
forms of insurance.
At the time of taking
a policy, policyholder should ensure that all
questions in the proposal form are correctly
answered. Any misrepresentation, non-disclosure
or fraud in any document leading to the
acceptance of the risk would render the
insurance contract null and void.
Protection: Savings
through life insurance guarantee full protection
against risk of death of the saver. Also, in
case of demise, life insurance assures payment
of the entire amount assured (with bonuses
wherever applicable) whereas in other savings
schemes, only the amount saved (with interest)
is payable.
Aid To Thrift:
Life insurance encourages 'thrift'.
It allows long-term savings since payments can
be made effortlessly because of the 'easy
instalment' facility built into the scheme.
(Premium payment for insurance is either
monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme
popularly known as SSS, provides a convenient
method of paying premium each month by deduction
from one's salary.
In this case the employer
directly pays the deducted premium to LIC. The
Salary Saving Scheme is ideal for any
institution or establishment subject to
specified terms and
conditions.
Liquidity:
In case of insurance, it is easy to acquire
loans on the sole security of any policy that
has acquired loan value. Besides, a life
insurance policy is also generally accepted as
security, even for a commercial
loan.
Tax Relief:
Life Insurance is the best way to
enjoy tax deductions on income tax and wealth
tax. This is available for amounts paid by way
of premium for life insurance subject to income
tax rates in force.
Assessees can also avail
of provisions in the law for tax relief. In such
cases the assured in effect pays a lower premium
for insurance than
otherwise.
Money When You Need
It: A policy that has a suitable
insurance plan or a combination of different
plans can be effectively used to meet certain
monetary needs that may arise from time-to-time.
Children's education, start-in-life or
marriage provision or even periodical needs for
cash over a stretch of time can be less
stressful with the help of these policies.
Alternatively, policy money can be made
available at the time of one's retirement from
service and used for any specific purpose, such
as, purchase of a house or for other
investments. Also, loans are granted to
policyholders for house building or for purchase
of flats (subject to certain
conditions).
Any person who has
attained majority and is eligible to enter into
a valid contract can insure himself/herself and
those in whom he/she has insurable interest.
Policies can also be taken, subject to
certain conditions, on the life of one's spouse
or children. While underwriting proposals,
certain factors such as the policyholder’s state
of health, the proponent's income and other
relevant factors are considered by the
Corporation.
Prior to nationalisation
(1956), many private insurance companies would
offer insurance to female lives with some extra
premium or on restrictive conditions. However,
after nationalisation of life insurance, the
terms under which life insurance is granted to
female lives have been reviewed from
time-to-time.
At present, women who work
and earn an income are treated at par with men.
In other cases, a restrictive clause is imposed,
only if the age of the female is up to 30 years
and if she does not have an income attracting
Income Tax.
Life insurance is normally
offered after a medical examination of the life
to be assured. However, to facilitate greater
spread of insurance and also to avoid
inconvenience, LIC has been extending insurance
cover without any medical examination, subject
to certain conditions.
An insurance policy
can be 'with' or 'without' profit. In the
former, bonuses disclosed, if any, after
periodical valuations are allotted to the policy
and are payable along with the contracted
amount.
In 'without' profit plan the
contracted amount is paid without any addition.
The premium rate charged for a 'with' profit
policy is therefore higher than for a 'without'
profit policy.
