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.
Keyman insurance is taken by a business firm
on the life of key employee(s) to protect
the firm against financial losses, which may
occur due to the premature demise of the Keyman
