ADVANTAGES OF LIFE INSURANCE
Protection: The Life Insurance Policy offers full protection
against risk of death, unlike other savings plans. In the event of death, the
life insurance assures full sum compared to the other savings plan where the
amount saved (with interest) is only payable.
Accidental death benefits: Policies also provide for an
entire some to be paid (equal to the sum assured) if death occurs as a result
of accident.
Encourages and aids thrift: Insurance allows long term
savings as premiums are paid in easy installments (monthly, quarterly, half yearly
and yearly). In other type of savings, one is tempted to withdraw the savings and
the savings account does not fulfill its purpose.
Tax benefit: Depending on the income tax rates in force, tax
relief is available for life insurance. In order to gain income tax exemptions,
a person can pay premiums under policies on his/her life or family members lives.
Provides liquidity: Loans can be taken by policy holders against
the policy. Different plans can be effectively used to meet children’s
education or marriage or can also provide for old age through retirement
insurance plans. The Life insurance policy can be assigned to the bank,
insurance company or other financial institution as security for a loan incase
of requirement. Thus Life Insurance acts as an Emergency fund.
Collateral security for housing loan: Incase of death of the
policy owner, the amount received through life insurance can be adjusted to the
outstanding loan and the home can be released to the beneficiaries.
No stamp duty on transfer of property contained in a life insurance
policy. This is done under Sec.38 of Insurance Act 1938 through endorsement on
the back of the policy document or on stamp paper.
Management of funds: A life insurance Company will have the
necessary experience and expertise in the field and the policy holder gets the
benefit of the same entirely free.
Settlement of claim under life insurance policy is very
simple. In case of a death claim, the nominee receives the funds. In case of
survival of the policy holder, on maturity the amount is paid to him/her.
Socially and economically backward sections of society can also
benefit through group life insurance schemes that are designed for them. The Government
may also provide subsidies for the same.
Life insurance is a safe and profitable investment. The Insurance
Regulatory and Development Authority (IRDA) constituted by the Government of
India in 1999 keeps a constant watch and vigil on the financial position of
Life Insurance companies.
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