Life Insurance made its debut in India well over 100 years ago. But strangely enough even its salient features are not as widely understood in our country as they ought to be. What follows is an attempt to acquaint readers with some of the concepts of life insurance, with special reference of LIC. It should, however, be clearly understood that the following narration is by no means an exhaustive description of the terms and conditions of an LIC policy or its benefits or privileges. At Sai Securities, we help you choose the life insurance plan to meet your needs and render policy servicing.

What is Life Insurance ?

Life Insurance is a contract for payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) on the happening of the event insured against. Usually the contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the assured. 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 the 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 and that of living to old age without visible means of support.


Benefits of Life Insurance

1. Protection : Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.



2. Aid to thrift : Life Insurance encourages 'thrift'. Long term saving can be made in a relatively 'painless' manner because of the 'easy installment' facility (method of paying premium either monthly, quarterly, half-yearly or yearly) built into the scheme. Take, for example, our Salary Savings Scheme. This scheme provides a convenient method of paying premium each month by deduction from one's salary. The deducted premium is remitted by the Employer to the LIC. The Salary Savings Scheme can be introduced in an institution or establishment subject to specified terms and conditions.



3. Liquidity : Loans can be raised on the sole security of a policy which has acquired loan value. Besides, a life insurance policy is generally accepted as security for a commercial loan.



4. Tax Relief under Section 88 of the Income Tax Act: Considerable tax relief in Income Tax and Wealth Tax is available to an individual or a Hindu Undivided Family for amounts paid by way of premium for life insurance. Individual and HUF assesses can avail themselves of provisions in the law for tax relief. In such cases the assured in effect pays substantially lower premium for his insurance than he would have to pay otherwise.



5. Maturity Amount is completely Tax Free A very attractive feature of a LIC policy is that the amount received on maturity is completely Tax Free



6. Money when you need it : A suitable insurance plan or a combination of different plans can be taken out to meet specific needs that are likely to arise in future, such as children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time. Alternatively, policy moneys can be so arranged to be made available at the time of one's retirement from service to be used for any specific purpose, such as for the purchase of a house or for other investments. Subject to certain conditions, loans are granted to policyholders for house building or for purchase of flats.

Who can buy a Life Insurance Policy ?

Any person who has attained majority and who can enter into a valid contract can take out a life insurance policy for himself and on those in whom he has insurable interest. Policies can also be taken out, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, factors such as the state of health of the life to be assured, the proponent's income and other relevant factors are considered by the Corporation.