What is Life Insurance
Life insurance is insurance on human beings. Though Human life cannot be valued, a monetary sum could be determined which is based on loss of income in future years. Thus life insurance is a policy that people buy to insure against the breadwinner’s death. Life insurance products provide a definite amount of money to the dependants of the insured in case the person dies during his active income earning period or becomes disabled on account of an accident causing reduction/complete loss in his income earnings.
Life Insurance can be a form of savings in the long run if one purchases a plan that offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person's pension plan. A person can make contributions to a pension that is funded by a life insurance company. These are considered private pension arrangements.
A good life insurance program does more than just replace the loss of income that occurs if one dies. It also provides money to cover the new costs that arise after the insured’s death — funeral expenses, taxes, probate costs, the need for housekeepers and child care, and so on. And the cash benefits should also provide for his family's future needs as well, including college education for his children and part or all of his spouse's retirement needs. In almost all cases, the beneficiary can use the cash benefits in the way he or she sees fit, without restriction.
With a life insurance policy in place, a person can:
- Provide security for your family
- Protect your home mortgage
- Take care of your estate planning needs
- Look at other retirement savings/income vehicles
There are a variety of life insurance products to suit to the needs of various categories of people—children, youth, women, middle-aged persons, old people; and also rural people, film actors and unorganized laborers.
Life insurance products could be purchased from registered life insurers notified by the IRDA. Insurers appoint insurance agents to sell their products. Public who are interested to buy life insurance products should receive proper advice from insurance agents/insurer so that a right product could be chosen to suit particular financial needs.
Five reasons why one needs Life Insurance
There are many reasons why a life insurance policy has become an essential part of everybody's future planning. These are elucidated below:
A) Early Deaths: The mortality rate is experiencing a declining trend in many parts of the world. However it is also important to note that the age at which People die is also ever decreasing. Some reasons for this include unhealthy living style, stress, pollution, and some natural calamities. This necessitates people to make adequate measures to yield income for their family and dependents. This could be a serious concern if the insured happens to be the sole bread winner. Some individuals see this as an option to plan their retirement.
B) Advancements in Health Care : The mortality rate has declined rapidly even though the fact remains that the number of people who die at an early age is on the increase. This necessitates some solid savings in the old age to bank upon for a person. Unless they invest in Life insurance or other forms of insurance like health insurance it becomes next only to impossible to meet the financial demands especially during the old days.
C)Increase in the Cost of Living and Spending Power: The purchasing power of the consumers and the standard of living has experienced a steep rise over the years. The increase in National Income and gross domestic product are partly responsible for this. Individuals incur many unexpected expenses due to the growing needs. Insurance comes in handy to meet such an unexpected expense. It also makes sure that an individual is able to meticulously plan his finances. Insurance option is more or less an interest free loan. An individual can cancel his insurance policy and obtain a huge amount if it is imperative in meeting an urgent expenses and he does not have alternative sources for finance. Life insurance companies therefore do the needful to consumers.
D) Tax Concessions: Income tax concessions are available to individuals and corporate houses who adopt insurance policies. Many have been making investments in Insurance with the sole aim of enjoying tax benefits. This naturally increases spending power. Since the investments increases the economic activities in the country automatically increases.
E) Best Option for Salaried Youth: Insurance is by and large regarded as one of the savings scheme. Students who earn while studying and those who take up full time employment after their studies see insurance as a profitable scheme to regulate their savings. Apart from tax concessions life insurance entails individuals to enjoy more benefits as they have special and attractive schemes for this segment.