Life insurance

 Q.What is the meaning of life insurance? Explain its main features and objectives. 

Answer:-

Introduction 

Whoever is born, their death is certain. But it is uncertain when any person will die. However, some people think about what will happen to their dependent family if they die suddenly. And how will they face financial problems? To overcome this problem, they take out life insurance. 

Meaning of Life Insurance 

In simple words, life insurance refers to such insurance that is taken out with the objective of getting protection from the loss caused by death. Under this, the insurance company promises to pay a certain amount to the legal heir of the insured person after a fixed period in exchange for a fixed premium. 

Features of Life Insurance 

The main features of life insurance are as follows: 

1. Life insurance is taken with the objective of compensating for losses arising due to death. 

2. Life insurance is a contract. 

3. Life insurance is not a contract of indemnity. 

4. Under this, the insurance company promises to pay a specific amount to the legal heir of the insured person after a fixed period (death) in exchange for a certain consideration. 

5. Life insurance has a surrender value. 

6. Life insurance can be taken for more than one year. 

7. Life insurance is also taken for investment purposes. 

Objectives of Life Insurance 

The main objectives of life insurance are as follows: 

1. Financial Security:  A Major objective of Life insurance obtaining financial security. Because if the person who gets the insurance dies, then in that situation, the insurance company provides financial security to the family of the insured person. 

2. Encouragement of frugalaity: A major objective of life insurance is to encourage frugalaity. 

3. Encouragement of Savings: A major objective of life insurance is to encourage savings. 

4. Income Tax Exemption: A major objective of life insurance is to obtain income tax exemption. Because the amount paid as life insurance premium receives an exemption under Section (80C) of the Income Tax Act. 

5. Legal Security: A major objective of life insurance is to obtain legal security. Because a life insurance policy cannot be attached by the court. 

Benefits of Life Insurance 

The main benefits of life insurance are as follows: 

1. Benefits to the Individual 

2. Benefits to Society 

3. Benefits to the Government 

1. Benefits to the Individual

The Individual receives the following benefits from life insurance: 

1. Financial Security: the first benifit of Life insurance obtaining financial security. Because if the person who gets the insurance dies, then in that situation, the insurance company provides financial security to the family of the insured person. 

2. Encouragement of frugalaity: the second benifit of life insurance is to encourage frugalaity. 

3. Encouragement of Savings: the third benifit of life insurance is to encourage savings. 

4. Income Tax Exemption: the fourth benifit of life insurance is to obtain income tax exemption. Because the amount paid as life insurance premium receives an exemption under Section (80C) of the Income Tax Act. 

5. Legal Security: the fifth benifit of life insurance is to obtain legal security. Because a life insurance policy cannot be attached by the court. 

2. Benefits to Society

The Society receives the following benefits from life insurance: 

1.Proper utilization of social savings: Life insurance leads to the proper utilization of social savings. This is because insurance companies invest social savings in productive activities. 

2. Encouragement of capital formation: Life insurance encourages capital formation. This is because insurance companies collect crores of rupees in the form of premiums, which are then used for the economic development of the country. 

3.Financial assistance to industries: Industries receive financial assistance from life insurance. This is because the amount received by insurance companies as premiums is used to purchase shares of companies. 

3.Benefits to the government: The government receives the following benefits from life insurance: 

1. Investment in government securities: Insurance companies are required to invest more than half of their capital in government securities. 

2.Income tax: The government receives a large amount of income tax on the income of insurance companies. 

3.Help to the unemployed and disabled: Insurance companies provide financial assistance to unemployed and disabled individuals through insurance. 

Process of Obtaining Life Insurance 

The process of obtaining life insurance can be divided into the following steps: 

1. Preparation of the Proposal Form: This is the first and most important step in the life insurance process. In this, the individual seeking insurance prepares the proposal form, in which they mention all important information related to themselves. 

 • For example: Name, education, income, type of insurance policy, date of birth, objective of insurance, name of nominee, etc. + declaration. 

2. Proof of Age: This is the second and most important step in the life insurance process. In this, the individual seeking insurance provides proof of their age to the insurance company. 

 • For example: Birth certificate, mark sheet of UP board, domicile certificate, etc. 

3. Medical Examination: This is the third and most important step in the life insurance process. In this, the individual seeking insurance undergoes a medical examination by the authorized doctor of the insurance company (if required). 

4.Agent's Confidential Report: This is the fourth and most important step in the life insurance process. Under this, the confidential report of the agent by the life insurance company is studied. 

5.Registration of Proposal: This is the fifth and most important step in the life insurance process. Under this, the proposal is registered. 

6.Consideration of Proposal by the Insuring Company: This is the sixth and most important step in the life insurance process. Under this, the proposal of the person seeking insurance is considered by the insuring company. 

7. Sending the Acceptance Letter: This is the seventh and most important step in the insurance process. Under this, the acceptance letter is sent to the person seeking insurance by the insuring company, which mentions all important points. 

8. Issuance of Insurance Policy: This is the eighth and most important step in the life insurance process. Under this, the insurance policy is issued by the insuring company to the person seeking insurance. This serve  as proof (evidence) of the agreement between the insuring company and the person seeking insurance.