HISTORY OF MOTOR INSURANCE

7 Nisan 2015 Salı

 Motor insurance was first launched  in U. K.. The first car was manufactured  in 1984and the first motor insurance  policy was issued  in 1985. It covered liabilities  to third party. In 1889, accidental damage to car in 1901 burglary and fire were added. Thus the progress made is found is in comprehensive policy of today. In 1903, the car and General Insurance Corporation Ltd. Was started and many companies  were started later. After World war, number  of card and car accidents increased. The victims of the car accidents  were not given any compensations. So the third party insurance was made mandatory (The Road Traffic Act 1930, 1934, and 1969)  (In Motor Vehicles)  Act was enacted  in 1939. The act was the same as that of U. K. The only differences  is that in U. K. tariff is withdrawn, but India�s tariff governs the  insurance.

FUNDAMENTAL PRINCIPALS OF MOTOR INSURANCE

The basic principals  applicable to motor  insurance are the same as they are  in property and liability  insurance. But the applications of these principles  to automobile  insurance is accepted  as a specialised  problem requiring a special contract. However let us recall the principles below in brief: (1) Utmost good faith: Motor  insurance contracts are contracts of utmost good faith . The proposer is liable to disclose all the material facts relating  to the motor vehicle  to insurer. For this purpose the proposer is a given a proposal  from and he is asked to give answers for all the questions asked in it. The answers  given by the proposer  becomes warranties or promises. So the answers  must be true to the language and must  be correct. Any incorrect answer  on any matter will make the contract viodable. Some examples  of material facts are: the type of vehicle, the geographical  area of use, the physical health  of driver the driving history, traffic convictions and post loss experience etc. Many of these provisions are now regulated by motor vehicle Act 1939 

. (2) INSURABLE INTEREST: It refers to legal right to insure. The essentials of insurable interest are: (a) Existence of motor vehicle exposed   to damage or liability : (b) such motor vehicle must be the subject matter of insurance: and ( C ) the insured must be in such a position that he shall suffer by loss or damage or benefit by the safety of the motor vehicle. Generally the following parties are expected to have a

n insurable  interest.  (a)  INSURED: As a owner of vehicle the insured suffers a loss if his vehicle is damaged or from a legal liability to third  party who suffers a loss for his negligence. (B) OTHER THAN INSURED:  The driver of the vehicle may create liability for insured. In effect, the insured becomes the agent for the drivers and insured indemnifies him.  ( C ) FINANCIER: In hire purchase agreement, the financier�s interest is insurable. In case the vehicle  is lost  or damaged, the financier can get compensation.

(d) MOTOR TRADER: The garage proprietors as bailees have insurable interest for customer�s loss or damage.  (3) INDEMNITY: The objects of this principle is to place the insured after a loss in the same financial position as far as possible, as he occupied immediately  before the loss. The effect of this principle is to prevent the insured from making a profit out of his loss or gaining any benefits or advantage. Accordingly  to this principle, the insurer is liable to pay the actual value of loss or sum insured whichever is less in case of total loss to insured. If old parts are replaced by new a suitable depreciation is charged on new parts. Insurer may repair or replace or pay cash as it likes. Liability to third party is limited to policy sum Legal costs are also indemnified. 

  (4) SUBROGATION AND CONTRIBUTION: Subrogation is transfer of rights and remedies of the insured to the insurer who has indemnified the insured  in respect of the loss. It arises only when the third party is responsible for damage. Insurer may exercise the insured�s right to recover damages. Generally they the right arises after payment of damage. Contributions  refers to sharing of damage between co-insurers. It is done in the proportion  the insurer�s share bears to total sum of all insurers

(5) PROXIMATE CAUSE: The insurers are liable to pay  compensations only if loss is caused  by a peril most proximate or the nearest to damage and if it is insured against. It is applicable to third party claims also.

Devamını oku »

MISCELLANEOUS INSURANCE

MISCELLANEOUS INSURANCE

Introduction :  Insurance not falling under fire insurance and marine  insurance is considered as miscellaneous  insurance as per the insurance. Act 1938. The four public sector general insurance companies and some private general insurance companies have brought to light a number of miscellaneous insurance policies is cover a variety of other risks. The most important  forms of miscellaneous insurance are: Motor insurance, Legal liability insurance, Business insurance, Hospitalisation insurance, Social sector insurance, Engineering insurance,  Rural insurance,  and other insurance. Let us discuss all these  insurances, one by one in the pages to come

. 1. MOTOR INSURANCE : The owner of a motor vehicle  is exposed to various types of risks. These risks fall into two groups. First those of damage to , or loss or destruction of the motor  vehicle  itself and second, that of being called upon to pay damages for injuries which may be done to others through  the use, ownerships  or maintenance of the motor vehicle. The first

or risk  may further be classified as follows: 

(1) Destruction by  fire, internal or external in origin, 

(2) Theft,

(3) Injury through collision with some other object moving or fixed or through upset.

 (4) Other damages to motor  vehicles as by breakage of glass, damage in flood, or while being transported. The second type of risk  is the liability of the insured to third parties arising out of a accidents caused by the use of a motor vehicle on the road. The liability may be for death  or bodily injury or for damages to property. The risk also vary accordingly  to the class of vehicle. E. g. in a passenger automobile. the liability may be for death  of or injury  to passengers  or in a common carrier, the liability may be loss of or damage to the property carried. In order to safeguard  the owner of a motor vehicle from the above mentioned risks a special insurance,

 has been conceived known as marine insurance

Devamını oku »

TYPES OF GROUP INSURANCE POLICIES

The LIC of India has designed some group insurance policies  for the benefit of working class. Such  policies are described  briefly  below.

  (1) Group (Term) Insurance Scheme: It provide  life insurance protection  to group of people. It is offered  under One Year Renewable Group term Assurance (OYRGTA) and  the scheme�s  is renewed  every year after taking in to a account the changes  in the size of group. The following are the main features of this scheme.  (a)  Master policy: A single master policy is issued covering  all the members of the scheme. The scheme is administered by the Employer Associations, Societies, etc. called Nodal agencies, 

(b) Premium : Premium rates are reviewed on the basis  of claim experienced under the individual scheme. ( C ) Eligibility : For all Non-employer employee  group scheme, the basic insurability condition is that the member should be  in good health on the date of entry. For the GI scheme of employer- employee groups the  insurability   condition is that the member should not be absent on  groups of sickness on the entry date.  ( D)  Restrictions: The restriction under this scheme relate to minium and maximum age limit for eligibility of cover (18to 60), participation of minimum percentage (75%)  of eligibility  members  of the  groups at inception  and compulsory participation of all new members.  (E)  Benefits: As the name term insurance indicates the amount cover is payable in the event of death of the member. Nothing is payable on survival. The cover amount  is either uniform or graded. Uniform cover means that every member  of the  groups is insured for the same amount. The cover is decided  on the basis of average size of the  group and occupation or activity  which  group is engaged in. Graded cover  us usually granted to employer / employee  groups because of general level of health care and life style of the member being  satisfactory. For graded cover,  group can be divided  in to who three or four levels such as: 

GROUP INSURANCE SCHEME IN LIEU OF EDLI (EMPLOYEE�S  DEPOSIT LINKED INSURANCE) : All employers to whom the Employee�s . Provident fund and Mis. provision Act 1952 applies  have a statutory liability to provide life insurance benefit to all their  employees by subscribing  to Employees Deposit linked Insurance (EDLI)  1976 i.e, Rs. 0.60 per Rs. 100 wage  bill of each employee. Under EDLI  scheme, in the event of death  balance in PF account  of the deceased Rs. 60, 000, whichever is lower . The Employees P.F and Mis . Provision Act also provides

that if  any scheme of insurance gives more benefits than the EDLI the employer  is entitled to switch over to that scheme after obtaining  the approval of the  Central provident Fund Commissioner.  LIC�s  GroupInsurance  Scheme in lieu of EDLI has been accepted  as a better alternative for EDLI. Under LIC�s  group insurance Scheme. each employee is covered for a sum assured  of more than Rs. 60, 000 depending upon the current salary and services put in from the very first  day, irrespective  of the actual balance in the provident Fun.  ELIGIBILITY:  For LIC�  Group insurance  Scheme in lieu of EDLI  the insurability  condition is that he should be a member  of the Provident Fund�s Scheme  of the employer.  ACCIDENT BENEFIT: Double  accident benefit can be allowed to the extent of the sum assured  for an extra premium @ Rs. 0.75 per thousand. Benefits to Employer: (a) Premium under LIC�s Group insurance scheme is usually less than the total contribution to provident fund  authorities. (b) Settlement of claim is quicker  ( C ) Premium paid is treated as business expense  for income tax purpose.  

 GROUP SAVINGS LINKED INSURANCE (GSLI) scheme: The GSLI scheme offers insurance cover together with a saving element. The GSLI scheme this scheme , is deducted from the monthly salary of the member. The scheme is applied in Govt. Bodiespublic sector corporations and reputed  private companies who  keep accurate records of their employees. A portion of the contribution of the employees is utilised  as premium to cover  term assurances  for a fixed sum and the balance is treated as savings which are accumulated  at an attractive rate. At present, the rate  is 10%  p.a, Member exit the scheme on retirement or earlier by death or resignation. BENEFITS: (a) On death while in service: Amount of insurance cover and accumulated  savings up to  the date of death. (b)

 On retirement / resignation: Accumulated  savings up to the date of exit. TAX BENEFIT: (a)  Contribution Full are treated as insurance premium and enjoy the benefits under section 80C. (b)  Savings accumulations received are tax free.

Devamını oku »

GROUP INSURANCE POLICIES

Group insurance policies  are certain plans of insurance which are offered to group of persons. The group may be:

(a) Employer- employee  group, (b) Association  of professional, doctors, etc., ( C ) Members of Co-operative Banks / Credit societies. (d)  Association of weaker sections such as Rickshaw pullers, Railway porters etc., (e) Member  of housing Societies.  (f) Borrowers of housing  loan from public sector undertakings.  (g) Borrowers of Bank  Co-operative Societies or housing societies. Under group insurance a master policy  is issued as evidence of contract between the insurance company and another legal entity which may be an employer, trustee, and an association.

The master policy defines the group of lives to be covered  benefit if confers, the amount of contribution  to be paid and other condition and privileges  of the participating  group member. Group insurance is a group selection process and not a selection of individual life. It is recognised that every group  will contain some proportion of substandard lives but group under writing  assumes that the insurer is able to reasonably  assess the overall risk from the general nature  of the group. The group  is supposed to be homogeneous and contains  sufficient  numbers so that the number of claims to be  homogeneous and contain  sufficient numbers so that the number of  claims by death can be reasonably  estimated on the basis of the average. The amount of cover is determined on the basic of a formulas and is not decided by individual  forming the group. Insurance on the lives of all members up to a limit called �Free cover limit�  is granted  on the basis of simple rules of  insurability �. �Simple rules of insurability   means not absent from duty on group of sickness  on the date of effecting insurance. Free cover limit does not mean free insurance premium. It is free to the extent that no evidence of health is called for .  As a result of ,ass administration and simple underwriting  practice, group insurance becomes  a low cost insurance cover for a group. However the premium rates are adjusted   on the basic of experiences. This is called. Experiences Rating . For medium and big sized group. sharing of profits on the basis of years after taking into amount feature. If surplus is generated over a period of years after  taking into account the premium collected and the benefit conferred the rate of premium can be reduced in the future years. If on the other hand, it results in continuous  is rated up.

Difference between Group Insurance and individual insurance  Group insurance differs from individual  insurance on the following counts.

 (1) Cover: A group of person  is covered under the Group insurance. A person�s life covered in individual insurance. (2) Contract: The Group insurance is contract between the insurer and another legal entity, which may be an employer, trustee and an association. The individual insurance is a contract between the insured and the insurer.

(3) Medical Examination : No medical examination is required for Group insurance. In  Individual  insurance, medical examination is necessary in most of the cases. (4) Policy: A master policy is issued   for Group insurance as against an individual policy  in individual insurance. (5) Sum Assured : A fixed sum assured is paid for every claim under Group insurance. The sum assured depends  upon the premium paying capacityof the assured in individual insurance.

  (6) Premium: The premium under the Group insurance is paid by the employer or employee or by both. The premium under individual insurance is paid either by the assured or by the insuring party.  (7) Protection: The group insurance  is a social welfare scheme. The individual insurance is a provision  for old age and for the family.  (8). Change of Assured: The individual is changed under the Group insurance in case of retirement or death. No such change is possible in individual insurance.

Devamını oku »

LIFE INSURANCE PRODUCTS OR POLICIES

As mentioned earlier  in the  life insurance  industry, apart from LIC India Several private companies are also involved  in selling  life policies to general public living in different corners of our country. The policies of private players have already been given in the previous chapter. The policies of LIC of India have great have been grouped under the following nine major  heads.

1) Whole life policies. 2)  Endowment policies  3) Children�s policies 4)  Joint life policy  5) women�s policy 6) Term policies  7) Special policies  8) Group insurance policies  9) Pension policies.   

(1) whole life policies:  

The risk is covered for the entire of the policy holder which is why they are known as whole life policies. They policy amount and the bonus are payable only to the nominee or the beneficiary upon the death of the policy holder. The policy holder is not entitled to any money during his or her own life time i.e., there is no survival benefit. This represents a  serious drawback in the case of whole life policies for they go on covering a policy holder�s life even after his life has no further economic  value for others. One the other hand   a policy holder would probably require  the money for himself  and his spouse during  retired life but this would not be possible since the sum assured is payable  only when the   policy holder dies. In his sense whole life  policy  are fairly  rigid and suitable  only in a few very specific cases. The important  whole life  policies offered by LIC of India are as follows:

 1)  Single  premium whole life plan No.8: Under this  policy  the total  amount of premium payable is paid in one lumpsum by the assured. The time element is the predominating feature and protection element  is substantially less than the face value of the  policy . The  policy  is not so  popular but is purchased for investment  purpose. It suits those persons who get windfall income like lotteries etc. and who can afford such single payment. The minimum sum assured is Rs. 20,000 and there is no limit  maximum sum assured.

(2) Convertible whole life plan No-27:  This  policy  is suitable to young man who is on the thresh hold  of his career and has prospects of increase in income after some times. The object of  this is to provide maximum protection at minimum cost. It is a whole life without profit plan, premiums payable up to age of 70 yearsof the assured. The premium charged is that of whole life without profits  and therefore sufficiently low. This risk is however covered for the full sum assured. After 5 years, the life assured can convert this  policy  into an endowment with or without profits choosing that term without having to go on in for a medical examination In case the conversion option is not exercised at the end of 5 years the  policy continues as a whole life plan without  profits with the premium payments ceasing at the age of 70. The minimum sum assured is Rs. 20 000, and the maximum age at the entry is 45 years.  3) Limited payment whole life plan  No-5: In this  policy the life assured required to pay premium for a fixed period from 5 to 55 years. The life assured shall have

Devamını oku »

SCIENTIFIC PRINCIPLES OF LIFE INSURANCE

Insurance  have been able to keep their promise because  life insurance  is based on sound scientific  principles. These include

 1)  Shared risk: Members of our  earliest societies understood the benefits  of pooling  their resources talent and also risk . Whether  hunting for food or defending  against common enemies  people found that sharing the risk among the group minimized the risk to the individual. This is how the workers  guilds of the middle ages attempted  to protect families of members  against another common enemy: financial hardship caused by death. Members  would contribute  small amounts  each years  into a common widows and orphans fund. Though the system was flawed it did provide basic protection for families  of members who died during the year. This idea was still used as late as the Nineteenth Century  in this country by immigrant groups: it later became the basis for the hundreds of fraternal  life insurance  companies still flourishing  today as well as  for association group insurance plan including  those offered by the American Academy of family physicians. 

2) The La of the large numbers: The principles of shared risk only works when the law of large numbers is also applied, Under this scientific  principles the larger the group, the less impact the death of one member has on the group as a whole. A group with just ten, a hundred even a thousands members would not works. The base would  be too fragile  to susceptible  to mortality blips due to situations and events that lead to unexpected  deaths such as a  flu epidemic  or earthquake that look of thousands of lives in a  certain geography  location. This is one reason groups and individual today transfer the risk to insurance companies in effect forming new groups consisting of  hundreds of thousands  very often millions of members.

3)  Predictable Mortality: A third principle of  life insurance   is predictable mortality. It is not possible to tell when a given individual will die. but du to more than a century of tracking and recording data about health life style and mortality trends, insures can projects life expectancies. This data  is recorded in mortality tables. A mortality table is a chart summarizing the life span of a large number of people. Specifically it projects (a) the number of death that will occur per 1,000 individual  at a given age and  (b) the life expectancy of an individual at any age. The 1980 commissioner�s standard ordinary mortality table 1980 (SO) is the official mortality table in use the by all insurances today, It charts a representative sample of 10 million lives and  follows them to age 100 when for insurance purpose the last person is presumed to have died.  Once  the insurance company  can reasonably  predict how many people of a given age will die in a given year, it can project mortality experience. Subsequently the insurer can then project costs and premium  rates. For instances  as life expectancy  has climbed dramatically in this century the cost of  life insurance  has decreased.

4)  Invested Assets: When the insurance company receives premium, that money is not just put into  a vault. It is invested. It may be years before a claim is made against the police. So, the impact of investment experience can be significant. The projected return is factored into premium and other costs. At the same time a percentage of assets is set aside in company  reserves to reduce the impact of unexpected events.  

 5) Fair and accurate risk selection: A  life insurance  contract is an aleatory contract. It is  based on the possibility  of a chance occurrence and in all likelihood, one side will benefit more than the other. However  for  life insurance  to work, the insurer needs to recover as many variables as possible. This brings  up to the final principle  of insurance, which is fair and accurate risk assessment. Especially  with the individual insurance policies, coverage is issued based on the assumption of reasonable risk. This means insuring people who are  generally in good  health at the time of application. This is also why medical exams  and blood samples are sometimes required. Once  insured policy owners are protected if they become ill. That is the reasonable risk the company  assumes that a certain percentage of insured will die prematurely. However  were the company to issue policies on seriously ill application   life insurance  would becomes prohibitively  expensive.

Devamını oku »

LIFE INSURANCE Vs NON- LIFE INSURANCE

 The following are the differences between  life insurance  and other forms  insurance  such as a  fire marine  and miscellaneous insurance.  1) Happening of event: The event insured against in  life insurance  is a certain event, the only uncertainty being the time when the event will occur. But in case of fire and marine   insurance   the events insured against may or may not take place at all or may tale place wholly or partly. Thus in  life insurance , every policy will become a claim sooner or  later but it is not so in other insurances.

 2)  Partial Loss:  Life insurance  is a contract  to pay an absolute amount on the maturity of the policy and there is no possibility of partial losses but the other insurance are indemnity contracts where only the actual  amount of loss will be payable irrespective of the assured sum.  3) Risk assessment: Risk classification is generally more simple in  life insurance  chan in the  others forms of insurance. Here all the lives are divided into three groups: Standard sub-standard and  uninsurable. But of property insurance.  the classification is more complex e.g. in marine insurance. the risk may be divided according to the type of vessel. voyage, season  etc. So is the case of fire and other insurance.

 4)  Period:  In most forms of insurance the policy is taken for one years of even for a shorter period  but in life contracts the insurance is taken for very long period.  

5) Premium: In  life insurance  the premium are charged generally on level premium plan which means that the premium charged in the initial years of the policy are higher than the actual cost of insurance but in fire and marine insurance contract , the premiums are just sufficient to cover the actual cost of insurance  it contains both the investments and protection elements but in  the fire or marine contracts there exists  the protection  element only.

 6)  Insurable Interest: In  life insurance  the insured  must have the insurable interest when the policy is taken. but in marine insurance  he must  have it when the loss aries. In  life insurance  the insurable interest must be present at both the times, when the policy is taken and when it becomes a claim. 

  7)  Higher hazard: In  life insurance   the hazard increases from year to year. This happens in fire and marine insurances also but there the subject  matter may be kept in good condition  by  repair or the  replacement or worst  parts: but in  life insurance  the chances of death go on increasing with increased age whatever precautions  may be taken by one about one�s health. In spite of the higher hazard  from year to year, the same premium rate is charged in life contracts.  

8) Procedure: Medical examination  is required  before a  life insurance  is granted whereas survey is made for before a property is insured. 

 9) Amount: Life insurance  can be taken for any amount depending  upon the premium paying capacity of the insured. But  in other insurances policies can be taken up to the value of the property 

 10) Transfer: A  life police  can be  transferred either by assignment or by nomination. But in other insurance the financial  interest can be transferred only by assignment with the prior permission  of the insurer.  

11)  Surrender: A life policy  can be surrender  by the insured before its maturity. But in other insurances, it cannot be done. 

12)  Claim:  The claim money in  life insurance  is an agreed amount as the insured sum which is fixed in advance by the insurer as well as the insured. Claim money in other insurances  arises only in  case of

loss due to risk.

Devamını oku »

ADVANTAGES OF LIFE INSURANCE

The advantage of life insurance over other types of savings instrument available  in the market are as follows

 1)  Creates an Estate: Life insurance policy creates an estate. At any point of time the value of any other type of saving is the total accumulation in that account only. If the savings holder unfortunately dies, the amount  available  to the dependents  is the accumulation only. In case of the life insurance the moment a policy  is taken an estate in created to the extent of the sum assured under the policy i.e. if the policy owner dies, what becomes payable to the dependents is the sum assured   the total value of the state and not the total premiums paid. 

 2) Encourages thrift:  Life insurance encourages  thrift i.e., forced and compulsory  savings. In case of  other types of savings. the moment persons feels the need for money, there is great attraction to which money from the savings accumulation. The purpose for which the savings accounts is opened is seldom fulfilled for that reason. in Life insurance policies there is a built-in discouragement  to withdraw. Only surrender value which is  a small  percent  of the premium. paid will be available to the policy owner  if he wants be to withdrawn . The policy owner thus is forced to continue  payment of premiums and never try to surrender a policy. This will ultimately  fulfill the purpose fore which the policy was purchased. 

3) Gift to near and dear: Life insurance policies cannot be attached by any court of law or income-tax authorities. A  married man can take  a policy under married Women�s Property Act for the benefit of his wife and / children separately and create separate estates for their benefits. Once a policy  is obtained under his legislation  the policy  holder will not have any hold or right over it. Life insurance thus can be used as  a gift to the near and dear.  

4) Protection against liquidation of property: A Life insurance policy can be utilised

 as a collateral  security for a housing loan. In case of unfortunate death of the policy owner, the amount available  under the Life insurance policy is adjusted towards the outstanding  loan and interest and the house is released to the beneficiaries  without any encumbrance. Without such a facility the family will have to self sell the house in the open market to clear the loan. It will be a distress sale and so would fetch only a fraction of the real market value  of the house. Life insurance thus affords protection against forced liquidation of property. 

5)  Acts as an Emergency fund: If immediate  liquid cash is needed a policy of Life insurance can be against to the Life insurance company, a Bank or any other financial institution as security for a loan.

Life insurance thus can acts as an Emergency Fund. banks today grant educational loans to students for higher education. They insist on a Life insurance policy as a collateral  security.  6) No stamp duty: Transfer of property contained in a Life insurance policy does not attract any  stamp duty like other property. It can be done by an assignment under sec. 38 of Insurance  Act  1938, either by an endorsement on the back of the policy  document or on a stamp paper.  7)  No tax on proceeds of policy: The processed of a Life insurance policy including  any bonuses paid are not liable for income tax. 

 8) Tax Exemption: For gaining income tax exemptions under Sec. 80C of Income tax act, a person, can pay  premiums under policies is the  on his /her life or an the life is spouses  or children, whether major of minor married or unmarried.

(9)  Simple claim settlement: Settlement of a claim under Life insurance  policies  is very simple. In case of  a death claim, the nominee receives the policy moneys. Incase  of survival of the policy  holder till the date of maturity of the policy, the maturity claim is paid  to the policy holder himself. 

10)  Safe method  of Investments : Life insurance  is a safe and profitable investments. The IRDA constituted  by the Govt of India  in 1998 keeps a constant  watch and vigil over the financial positions of the Life insurance  companies. There are strict solvency margins to be maintained by the companies. The IRDA pays special attention  to the safety of the moneys paid by the policy holders. thus life insurance  provides a safe method  for investments especially by the middle class.  11) Effective management of funds: One of the important  criteria for investments of funds, apart from safety and liquidity is management of funds. A life insurance  company  will have the necessary experience and expertise in this field and a policy holder gets the benefits of the same entirely free. Moreover the policy holder will be free of all tensions.  

Devamını oku »

ECONOMIC USES OF LIFE INSURANCE

Following are the different economics uses of the Life insurance

 1:  Financial security: Life insurance provides financial security to the family. An untimely  and premature death of the bread winner result in a great financial problem to the family. If no security provision is made by the breadwinner to meet such this situation., his death  would make the family destitute. They will become a burden to the society. Life insurance is the best instrument to provide security in the event  of happening  of such contingency.

2) Savings: Life insurance is also a potent instrument for savings. 

 3) Dreams come true: Every person lives in dream  dream of very high education for children very decent marriages to daughters  etc. Life insurance makes such dreams come true even if they dreamer is no more. 

 4)  Collateral of Security : Own shelter has become an  essential to everyone. Many institutions offer mortgage loans for purchase  construction of  a house/ flat/ Life insurance acts as a collateral security  in respect of the such loans. Without such security the same shelter considered  an asset as long as the house purchaser is alive, will become a liability to the family if he dies before repayment of the entire loan. To repay the outstanding loan, the property will have to be disposed off. Circumstances. will make  it a distress sale and it will fetch much less than its reasonable market value. 

 5)  Financial Independence: Life insurance provides financial Independence  in old age. The lumpsum maturity value of a policy when received  can be invested to yield interest  sufficient  to meet expenses after retirement from work life. Or the same  money can be utilised to  purchase an annuity. While  still young, an individual  can purchase a deferred annuity  and fund the same in easy instalments. 

 6)  Protects Creditors: Organizations  or  individual  who are in credit business, can ensure  for themselves  recovery of loan  when a  debtor dies. The can obtain a group  individual  life insurance   policy on then lives  of debtors. So that if a  debtor  dies, the policy proceeds will repay the  outstanding  loan. 

 7) Protects Partnership firm: A Partnership firm can insure the lives of the partners to the extent of capital invested by each  in the business. In case of the death  of the partner  the danger of withdrawal of capital by the legal heirs of the deceased   partner can be met from the processed  of the policy. Otherwise  there is the risk of financial problems for the partnership business.  

8) Provides  fund for replacement: Under key man insurance  an organization  can insure the lives of executive whose expertise greatly  contributes  to their profits. In

 case  of the death  of a key man, the money provided by the insurance can be utilised  to recruit  a new person who is equally capable as a replacement.

 9) Improves  productivity:  Organization  can purchase group life insurance policies as part of the their employee� welfare program. This acts as a  morale booster to the workers and result in improved production. 

Devamını oku »

CHARACTERISTICS OF LIFE INSURANCE

The following characteristics  of features in life insurance may be deduced from the aforesaid definitions

: 1) Offer and acceptance: Like other contracts of insurance the life insurance  contract is also  the outcome of an offer made by the policy owner and its acceptance by  the insurer. Generally the  life insurance  is a  contract is made in waiting. 

2) Agreed sum of money: The insurer agrees to pay a  certain sum of money either on the death of policy owner  or on the maturity of the policy whichever is earlier 

 3) Premium: The policy  owner is liable to pay periodically the amount of the payment in the form of premium till the death of the policy owner or expiry of the period of policy  whichever is earlier

4) Not a contract of indemnity: Life insurance contract is a note a contract  of indemnity as the loss caused by the death cannot be measured in terms of money is a compensation for loss of the one�s life. 5)  Insurable interest: In life insurance  insurable interest must exist when the claim. The person who has been assigned  a life policy  need not  have insurable interest in it as the insurable interest was already present at time of taking policy.

 6) Lending helping hand: Life insurance  provides helping hand to those  who are left support less and  helps financially in case of the death of the insured. It is also considered to be than the best alternative for making savings. 

7) Covers other risks: Life insurance covered  others risks which are connected with the  human life in addition  to the risk of death. For example, total and permanent disability  or temporary disability and medical expense compulsory retirement or the  economics death risks etc., have also  been covered  under the purview of Life insurance these days. 8) Relief  sword of damocles: Life insurance relieves  the insured  from the sword of damocles  i.e.., various risks and uncertainties  which may occur before and after  the death of the insured

Devamını oku »