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Life Insurance Vs
Other savings
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Contract Of Insurance
A contract of insurance is a contract of utmost
good faith technically known as uberrima fides. The doctrine of disclosing all
material facts is embodied in this important principle, which applies to all
forms of insurance.
At the time of taking a policy, policyholder
should ensure that all questions in the proposal form are correctly answered.
Any misrepresentation, non-disclosure or fraud in any document leading to the
acceptance of the risk would render the insurance contract null and void.
Protection
Savings through life insurance guarantee full
protection against risk of death of the saver. Also, in case of demise, life
insurance assures payment of the entire amount assured (with bonuses wherever
applicable) whereas in other savings schemes, only the amount saved (with
interest) is payable.
Aid To Thrift
Life insurance encourages 'thrift'. It allows
long-term savings since payments can be made effortlessly because of the 'easy
instalment' facility built into the scheme. (Premium payment for insurance is
either monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme popularly known as SSS, provides a
convenient method of paying premium each month by deduction from one's salary.
In this case the employer directly pays the deducted premium to LIC. The Salary
Saving Scheme is ideal for any institution or establishment subject to specified
terms and conditions.
Liquidity
In case of insurance, it is easy to acquire loans
on the sole security of any policy that has acquired loan value. Besides, a life
insurance policy is also generally accepted as security, even for a commercial
loan.
Tax Relief
Life Insurance is the best way to enjoy tax
deductions on income tax and wealth tax. This is available for amounts paid by
way of premium for life insurance subject to income tax rates in force.
Assessees can also avail of provisions in the law for tax relief. In such cases
the assured in effect pays a lower premium for insurance than otherwise.
Money When You Need It
A policy that has a suitable insurance plan or a
combination of different plans can be effectively used to meet certain monetary
needs that may arise from time-to-time.
Children's education, start-in-life or marriage provision or even periodical
needs for cash over a stretch of time can be less stressful with the help of
these policies.
Alternatively, policy money can be made available at the time of one's
retirement from service and used for any specific purpose.
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