This is most important and popular type of insurance. In the insurance, insurance companies promise to pay a specific sum of money to the insured on the expiry of the period of policy or on the death of insured, whichever is earlier, to his nominees. This type of insurance relieves the window of insured and his dependents from the hardship and poverty, if the insured is the bread of the family. Health insurance amenities are also covered in Life Insurance.
Sixteen commission agents jointly started the business of life assurance by selling the life assurance policy to William Gibbons in June, 1538. In 1706, Queen Anne permitted to frame such rules of life insurance on the basis of which a certain sum of money was paid from the contribution of other members to the heirs of the member died during the period of duration of membership.
“Life insurance is defined as a contract whereby the insurer in consideration of a premium paid in lump sum or in periodic installments undertakes to pay a specified sum either on the death of the insured or on the expiry of specified number of years in the policy”
Advantage of Life Insurance
Provides Money to Nominee:
Insurance provides the policy’s sum to nominee and dependents on the death of insured before the maturity of policy. They are assured to the extent of the sum insured. It is better than ordinary savings because it also covers the risk of death.
Payment of premium is a kind of forced savings. The sum of premium paid with bonus is returned to the insured on maturity of the policy.
Less Financial Burden:
By life insurance, policyholder gets rid of from some financial difficulties. He can use the money saved in education and marriage of his children. He can also start any business on getting the money on maturity of policy.
Increase in Investment:
Insurance companies get premium from policyholder. They keep a part of it to meet the claims, but rest of the fund is invested in industries etc. He can also start any business on getting the money on maturity of policy.
Exemption from Tax:
If a person invests his saving, he has to pay income tax on the profit form such investment. But if he takes life insurance policy and pays premium, the amount received on death or maturity of policy, is exempted from income tax to a certain extent.
Security of Loan:
The insured person can obtain loan from the banks or financial institutions in the hour or need by presenting the insurance policy as security.