Life Insurance – The Next Great Step

This article does not address whether or not you should apply for Life Insurance Policies. It focuses more on what policies are available and the requirements for obtaining a policy. Long term life insurance plans will also be the focus of our discussion. Before we get into the details about policies, let’s first define what “Insurance” means.

You may wonder why he would want to explain the meaning of Insurance. That is something we all know. This article is meant to help people understand what Insurance and Life insurance are all about. Insurance is an agreement between two people, the “insurer” or “insured”. Insurance is a contract between the insured and the insurer. The insurer agrees, in return for a set amount called premiums, to pay the insured a predetermined amount of money upon the occurrence of a particular event. The premium money collected from the insured public will be used to pay any loss. The insurance company acts as trustee for the collected amount. Why should you buy insurance? It provides tax benefits, but it also protects your family members in case of an unexpected event. Some Insurance contracts are also required by law.

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Take, for example:

* Motor Vehicles Act 1988 stipulates that anyone driving a vehicle in public places must have valid insurance policies covering the “Act” risks.

* The Environmental Protection Act is another example of compulsory insurance. This Act states that anyone using or transporting hazardous substances must have a valid policy covering public liability (Act).

You may have seen the famous LIC (Life Insurance Company of India), a commercial on television in which a character named Mrs. Sharma can be seen crying before the photo of Late. After their daughters’ wedding, Mr. Sharma. The voice says “Today all of your work has been completed”. But she claims that they did all the work when he purchased his life insurance policy through a reputable Life Insurance Company. This shows how life insurance policies can help to secure the future for our loved ones. It is also a sign of responsibility that everyone should take part in to ensure their future. Other types of insurance and endowment policies were created with the introduction of life insurance, including child endowment and pension plans. These policies offer the following tax benefits:

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Tax relief:

1. Section 88 of the Income Tax Act allows a portion of life insurance premiums to be deducted from tax liability. Exemption is also available for premiums paid to Health Insurance Policies.

2. Exempt from Income Tax is money paid to claim, including bonus under a life insurance policy.

Encourage Savings

Insurance schemes encourage thrift. This insurance scheme encourages saving, unlike other savings instruments that can be easily withdrawn.

Beneficiaries of an insurance claim amount are protected against creditors’ claims by effecting a valid assignment.

A trust is established for the benefit of spouse and children in a policy under the MWP Act (1874), (Married Women’s Property Act).

As security for loans, Life Policies can be accepted. You can also surrender them to meet unexpected emergencies.

Insurance is the only option. There are so many benefits to insurance that I believe everyone should have. They say, “You might not know what the next chapter has in store for” The question is now, where can you find an insurance policy? You have two options. Either you contact the company directly, or you approach an insurance agent. They will fill out the form for you and charge commission on the amount assured. The policy details and how long the premium has been paid will determine the commission fees. This is how it looks in most cases, according to Wikipedia

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+ 35- 40% for the first year premium, if the premium payment term is longer than 20 years

+25 – 30% 1st Year Premium if premium payment term is longer than 15 Years

+10 – 15% 1st Year Premium if premium payment term is less that 10 years

+ 7.5% for yr 2/3 and 5% thereafter for premium-paying terms.

It varies between 1.5% and 60% depending on the premium paid for Mutual fund-related – Unit linked policies.

Agency commission for retail pension policies:

+ 7.5% 1st Year Premium and 2.5% every subsequent year

Maximum broker commission – 30%

Bank referal fees – Maximum 55% for regular premiums and 10% for single premiums. This fee is not allowed to exceed the agency commission that was filed under the product.

The market you are in may alter the structure. The commission paid to agents in India may be different.