VARIOUS PRINCIPLES BEHIND THE LIFE INSURANCE PREMIUM…….

Life insurance, in its current abstract is based on the various number of principles. These are modified and adapted to the market, ensuring that insurance companies can easily make a profit, while offering protection to the insured individuals.

Individuals can say that there are four major principles applied in India, with these being:

1. Insurable Interest– This is basically pertained to the interest of an individual who is expected to have in a policy. An individual who is looking to buy a plan for someone else should have a connection with that individual. This could be any family bond, personal relationship etc. An insurance company can choose to decline an application if there is no insurable interest involved. This can be done in order to protect against the misuse of a policy.

For example, Mr. Jay decides to buy an insurance plan for his mother. The life assured in this case is his mother and the policyholder is Jay. In case Jay decided to buy a policy for his neighbour’s mother the insurance company would decline it as there is no insurable interest in this case.

2. Law of large numbers: It is not possible to predict the death of an individual. Insurance companies apply the law of large numbers to generate a death rate which can be applied to a particular sample size. This percentage is used by insurers while offering a policy. This law is used to reduce losses and provide a certain level of stability.
3. Good faith: Buying an insurance in bad faith is something which is bound to dilute the value of the plan. Insurance, being a contract, should be entered into the good faith, with all information provided honestly. Hiding information can result in consequences in the future. So the buyer is expected to be honest while providing personal information, the insurer should explain all details related to the policy, ensuring that there is no hidden clause and that the applicant is made aware of all terms and conditions.
4. Minimal or risky loss: Insurance companies are legal businesses who aim to make profits. This can be extremely difficult to do if there is a high risk factor. The principle of low risk states that the insured individual is expected to take important measures in order to limit damage to self. This could include following a healthy lifestyle, quitting smoking, exercise, eating light, etc.

IMPORTANCE OF LIFE INSURANCE PREMIUM:

The average life expectancy in India is around 68 years, but we all know that people who are passed away before they reached this age. The unpredictability of life can cause damage which can never be changed with our loved ones. A good life insurance plan can help to reduce the financial burden associated with the loss of our dear ones.

Given the stress connected with our daily life, we often come across different cases of people meeting an untimely end, often leaving entire families shattered after their death. Here are the 3 main reasons why one should consider investing in a life insurance plan.

• Peace of Mind: Peace is something for which we all run, with only a few people succeeding in finding it. Buying an insurance plan can provide a specific amount of peace, knowing that the welfare of our loved ones is taken care of in case of any miserable event. This enable individuals to continue with life, providing a chance to live to the fullest without worrying about the future.
• Financial coverage: An insurance plan takes care of any financial needs the nominee or beneficiary could have. One can categorised a policy to meet ones expectations. Additionally, a number of us take loans to meet specific expenses. This loan amount needs to be payable back, even if the borrower passes away. The burden of repayment falls into the family members in that cases. A life insurance plan provides sufficient amount of funds to repay any sum, ensuring that there are no additional liabilities taken care of.
• Additional income: Certain life insurance plans are designed to offer an additional source of income to the insured during his or her life. This keeps pace with inflation, provides a decent returns on the initial investment. One can plan for the future by investing today in a life insurance plan.

BENEFITS OF PURCHASING A LIFE INSURANCE PLANS……

Buying a life insurance plan comes with a various benefits, with the primary ones highlighted below:

1. Peace of mind: Most of us are now a days live in stressful environments, with our different lifestyles and health taking a beating due to this. This is adding to the burden of what the future might hold is bound to increase that stress, which could result in illnesses or breakdowns. Buying an insurance plan provides peace of mind, enabling individuals to continue with our lives without thinking about what could happen in the near future.
2. Protects the family interests: Most of us are working with the aim of providing the best for our families. A good life insurance plan provides that the family of an insured individual is financially taken care of even after his or her death. One can buy a policy to fund the child education, for the wedding of a loved one, etc.
3. Savings: While a life insurance plan may not be intended towards inculcating the habit of saving, it can help one to save money for the near future. Certain policies offer returns which are linked to the market, while other offer bonuses on maturity.
4. Tax benefits: Investing in a life insurance plan helps an individual to save tax. Individuals can take the tax benefits or tax deductions under various sections of the Income Tax Act. While there is a limit on the reductions permitted on premiums paid, the amount received as a death benefit does not attract any tax.
5. Income Added: Insurers grants additional advantages to individuals looking to buy a life insurance plan. A pension plan helps an individual to get regular income after retirement. Similarly, there are more plans that offer periodic payouts.
6. Loan: An individual can avail a loan against a life insurance plan. This depends on the policy in force and could differ from insurer to insurer.
7. Planning: A life insurance plan helps an individual to plan for the future. One should take different scenarios into account before buying the policy.
8. Offsets liabilities: Any liability which an insured one has is likely to be transferred to his or her family after his or her death. A life insurance plan offsets these liabilities, providing funds to make payment for any outstanding debt, ensuring that the family is not plunged into further debts.