Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay an indicated beneficiary a sum of money upon the death of the insured person. A form of insurance on the life of a person. If the person dies then the insurance policy pays out a sum of money to the policyholder (such as a person's family).In other language we cas say that payment to beneficiaries at the insured's death in exchange for the premium paid during the insured's lifetime.
Advantages of life Insurance
Life Insurance has no competition form any other business. Many people think that life insurance is na investment or a means of saving. This is not a correct view. When a person saves, the amount of funds available at any time is equal to the amount of money set aside in the past, plus interest. A comparison what other forms of savings will show that life insurance has the following advantages.
● In the event of death, the settlement is easy. The heirs can collect the moneys quicker, because of the facility of nomination and assignment. The facility of nomination is now available for some bank accounts, provident fund etc.
● There is a certain amount of compulsion to go through the plan of savings. In other forms, if one changes the original plan of savings, there is no loss. In insurance, there is a loss.
● Creditors cannot claim the life insurance moneys. They can be protected against attachments by courts.
● There are tax benefits, both in income tax and in capital gains.
● Marketability and liquidity are better. A life insurance policy is property and can be transferred or mortgaged. Loans can be raised against the policy.
● It is possible to protect a life insurance policy form being attached by debtors. The beneficiaries’ interests will remain secure.