Life Insurance Vs. Other Savings
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.
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.
Assesses 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.
Who Can Buy A Policy?
Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself and those in whom he/she has insurable interest.
Policies can also be taken, subject to certain conditions, on the life of one’s spouse or children. While underwriting proposals, certain factors such as the policyholder’s state of health, the proponent’s income and other relevant factors are considered by the Corporation.
Medical And Non-Medical Schemes
Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance and also to avoid inconvenience, All the Life Insurance companies have been extending insurance cover without any medical examination, subject to certain conditions.
Higher education and marriage
Two needs which need maximum attention and planning from parents (especially modern day parents) are higher education and marriage. Within no time, parents realise that their tiny tots have grown up and it’s time for them to decide future course of their life in terms of profession they want to take. Funding for your children’s education and wedding is one of the most valuable gifts you can give them and it is possible for you to do it in the most uncompromising way.
The best way to start is with a mix of savings in debt products (like National Savings Certificate (NSC) and Provident Funds like EPF, Company PF, DSOPF, PPF etc) and investments in mutual funds and equity markets.
While the former will give you assured, though low, returns that will multiply every year, the latter will balance it out with a possibility of high growth. The first strategy will help you reduce your risks and the second will put you at higher risks but with a probability of higher returns. Government bonds and instruments generally give around 8% returns per annum while the history of Indian stock market has shown that returns are in the range of 12-15 % each year over a period 10-15 years. This mix of savings and investments gives a reasonable degree of safety (capital protection) and also enables you to take decent risks by investing other half in higher-risk-higher-returns equity class.