Life insurance: Why a necessity?

There is virtually no activity or workplace that is safe from risk to life. Life is in peril when traveling, working on machines and even when you stroll for a morning walk. Insuring your life is an option that will partially offset the agonies that surviving members undergo when they lose their breadwinner. It provides for payment of a lump sum amount by the insuring company to the family of the insured in the event of unforeseen death of the insured. This money acts as a buffer until someone in the family is able to take over the responsibilities of the deceased.

As the breadwinner, every individual must understand the need for life insurance, and insure his or her life for the benefit of the surviving members. Companies offer different plans to offer. Some are traditional plans wherein the insured pays a fixed amount every year (sometimes half-yearly, quarterly or monthly) for the rest of the life and money is never returned to the insured. The amount that the insured pays is commonly known as premium.

Another type is linked to savings, and is more popular these days. Insured prefer savings-linked plans because the premium that they pay is returned at the end of the policy’s term, while at the same time providing cover to the family of the insured. In addition to that, the premium also earns a return. There are yet other types of covers that are ideally suited to provide for pension and children’s education and so on. Your requirement should be based on your age, your perception of cover for your family and your income.

Yet another benefit for insurance buyers is the tax benefit that they get when computing the taxable income. A predetermined amount is deductible from the insured’s income during a year, thereby lessening income tax liability. Many income tax assesses use this facility to plan their tax liability. Some employers insist on their employees to buy policy cover, or subscribe to a plan wherein the company contributes a part of the premium amount.

With so many companies and plans around, choosing the right policy can be a little difficult, especially if you do not know much about life insurance. Life insurance companies solicit business through agents. In India, agents undergo rigorous training before they can act as an agent. License to agents are issued by IRDA after they pass an examination. Agents act as links between insurance companies and the insured. IRDA also acts as an ombudsman body, and is endowed with powers to issue directives to the insurers, and is an alternate venue for resolving issues between stake holders.

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