Life insurance made its debut in India over a century ago. Despite being one of the most populated countries in the world, insurance is not widely understood as it should be. This article aims to introduce readers to the concepts of life insurance, with a particular focus on LIC. It is important to note that this content is not an exhaustive description of the terms and conditions of an LIC policy or its benefits and privileges. For further details, please contact our branch or divisional office, where an LIC Agent will be happy to assist you in selecting a life insurance plan that meets your needs and provides policy servicing.

Life insurance is a contract that guarantees payment of a specified amount to the person assured or their nominee upon the occurrence of the insured event. The contract is valid for payment of the insured amount during the date of maturity, specified dates at periodic intervals, or unfortunate death, if it occurs earlier. The contract also provides for the payment of premiums periodically to the Corporation by the policyholder. Life insurance is an institution that eliminates risk, substituting certainty for uncertainty, and provides timely aid to the family in the unfortunate event of the breadwinner’s death.

Life insurance is a partial solution to the problems caused by death. It is concerned with two hazards that stand across the life-path of every person: dying prematurely, leaving a dependent family to fend for itself, and living till old age without visible means of support.

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, the 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.

Life insurance provides full protection against the risk of death of the saver. 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. Life insurance encourages thrift and allows long-term savings since payments can be made effortlessly because of the easy installment facility built into the scheme. In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan.

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. Assessees 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.

Any person who has attained majority and is eligible to enter into a valid contract can insure themselves and those in whom they have 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.

Prior to nationalisation (1956), many private insurance companies would offer insurance to female lives with some extra premium or on restrictive conditions. However, after nationalisation of life insurance, the terms under which life insurance is granted to female lives have been reviewed from time-to-time. At present, women who work and earn an income are treated at par with men. In other cases, a restrictive clause is imposed, only if the age of the female is up to 30 years and if she does not have an income attracting Income Tax.

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, LIC has been extending insurance cover without any medical examination, subject to certain conditions.

An insurance policy can be ‘with’ or ‘without’ profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable along with the contracted amount. In ‘without’ profit plan the contracted amount is paid without any addition. The premium rate charged for a ‘with’ profit policy is therefore higher than for a ‘without’ profit policy.

Keyman insurance is taken by a business firm on the life of key employee(s) to protect the firm against financial losses, which may occur due to the premature demise of the Keyman.