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.

Aid To Thrift:
Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy instalment' facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one's salary.
In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.

Liquidity:
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.

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.
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.

Answered by Seema , an ibibo Master, at 8:13 PM on June 13, 2008

Do not consider insurance as an investment . Till some time back, if you wanted to buy insurance, the only option you had was to buy an endowment plan. Of course, there were many different plans, with many different, fancy names. Each had its own table of promised or possible returns. But the bottom line was - they were all endowment plans.

This means that when you wanted to buy insurance, you were forced to also invest at the same time. On this insurance "investment", companies declared "bonuses" every year. No one knew where the money was invested, and you, the policy holder, had no control over it. All you ever knew was the "bonus" declared every year. And since Indians had been "investing" in insurance for a very long time, we started expecting "returns" from our insurance policies as a given.

When the private insurance companies came into the picture, they saw a big opportunity. They made us ask the question - if it is my money that is being invested, should I not have at least some control over it.

Today people are going in for ELSS mutual funds as a better option for investments. A certian amount of insurance is necessary for any indvidual to take care of their family members.

Answered by subu , an ibibo Specialist, at 11:54 AM on May 22, 2008

hi seeta rani :-

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.

Aid To Thrift:
Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy instalment' facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one's salary.
In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.

Liquidity:
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.

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.
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.

Answered by shepherd , an ibibo Master, at 8:46 AM on May 20, 2008

Contract of Insurance
A contract of insurance is technically known as uberrima fides, which means it is a contract of utmost good faith. In this principle, you have the doctrine of disclosing all material facts and that applies to all forms of insurance. Any misrepresentation, fraud or non-disclosure in any document leading to the acceptance of the risk will render the insurance contract null and void.

Protection
Life insurance assures payment of the entire amount assured (along with bonuses, wherever applicable) in case of demise, whereas in other savings schemes, only the amount saved (with interest) is payable.

Aid to Thrift
Life insurance schemes allow ‘thrift’, that is, it allows long-term savings because premium payments can be made through an easy instalment facility. Premium payments can be monthly, quarterly, half-yearly or yearly. Some insurance schemes provide a convenient method of paying premium each month by deducting the amount from your income.

Security on Loan
Generally, a life insurance policy is accepted as security, even for a commercial loan. You can acquire loans on the sole security of a policy that has acquired loan value.

Tax Relief
The best way to enjoy deductions on income tax and wealth tax is through life insurance. The deductions are available for amounts paid by way of premium for life insurance subject to the prevailing income tax rates. You can also avail of provisions in the law for tax relief, in which case you, as the assured, can pay a lower premium for the insurance than what you normally pay.

Easy Liquidity at Periodic Intervals
You can avail of money when you need it if you have taken a suitable insurance plan, or a combination of plans. It will help you meet certain financial needs as and when the need arises. Situations such as children’s education, marriage or any other need for cash can be made less stressful with the help of such policies. You can also use policy money at the time of retirement from service, or for any other purpose such as purchase of a house, investments, etc.

Answered by Nagendra , an ibibo Master, at 6:20 AM on May 20, 2008