Why insurance is superior to other forms of savings?
Protection: Savings through life insurance guarantee financial protection against risk of death of the policy holder. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.
Aid to thrift: Life Insurance encourages ‘thrift’. Long term saving can be made in a relatively ‘painless’ manner bacause of the ‘easy installment’ facillity (premiums can be paid through monthly, quarterly, half-yearly or yearly instalments). The salary savings scheme, popularly known as SSS, provides a convenient method of paying premium each month through deduction from one’s salary. The employer remits the deducted premium to the LIC. The salary savings scheme can be introduced in an institution or establishment subject to specified terms and conditions.
Liquidity: Loans can be raised on endowment type and whole life policies as per policy conditions on the sole security of a policy which has acquired a paid-up level. Besides, a life insurance policy is also generally accepted as security for even a commercial loan/housing loan.
Tax Relief: Tax Relief in income Tax is available for amounts paid by way of premium for life insurance subject to the income tax rules in force. Assesses can avail themselves of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for his intance than he would have to pay otherwise.
Money when you need it: A suitable insurance plan or a combination of different plans can be taken to meet specific needs that are likely to arise in future, such as children’s education, start-in-life or marriage provision or even periodical needs for cash over a predetermined stretch of time. Alternatively, policy moneys can be so arranged to be made available at the time of one’s retirement from service to be used for any specific purpose, such as for the purchase of a house or for other investments. LIC pension plans also offer regular income in the form of an annuity when you retire from active work or in a later part of life at your choice leaving a lump sum purchase price for your heirs. Subject to certain conditions, loans are granted to policy holders for house-building or for purchase of flats.