The insurance provides safety and security against the loss on a particular event. In case of life insurance payment is made when death occurs or the term of insurance is expired.
The loss to the family at a premature death and payment in old age are adequately provided by insurance.
In other words, security against premature death and old age sufferings are provided by life insurance. Similarly, the property of insured is secured against loss or a fire in fire insurance.
In other insurance, too, this security is provided against the loss at a given contingency.
The insurance provides safety and security against the loss of earning at death or in old age, against the loss at fire, against the loss at damage, destruction or disappearance of property, goods, furniture and machines, ete.
1. Insurance affords Peace or Mind
The security wish is the prime motivating factor. This is the wish which tends to stimulate to more work, if this wish is unsatisfied, it will create a tension which manifests itself to the individual in the form of an unpleasant reaction causing reduction in work.
The security banishes fear and uncertainty, lire, windstorm, auto-mobile accident, damage and death are almost beyond the control human agency and in occurrence of any of these events may frustrate or weaken the human mind.
By means of insurance, however, much of the uncertainty that centers about the wish for security and its attainment may be eliminated.
2. Insurance protects Mortgaged Property
At the death of the owner of the mortgaged property, the property is taken over by the lender of money and the family will be deprived of the uses of the property.
On the other hand, the mortgagee wishes to get the property insured because at the damage or destruction of the property he will lose his right to get the loan replayed.
The assurance will provide adequate amount to the dependents at the early death of the property-owner to pay off the unpaid loans. Similarly, the mortgagee gets adequate amount at the destruction of the property.
3. Insurance eliminates dependency
At the death of the husband or father, the destruction of family needs no elaboration.
At destruction of, property and goods, the family would suffer a lot it brings reduced standards of living and the suffering may go to any extent of begging from the relatives, neighbors or friends. The economic independence of the family is reduced or, sometimes, lost totally.
What can be more pitiable condition than this that the wife and children are looking others more benevolent than the husband and father, in absence of protection against such dependency.
The insurance is here to assist them and provides adequate amount at the time of sufferings.
4. Life Insurance encourages saving
The elements of protection and investment are present only in case of life insurance. In property insurance, only protection element exists. In most of the life policies elements of saving predominates.
These policies combine the programs of insurance and savings. The saving with insurance has certain extra advantages
- Systematic saving is possible because regular premiums are required to be compulsorily paid.The saving with a bank is voluntary and one can easily omit a month or two and then abandon the program entirely,
- In insurance the deposited premium cannot be withdrawn easily before the expiry of the term of the policy. As contrast to this, the saving which can be withdrawn at any moment will finish within no time.
- The insurance will pay the policy money irrespective of the premium deposited while in case of bank-deposit; only the deposited amount along with the interest is paid.The insurance, thus, provides the wished amount of insurance and the bank provides only the deposited amount,
- The compulsion or force to premium in insurance is so high that if the policy-holder fails to pay premiums within the days of grace, he subjects his policy to causation and may get back only a very nominal portion of the total premiums paid on the policy.For the preservation of the policy, he has to try his level best to pay the premium. After a certain period, it would be a part of necessary expenditure of the insured. In absence of such forceful compulsion elsewhere life insurance is the best media of saving.
5. Life Insurance provides profitable Investment
Individuals unwilling or unable to handle their own funds have been pleased to find an outlet for their investment in life insurance policies. Endowment policies, multipurpose policies, deferred annuities are certain better form of investment.
The elements of investment i.e., regular saving, capital formation, and return of the capital along with certain additional return are perfectly observed, in life insurance.
In India the insurance policies carry a special exemption from income-tax, wealth tax, and gift tax and estate duty. An individual from his own capacity cannot invest regularly with enough of security and profitability.
The life insurance fulfills all these requirements with a lower cost. The beneficiary of the policy-holder can get a regular income from the life-insurer; if the insured amount is left with him.
6. Life insurance fulfills the needs of an individual’s family needs
Death is certain, but the time is uncertain. So, there is uncertainty of the time when the sufferings and financial stringency may be failing on the family. Moreover, every person is responsible to provide for the family.
It would be a more pathetic sight in the world to see the wife and children of a man looking for someone more considerate arid benevolent than the husband or the father, who left them un-provided. Therefore, the provision for children up to their reaching earning period and for widow up to long life should he made.
Any other provision except life insurance will not adequately meet this financial requirement of the family. Whole life policies are the better means of meeting such requirements.
7. Life insurance fulfills the needs of an individual’s Old-age heeds
The provision for old-age is required where the person is surviving more than his earning period.
The reduction of income in old-age is serious to the person and his family, if no other family member starts earning, they will be left with nothing and if there is no property, it would be more piteous state.
The life insurance provides old age funds along with the protection of the family by issuing various policies.
8. Life insurance fulfills the needs of an individual’s Re-adjustment Needs
At the time of reduction in income whether by loss of unemployment, disability, or death, adjustment in the standard of living of family is required.
The family members will have to be satisfied with meager income and they have to settle down to lower income and social obligations.
Before coming down to the lower standard and to be satisfied with that, they require certain adjustment income so that the primary obstacles may be reduced to minimum.
The life insurance helps to accumulate adequate funds. Endowment policy anticipated endowment policy and guaranteed triple benefit policies are schemed to be a good substitute for old age needs.
9. Life insurance fulfills the needs of an individual’s Need for Education
There are certain insurance policies, and annuities which are useful for education of the children irrespective of the death or survival of the father or guardian.
10. Life insurance fulfills the needs of an individual’s family relations
The daughter may remain unmarried in case of father’s death or in-case of inadequate provision for meeting the expenses of marriage. The insurance can provide funds for the marriage if policy is taken for the purpose. Insurance needed for settlement of children.
After education, settlement of children takes time and in absence of adequate funds, the children cannot be well placed and all the education goes to waste.