Introduction

Risk and uncertainty are incidental to life. Individuals may meet an untimely de
ath. He may suffer from accident. Destruction of property, Fire, Sea and perils,
floods, earthquakes and other natural calamities.

Whenever there is an uncertainty, there is risk as well as insecurity. It is to

provide against risk and insecurity that insurance came into being.

Insurance does not avert or eliminate loss arising form uncertain events it onl
y spreads the loss over a larger no of people who insure themselves against that
risk.

The concept of insurance is in essence related to the protection of the economic

value of assets. Every assets whether physical or in form of a human being has
a value. The assets is built up in the expectation that either through the incom
e generated there from some other output, some needs of the individual would be
met.

There is normally an expectancy level of life, during which the man performs his
assigned role. A prudent individual makes some arrangement, so that expected le
vel of comfort or convenience is assured to the person concerned or his family i
n case of any unfortunate event.
Why insurance
The origin of the insurance systems used today can be traced more than 5000 year
s ago. In ancient times, people whose property and other resources were vulnerab
le to the losses from natural and man made causes came together and created a so
cial fund by contributing to it. In case of any disaster, they could withdraw m
oney from this fund as per their needs.
Insurance plays a very important role in the economic development of a country.
It encourages an individual to save money .In a way the payment of premium of in
surance is a kind of savings and it can be withdrawn by the policy holder before
the completion of period of insurance policy.

The fund collected by the insurance companies from their policy holders are made
available to the industries and traders in the country. The premium amount is i
nvested in industries and trade by providing capital and loans. This helps compa
nies to undertake new industrial projects or expansions for factories.
The money is also used by traders in increasing both their sales in the local ma
rkets and enters into contracts with foreign companies. The return helps in the
development of trade and industry of the country and growth of the gross Domesti
c product (GDP)

For economic development, investments are necessary. Investment is made out of s

avings. A life insurance company is a major instrument for the mobilization of s
avings of people, particularly from the middle and lower income groups.
Insurance and other Act in a view
These savings are channeled into investment for economic growth. An insurance c
ompany’s strength lies in the fact that huge amounts come by way of premiums. Ever
y premium represents a risk that is covered by that premium. In effect, therefor
e, these vast amounts represent pooling of risks. The funds are collected and he
ld in trust for the benefit of the policyholders.

The management of insurance companies is required to keep this aspect in mind an

d make all its decisions in ways that benefit the community. This applies also t
o is investments. This is why successful insurance companies would not be found
investing in speculative ventures.
Indian insurance act 1938 amended Insurance regulatory and development Authority
Act 1999, consumer protection act 1986 and income tax act 1961 commonly agreed
and expecting from IRDA:
1. To protect the interest of and secure fair treatment to policyholders.
2. To bring about speedy and orderly growth of the insurance industry (incl
uding annuity and superannuation payment)for the benefit of the common man, and
to provide long term fund for accelerating growth of the economy.
3. To set, promote, monitor and enforce high standards of integrity, financ
ial soundness, fair dealing and competence of those it regulates.
4. To ensure that insurance customers receive precise, clear and correct in
formation about products and services and make them aware of their responsibilit
ies and duties in this regard.
5. To ensure speedy settlement of genuine claims, to prevent insurance frau
ds and other malpractices and put in place effective grievance redresses machine
ry.
6. To take action where such standards are inadequate or ineffectively enfo
rced.
7. To bring about optimum amount of self regulation in day to day working o
f the industry consistent with the requirement of prudential regulation.

Concerned topic
Savings through life insurance guarantee full protection against risk of death o
f the saver. Also in case of demise, life insurance assures payment of the entir
e amount assured (with bonuses wherever applicable) whereas in other savings sch
emes, only the amount saved (with interest) is payable.
Life insurance encourages ‘thrift’ it allows long term savings since payments can be
made effortlessly because of the easy installment facility built into the schem
e. (Premium payment for insurance is monthly, quarterly, half yearly or yearly)
For example: The salary saving scheme popularly known as SSS provides a convenie
nt method of paying premium each month by deduction from one’s salary.
In case of insurance it is easy to acquire loans on the sole security of any pol
icy that has acquired loan value. Beside a life insurance policy is also general
ly accepted as security even for a commercial loan.
TAX Relief:
Life insurance is the best way to enjoy tax deduction on income tax and wealth t
ax. This is available for amounts paid by way of premium for life insurance subj
ect to income tax rates in force. Assessee can also avail of provisions in the l
aw for tax relief. In such cases the assured in effect pays a lower premium fro
insurance than otherwise.

Money when you need it:

A policy that has a suitable insurance plan or a combination of different plans
can be effectively used to meet certain monetary needs that may arise from time
to time.
Children’s education, start –in-life or marriage provision or even periodical needs
fro cash over a stretch of time can be less stressful with the help of these pol
icies. Alternatively, policy money can be made available at the time of one’s reti
rement from service and used for any specific purpose, such as purchase of a hou
se or for other investments. Also, loans are granted to policyholders for house
building or for purchase of flats.
Any person who has attained majority and is eligible to enter into a valid contr
act can insure himself/herself and those in whom he/she has insurable interest.
Policy can also be taken, subject to certain conditions, on the life of one’s spou
se or children. While underwriting proposal, certain factors such as the policyh
older’s state of health, the proponent’s income and other relevant factors are consi
dered by the corporation.
Medical and non medical schemes:
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 i
nconvenience, LIC has been extending insurance cover without any medical examina
tion, subject to certain conditions.
With profit & without profit plan;
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 paid without any addition. The premiu
m rate charged for a with profit policy is therefore higher than for a without p
rofit policy.
Keyman Insurance
Keyman insurance is taken by a business firm on the life of key employees(S) to
protect the firm against financial losses, which may occur due to the premature
demise of the key man.