Role of life insurance Posted Date: 03 Jul 2009     Resource Type: Articles/Knowledge Sharing     Category: Health Author: soubhagya das Member Level: Diamond     Rating: Points: 10 (Rs 5)

Life insurance as risk cover: Insurance is a safeguard in the case of accidents or a drop in incomes due to any unforeseen event. An accident or disability can be divesting, and an insurance policy can lend timely support to the family in such times. It also comes as a great help at retirement, incase no untoward incident happens during the term of the policy. This helps to cover the unpredictable loss. Life insurance as investment: Insurance is an attractive option for investment. While most people recognize the risk hedging and tax saving potential of insurance, many are not aware of its advantages as an investment option as well. You cannot compare an insurance product with other investment schemes for the simple reason that it offers financial protection from risks, something that is missing in non-insurance products. In fact, the premium you pay for an insurance policy is an investment against risk. Thus, before comparing with other schemes, you must accept that a part of the total amount invested in life insurance goes towards providing for the risk cover, while the rest is used for savings. Life insurance as tax planning: Insurance serves as an excellent tax saving mechanism too. The government of India has offered tax incentives to life insurance products under section 80C of the Income Tax Act in order to facilitate the flow of funds into productive assets.

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