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Life insurance is a contract under which the insurer (Insurance Company) in consideration of a premium paid undertakes to pay a fixed sum of money on the death of the insured or on the expiry of a specified period of time whichever is earlier.

In case of life insurance, the payment for life insurance policy is certain. The event insured against is sure to happen only the time of its happening is not known. So life insurance is known as ‘Life Assurance’. The subject matter of insurance is life of human being. Life insurance provides risk coverage to the life of a person. On death of the person insurance offers protection against loss of income and compensate the titleholders of the policy.

Importance of life insurance.

Life Insurance is of great importance to individuals, groups, business community and general public. Some of the main benefits of life insurance are given below.

Protection Against Untimely Death

Life insurance provides protection to the dependents of the life insured and the family of the assured in case of his untimely death. The dependents or family members get a fixed sum of money in case of death of the assured.

Saving for Old Age

After retirement the earning capacity of a person reduces. Life insurance enables a person to enjoy peace of mind and a sense of security in his/her old age.

Promotion of Savings

Life insurance encourages people to save money compulsorily. When a life policy is taken, the assured is to pay premiums regularly to keep the policy in force and he cannot get back the premiums, only surrender value can be returned to him. In case of surrender of policy, the policyholder gets the surrendered value only after the expiry of duration of the policy.

Initiates Investments

Life Insurance Corporation encourages and mobilizes the public savings and channelizes the same in various investments for the economic development of the country. Life insurance is an important tool for the mobilization and investment of small savings.

Credit Worthiness

Life insurance policy can be used as a security to raise loans. It improves the credit worthiness of business

Social Security

Life insurance is important for the society as a whole also. Life insurance enables a person to provide for education and marriage of children and for construction of house. It helps a person to make financial base for future.

Tax Benefit

Under the Income Tax Act, premium paid is allowed as a deduction from the total income under section 80C.The maturity proceeds are exempt from tax under section 10(10D) of the Income Tax Act, 1961.

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