Page 129 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes Classify the policies prevailing in market
Describe the concepts of annuity, mortality tables
Explain the role of LIC

Introduction

In the previous unit, you have studied about the history of IRDA act. The unit also gave an
overview IRDA act. The previous unit also summarized the salient features of IRDA act as well
as the provisions of IRDA act.
You need to know that a good financial planning will protect an individual from unforeseen
financial crisis. It will provide required financial support and confidence. Financial planning
can be done for long-term or short-term depending upon the need to cover the entire life or part
thereof of an individual.
As we know, financial needs and priorities keep changing from one stage of life to another. Even
the earning of a person may also change from time to time. An individual has to undergo
various phases of life viz., student, middle-aged person, and retired individual. Each stage of life
requires a different financial plan. A prudent individual will prepare his/her financial plans on
the basis of the needs, desires and priorities of life.

You must also keep in mind the various related social, economic and environment factors. An
individual should realize that life insurance, apart from meeting the contingencies and
administering savings, also offers the benefit of peace of mind. So, in this unit you will study
about life insurance in detail.

In the next unit, you will study about the various elements of general contract. The unit will also
deal with the meaning and definition of marine insurance, kinds of marine insurance policies
and various clauses incorporated in marine insurance. It will also summarize the concepts of
marine losses and payment of claims.

8.1 Meaning and Definition of Life Insurance

You must be aware that life insurance is protection against financial loss resulting from insured
Individual’s death. In legal terms life insurance is a contract the policy owner and the insurer,
where the latter agrees to reimburse the occurrence of the insured individual’s death or other
event such as terminal illness or critical illness. The insured agrees to pay the cost in terms of
insurance premium for the service.
The elements of life insurance are risk coverage and savings for future. Life Insurance provides
you and your family with protection against all the risks involved, moreover providing you an
opportunity to grow your investments. It could be viewed as a long-term investment to provide
for your child’s future expenses or your expenses, post retirement.
It is the earnest desire of every individual to own property. Anyone who is in possession of
something tangible feels secure. But very few people have adequate income to own something
of their own. It is just they failed to plan and not planned to fail.

!
Caution It is always desirable that we identify our financial needs and buy an instrument
rather than buy the instrument and try to fit in our needs. Financial planning has become
more complex because of greater economic uncertainty, constantly changing tax laws and
varieties of options.

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