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Unit 8: Insurance Planning
Self Assessment Notes
State True or False:
6. Insurance as a part of the financial system provides valuable services to those affected by
various risks or contingencies.
7. Obligation to pay the premium to the insurer is one of the rights of the insured.
8. Crop Insurance falls into general insurance category.
9. Financial system may be defined as a set of institutions, instruments and markets, which
gather savings and channel them to their most efficient use.
10. Insurance’s basic motive is meant to provide wealth creation for the insured.
8.7 Insurance Products
8.7.1 Life Insurance
Life Insurance started in India as early as the year 1818. The first Insurance Company in India
“The Oriental Life Insurance Company” started in Calcutta by Europeans to help widows of
their own community. The year 1870 saw the birth of life insurance business through the first
Indian Insurance Company “The Bombay Life Assurance Society”. The British Government
enacted The Indian Insurance Act in 1870.
The Insurance Act, 1938, was the first comprehensive legislation governing both the life and
non-life sectors of insurance. The life insurance business in India was nationalised on 19th
January 1956, through a presidential ordinance by the then Finance Minister Sh. C.D. Deshmukh.
The Life Insurance Corporation was established on 1st September 1956 under the general direction
and control of Ministry of Finance. The protective hands and a luminous flame of lamp is the
insignia of “Life Insurance Corporation Of India”. No doubt it signifies protection of human life
through the instrument of life insurance.
Life Insurance is a contract for payment of a sum of money to the person assured or his/her
nominee on the happening of the event insured against. As per the contract, the payment of the
specified amount will be made on the date of maturity or on the specified dates at periodic
intervals or on death if it happens earlier.
Life Insurance is an institution, that eliminates ‘risk’. It substitutes certainty for uncertainty and
comes to the aid of the bereaved family in the event of the unfortunate death of the assured. Life
Insurance thus covers two hazards, eventuality of accidental or untimely death and thereby
provides support to the dependent family, and old age social security in the case of survival of
the insured.
Salient Features of Life Insurance
The following are the key features of life insurance:
Instrument of savings.
Provides social security.
Risk coverage starts from the date of accepting of proposal.
Beneficiary nominee/legal heir stands to gain.
LOVELY PROFESSIONAL UNIVERSITY 141
