Insurance is technically known as uberrima fides, which means it is a contract of utmost good faith. In this principle, you have the doctrine of disclosing all material facts and that applies to all forms of insurance. Any misrepresentation, fraud or non-disclosure in any document leading to the acceptance of the risk will render the insurance contract null and void.
Protection
Life insurance assures payment of the entire amount assured (along with bonuses, wherever applicable) in case of demise, whereas in other savings schemes, only the amount saved (with interest) is payable.
Aid to Thrift
Life insurance schemes allow ‘thrift’, that is, it allows long-term savings because premium payments can be made through an easy instalment facility. Premium payments can be monthly, quarterly, half-yearly or yearly. Some insurance schemes provide a convenient method of paying premium each month by deducting the amount from your income.
Security on Loan
Generally, a life insurance policy is accepted as security, even for a commercial loan. You can acquire loans on the sole security of a policy that has acquired loan value.
Tax Relief
The best way to enjoy deductions on income tax and wealth tax is through life insurance. The deductions are available for amounts paid by way of premium for life insurance subject to the prevailing income tax rates. You can also avail of provisions in the law for tax relief, in which case you, as the assured, can pay a lower premium for the insurance than what you normally pay.
Easy Liquidity at Periodic Intervals
You can avail of money when you need it if you have taken a suitable insurance plan, or a combination of plans. It will help you meet certain financial needs as and when the need arises. Situations such as children’s education, marriage or any other need for cash can be made less stressful with the help of such policies. You can also use policy money at the time of retirement from service, or for any other purpose such as purchase of a house, investments, etc.
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