Benefits of Life insurance

Advantages of Life Insurance

Advantages of Life Insurance

 Risk Cover - Life today is full of uncertainties; in this scenario Life Insurance ensures that
your loved ones continue to enjoy a good quality of life against any unforeseen event.

 Planning for life stage needs - Life Insurance not only provides for financial support in the
event of untimely death but also acts as a long term investment. You can meet your goals, be
it your children's education, their marriage, building your dream home or planning a relaxed
retired life, according to your life stage and risk appetite. Traditional life insurance policies
i.e. traditional endowment plans, offer in-built guarantees and defined maturity benefits
through variety of product options such as Money Back, Guaranteed Cash Values,
Guaranteed Maturity Values.

 Protection against rising health expenses - Life Insurers through riders or stand alone
health insurance plans offer the benefits of protection against critical diseases and
hospitalization expenses. This benefit has assumed critical importance given the increasing
incidence of lifestyle diseases and escalating medical costs.

 Builds the habit of thrift - Life Insurance is a long-term contract where as policyholder, you
have to pay a fixed amount at a defined periodicity. This builds the habit of long-term
savings. Regular savings over a long period ensures that a decent corpus is built to meet
financial needs at various life stages.

 Safe and profitable long-term investment - Life Insurance is a highly regulated sector.
IRDA, the regulatory body, through various rules and regulations ensures that the safety of
the policyholder's money is the primary responsibility of all stakeholders. Life Insurance
being a long-term savings instrument, also ensures that the life insurers focus on returns over
a long-term and do not take risky investment decisions for short term gains.

 Assured income through annuities - Life Insurance is one of the best instruments for
retirement planning. The money saved during the earning life span is utilized to provide a
steady source of income during the retired phase of life.

 Protection plus savings over a long term - Since traditional policies are viewed both by the
distributors as well as the customers as a long term commitment; these policies help the
policyholders meet the dual need of protection and long term wealth creation efficiently.
 Growth through dividends - Traditional policies offer an opportunity to participate in the
economic growth without taking the investment risk. The investment income is distributed
among the policyholders through annual announcement of dividends/bonus.

 Facility of loans without affecting the policy benefits - Policyholders have the option of
taking loan against the policy. This helps you meet your unplanned life stage needs without
adversely affecting the benefits of the policy they have bought.

 Tax Benefits-Insurance plans provide attractive tax-benefits for both at the time of entry and
exit under most of the plans.

 Mortgage Redemption- Insurance acts as an effective tool to cover mortgages and loans
taken by the policyholders so that, in case of any unforeseen event, the burden of repayment
does not fall on the bereaved family.
Micro insurance
1. Microinsurance is insurance with low premiums and low caps / coverage. In this
definition, “micro” refers to the small financial transaction that each insurance policy
generates. The Microinsurance Regulations, issued in 2005 by the Indian Insurance
Regulatory and Development Authority (IRDA), for example, adopted this definition in
explaining “microinsurance products”[1] as those within defined (low) minimum and
maximum caps. The IRDA’s characterization of microinsurance by the product features
is further complemented by their definition for microinsurance agents, those appointed by
and acting for an insurer, for distribution of microinsurance products (and only those
products).
2. Microinsurance is a financial arrangement to protect low-income people against specific
perils in exchange for regular premium payments proportionate to the likelihood and cost
of the risk involved.[2] The author of this definition adds that micro-insurance does not
refer to: (i) the size of the risk-carrier (some are small and even informal, others very
large companies); (ii) the scope of the risk (the risks themselves are by no means “micro”
to the households that experience them); (iii) the delivery channel: it can be delivered
through a variety of different channels, including small community-based schemes, credit
unions or other types of microfinance institutions, but also by enormous multinational
insurance companies, etc

Insurance functions on the concept of risk pooling, and likewise, regardless of its small unit size
and its activities at the level of single communities, so does microinsurance. Microinsurance
links multiple small units into larger structures, creating networks that enhance both insurance
functions (through broader risk pools) and support structures for improved governance (i.e.
training, data banks, research facilities, access to reinsurance etc.). This mechanism is conceived
as an autonomous enterprise, independent of permanent external financial lifelines, and its main
objective is to pool both risks and resources of whole groups for the purpose of providing
financial protection to all members against the financial consequences of mutually determined
risks.

The last definition therefore, includes the critical features of the previous three:

1. transactions are low-cost (and reflect members’ willingness to pay);

2. clients are essentially low-net-worth (but not necessarily uniformly poor);
3. communities are involved in the important phases of the process (such as package design
and rationing of benefits); and
4. the essential role of the network of microinsurance units is to enhance risk management
of the members of the entire pool of microinsurance units over and above what each can
do when operating as a stand-alone entity.

Microinsurance products

Microinsurance, like regular insurance, may be offered for a wide variety of risks. These include
both health risks (illness, injury, or death) and property risks (damage or loss). A wide variety of
microinsurance products exist to address these risks, including crop insurance, livestock/cattle
insurance, insurance for theft or fire, health insurance, term life insurance, death insurance,
disability insurance, insurance for natural disasters, etc.

Microinsurance has made a significant difference in countries like Mali, Maxime Prud'Homme
and Bakary Traoré describe. Innovations in Sikasso Still, many countries face continuing
challenges. Specifically in Bangladesh, micro health insurance schemes are having trouble with
financial and institutional sustainability, Syed Abdul Hamid and Jinnat Ara describe, but things
are improving. Progress in Bangladesh

Microinsurance scheme

A microinsurance scheme is a scheme that uses, among others, an insurance mechanism whose
beneficiaries are (at least in part) people excluded from formal social protection schemes, in
particular informal economy workers and their families. The scheme differs from others created
to provide legal social protection to formal economy workers. Membership is not compulsory
(but can be automatic), and members pay, at least in part, the necessary contributions in order to
cover benefits.

The expression "microinsurance scheme" designates either the institution that provides insurance
(e.g., a health mutual benefit association) or the set of institutions (in the case of linkages) that
provide insurance or the insurance service itself provided by an institution that also handles other
activities (e.g., a micro-finance institution).

The use of the mechanism of insurance implies:

 Prepayment and resource-pooling: the regular prepayment of contributions (before the

insured risks occur) that are pooled together.
 Risk-sharing: the pooled contributions are used to pay a financial compensation to those
who are affected by predetermined risks, and those who are not exposed to these risks do
not get their contributions back.
 Guarantee of coverage: a financial compensation for a number of risks, in line with a pre-
defined benefits package.

Microinsurance schemes may cover various risks (health, life, etc.); the most frequent
microinsurance products are:

 Life microinsurance (and retirement savings plans)

 Health microinsurance (hospitalisation, primary health care, maternity, etc.)
 Disability microinsurance
 Property microinsurance – assets, livestock, housing
 Crop microinsurance