What is Insurance?

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. Insurer, in economics, is the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

Also see What is Life Insurance? | Tax Benefits gain with Life Insurance.

Tax Benefits gain with Life Insurance

Income-tax provisions for the Financial Year ending 31st March, 2007 :

Under Sec.80C of the Income Tax Act.
Premiums paid upto maximum of Rs.1,00,000 subject to maximum of 20% of Capital sum Assured under Traditional & Unit linked Plans.

Under Sec.80CCC of the Income Tax Act.
Premiums paid upto maximum of Rs. 1,00,000 under pension plans.

However, u/s.80 CCE, the aggregate amount of deduction under section 80C, section 80CCC, and section 80CCD shall not, in any case exceed one lakh rupees.

Under Sec.80DD of the Income Tax Act.
Premiums paid under plans exclusively for physically handicapped persons upto Rs.50,000/-In case of severe disability as certified & issued by the medical authority upto Rs. 75,000/-

Exemption of Life Insurance Proceeds :

Under Sec.10(10D) of the Income Tax Act.

• Maturity benefits are tax free. However in cases where premium exceeds 20% of capital sum assured within a year, benefits paid in excess of premiums paid will be taxable.
• Death benefits are tax-free.

What is Life insurance?

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the policy owner's death. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals. Assets, Bills, and death expenses plus catering for after funeral expenses should be included in Policy Premium. Anyone whose assets equal more than the value of their primary residence should not be compensated beyond that value in case they cannot sell their house. In the case of those whose lost their spouse should be compensated also for one full year the wages of their spouse which would or should be included to avoid lawsuits.

As with most insurance polices, life insurance is a contract between the insurer and the policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon life (or lives) of the people named in the policy.

Insured events that may be covered include:

• death
• accidental death
• Sickness

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide (after 2 years suicide has to be paid in full)(in India after one year Suicide is covered), fraud, war, riot and civil commotion.

Also See Tax Benefits gain with Life Insurance.

IRDA - Insurance Regulatory Development Authority

The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto."

The law of India has following expectations from IRDA :

1. To protect the interest of and secure fair treatment to policyholders;

2. To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy;

3. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates;

4. To ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard;

5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery;

6. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players;

7. To take action where such standards are inadequate or ineffectively enforced;

8. To bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation.

IRDA Website: http://www.irdaindia.org