About Life Insurance.

Life insurance :- Life Insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the "premium") at regular intervals or in lump sums. In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured's demise.


The value for the policy owner is the 'peace of mind' in knowing that the death of the insured person will not result in financial hardship.

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; common examples are claims relating to suicide, fraud, war, riot and civil commotion..

                Life-based contracts tend to fall into two major categories :-

§          Protection policies – Designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.

§         Investment Policies :- Where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life,universal life and variable life policies.

History Of Insurance :- Insurance began as a way of reducing the risk of traders, as early as 2000 BC in China and Babylon in 1750 BC. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in 17th century England, originally as insurance for traders: merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous  Lloyd's of London. The first society to sell life insurance was the Amicable Society for a Perpetual Assurance Office.

The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759.Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived.

Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies.New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation.

What is Life Insurance :-

Life Insurance is insurance for you and your family's peace of mind. Life insurance is a policy that people buy from a life insurance company, which can be the basis of protection and financial stability after one's death. Its function is to help beneficiaries financially after the owner of the policy dies.

It can also be a form of savings in the long run if you purchase a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person's pension plan. A person can make contributions to a pension that is funded by a life insurance company. These are considered private pension arrangements. 

In addition, you should also make a list of what you feel needs to be protected in your family's way of life. With a life insurance policy in place, you can:

·                                 provide security for your family

·                                 protect your home mortgage

·                                 take care of your estate planning needs

·                                 look at other retirement savings.

     

      Why do I need Life Insurance :-

      Life Insurance provides for financial security in the event of death or on the inability to earn due to physical disabilities. Besides providing for financial security in the case of one's untimely death, it can be used to accumulate a kitty for your old age, systematically build assets, for funding your child's education and also for saving on taxes.

       

      When does a policy lapse :-

      A policy lapses when the policy holder fails to pay the premium even within the grace period. In this case, the policy loses all its benefits.

      Income Tax Slab :-

          INCOME-TAX RATES FOR ASSESSMENT YEAR 2011-2012 (FINANCIAL YEAR 2010-2011)

Income Tax Slabs			Tax Rates
Individual & HUF below age of 65 years	Woman below age of 65  years	Individual above age of 65 years
Income upto Rs.1,60,000	Income upto Rs.1,90,000	Income upto Rs.2,40,000	NIL
Rs.1,60,001 to           Rs.5,00,000	Rs.1,90,001 to Rs.5,00,000	Rs.2,40,001 to Rs.5,00,000	10%
Rs.5,00,001 to           Rs.8,00,000	Rs.5,00,001  to  Rs.8,00,000	Rs.5,00,001  to  Rs.8,00,000	20%
Above Rs.8,00,001	Above Rs.8,00,001	Above Rs.8,00,001	30%

            

      If I pay the premium on policy for my wife/husband, can I claim Tax benefits :-

      

      Life insurance premium paid by you for your wife/husband's policy qualifies for a deduction under Section 80C of the Income Tax Act, 1961. For financial year 2011-2012, an assesses, being an individual or Hindu Undivided family (HUF) are entitled to additional relief under Section 80D.
            

      If I stop paying premiums on my life insurance or pension policies, can I claim Tax Benefits

      If you stop premium payments of your policy, it amounts to discontinuation of the policy and qualifies for Income Tax. In this case you cannot claim any tax benefits. In case you discontinue your premiums after paying for 2 years from commencement of your policy, no tax deduction is allowed on premium paid in the year when policy terminates. The amount of tax deduction allowed on the premium paid in the preceding year, is also taxable in the year when policy terminates.

      Can I claim tax benefit on interest on loan taken against insurance policy for  

       purchase/construction of house :-

      Interest on loans taken against an insurance policy is allowed as a deduction from income chargeable under the head “Income from house property” provided the amount of loan is used by the policyholder to acquire/construct /reconstruct/repair or renew any property.