Golden rule insurance

The business of insurance is related to the protection of ethical as well as the economics value of assets. If we consider life as a precious asset, then along with the other assets it also has a value and it also should be protected. Hence comes insurance. Insurance is a mechanism that helps to reduce the consequences that may or may not arise. The adverse consequence, here mainly indicates risk. There always has to be an uncertainty about risk and insurance is done against the contingency that it may happen. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against. There is another meaning of the term risk. To an ordinary man, risk means exposure to danger where as in insurance practice, this term is used to refer to the peril or loss producing event.

A human life is also an income generation asset. So it is an obvious thought that, this asset can also be lost through unanticipated early death or made non functional through sickness and disabilities caused by accidents. Accident is an example of uncertainty but death is certain. Here, the problem is timing, which is uncertain. In case, if it happens much earlier, when the substitute arrangements are not in place, insurance is necessary to help those dependent on income. Therefore we can say, Life Insurance is a indenture, which is provided alongside the payment of the sum of money to the human being or failing him, to permit him to receive the same on the occurrence of certain event.

There are some outstanding advantages of Life Insurance that get from it are as follows :

  • To spread life protection to masses at reasonable cost.
  • To mobilize people?s saving through insurance linked saving schemes.
  • To conduct business with maximum economy.
  • To give relief from tax burden
  • To provide a ready marketability and suitability for quick borrowing
  • To provide an easy settlement and protection against creditors, etc.
  • The Life Insurance policies make a very flexible and financial instrument. Term Insurance, Whole Life Insurance Endowment policies, Annuity Contracts, Individual Insurance, Group Insurance are such kind of policies.

    Now let us focus on Term Insurance. The term insurance is a less expensive insurance policy than the permanent insurance policies and well suited for people on a tight budget, who need coverage, such as those in their child raising phase of adulthood as it acquires financial value.

    Here we should mention that these policies do not build equity. This life insurance is considered as a pure protection as it baits no cash value. The Term Insurance policies generally gives a coverage for a limited period of time and after that period the insured can drop the policy or annually pay the premiums to continue the coverage. In case, if the insured die during the term period, the same benefit amount will be paid to the beneficiary. The Term Insurance is often the most inexpensive way to purchase a substantial death benefit on a coverage amount per premium amount basis. Since, the Term Insurance is a pure death benefit coverage, it is basically used to provide for covering financial responsibilities of the insured person. Such responsibilities may include consumer debt, higher education, mortgages etc. but not limited to that.

    The most interesting part of Term Insurance is, it is a life insurance for a term of one year. If the insured died during the one year term, the death benefit would be paid by the insurance company but no benefit would be paid by the company if in case, the insured dies one day after the last date of the one year term. For example, suppose a person is holding a policy with a one year term i.e. the term period is from 15th July to 14th July 2008. Now the company will pay the total death benefit if the insurable person dies during this one year term period but if he dies after 14th July 2008, the co will not at all responsible to pay the death benefit to his nominee. So, we can say that, the premium paid is thus based on the expected probability of the insured dying in that one year. Another kind of event that has been experienced with some of these policies is the requirement of proof of insurability to renew. For instance, suppose, an insured person could acquire a terminal illness within the term of maturity but not actually dying until after the term expires. Now only because of his illness, the purchaser would likely be uninsurable after the expiration of the initial term or would be unable to renew the old policy or purchase a new one.

    Now if there is a problem, there should always be a solution. This means to say, the problems that we have discussed just before, could be overcome by some policies namely, "Guaranteed Re insurability", which allows the insured to renew the old policy without the proof of insurability. So it is my thought that, through this short term and cheap policy, every one can secure not only his own life but also the beneficiaries, dependent on him. So, we each and every one have to hold such kind of risk covering, cheap and short term insurance policies to protect our lives and get profit from it.

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