Movie Case Study
Shankar is a union leader. He works for Ratan Construction. One day, while working, a construction worker falls and loses his life. This makes Shankar agitated, and he demands compensation from the owner and a life insurance policy for all workers.
In this blog, Learning Perspectives will explore the meaning of life insurance.
What is life Insurance?
Insurance contracts are those that enable individuals or entities to receive life protection. This contract is between the policyholder (individual or entity who buys the policy) and the insurance company that provides the policy. In case of death, disaster, or other eventuality, the insurance company provides the money to the policyholder or the nominee.
The policyholder has to pay a premium to the policy provider annually or semi-annually.
Different insurance policy providers ask for different premiums. A policyholder should research the policy and pay premiums accordingly.
Insurance policies can be for:
- Life
- Health
- Motor
- Home
Policy Limit:
It is the maximum amount that the insurance company pays for the losses under the insurance policy. This amount is calculated based on the following:
- Duration
- Injury
- Indemnity Clause, if any
As Rajiv mentions the indemnity clause. The indemnity clause policy protects individuals and business owners in case of an event. In this case, the death of Rajiv’s brother. Indemnity is a contractual agreement between two parties. In this agreement, one party decides to pay for any losses that another party causes. Risks are managed between the parties through indemnity clauses.
If the death of an individual occurs and the nominee is suspected to be involved, then a police case is registered. Generally, when there is death by murder, the following documents are required:
- Death Certificate
- FIR
- Postmortem report
The Claim amount is paid to the legal heir. In case there is no legal heir, the amount is kept in the court till a successor is found.
Deductible:
It is the amount paid by the policyholder before the insurance company pays the claim. This could be in the form of percentage or out-of-pocket expenses for the policyholder.
In India, people can avail of tax benefits by purchasing an insurance policy:
80C:
Premium paid towards a life insurance policy is eligible for deduction under section 80C. Premium should be paid for a life insurance policy either for self or dependents.
80D:
This deduction is applicable to medical or health insurance. It is allowed when the premium is paid on self’s health policy or for health care of family members including parents.
10D(D):
This benefit is provided towards the premium paid for the life insurance policy.
