Insurance and Type of Insurance

By Dr. Jivan Kumar Chowdhury

• The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a
large number of insurance companies and the level of competition was high. There were
also allegations of unfair trade practices. The Government of India, therefore, decided to
nationalize insurance business.
• Life Insurance Corporation Of India Birth
• An Ordinance was issued on 19th January, 1956 nationalizing the Life Insurance sector and
Life Insurance Corporation came into existence in the same year. The LIC absorbed 154
Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign
insurers in all. It started its operations as a corporate firm in September 1956 after the Life
Insurance of India Act was passed by India’s Parliament in June 1956.
• LIC’s asset base goes past Rs. 38 lakh crore in fiscal 2021 (US$520.38 billions)
• The LIC had monopoly till the late 90s when the Insurance sector was reopened to the
private sector.
Role of LIC in Indian Economy
•LIC is known as India's largest government-owned life insurance and investment corporation. The main
role of LIC is to invest in global financial markets and different government securities after gathering
funds from people through their various life insurance policies. At least 75% of these gathered funds are
to be invested in Central and State Government securities, as stated by one of the LIC rules.
 Functions of LIC
•The major functions of LIC are as follows:-
•Collect people’s savings in exchange for an insurance policy and promote savings in the country.
•Protect the capital of the people by investing funds into government securities.
•Issue insurance policies at affordable rates
•Provide various loans like direct loans to industries, housing loans, loans to various national projects at
reasonable interest rates.

 
• Objectives of LIC
• LIC aims to spread awareness about the importance of life insurance among people living in
rural areas and people who are a part of socially and economically backward classes.
• It aims to meet several life insurance needs of the community people who are subjected to
change with the changing social and economic environment.
• It aims to conduct business economically while taking into consideration that the money
belongs to the policyholders. 
• It aims to maximize the mobility of people’s savings through attractive insurance-linked
savings. 
• It aims in providing utmost job satisfaction to all the agents and employees of the corporation
and promotes building a co-operative work environment to deliver efficient service with
courtesy to its insured public.
• It aims to deploy the funds to the best advantage of the investors and the community as well.
• Types of LIC Life Insurance Plans
• LIC provides numerous schemes to its policyholders. It offers different schemes for
different categories and segments of the Indian economy.
• It is the largest insurance policy company in terms of the number of policies it has
issued to date. Some of the policies are as follows:-
• LIC’s Jeevan Pragati
• LIC’s Jeevan Labh
• LIC’s Single Premium Endowment Plan
• LIC’S Jeevan Lakshya
• LIC’s Jeevan Tarun
• LIC’S Jeevan Shanti
• Basic Policies of the Life Insurance Corporation of India:
• The basic policies in Life Insurance Corporation of India (LIC) are term insurance, cash value
insurance, straight life insurance, and limited payment life insurance. The details of each of these
policies are given below:
• Term insurance: This insurance is like an insurance protection contract, similar to auto insurance,
home insurance, or health insurance. Therefore, it ensures the individual against any risk of financial
loss in case of death and does not include any savings plan. In this insurance policy, the owner buys a
fixed amount of coverage and pays an annual premium based on their age. The policy is for a fixed
period of time and thus the coverage stops if it is not renewed. These policies are available for five
years, ten years or fifteen years where the amount of premium to be paid remains constant. The life
insurance can also be purchased with a condition of 65 years of age and in this case, the amount of
premium to be paid increases annually. There is decreasing term life insurance also available wherein
the coverage of the insurance decreases with time so that the annual premium to be paid remains
constant. Term insurances provide maximum coverage to the premium spent.
• Cash value insurance: In this kind of policy, the amount of actual insurance
decreases over time and the savings component of the policy increases over
time. This type of insurance is funded by the premium payments done by the
insured along with the earnings of the saving element in the policy. These
insurance policies are of two types: straight life policy and a limited payment
policy that provides coverage to the insured throughout life.
• Straight life insurance: The insurance is throughout life. In this type of insurance,
the amount of protection decreases as the savings amount increases, though the
total coverage of the policy that includes the protection and savings elements
remains the same. The premium in these policies is higher than the term
insurance which is based on the age of the individual when he or she buys
insurance. The premium for this policy remains constant. The face value of
insurance refers to the amount which is paid when the insured person dies. 
• Limited payment life insurance: In this type of policy the insured person pays the
total amount of policy in a limited number of years, that is, usually 20 to 30 years or
by the age of 65. After the completion of the term, the policy remains active for the
whole life of the insured if he or she has not withdrawn the amount at any point in
time. The amount of premium to be paid every year in this policy is obviously higher
than the straight life policy. 
Benefits of Life Insurance of India Policy:
• The policyholder will get the most advanced and efficient service as they are associated
with an industry leader which has a technologically advanced network throughout the industry. 
*Maximum benefits are ensured to the policyholder and their family by designing innovative plans.
*It has an excellent customer support service that provides 100% grievance settlement facilities.
*It also provides online customer service to make the lives of policyholders easier.
*One can get the entire details of their policy via SMS.

 
• Types of Insurance
• A detailed guide about different Types of Insurance Policies in India
• In life, unplanned expenses are a bitter truth. Even when you think that you are
financially secure, a sudden or unforeseen expenditure can significantly hamper
this security. Depending on the extent of the emergency, such instances may also
leave you debt-ridden.
• While you cannot plan ahead for contingencies arising from such incidents,
insurance policies offer a semblance of support to minimise financial liability from
unforeseen occurrences.
• There is a wide range of insurance policies, each aimed at safeguarding certain
aspects of your health or assets.
• Broadly, there are 8 types of insurance, namely:
• Life Insurance
• Motor insurance
• Health insurance
• Travel insurance
• Property insurance
• Mobile insurance
• Cycle insurance
• Bite-size insurance
• Fire Insurance
• Marine Insurance
• Simply knowing the various insurance policies does not help. Instead, we must know how each of these plans
work.
• Without adequate knowledge about each of them, we may not be able to protect our finances, as well as
the financial well-being of our family members. We must Read on to learn all we need to know about the
various insurance policies.
• Life Insurance refers to a policy or cover whereby the policyholder can ensure financial freedom for his/her
family members after death. Suppose we are the sole earning member in our family, supporting our spouse
and children.
• In such an event, the death of a person would financially devastate the whole family. Life insurance policies
ensure that such a thing does not happen by providing financial assistance to the family in the event of
person’s passing.
• Types of Life Insurance Policies:
• There are primarily seven different types of insurance policies when it comes to life insurance. These are:
• Term Plan - The death benefit from a term plan is only available for a specified period, for instance, 40 years
from the date of policy purchase.
• Endowment Plan - Endowment plans are life insurance policies where a portion
of your premiums go toward the death benefit, while the remaining is invested by
the insurance provider. Maturity benefits, death benefit and periodic bonuses are
some types of assistance from endowment policies.
• Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a part of your
insurance premiums go toward mutual fund investments, while the remaining
goes toward the death benefit.
• Whole Life Insurance - As the name suggests, such policies offer life cover for the
whole life of an individual, instead of a specified term. Some insurers may restrict
the whole life insurance tenure to 100 years.
• Endowment Plan - Endowment plans are life insurance policies where a
portion of your premiums go toward the death benefit, while the
remaining is invested by the insurance provider. Maturity benefits, death
benefit and periodic bonuses are some types of assistance from
endowment policies.
• Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a part
of your insurance premiums go toward mutual fund investments, while
the remaining goes toward the death benefit.
• Whole Life Insurance - As the name suggests, such policies offer life cover
for the whole life of an individual, instead of a specified term. Some
insurers may restrict the whole life insurance tenure to 100 years.
• Benefits of Life Insurance
• If you possess a life insurance plan, you can enjoy the advantages from the policy:
Tax Benefits - If you pay life insurance premiums, you are eligible for tax benefits
in India, under Section 80(C) and 10(10D) of the Income Tax Act. Thus, you can
save a substantial sum of money as taxes by opting for a life insurance plan.
• Encourages Saving Habit - Since you need to pay policy premiums, buying such
an insurance policy promotes the habit of saving money.
• Secures Family’s Financial Future - The policy ensures your family’s financial
independence is maintained even after one’s demise.
• Helps Plan Your Retirement - Certain life insurance policies also act as investment
options. For instance, pension plans offer a lump-sum payout as soon as you
retire, helping you to fund your retirement. Thanks !!!