We all are familiar from our birth that our whole life is bound with an unforeseen situation, anything and anywhere things can take unusual turns out of the blue.
For this kind of, various Insurance policies has been brought up to offer financial support and protection to you and your loved ones in inevitable times. You can also choose an insurance cover to safeguard your assets and property.
Before understanding the Insurance laws in India, we must know what an insurance policy means and how it works since not every individual is that much aware of it. There are still some people who either have only a little knowledge of it or are unknown about this.
The term insurance refers to the legal contract between two parties whereby a party known as the insurer tackles, the insured paid in contemplation for a sum of money known as premium, to pay a sum of money or its counterpart on the manifestation of a specified future event.
Who Can Buy Insurance?
However, the question comes to mind who can buy insurance. So, a person who is a bread earner of the family or has no substantial investments or corpus has debt, for instance, a home loan. It can be central responsibilities such as children’s education, weddings, etc.
What’s The Right Time To Buy It, And The Amount Of Insurance Covers It.
The imperative thing in insurance is that anyone who is applying for this policy makes sure to try to be insured at the time you are healthy, fit, and fine so that your amount of premium always remains on the lower side.
Having insurance at a certain early age is important. Conclude you are of 25 years of age and if you take out your insurance policy and also your premium amount is supposed to be Rs. X.
You have insured yourself for 35 years, and at that time, you’ll be at your age of 60, and your insurance premium amount at the age of 25 and your insurance premium amount at even the age of 60 remains the same. That’s why getting insurance earlier is better.
Now how much should be the amount of insurance covered? As a thumb rule, we can say a minimum amount should be 10 times your annual income.
Speculate just an example, I or anyone earns 10 lakh Rs. per year and I should be having insurance cover of Rs. 1,00,00,000 crore minimum; nevertheless, if you say this is like minimum, then what could be optimal? It could be 15 to 20 times of your annual income.
Another point is why do we take insurance? It is only to cover your risks further. For this purpose, the term plans are the best, and if you are looking at insurance for investment ambition, you may think of applying something like an Endowment plan or whole life plan.
And the last question which remains in our mind is, will I get tax benefits on the amount of premium paid? The answer is Yes. Whether it is a term plan or any other type of life insurance plan, you will get tax benefits under section 80 C of the Income Tax Act.
How To Buy Insurance?
If you were to buy term insurance, then you can choose two major options one is offline mode, and another one is online mode. If you want to go offline mode, you’ll have to approach an insurance agent.
However, the problem is that the agent’s commission is also involved in offline mode. Generally, it is seen that the offline premium is shared higher than the online premium.
If you want to buy insurance online, we can make you understand with the example of Policy the bazaar portal. Many of you might have heard of this. Mainly, this helps you compare the premiums of so many insurance providers, like how you can buy your insurance policy so that you’ll have to fill in some basic information.
Increase In Premiums Of Term Insurance.
According to one of the reports by economic times, it has been believed that the term life insurance premiums are expected to increase in FY 2020.
They had increased the premiums up to 20℅ in the previous year on the back of rising insurance claims for the reason is that because of covid-19, and if so, that means there are possibilities from April 1st, the premiums may rise to 20% this year too.
Various Insurance Policies.
Insurance is divided into two categories:-
General Insurance and Life insurance.
Let’s talk about general insurance first, also known as non-life insurance that provides insurance on products other than our life. It defends against damage, loss, and theft of your value that is insured, for instance, Home, health, fire, travel, motor, and crop insurance, etc.
- Motor insurance: the motor vehicles act, 1988 injunctions all vehicles running on Indian roads should be insured. Motor insurance can be for cars 2-wheeler vehicles. It has been mentioned as per law that it provides insurance against defects done to another vehicle or person by your vehicle, by this means damage to another person’s vehicle or property during an accident by your vehicle. It does not provide insurance for your vehicle.
- Health insurance: Refers to the insurance in which the insured is covered for medical and surgical expenses. It covers many other things, including Room rent, maternity cover, critical illness cover, and hospital payment.
- Travel Insurance: Travel insurance is also imperative to have the reason behind is that if suppose any person is on travel and something goes wrong such as that person’s bag has lost somewhere, maybe trip delay. To provide cover against such events, travel insurance is there.
- Home Insurance: Home insurance proposes the whole structure of your house and secures all your belongings. It provides security from fires happening unexpectedly.
- Commercial Insurance: Commercial insurance is also part of general insurance in which these plans cover the risk related to business ordinances.
And it has been divided into 5 insurances:- Marine insurance covers the ships and the cargo, and Liability insurance safeguards insured from the risk of liabilities assessed by lawsuits.
Energy insurance for petrochemicals and chemical plants and chemical fertilizers plants protection. Financial lines insurance covers costs, and the last one is that engineering insurance provides an economic safeguard to the risks faced by the installation project, machines, and equipment.
After discussing general insurance, now moving ahead to Life Insurance is an essential part of one’s finance portfolio, but questions confuse us about which type of life insurance.
Since it has five various life insurance policies, we’ll examine them one by one. A Life Insurance policy is the simplest term that is one where monetary compensation is paid to the nominee or beneficiary under the policy upon the death of the policyholder.
It means if the policyholder survives, then no maturity benefits are payable, and on the other hand, the death of the policyholder often covers most situations, including sickness and accidents.
Insurance Laws Of India.
Eventually, after going through all the basics of insurance above, Let’s come to the main point of this article; as you all know, without implementing laws, there’s a chance of getting things done wrongfully.
We all want our premium to be secured in the hands of the insurer, and for that security, it’s fundamental to have some laws to direct the work of insurance companies in India. Until 1912, there was no insurance law in India beforehand.
The insurance companies were governed by the provisions of the Indian Companies Act 1882. At the very beginning, many companies vault up; however, so many of them were unstable, so this demanded legislation to oversee the insurance companies. After this, the act was passed to control life insurance.
The committee made several changes, and the government of India acquainted the Bill in the legislative Assembly in 1937, which emerged as the Insurance Act of 1938. It was approved on July 1st, 1939.
The parliament imposed the Life Insurance Act of 1956 on July 1st, 1956. In this act, section 37 provides that the sum is assured by all policies issued by the life insurance corporation of India, including any bonuses that shall be guaranteed about payment in cash by the central government, which is going to guarantee them.
Then section 6 talks about two factors; one is the corporation’s function, which says the general duty of the corporation is to carry out this life insurance business in India or outside India.
However, it is to develop the life insurance business to the best merit of the community.
In addition, this life insurance corporation will have the power to carry out a capital redemption business. A marine insurance act was inaugurated in 1963.
The liability of the goods from the parties & intermediaries involved to the insurance company is transferred by Marine insurance; as per this act, anybody involved in the trade process could insure the goods further.
Indemnity has a surety of losses being covered. If in any given situation, the traders were to face destruction due to theft, fire, or misfortune, the losses could be covered by the insurer.
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