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Final Bajaj5

Final Bajaj5

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Published by chauhanshriram1076

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Published by: chauhanshriram1076 on Mar 16, 2010
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01/21/2013

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1.Introduction
Fundamentals of insurance
In life every human being-you and we included is exposed to an element of risk, commonly defined asthe possibility of loss. These broadly relate to two spheres-our lives and our material possessions.Further, every loss has two implications: financial and non-financial. For instance when a person dies,the family suffers a grievous emotional loss, which can perhaps never be compensated. But the familyalso suffers another significant loss-financial loss; particularly person who dies was an earning member or even potentially earning member. There are then concerns about the financial stability of thedependents. Similarly, when a factory is gutted in a fire, in addition to the loss of property, there areother considerations: the effort to rebuild the factory, the future of workers and the fate of suppliers andconsumer attached to the business.In both instances, little can be done about non-financial losses. But financial losses can-and must-beaddressed and using risk management tool and that is insurance.
What is insurance?
“Insurance is a financial service for collecting the saving of the public and providing them witha risk coverage.”
General definition
: in the words of john Magee,
insurance is a plan by which large number of  people associate and transfer to the shoulders of all risks that attach to individuals.”
Fundamental definition
: in the words of D.S. HANSELL, “insurance is accumulated contributionsof all parties participating in the scheme.”
Contractual definition
: in the words of justice TINDALL, “insurance is a contract in which a sumof money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sumupon a given contingency.”1
 
What is life insurance?Definition of life insurance
According to the us life office management association incorporation (loma), life insurance is definedas follows:“Life insurance provides a sum of money if the person who is insured dies whilst the policy is ineffect.”In other words, surely this is far too brief an explanation for a financial service that provides a verysophisticated range of savings and investment products, as well as mere compensation for deathLife insurance is a guarantee that your family will receive financial support, even in your absence. Putsimply, life insurance provides your family with a sum of money should something happen to you. Itthus permanently protects your family from financial crises.in addition to serving as a protective cover, life insurance acts as a flexible money-saving scheme,which empowers you to accumulate wealth-to buy a new car, get your children married and even retirecomfortably. Life insurance also triples up as an ideal tax-saving scheme.
 Need for life insurance
Today, there is no shortage of investment options for a person to choose from. Modern day investmentsinclude gold, property, fixed income instruments, mutual funds and of course, life insurance. Given the plethora of choices, it becomes imperative to make the right choice when investing your hard-earnedmoney. Life insurance is a unique investment that helps you to meet your dual needs - saving for life'simportant goals, and protecting assets.2
 
Unique benefits of life insurance
Asset protection
From an investor's point of view, an investment can play two roles - asset appreciation or asset protection. While most financial instruments have the underlying benefit of asset appreciation, lifeinsurance is unique in that it gives the customer the reassurance of asset protection, along with a strongelement of asset appreciation.
 
The core benefit of life insurance is that the financial interests of one’s family remain protected fromcircumstances such as loss of income due to critical illness or death of the policyholder.Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. Thecustomer therefore benefits on two counts and life insurance occupies a unique space in the landscapeof investment options available to a customer.
Goal based savings
Each of us has some goals in life for which we need to save. For a young, newly married couple, itcould be buying a house. Once, they decide to start a family, the goal changes to planning for theeducation or marriage of their children. As one grows older, planning for one's retirement will begin totake precedence.
 
Clearly, as your life stage and therefore your financial goals change, the instrument in which you investshould offer corresponding benefits pertinent to the new life stage.
 
Life insurance is the only investment option that offers specific products tailor-made for different lifestages. It thus ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage, and hence ensures that the financial goals of that life stage are met.3

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