THE PRACTICE OF LIFE INSURANCE

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Licentiate Exam -IC02 - Practice of Life Insurance (Mock Test)

Introduction

In the event of an individual's death, life insurance will have a significant impact on the lives of the beneficiaries. The money can be used to help fund important costs, including servicing a mortgage or paying for children's college tuition. Life insurance is an arrangement between an insurance policyholder and an insurance provider in which the insurer agrees to reimburse an amount of money in return for a premium after a specified period or upon the death of an insured individual.


Benefits of Life insurance

The benefits of buying Life Insurance Policies are:

1.) Life Insurance policy assures the insured of a guaranteed sum to the nominee of the insured in case of death otherwise it provides survival benefits to the insured.

2.) A life insurance policy saves our money and gives us long-term benefits by giving us a certain rate of interest.

3.) Insurance companies have different plans and the persons can select according to their needs and capacity from the various options.

4.) Insurance companies may also provide a loan to their customers if the customers want to borrow a certain amount. The loan is given on selected policies.

5.) Under section 80C of the income tax Act, 1961 insurance premium is tax deductible and the insured can get a rebate on it.


Type of Life Insurance

Generally ,  there are 6 kinds of life insurance policies

1.) Term Life Insurance policy: These kinds of life insurance policies are very popular among people. In most cases, these policies are for a term of 5 to 30 years. In this scenario, the amount/sum insured is paid to the nominee in the event of the policyholder's death.

2.) Endowment policy: Such kinds of policies are also popular among the people. It offers policyholders both security and investment opportunities.

3.) Money-back policy: In a money-back policy, the policyholder is entitled to receive a certain amount from time to time. Money-back policies are usually taken for a period of 10 to 25 years. Survival benefit is paid to the policyholder in maturity.

4.)Whole Life Policy: This kind of policy covers the whole life of the policyholder. It can last for 20-30 years. In the event of the policyholder's death, the amount assured will be paid to the nominee.

5.) Pension Policy: It is very popular among people who want to have a regular income source post-retirement. It does not give a higher return on investment but certainly, it provides a kind of satisfaction to the policyholder. In this category, premiums are mostly high priced.


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