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Meaning of Insurance Insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company. Definition Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance. The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'.

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In India Insurance company started in 1818 Oriental life insurance company in Calcutta Indian insurance act 1912 the first statutory measures to regulate life business . Insurance amendment act 1950 established principle of agency 1956 LIC and Insurance sector came in to existence and nationalized. Insurance came to India through Briteeshers in the 17th centuary . In general insurance business was nationalized in the year Jan 1st 1973. Today there are 24 general insurance companies . Insurance services add about 7% to the countries GDP.

Indias life insurance market has grown rapidly over the past six years, with new business premiums growing at over 40% per year. The average household premium will rise to Rs 3,0004,100 from the current Rs 1,300 . Management consultancy firm McKinsey has forecast that Indias life insurance industry will be double in the next five years from $40 billion to $80-100 billion in 2012. This growth would improve the level of insurance penetration from 5.1% of gross domestic product to 6.2% in 2010-2012. The Indian life insurance industry could witness a rise in the insurance sector premiums between 5.1% and 6.2% of GDP in 2012, from the current 4.1%. Total market premiums are likely to more than double during this period, from about $40 billion to $80-100 billion. India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors.

 The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice.  The insurance agents still remain the main source through which insurance products are sold. The concept is very well established in the country like India but still the increasing use of other sources is imperative. At present the distribution channels that are available in the market are listed below. Direct selling Corporate agents Group selling Brokers and cooperative societies

I want to save tax


Its true that Section 80 of Income Tax Act provides deduction of the amount paid as insurance premium (with some exceptions) from the assessees taxable income subject to limits. If the sole purpose of buying insurance is to save on tax, then its the costliest way to do so. If someone does this early in his/her life with policies like endowment or money back or even ULIP, their ability to create wealth diminishes by a very high degree

I want to save/invest In my opinion, this is the worst reason for someone to buy insurance. Savings is generally understood as the amount remaining with a person after he/she meets all his/her expenses and other cash needs. My agent asked (forced) me to buy this policy This is one of the commonest reasons you hear if you ask some one why he/she bought insurance policy. Insurance advisors are drilled to think that insurance is always sold and never bought and this results in an advisor selling insurance for all wrong reasons. Survival of the insurance advisor is the sole driver here and not the need of the buyer.

I want to plan for my retirement Insurance companies have devised these products keeping in view the tax exemption available under the Income Tax Act. The same reasoning that insurance is not an investment product applies here as well. Gone are days when the returns were assured by the insurance company. True retirement planning may be achieved more effectively and economically using other financial products. I want to provide security for my children for their education This is one of legitimate reason for which insurance is to be bought. However, the risk to be covered is not of the child but of the parents. So called children policies do not provide this option by default and the parent has to pay an additional premium to cover his/her risk I want to cover my life risk I have come across very few people giving me this reason for buying a life insurance policy. Actually, this is the right reason for which insurance is to be bought. The very purpose life insurance products came into existence was to provide economic security to the dependents of the breadwinner in his/her absence. My Bank asked to purchase insurance policy This means its only due to the pressure exerted by bank (it could be other types of lenders also like housing finance companies, car finance companies etc to safeguard the loan) that one will buy insurance. Otherwise, he/she will not get the loan. In this situation, the purpose is fine but its not bought with the awareness of ones total risk exposure.

Thank you

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