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Life Insurance - What does Life Insurance provide?
08-Jan-2003
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Final expenses resulting from death

After an individual's untimely death, his survivors and heirs are entrusted with the responsibility of conducting his last rites according to customs and traditions as propagated by religion. Almost all religious sects follow certain rules that need to bidden regardless of the social circumstances.

As it is, the deceased individual's family members are likely to be emotionally devastated by their loss. And if they are saddled with monetary expenditure resulting from the death of their family member, their condition might become dangerously unstable.

Thankfully, the proceeds from the deceased's insurance policy will more than provide for the final expenses and rituals associated with the funeral. At least this way, the deceased's family is absolved from the shame and sacrifice that might be expected of them after their family member's death.

Guaranteed maintenance of lifestyle

As long as there is a steady and assured supply of income, an individual's family and dependants are able to keep a self-professed standard of living. The family's eating and drinking habits, entertainment and lifestyle expenses are maintained at a certain level during their earning member's lifespan.

In case of the unexpected death of the earning member, his or her family will be hard-pressed in trying to arrange for funds that would assist them in maintaining the standard of living that they've grown accustomed to. After all, no one really likes to make sacrifices, despite their miniscule fiscal value.

And this is exactly where the proceeds from insurance will prove extremely useful for the family members. They will be able to maintain their standard of living without making any sacrifices whatsoever.

Replacement of income

Most families in India depend on the earnings of the breadwinner to sustain their existence. Routine day-to-day expenses like provisions and ration supplies, milk, newspapers, medical bills and general maintenance are normally met through a regular supply of income.

Additionally the income also provides for any outstanding payments arising from rent, loans or mortgages. These liabilities have to be minimised by making payments at regular intervals. In case there is a default in payments, there are chances of legal intervention and repossession of the utility made available.

And having to do without a service that the family has grown accustomed to can prove to be severely detrimental to their metaphysical and social well being. The proceeds from insurance if invested wisely can support the insured's family members and dependants for the remainder of their lives with relative ease and in creature comfort.

Mortgage or liquidation payments

These days, people tend to constantly compete within their peers and social groups with regards to their lifestyles and related expenses. The spending pattern is governed by advertising and credit facilities offered by numerous financial institutions.

Since liquid funds are available at a very marginal rate from various financial institutions, people go forth and borrow without a care being seduced by the "Buy now, Pay later" philosophy. They are able to make the installment payments from their regular sources of income and sustain a standard of living that would have been beyond their means under ordinary circumstances.

As long as income is flowing in on a regular basis, there is no cause of concern. But in case of any default in payments, the lending company will obviously initiate legal proceedings. Legal proceedings initiated by a corporate body against an individual can have devastating consequences on the individual's social and economic status.

And the only salvation from such painful ignominy comes from the proceeds due to the insured's family thanks to his or her insurance policy. The funds that will be obtained from the insurance company will provide a buffer that will curtail any impending calamity before it can come close enough to cause any real damage.

Costs of education

Education used to be considered as a sacrosanct field until a decade back. With the advent of privatisation into mainstream education, the cost of higher studies has escalated beyond all reasonable limits. And to add fuel to this fire is an annual inflation rate of 6.32 percent.

Most families start planning for their child's future education costs as soon as he clears his kindergarten papers. After all, every parent wants his or her child to grow and become a professionally qualified engineer or physician or likewise. And this is a fairly mean task since year after year since capitation fees charged by even run-of-the-mill colleges come up to lakhs of rupees.

In case either of the child's guardians or parents happens to expire before the end of his education, there are chances that he will not be able to complete his education. Nothing aids an individual in his life as much as what he or she knows. In any case, every parent wants to plan for his children's future and security.

And to achieve success in this plan, it is vital that the guardian or parents uses insurance as a tool to plan for his children's future, regardless of his or her presence. In case of the demise of a parent, the proceeds from his or her insurance can be channeled into their dependant children's education fund.

Estate and other taxes

Normally after a family member's death, his family or dependants are usually flooded with notices from creditors or taxation officers. At a time like this when the family is struggling to recover from such a severe shock, it might seem inhuman for them to be subjected to such humiliation.

However in today's materialistic world, chivalry is no longer in demand. In case of an emergency, women and children rarely come first but creditors always do. Not only is it prudent for any individual to clear his debts prior to his demise but it would also spare his or her family the shame of having to clear debts that they did not incur, at least directly.

Since no one knows when his or her time may come, there is always a chance that the dependants will have to pay the existing dues regardless of their economic status. Thanks to insurance, all existing debts and taxes can be cleared from the proceeds in no time at all. And the dependent family will be spared from the ignominy of having to pay what they did not owe, in the first place.

Continuity & security of interests

At times after an individual's death, his family might have to sacrifice their interests in business or investments to arrange for their expenses and maintain a decent standard of living. In extreme cases, the dependent spouse might also have to suffer and sacrifice everything the family owns in a desperate bid to maintain the family name and crest above everything else.

After all, India is still a country where honour is regarded higher than life itself. Surely, making prudent investments in insurance from time to time can aid in averting such a disgraceful situation for any self-respecting individual's family. Only then will the family be able to maintain its standard of living prior to the demise of the head of the family.

Obviously, the proceeds from insurance will help secure the family's status and position in society as well as maintain their socio-economic level in life. Thus insurance serves the perfect hedging tool for securing the interests of the family and maintaining the continuity of their interests.

Source : insuremagic.com back

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