Following are the different
economics uses of the Life insurance
1:
Financial security: Life insurance provides financial security to the
family. An untimely and premature death
of the bread winner result in a great financial problem to the family. If no
security provision is made by the breadwinner to meet such this situation., his death would make the family destitute. They will
become a burden to the society. Life insurance is the best instrument to
provide security in the event of happening of such contingency.
2) Savings: Life insurance is also a potent
instrument for savings.
3) Dreams come
true: Every person lives in dream dream
of very high education for children very decent marriages to daughters etc. Life insurance makes such dreams come
true even if they dreamer is no more.
4) Collateral of Security : Own
shelter has become an essential to
everyone. Many institutions offer mortgage loans for purchase construction of a house/ flat/ Life insurance acts as a
collateral security in respect of the
such loans. Without such security the same shelter
considered an asset as long as the house
purchaser is alive, will become a liability to the family if he dies before
repayment of the entire loan. To repay the outstanding loan, the property will
have to be disposed off. Circumstances. will make it a distress sale and it will fetch much
less than its reasonable market value.
5) Financial Independence: Life
insurance provides financial Independence
in old age. The lumpsum maturity value of a policy when received can be invested to yield interest sufficient
to meet expenses after retirement from work life. Or the same money can be utilised to purchase an annuity. While still young, an individual can purchase a deferred annuity and fund the same in easy instalments.
6)
Protects Creditors: Organizations
or individual who are in credit business, can ensure for themselves recovery of loan when a
debtor dies. The can obtain a group
individual life insurance policy on then lives of debtors. So that if a debtor
dies, the policy proceeds will repay the
outstanding loan.
7) Protects Partnership firm: A Partnership
firm can insure the lives of the partners to the extent of capital invested by
each in the business. In case of the
death of the partner the danger of withdrawal of capital by the
legal heirs of the deceased partner can
be met from the processed of the policy.
Otherwise there is the risk of financial
problems for the partnership business.
8) Provides fund for replacement:
Under key man insurance an
organization can insure the lives of
executive whose expertise greatly
contributes to their profits. In
case of
the death of a key man, the money
provided by the insurance can be utilised
to recruit a new person who is equally
capable as a replacement.
9) Improves
productivity: Organization can purchase group life insurance policies as
part of the their employee– welfare program. This acts as a morale booster to the workers and result in
improved production.