The main advantages of life insurance are summed up as under.
1. Financial Protection to the Family members. life insurance gives protection to the family members of the insured against the loss of future earning power. the compny on the death of the policy holder make payment equal to the face value of the insurance policy to the beneficiary named therein. the family thus gets a timely financial protection which may restore them and place them on a sound financial footing.
2. Promotion of thrift. The insured has to make a periodic payments to the life insurance company. He, therefore, economizes in his expenditure and saves money to pay the insurance premium regularly.
3. Provision of funds. if the policy holder survives, he then on the maturity of the policy gets a lump sum of money to build or purchase a house, meet the expenditure of marriage, education of his children etc.
4. Loan against policy. The life insurance policy has the advantage that the policy holder can obtain loan against the insurance policy for meeting urgent needs.
5 Peace of mind. The death of a man is certain. if it is sudden and premature, the family loses the man as well as a person who was a source of income for them. the life insurance provides a little relief, a peace of mind to the dependants that they will be financially cared for.
Business use of life insurance.
1. Effect on business. if the sole proprietor has insured himself for a big amount and he dies before the attainment of specified age in the contract, the beneficiaries can operate the business on receiving the claim from the insurance company. the business in thus not closed.
2. Availability of credit. The solo proprietor can obtain loan for meeting the operating cost of a business against the life insurance policy.
3. Staying Power. if the beneficiary is not able to run the business on the premature death of insured. he can at least stay in the business for a short period and sell the business in the running condition which certainly fetches a better price.
4. Shock absorber. The death of a solo proprietor completely upsets the business. the payment of claim by the insurance company acts as a shock absorber and promotes financial security for operating the business.
5. Payment of debts. if the sole proprietor is insured, the creditors have insurable interest in him. they can receive the amount of loan on the settlement of claim on the sudden death of the proprietor.
6. Financial strength. The periodic payments by the policy holder accumulates large saving which provides financial strength to the sole proprietor.
7. Partnership Insurance. In a business partnership, if the partner have obtained a joint life policy, the surviving partner is not financially affected. he can purchase the interset of the deceased partner.
8. Benefit to stock holders. The stock holders in a close corporation may also have a joint life policy and thus ensure the availability of funds for the business.
9. Insurance of key executive. The life insurance companies also provide the benefit of insuring the key executive of the firm. if the key executive dies before the specified age, the firm is compensated of the loss as caused in the disruption of the company.
10. Group life insurance. The firm can provide an added benefit to its employees by giving them a group life insurance policy. in the group insurance, the maximum limit of payment on the death of an employee is fixed by the insurance company. the employees thus also benefit from life insurance companies.
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