My article written here does not tell you whether you should go in for Life Insurance Policies but it features more on the aspect of what policies provide you and what are the prerequisites for taking up a policy. Our emphasis will also be on long term life insurance plans. But before we discuss anything further about policies let us first understand the meaning of the term "Insurance". Y

You might think why does he want to tell us the meaning of the term Insurance? We all know that. But for me this article aims to educate those people who may not know what Insurance and Life insurance is all about. Insurance is an agreement between two parties "insurer" and "insured". It is a contractual agreement by the insurer and the insured where the insurer undertakes in exchange for a fixed sum called premiums; to pay the other party called insured a fixed amount of money on the occurrence of a certain event. A loss arising out shall be paid from the premium money collected from the insuring public and the insurance company acts as trustees for the amount collected. But why should you take up insurance and why should you spend money on buying the policy. Apart from Tax benefits that it provides it also safeguards your loved ones in the event of any unforeseen happenings. Certain Insurance contracts are also made compulsory by legislation.

For example:-

· Motor Vehicles Act 1988, stipulates that a person driving a vehicle in a public place should hold a valid insurance policy covering " Act" risks.

· Another example of compulsory insurance pertains to the Environmental Protection Act, wherein a person using or carrying hazardous substances (as defined in the Act) must hold a valid public liability (Act) policy.

You must have seen the famous LIC (Life Insurance Company of India) ad on the television where a character called Mrs. Sharma is seen crying in front of the photograph of Late. Mr. Sharma after their daughters wedding. There is a voice over which says that "Today all your work has been done" but she says that all the real work was done by them when he had purchased the life insurance policy from a reputed Life Insurance Company. This tells us how life insurance policies have helped in securing the future for all our loved ones. It is also shown to be an act of responsibility and that every individual should do it in order to secure future. With the advent of life insurance came other types of insurance and endowment policies such as child endowment and pension plans for the aged. The tax benefits that these policies provide are as follows.

Tax Relief:

1. Under Section 88 of Income Tax Act, a portion of premiums paid for life insurance policies are deducted from tax liability. Similarly, exemption is available for Health Insurance Policy premiums.

2. Money paid as claim including Bonus under a life policy is exempted from payment of Income Tax.

Encourages Savings:

An insurance scheme encourages thrift among individuals. It inculcates the habit of saving compulsorily, unlike other saving instruments, wherein the saved money can be easily withdrawn.

The beneficiaries to an insurance claim amount are protected from the claims of creditors by affecting a valid assignment.

For a policy taken under the MWP Act 1874, (Married Women's Property Act), a trust is created for wife and children as beneficiaries.

Life Policies are accepted as a security for loan. They can also be surrendered for meeting unexpected emergencies.

So frankly speaking there is no alternative to insurance. With so many benefits in hand I believe that everyone should have one insurance policy because they say "You may not know what the future has in store for you". Now the question arises from where do you get an insurance policy? There are two ways for this, one is either you approach the company directly or secondly you approach an Insurance agent who will take all the effort of filling in the form and will charge commission on the total sum assured. The commission charges varies depending upon the policy and the number of years the premium is paid. Typically the scenario is this as taken from Wikipedia

+ 35 - 40% for 1st year premium if the premium paying term is more than 20 years

+ 25 - 30% for 1st year premium if the premium paying term is more than 15 years

+ 10 - 15% for 1st year premium if the premium paying term is less than 10 years

+ 7.5% - yr 2 and 3rd year and 5% - thereafter for all premium paying terms.

In case of Mutual fund related - Unit linked policies it varies from 1.5% to 60% on the premium paid.

Agency commission for retail pension policies:

+ 7.5% for 1st year premium and 2.5% thereafter

Maximum broker commission - 30%

Referral fees to banks - Max 55% for regular premium and 10% for single premium. However in any case this fee cannot be more than the agency commission as filed under the product.

But the above structure may change depending upon the market you are into. In India the agent's commission may differ.

With Bharti Life we offer a full-customized support with a personalized plan for you. Our executives out there to provide you with the best life insurance plans and Long term Life Insurance. Just write to us at service@bharti-axalife.com or Visit http://www.bharti-axalife.com for more info.

Matthew Green
Intenational Marketing Manager - Online
Bharti AXA Life
Kotak Securities