How Life Insurance works...!!!

Dear friends

Thank you very much for your valuable comments and feedback on my last blog on life insurance. I am sure you have revisited your insurances. In this blog I am taking you to a simple & quick tour on concept and working of life insurance.

A simple definition of life insurance is “insurance on human life”. In legal context;

· Life insurance is a contract. There are two parties in this contract.

· One party is Life insurance company, we call it “insurer” & another party is known as insured – or Life insured - the person on whose life insurance is taken.

· Insurer promises to pay the insured (or beneficiary/nominee) a stipulated amount of money called Sum Assured in the event of death of insured taking place during the policy term or at maturity of policy (depending on policy type).

· To be eligible to receive the death/maturity benefit, insured’s obligation is to keep the policy running in force by paying timely & regular premium to the insurer.

· The contract ends at death of insured or maturity of the policy whichever happens earlier.

· It can also be terminated premature, if insured doesn’t wish to continue the policy. In other cases, it can be terminated by insurer, if certain policy provisions ask for such termination.

How life insurance works:

The concept of life insurance dates back to very old time. Today, modern statistical tools and scientific applications have made life insurance business a different stuff altogether. However, basic mechanism on which life insurance works remains the same always. This mechanism is sharing and pooling of risks. In principle, a group of individuals together contribute to a pool or fund where the contributions made by them are utilized to pay a compensation amount to family of those who die during the period. In modern times, life insurance companies play the same kind of role. They invite proposals from thousands of interested individuals to pay a defined small contribution called premium, to build a huge reserve maintained by the company and this fund is used to pay/compensate nominees of unfortunate individuals who are no more. In other words, you can say that you transfer risk of death to the life insurance company at a nominal cost called premium. This is how life insurance works.

Today, we have house/car/personal loans, EMIs and credit cards, so most of us live in debt. These debts are burden which we always wish to settle while we are earning & alive. Through a life insurance policy, we can relieve ourselves from this burden to some extent and build wealth & assets while we are alive. Moreover, in case of an unfortunate event, we can relieve our loved ones from huge financial burden passing on to them because of our not being there. This way, we are not only living tension free and building a financial soundness while alive, but we are also supporting our near and dear ones, while away from them. That’s why one of LIC’s ad says – Zindagi ke saath bhi, zindagi ke baad bhi.

Friends, in Life insurance parlance;”Dying too early and living too long – both are risks”. In my next blog I will take you to the life insurance tools (products) to counter both of these risks.

What's our Destination...?

We remember our childhood days very well, don’t we? With time, many memories fade, though there are always some unforgettables like friends, school, mischiefs, colony, neighborhood, sports - cricket, kites, gulli danda, kho kho and entertainment by Doordarshan - “Feature film jaari hai, Chitrahaar thodi der me, Rukawat ke liye khed hai”] and of course Aakashvaani – “Ye Akaashvaani hai, ab aap Devki nandan Pandey se samaachar suniye Or the Cibaca Geetmaala by the veteran RJ of all times, Mr Ameen Sayani” and many such lively things.

Remember the desperate wait for Sundays when morning started with Mickey & Donald show. Sunday evening with Vikram and Betaal followed by the much awaited Hindi Feature Film. It was ensured that all household activities are done before the start of movie. At times, bholu and babloo from neighborhood, would come to watch the cartoon or Sunday movie at your home, because there were not many television sets. Microwave oven sized radio sets, were a common site in many homes.

Forget about modern age cell phones, even traditional telephone sets were rare. Instead of modern day STD, there were trunk calls. The most common and popular mode of communication was either a 15 paisa post card or a 50 paisa inland letter.

For visiting distant places, common transport modes were buses and trains, air travel being a luxury. Trains were pulled by the big and monstrous steam engine; whose visible machinery and carbon black fumes would immediately catch your attention. With in city, travel was by cycle, rickshaw, Tonga, bikes like Rajdoot & Yezdi, scooters Bajaj,Priya, Vijay super & Lambretta. Ambassadors and Premier Padmini cars were high-class luxuries and limited in number.

Not everyday we would go to market or an outing. 3 or max 5 cinema halls in downtown, popularly known as “Talkies” with traditional names like Alpana, Ratan, Sangam, Apsara etc, would release an Amitabh starer and papa would take us to the talkies. After movie, we all would go to a nearby famous eating joint and would have the eating stuff of our choice. There were joint families, big in size, socially united. Every member would go for the planned outings and enjoy.

Social values used to bind all neighbors and relatives together. Be it an occasion or not, you would visit your neighborhood, uncles, relatives without an expectation from them to visit your place, because you knew that they would certainly visit you. Festive occasion was a time everyone longed for when you all celebrate your favorite festival with loads of fun and frolic.

There are hundreds of such memories, which you can recall instantly, and feel nostalgic the way I felt while writing this blog. However the idea behind this blog was not only to take you back to those golden times, but also to let you identify and realize where are we standing today and where are we heading to. Thanks to globalization, we have all time advanced technology in all things in life,

· Be it multi channel high definition television with 180 channels but not a single channel or program for which we wait eagerly.(as remote control is our boss)

· Be it the slimmest multimedia cellphone with blue tooth & camera, FM radio (Its ages I heard anyone listening to AM) a laptop or an ipod and all instant communication gadgets.

· Be it high speed shatabdis/Rajdhaanis, modern airlines (though now fighting for survival)

· Be it Malls & multiplexes, food courts, retail outlets (with free home delivery), where we spend our so-called weekends. (For not visiting a neighbor or friend, we have hundreds of excuses)

· Be it festivals and food, where we confine ourselves to a limited territory for celebration and for food we eat fast food, frozen foods, pizza & burger etc and other junk food items.

Today, Families have become nuclear. Physical distances though reduced a lot, emotional distances are increasing with in families, friends and relatives. Visiting neighbors or relatives in normal routine has come to an end, leave festive occasions. On an occasion too, chances are rare that you will see all your friends and relatives. Instead you will find one representative to mark an attendance. We do not know our neighbors. You can normally see all neighbors either on a festival or at the time of an earthquake tremor when they come out from their homes.

Result of all this is, broken social & emotional network, increasing crime next door(we can also be a victim one day), lonely elderly people, starving children (starving not for food but for parents' love, as both mom and dad go to work), divorces, increasing suicides and many other problems.

Friends, please spare your valuable time to think over this issue. I welcome your valuable comments and views on how we can strengthen our social & emotional bonds which are getting impacted (positively or negatively i don't know) due to reasons I listed above....

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