Ever wondered why you get tax rebates on your insurance premiums? No?
Would you believe us if we tell you that when you pay insurance premiums, you’re not just seeking financial protection for yourself, your family or your assets, but you’re doing much more than you think you are. You’re helping the national economy.
You must be wondering how exactly does your paying insurance premiums help the national economy? Let’s answer your query.
Income from Premium Collection
Policyholders are bound to pay premiums regularly to be able to receive the promised amount at a chosen time. Now, imagine the kind of earnings that the insurance companies make out of the thousands of people out there who are paying premiums each year.
For your knowledge, the life insurance segment alone had garnered a total of Rs 4.18 trillion (USD 64.92 billion) in FY17. In FY18, Life Insurance Corporation (one of the major insurance players in India), continued its legacy of leading India’s insurance market share by recording an all-time-high first year premium (FYP) collection of Rs 1,34,551.68 crores.
Insurers, whether public or private, invest the money earned from their premium collection into different projects. These projects may be for the public or for the private sector. This way, they further the cause of national development by helping build national and local infrastructure like roads, flyovers, buildings, commercial/retail structures, and other similar projects. Hence, the money, instead of remaining stagnant in bank vaults, gets circulated for a number of development causes. And this is exactly why the government provides you tax rebates on your premiums.
Just as the taxes you pay are used for development projects, the premiums you pay are also eventually being invested to further the cause of the development of the country. So, congratulations, you’re contributing to the growth of the national economy!
Moving further, the exchange over here is not just one-way. If we dig deeper, barring the financial security that the insurance industry provides its policyholders in exchange for premiums, it further helps the citizens in certain ways. Let’s explore how!
Creates Employment Opportunities
The insurance industry in India has relied heavily on agents to sell their products. Up until a few years ago, almost 90% of all insurance sales were initiated through face-to-face first contact. These days, lakhs of tele-callers have found employment in this industry. What’s more, the industry is also witnessing a gradual tendency towards gender equality as far as field agents are concerned. In fact, the increased percentage of women entering the insurance industry as agents is pleasantly surprising. Early this decade, a growth of 30% was reported with respect to women joining in as agents in major insurance companies. The report also revealed that 47 of 100 insurance agents were women.
Financial Security = Financial Freedom
Research has shown that when the average Indian retires, his or her standard of living drops and the retiree spends far lesser than when they were earning. This is partly because they haven’t planned their finances properly and there is the fear playing on the back of their minds that their savings will be exhausted if they continue to live the same lifestyle as earlier.
This tendency is not only detrimental to the retiree but also to the national economy. Through retirement or pension insurance plans that are available, however, retirees have access to much-needed financial backup. Investment plans like these ensure retirees remain a vital part of the economy and live life to the fullest – a double whammy!
So, the next time you pay your insurance premiums, remember that besides obtaining financial security, you’re helping build the national economy. Take pride in it.
(with inputs from IBEF, Economic Times, askarvi, and dna India)