Question

Benefit(s) of life insurance is/are

• A. Financial assistance on accidental death
• B. Exemption from income tax
• C. Good means of saving
• D. All of these

Hint:

Think of life insurance as a tool that serves three main purposes: Protection, Savings, and Tax Benefits.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
Life insurance is a contract between an individual and an insurance company, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. It offers several benefits beyond the basic death benefit.

Step 2: Detailed Explanation:
- Financial assistance on accidental death: The primary purpose of life insurance is to provide a death benefit to the nominee, offering financial security to the family in case of the insured's demise.
- Exemption from income tax: In many countries, including India (under Section 80C of the Income Tax Act), the premiums paid for life insurance are eligible for tax deductions. The maturity or death benefit proceeds are also often tax-free (under Section 10(10D)).
- Good means of saving: Many life insurance policies (like endowment plans or ULIPs) are designed with a savings or investment component, helping the policyholder build a corpus over time which is paid out on maturity.
All three options are significant benefits of life insurance.

Step 3: Final Answer:
Life insurance provides financial assistance on death, tax exemptions, and acts as a means of saving. Therefore, 'All of these' is the correct answer.