As per IRDA's annual report for the year 2010-11, LIC's well oiled claim settlement machinery has done way better than private life insurance companies.

In the year 2010-11, the life insurance companies have settled 8.13 lakh claims on individual policies, with a total payout of Rs 7,595 crore. The number of claims repudiated was 17,350 for an amount of Rs 336 crore. The number of claims pending at the year-end was 16,415 and the amount involved was Rs 306 crore.

Overall, the industry's settlement ratio has improved slightly at 95.58 % in 2010-11 from 95.24 % in 2009-10 but the repudiation ratio has also gone up to 2.04 % in 2010-11 from 1.93 % in 2009-10.

A K Dasgupta, LIC's Managing Director has an insight into the life insurance industry by saying, ""Insurance is not what you sell, but deliver."  "People trust LIC because of our strong claims settlement record. (Source: ET)"

Planning for contingencies like death and hospitalization also forms an important part of financial planning. Buying life insurance provides for the living expenses of bread earners family in his absence on death. Let me debunk a few insurance myths today so that you will be able to take better financial and investment decisions.

Myths about insurance:

MYTH 1: LIFE INSURANCE IS A WASTE OF MONEY

Life insurance is bought to protect ourselves from the contingency of untimely death. It would take care of the living expenses of your family if you die young. Life insurance is an investment that is more of a safety mechanism; it is to provide financial security to the dependants. Term policies that cover the risk of untimely death are cheap and most ideal for providing life coverage.

Life Insurance has witnessed a slow down in 2011. When we reviewed the decade of life insurance, we saw that as on August,2011, the Individual single premium was down by (-)  62.45% . The individual non-single premium was down by (-) 28.65%.

The slowdown continues. As on September, 2011 the sale of policies was 35,88,869 policies as against 55,88,804 policies the year ago. That is a 40% dip.

The insurance industry is reeling under the regulatory changes by IRDA resulting into lower margins.

Moreover, the proposed direct tax code (DTC) also is bad news for the insurance industry. From April, 2012, only term insurance will get tax benefits and the amount is limited to Rs 50000/- and clubbed with tuition fee and health insurance.

i-Life, i-Term and i-Protect online products from Aviva, Religare and ICICI are some of the achievements of the life insurance industry in this time of turmoil.