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Sum assured under life insurance

CA SONIYA AGARWAL (self practice) (3005 Points)

18 February 2014

SUM ASSURED UNDER LIFE INSURANCE SHOULD IT BE SHOWN AS INVESTMENT IN BALANCE SHEET , SIMILARY ABOUT OTHER INSURANCE LIKE VEHICLE INSURANCE , MEDICAL INSURANCE , HOW SHALL IT BE DISPLAYED IN BALANCE SHEET , SINCE INSURANCE PREMIUM GOES TO DRAWINGS ACCOUNT SIMILARY WHAT SHALL BE THE ADJUSTMENT OF SUM INSURED .

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4 Replies

CA. Kuldeep Singhi (Entrepreneur) (424 Points)
Replied 18 February 2014

You can show life insurance premium paid either as drawings or as investment as you think feasible.You can't show both together.

If you show it as investment.Following entry will be passed:

Life Insurance (Investment) Dr.

To Bank Cr.

If you show it as drawings.Following entry will be passed:

Drawings Dr.

To Bank Cr.

& no need to show vehicle & medical insurance as investment i.e. in balancesheet. The annual premium paid should be shown in P&L only because if nothing happens to your vehicle or health for which you have taken the policy then nothing will be paid under these policies i.e. they will lapse unlike life insurance policy where there is assured return at the end.

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CA SONIYA AGARWAL (self practice) (3005 Points)
Replied 18 February 2014

I DID NOT GET THE POINT CLEARLY

CA. Kuldeep Singhi (Entrepreneur) (424 Points)
Replied 18 February 2014

I have modified it, read it again & tell what you didn't understood

CA SONIYA AGARWAL (self practice) (3005 Points)
Replied 19 February 2014

means in insurance there is no guaranteeed return , if nothing happens to vehicle then all premium paid by us will lapse and it be loss to us , further does same happens in life insurance there is no guarante of sum assured after maturity or if individual survives at end of policy period.