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Introduction
Most of us ignore the idea of taking up insurance assuming we don't require it. However, a sudden accident or a mishap brings us to the realization that life could end anytime for us without providing any hints or clues. In such situations, our dependents could be struck with a sea of liabilities such as rents, loans, EMIs, child expenses etc. The flow of income could be discontinued and there may be no alternate source. Financial security and protection are what an individual long for and life insurance is a perfect answer to that.
Insurance is a legal agreement between two parties i.e. the insurance company (insurer) and the individual (insured). In this, the insurance company promises to make good the losses of the insured on happening of the insured contingency.
The contingency is the event which causes a loss. It can be the death of the policyholder or damage/destruction of the property. It’s called a contingency because there’s uncertainty regarding the happening of the event. The insured pays a premium in return for the promise made by the insurer.
What are the Advantages of Insurance?
Insurance is an important addition to your financial portfolio. Insurance has various advantages that can guarantee your financial security and that of your family as well. Let us tell you how Insurance can be beneficial to you apart from giving your loved one’s financial benefits in case of your death or any unforeseen event.
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Protection for you and your family - Your family depends on your financial support to enjoy a decent standard of living, which is why insurance is especially important once you start a family. It means the people who matter most in your life may be protected from financial hardship if the unexpected happens.
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Reduce stress during difficult times – We don’t know what lies around the corner. Unforeseen tragedies such as illness, injury or permanent disability, even death – can leave you and your family facing tremendous emotional stress, and even grief. With insurance in place, you or your family’s financial stress will be reduced, and you can focus on recovery and rebuilding your lives.
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To enjoy financial security - No matter what your financial position is today, an unexpected event can see it all unravel very quickly. Insurance offers a payout so that if there is an unforeseen event you and your family can hopefully continue to move forward.
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Peace of mind - No amount of money can replace your health and wellbeing – or the role you play in your family. But you can at least have peace of mind knowing that if anything happened to you, your family’s financial security is assisted by insurance.
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A legacy to leave behind - A lump sum death benefit can secure the financial future for your children and protect their standard of living.
Different Types of Insurance Covers
Insurance in India can generally be divided into three categories:
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Life insurance - Life insurance provides financial protection to your life. Life insurance can be bought to make sure your dependents are financially secured in the event of your untimely demise. Life insurance is particularly important if you are the sole breadwinner for your family or if your family is heavily reliant on your income. Under life insurance, the policyholder’s family is financially compensated in case the policyholder expires during the term of the policy.
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Health insurance - Health insurance helps to cover medical costs for expensive treatments. Health insurance policies cover an array of diseases and ailments. You can buy a generic health insurance policy as well as policies for specific diseases. The premium paid towards a health insurance policy usually covers treatment, hospitalization and medication costs.
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Car insurance – Today, car insurance is an important policy for every car owner. This insurance protects you against any untoward incident like accidents. Some policies also compensate for damages to your car during natural calamities like floods or earthquakes. It also covers third-party liability where you have to pay damages to other vehicle owners.
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Education Insurance - Education insurance is somewhat similar to a life insurance policy which has been specially designed as a saving tool. Education insurance can be a great way to provide a lump sum amount of money when your child reaches the age for higher education and gains entry into college (18 years and above). This fund can then be used to pay for your child’s higher education expenses. Under this insurance, the child is the life assured or the recipient of the funds, while the parent/legal guardian is the owner of the policy.
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Home insurance – Every individual dream of owning a home. Home insurance can help with covering loss or damage caused to your home due to accidents like fire and other natural calamities or perils. Home insurance covers other instances like lightning, earthquakes etc.
FAQs
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Why do I need Insurance?
Insurance is a hedge against the occurrence of unforeseen incidents. Insurance products help you in not only mitigating risks but also helps you by providing a financial cushion against adverse financial burdens suffered.
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What is insurance?
Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection and losses are paid out of the premiums collected from the insuring public.
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How much Insurance do I need?
It is very important to have an adequate amount of coverage for each insurance policy. For any asset or property insurance, the value of the asset based on market value or reinstatement value should be taken into consideration before deciding the Sum Insured. If the Sum Insured is not adequate, the percentage representing the uncovered portion of the asset is to be borne by the insured.
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Can I get my policy cancelled once bought?
Yes, if you do not agree to any of the terms or conditions under the policy, you can get it cancelled within the free-look period stating the reason. In a life insurance policy, the free-look period is 15 days from the date of receiving policy documents.
End Note
Buying insurance is important as it ensures that you are financially secure and can face any type of problem in life. Insurance is a very important part of financial planning. Any form of insurance such as life insurance, health insurance or general insurance, can be bought offline as well as online. Policy selection depends on the specific purpose and individual needs.