Insurance is sold but never bought. People do much research for rate shopping for the car, home, mobile phones and other gadget insurance premiums but they shy away from buying a life or health insurance. They need insurance for the car as it is mandatory. Life/medical insurance also should be made mandatory to get married, to have family.
What is insurance?
Insurance is a legal contract between you and the insurance company, the insurer in that insured person agrees to pay a monthly or yearly fee i.e. insurance premium to the insurance company to insure his life, health, home, vehicle, etc. for a particular period and in return insurer agrees to pay for the financial damages to the insured person or object. It will act as a tool that protects financially you and your family when chips are down.
Here the risk is transferred to the insurance company for a small fee. For example, if a person meets with a car accident and gets hospitalized. His health insurance policy will cover the hospitalization expenses; car insurance will pay for the damages to his car. If he dies during the accident, his family will receive a lump sum amount for his life insurance. What if there was no insurance for the car, health and life?
So having insurance is essential for any person and one should avail it as per his needs and priorities. Most important types of insurances are required for any one are: Life insurance, health insurance, liability insurance
Life insurance: Dying early is a risk if financial arrangements are not made for children’s education/marriage, retirement corpus for spouse running EMIs of a housing loan. Insurance protects his family financially by paying a sum assured if he dies during the policy tenure, and family can continue the same life style when he is not around.
There are different types of life insurance policies, like endowment, money back, term insurance, ULIPs, etc. Out of which, term insurance provides greater risk coverage with a lesser premium as compared to other types. But money is not paid to the policyholder if he survives the policy term. Cost of insurance is cheapest for the term plan. With endowment, money back or ULIP policies, the policy holder receives a lump sum after the policy tenure, but the premium amounts are much higher as compared to term insurance.
Health Insurance: It is the best way to ensure you and your family to get the medical care without worrying about the cost. The cost of medical treatment of the insured person(s) is borne by the insurance company. Importance of it is felt by most of the people after the pandemic like Covid-19. Also please read our article, “Are both Health insurance and Mediclaim the same?”
Liability Insurance: It is availed to insure cars, businesses, home, etc. By taking a liability insurance –if there is of any damage to the insured object or property during the policy tenure, the insurance company will financially compensate the owner of the policyholder.
Why one need to have insurance?
1: Insurance for family’s financial security and stability
If a person doesn’t have adequate life insurance, his family has face financial hardships with his untimely demise. If he and his family do not have sufficient health cover, there will be huge medical bills during any hospitalization. So it is essential to have adequate amount of insurance.
2: Insurance for mental peace
The premium is the price paid for insurance to the insurance company that will cover the damage in case of an unforeseen event, that guarantees that risk is covered which will give peace of mind. If there is any eventuality, family would be able to sail through the hard times due to insurance.
3: Insurance lessens stress during difficult times
Any unforeseen event can completely turn things upside down and create financial stress. With adequate insurance, any financial strain can be taken care.
Having enough insurance is an essential part of financial planning. It can will save a person/family from financial hardships in case of unforeseen eventualities. However, the decision to take insurance depends on requirement, the benefits of the policy, ability to pay the premium.
By Team Wealth ATM
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