Insurance is the most effective risk management tool which can protect individuals and businesses from financial risks arising out of various contingencies. The emotional and psychological loss can never be compensated, but at least the financial loss can be compensated with insurance. Though there are uncertainties in life which you cannot mitigate, but insurance will surely help you transfer the financial risk associated with the same. Show What is insurance?Insurance is a legal contract between two parties- the insurance company (insurer) and the individual (insured), wherein the insurance company promises to compensate for financial losses due to insured contingencies in return for the premiums paid by the insured individual. In simple words, insurance is a risk transfer mechanism, where you transfer your risk to the insurance company and get the cover for financial loss that you may face due to unforeseen events. And the amount that you pay for this arrangement is called premium. There is insurance available for various risks, starting from your life to mobile phones that you use. In the end, it’s essential to protect what is ‘important’ to you. How does insurance work?The concept of insurance works on the basis of ‘risk pooling’. When you buy any type of insurance policy from the insurance company for a specified period with specific cover, you will make regular payments (referred to as premiums) towards the policy. Similarly, Insurance Company collects premium from all of its clients (referred to as insured) and pools the money collected to pay for losses arising out of an insured event. In case the insured event takes place, and you make a claim, losses will be compensated by the insurance company from the pool of policyholder’s premiums. In case you don’t make a claim during the specified policy period, no benefits will be paid to you. However, there are various types of products offered by insurance companies today which also involve savings element attached to it. What is the deductible in insurance?Deductible refers to the amount of the claim that is incurred by the policyholder. The deductible amount, as the name suggests, is the amount that is deducted from the claim amount of an insurance policy. For instance, if the agreed deductible is INR 20,000 and the claim raised by the policyholder is ₹40,000 then the insurance company will only pay INR 20,000 to the policyholder. This, in turn, specifies that if only the claim amount exceeds the deductible amount, the insurance company will pay you. The higher the deductibles, the lower is the premium of the particular insurance plan and vice-versa. Deductibles play a vital role in deciding the practicality of your future claims. So, it is vital to pay utmost heed when deciding the deductibles for your insurance plan. Key features of insuranceInsurance policies are the much-needed support pillar one requires at the time of need. The salient features of insurance are-
Types of insurance availableThere are various types of insurance products available in India. Mainly, insurance products are classified as:
Life insurance covers you against the risk of death. Life insurance policies come in many variants such as term plans, endowment plans, whole life insurance plans, money back plans and unit-linked investment plans etc. Many life insurance products can be a great tool for long-term savings also as it comes as a combination of protection and savings. General insurance products cover financial losses caused by various risks other than death. General insurance products come in various types covering a wide range of risks such as health insurance, motor insurance, marine insurance, liability insurance, travel insurance and commercial insurance etc. Insurance is an effective risk management tool that protects what is precious for us –life, health, home and businesses etc. The requirement of insurance may vary from one individual to another, but there are certain types of insurance products that are must-have for every individual for ensuring a secure future. Must-have insurance productsKnowing the importance of insurance is the need of the hour. Following insurance products are the must-have for any individual today.
Likewise, there are many insurance types that are not suitable or required for every individual. It’s important to think about the benefits that you can reap before investing in an insurance plan. How to decide on the type of insurance you need? Before you buy any insurance, it’s important to understand the need for insurance. Here are certain things to keep in mind at the time of deciding what type of insurance you need.
List of benefits and importance of insuranceInsurance is a risk management tool not only benefits the individual and businesses but also benefits the society and economy in numerous ways. Following are some of the important benefits of insurance:
Following are some of the examples that demonstrate the importance of insurance:
To conclude, shield your life and important assets against all the uncertainties with the help of insurance. Know what insurance coverages you need, compare and invest wisely. It’s important to understand that the need for insurance is to secure what you love. |