What Is Insurance and Why Is It Important?
Insurance is a financial protection plan that you put in place to protect yourself against unexpected events in your life. Simply put, you pay a monthly or annual premium; in return, if a major financial problem occurs, the insurance company will help you cover those expenses.
Basics of Insurance
The basic principle of insurance is very simple – a system where many people contribute small amounts to cover large losses for a few. This creates financial security for everyone.
Risk Coverage
The main role of insurance is to protect against many risks in life (accidents, illness, property damage, loss of income, etc.). With risk coverage, you don’t have to bear the full burden of the loss alone.
Why is this important?
Without insurance, a major medical expense or accident can drain your savings. But with insurance, the company shares that burden. This not only protects your financial stability, but also gives you peace of mind.
Types of Insurance You Should Know About
No one can guarantee that our lives will go smoothly. Unexpected problems will arise at any time. In such cases, the right insurance taken in advance will save us and our family.
Life Insurance – If you are the primary income earner of the family, life insurance is a must. If something happens, your family will not be burdened financially, and it will help you continue with daily expenses, loan installments, and children’s education.
Health Insurance – Medical expenses now usually run into lakhs. Having a health policy will reduce hospital expenses and save your savings.
Vehicle Insurance – If you own a car or bike, this is not only legal but also important for safety. It will avoid big expenses in case of accident, theft, or damage.
Home Insurance – Home is not only a dwelling; it is the result of our hard work and the accomplishment of our dreams. Hence, it is extremely crucial to safeguard it. With home insurance, even in case of sudden incidents like fire, flood, theft, you will receive financial support to restore the damage incurred. This simplifies encountering unforeseen losses.
Travel Insurance – Travel is always a pleasant experience, but occasionally there are issues. When you travel a long distance or outside the country, if you lose your luggage, suffer a medical condition, or experience a flight delay, travel insurance can pay for them and enable you to finish your journey comfortably and without worries.
How Does Insurance Work?
Insurance is a system where everyone shares the losses of someone. Simply put, many people pay small premiums every month or year. Together, those amounts help that person to meet those expenses if a major financial problem (accident, illness, property damage, etc.) occurs.
When you buy an insurance policy, the company will provide you with financial assistance if the risks mentioned in the policy happen. For that, you have to follow the rules stated in the policy terms and conditions.
For instance, if you have a health insurance, when one day you develop a health issue and must be admitted to the hospital, the company can send payment directly to the hospital. At other times, even if you first pay out of your pocket, the company will reimburse you with the amount after you submit bills and proof.
Likewise, if you purchase vehicle insurance, if your car or bike is damaged during an accident or has been stolen, the insurance company will incur the cost of repairing or replacing it. In this way, your savings will not be impacted by unexpected expenses.
Factors to Consider Before Buying Any Insurance Policy
When buying an insurance policy, it is not a good idea to choose it just because it is “available at a low premium” or “everyone buys it”. You should first make sure that the policy you are buying really provides the protection you need for your life and assets.
First, clearly understand your needs. Do you need life coverage? Or do you need health protection to cover medical expenses? Or, do you need insurance for assets like your car or home? Each type of insurance has its own benefits, so it is important to choose the right one for your situation.
Next, examine the coverage details. In addition to the important benefits, carefully read the policy terms to see what is covered, what is not covered, and what are the limits on how much you can claim.
Third, compare different plans. Price, features, claim settlement ratio, etc. vary from company to company. Even if you have to pay a slightly higher premium, a company with a good track record is a safer choice.
Fourth, see if the claim process is easy. Even if you have insurance, it is useless if it is difficult to claim.
Finally, consider your budget. The right policy is one that you can afford to pay for over the long term without being burdensome.
Common Mistakes People Make When Choosing Insurance
When buying insurance, many people make some basic mistakes. First, choosing a plan because it is cheap – even if the premium is low, if the coverage is not adequate, it will not benefit you.
Second, buying without reading the terms and conditions in full. Some policies can be denied due to conditions when making a claim. Therefore, it is important to read the fine print as well.
Third, buying a plan without considering your life situation. For example, if you have a lot of family responsibilities, the life insurance sum assured should also be high.
Fourth, buying without looking at the company’s reputation. It is important to choose a company with a good claim settlement record and customer support.
Finally, buying without considering future needs. Even benefits that you do not need now may be important to you in the future.
How to Compare and Choose the Right Insurance Provider
Before buying insurance, it is a bad practice to make a decision based solely on the premium amount. First, compare several plans. Even though they offer the same type of coverage, some plans may offer additional benefits (free health check-up, accident cover, etc.).
Read reviews – You can find out about the experiences of policy buyers online, the speed of claim settlement, and the quality of customer service. However, since not all reviews are true, it is better to get information from various sources.
Check company credentials – You should buy a policy only from companies that are accredited by IRDAI (Insurance Regulatory and Development Authority of India). This will provide legal protection during the claim process.
Also, before buying through an insurance agent or online portal, check their license and background.
Choosing the right plan means choosing a policy that suits your needs and budget, from a reliable company, and comes with good reviews.
Do You Really Need Insurance? Self-Assessment Tips
Buying insurance is a big financial decision. Some people think, “Everyone else is buying it, so why not?” But before buying insurance, you need to assess whether you really need it.
First – consider your responsibilities.
If you are the sole income earner of your family, how will your family cope if an unexpected accident or health problem occurs? Insurance can be a great safeguard in such cases.
Next – assess your savings.
Even if you have an emergency fund for 6 to 12 months of expenses, you cannot afford to go without insurance if you have major medical expenses or property damage.
Consider your lifestyle.
If you have expensive assets like a car, house, bike, insurance is essential to protect them.
Don’t forget your future goals.
It is important to protect your children’s education, marriage, retirement planning, etc. without affecting them.
By doing a small self-assessment of all these things, you can clearly know what type of insurance and how much coverage you need.
Myths and Facts About Insurance
There are opinions of different people regarding insurance. Some are just near the truth, and some are misconceptions. If we know what are facts and myths, then our financial outcomes will be more favorable.
Myth 1: Spending money on insurance is a waste.
Fact: Insurance is not a cost, but an investment towards safeguarding. It prevents significant financial losses such as accidents, illness, or destruction of property.
Myth 2: Insurance is not required at an early age.
Fact: Premiums are lower at a young age. Therefore, buying early is beneficial.
Myth 3: Insurance provided by the company is enough.
Fact: Company coverage often does not meet your complete needs. It is safer to have a personal policy.
Myth 4: Life Insurance is only used in the event of death.
Fact: Some plans have many benefits like maturity benefits, loan facility.
Conclusion
There are some things in life that we may never need. Insurance is one of them. But experience shows that its value is only realized when we don’t have it. An accident, a sudden health problem, or damage to a home or vehicle—these don’t give anyone any warning. Instead of panicking when you look at your bank balance, having insurance can give you peace of mind.
I have seen that people who bought it when they were young because the premium was cheap, have benefited greatly ten years later. At the same time, those who ignored it because they thought they didn’t need it have suffered from high costs later.
Preparation is always important in our lives. Buying insurance is an important part of that preparation. It is not just an expense; it is a financial protection for your family in the future.
Therefore, spending a few rupees today for something that you don’t know whether it will happen tomorrow or not is actually a huge investment in your peace of mind and financial security.
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