What is Insurance and why do you need it? An overview

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What is Insurance and why do you need it? An overview

What is Insurance? A Brief Overview of the Insurance Sector.

We all have been advised to “buy insurance” more than once for life, health, home, and even for buying a new car or starting a new business.

But, often we shy away from buying insurance, thinking why do I need to buy a life or health insurance being a young and healthy person? Or, why do I need insurance for my car, I have good driving skills?

Contrary to such thoughts, no matter how healthy we are or how well we are doing financially, or how good a driver we are, we all need insurance. This is simply because insurance acts as a safety net that financially protects you and your family when chips are down.

In this blog, we will talk all about term life insurance, i.e. what it means, what are the most essential kinds of insurance, and why it is important.

What is insurance?

Insurance is a way of managing risks. When you buy insurance, you transfer the cost of a potential loss to the company in exchange for a fee, known as the premium. Insurance companies invest the funds securely, so it can grow, and payout when there’s a claim.

You pay a yearly, half-yearly, or monthly fee to the company to insure your life, health, business, vehicle, etc for a certain period. In return, the company pays for the financial damages in case of any harm to the insured person or object.

So, you are transferring the risk of a financial loss you might experience due to life’s uncertainties to the company for a small fee. For example, if you meet with a car accident and need to be hospitalized. Your “health insurance policy” will cover the medical costs for hospitalization. And, your “auto insurance” will pay for the damages to your car. Meanwhile, if you die during the accident, your family will receive an amount for your term policy.

Why Insurance is important?

1. Safety and Protection in Advance

Life is very uncertain and has a way of throwing surprises at you when you least expect them. In order to be fully prepared to deal with the contingencies in life. For example, life insurance plans safeguard your family and their financial needs, in case of your unfortunate and untimely demise. Your family should not be left alone to struggle in your absence. Along with the life cover, they also provide maturity benefits, resulting in a great savings corpus for the future.

2. Secure Future

Your present might be stable with your steady flow of income that is good enough to meet your family’s lifestyle needs. But, what will happen, if you suddenly have to face the end of your life? Will your family be able to meet their future needs without you?

This is where a term plan comes in handy. Secure the future of your family and buy a term policy that will help your family’s members receive a handsome amount to help them deal with their financial necessities.

3. Manage Risks

The company provides for effective risk management in life. The main enemy of life is uncertainties and one can plan for the uncertainties in life with coverage options. The risk of falling sick, the risk of losing your vehicle, the risk of facing an accident when traveling on your bike, the risk of your own death, and more can be dealt with with an effective policy.

In the case of term plans, your family will not have to face financial ordeal in the event of your untimely death and you can gain coverage options for the given term at an affordable cost.
Be it, life policy plans, health or vehicle insurance, the importance of insurance is to be understood by all.

4. Encourage Savings

Insurance is a great investment firm as well. Life insurance plans facilitate systematic savings by allocating funds in the form of a premium every year. At the end of the policy term, the policyholder can reap the benefits by getting a handsome amount that will result in a great wealth corpus.

Insurance encourages savings by “reducing your expenses” in the long run. You can avoid out of pocket payments for unfortunate events like medical ailments, loss of your vehicle, accidents, and more.

5. Peace of Mind

Live a peaceful life and manage the risks that you can face every day. Secure your life with insurance and ensure that you live your life tension-free. With rising medical costs, health insurance is mandatory to hold. Protect you and your family with the coverage of your health policy that will provide for your healthcare costs.

Insurance helps you:

  • Cover health care costs like vision care, dental care, prescription drugs, and other health-related items.
  • Provide for your family in the event of a death. There are life insurance options for long and short-term needs that protect your family’s home, and the cost of post-secondary education for your children.
  • Own a home, because mortgage lenders need to know your home is protected. It covers you for repairs and replacement of any damage. It provides protection against damage from perils like fire or water and financial responsibility that could result from a visitor being accidentally injured on your property.
  • Drive vehicles, because people could afford the repairs, health care costs, and legal expenses associated with collisions and injuries “without coverage options”. Auto insurance is also a legal requirement.
  • Maintain your current standard of living – if you become disabled or have a critical illness. It covers your day-to-day costs and “larger expenses” like your mortgage while you focus on your “health and recovery”.
  • Run a small business by managing the risks of ownership. Get owner, business, and employee coverage, and provide group benefits and retirement plans for employees.
  • Take vacations without worrying about “flight cancellations” or emergency “medical expenses” abroad.

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Tag: What is Insurance, Insurance overview