What Is Insurance And Why Is It So Important?

by Charlotte Lancaster We believe in Quality

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

But, usually, we shy away from buying insurance, thinking why do I need to buy a life or health insurance being a youthful and healthy person? Or, why perform I need insurance coverage for my vehicle, I have good driving skills?

Contrary to such thoughts, no matter how healthy we are or how well we have been doing financially or how good a driver we are, we all need insurance. This is simply because insurance works as a safety net that financially protects you and your family when chips are down. Two Wheeler Insurance Third Party, Building Insurance India

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

What is insurance?

The concept of insurance is very simple to understand. You pay a regular or yearly fee to the insurance company to insure your life, health, vehicle, property, etc for a certain period. In return, the insurer pays for the monetary damages in case of any harm to the insured individual or object.

Which means you are transferring the risk of a financial loss you might experience due to life’s uncertainties to an insurance provider 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 car insurance will pay for the damages to your vehicle. Meanwhile, if you die during the accident, your family will receive a lump sum amount for your term insurance.

From arts to household pets, there is insurance available for several things, and one should avail of insurance as per their needs and priorities. But there are 3 types of insurances that are most essential.

The 3 most important insurances are:

Life Insurance:

Life insurance financially protects your loved ones in case you die an early death. Here is how it works. You pay out a regular high quality to the insurance company for a specific number of years. In exchange the insurance provider pays a sum assured to your family in the event that you die through the policy tenure.

There are different types of life insurance policies and in some of those, you get a lump sum amount if you live through the policy tenure. For instance, term insurance policy provides higher coverage for a lower premium amount when compared with other life insurance coverage guidelines. But no money is paid to the policyholder if he survives the term. Meanwhile, for plans like endowment or moneyback, the policyholder receives a lump sum after the policy tenure ends. For such policies, premium amounts are much higher against the coverage, in comparison with term insurance.

Health Insurance:

Health Insurance is a way to ensure you and your family can get the best medical care without you worrying about the cost.

In a health insurance plan, the expense of medical treatment of the insured person(s) is borne by the insurance company. In exchange for a regular premium compensated by you, the insurance provider will pay for all the expenses related to an disease for which the insured person needs treatment. This includes hospitalization, daycare, blog post, and pre-hospitalization, etc. And with the cashless facility, your costs is directly settled between the company and the hospital

Liability Insurance:

Such insurance is definitely availed to insure properties, cars, businesses, etc. On investing in a liability insurance plan -like car insurance, home insurance, business insurance coverage, in the event of any damage to the covered object or property during the policy tenure, the insurance company will financially compensate the owner of the policyholder.

Today that you know the important type of insurance policy, let’s talk about why do you need insurance.

Reasons everyone should get insurance

As we said at the start, most people think insurance is an unnecessary expenditure. The reason is that we feel self-confident about our long term and our ability to tackle unseen conditions. But there is a massive difference between our perceived ability and reality. For instance, a few years of savings can vanish in case of a medical emergency. That’s just one example.

Here are 3 reasons why getting insurance is important

#1: Insurance ensures family’s financial stability

No matter how much you have managed to save or what your monthly income is, an unexpected event can burn a huge hole in your pocket or can simply jeopardize your family’s financial upcoming.

For illustration, if you do not have adequate life insurance, your family might have to go through financial hardship if you were to meet with an untimely dying. Though no amount of money can replace the loss of loved ones, having life insurance coverage would conserve them from going through monetaray hardship. Meanwhile, in the event that you or your loved ones do not have enough health insurance, then huge medical bills during any therapy can completely shake your finances.

So it is essential that you cover yourself, your family having an adequate quantity of insurance.

#2: Insurance coverage brings satisfaction

The premium you pay to the insurance company is the price that guarantees that the insurance provider covers the damage in the event of an unforeseen event. And, that guarantee that your risk is covered brings reassurance.

For example, let’s suppose you die an untimely loss of life at a time when you still have several milestones to attain like children’s education, their marriage, a retirement corpus for the spouse etc. Also there is a debt as a housing loan. Your untimely demise can put your loved ones in a hand to mouth circumstance. But, if you would have bought expression insurance considering all these factors, your family would be able to sail through the hard times.

#3: Insurance policy reduces stress during difficult times

No matter how tough you try to make your daily life better, an unforeseen event can completely turn things upside down, leaving you physically, emotionally and financially strained. Having sufficient insurance helps in the sense that at least you don’t have to think about money during such a hard time, and can focus on recovery.

For instance, suppose you or someone in your loved ones had a heart attack and requirements immediate hospitalization. Such treatments at good hospitals can cost lakhs. So having medical health insurance in cases like this, saves you the worries and tension of arranging money. With insurance in place, any economic stress will be taken care of, and you can concentrate on your recovery.

Bottom Line:

Having insurance - living, health, and liability - is an essential part of financial planning. It can save you from financial hardship in case of any unforeseen situations. However, the decision to get insurance should be determined by three factors - requirement, the benefits you obtain from the plan, and your capability to pay the superior.