Everybody has heard multiple times to purchase insurance, whether it be for life, health, or even for getting a new automobile or starting a new business.
But frequently, we put off getting insurance because we reason, “I’m young and healthy; why do I need to acquire life or health insurance?” Or, given that I drive safely, why do I need vehicle insurance?
In contrast, regardless of how healthy we are, how financially secure we are, or how safe our drivers are, we all require insurance. Simply put, insurance serves as a safety net that safeguards your family’s finances in times of need.
In this blog, we will cover everything related to insurance, including its definition, the most crucial types, and its significance.
What is insurance?
The concept of insurance is very simple to understand. You pay a monthly 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 financial damage in the event 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 an insurance company for a small fee. For example, if you get into a car accident and need to be hospitalized, Your health insurance policy will cover the medical costs of hospitalization. Your car insurance will pay for the damage to your car. Meanwhile, if you die during the accident, your family will receive a lump sum amount for your term insurance.
From art to pets, there is insurance available for a number of things, and one should avail of it as per their needs and priorities. But there are 3 types of insurance that are most essential.
The three most important types of insurance are:
Life Insurance:
Life insurance financially protects your family in case you die an early death. Here is how it works. You pay a regular premium to the insurance company for a specific number of years. In return, the insurance company pays a sum assured to your family if you die during 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 example, term insurance provides higher coverage for a lower premium amount as compared to other life insurance policies. But no money is paid to the policyholder if he survives the term. Meanwhile, for policies like endowment or moneyback, the policyholder receives a lump sum after the policy tenure ends. For such policies, premium amounts are much higher than the coverage as compared to 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.
The cost of medical treatment for the insured person(s) is borne by the insurance company under a health insurance policy.In exchange for a regular premium paid by you, the insurance company pays for all the expenses related to an illness for which the insured person needs treatment. This includes hospitalization, daycare, post-hospitalization, and pre-hospitalization, etc. And with the cashless facility, your bill is directly settled between the company and the hospital.
Liability Insurance:
Such insurance is available to insure properties, cars, businesses, etc. When buying liability insurance, like car insurance, home insurance, or business insurance, in the event of any damage to the insured object or property during the policy tenure, the insurance company will financially compensate the owner of the policyholder.
Now that you know the important types of insurance, let’s talk about why you need insurance.
Reasons why everyone should obtain health insurance
As we said at the start, most people think insurance is an unnecessary expense. The reason is that we feel confident about our future and our ability to tackle unseen circumstances. But there is a huge difference between our perceived ability and reality. For instance, a few years of savings can vanish in the event of a medical emergency. That’s just one example.
Here are 3 reasons why getting insurance is important.
#1: Insurance ensures a 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 future.
For example, if you do not have adequate life insurance, your family might have to go through financial hardship if you were to meet an untimely death. Though no amount of money can replace the loss of loved ones, having life insurance would save them from going through financial hardship. Meanwhile, if you or your family do not have enough health insurance, then huge medical bills during any treatment can completely shake your finances.
So, it is essential that you cover yourself and your family with an adequate amount of insurance.
#2: Insurance provides comfort.
The premium you pay to the insurance company is the price that guarantees that the insurance company will cover the damage in case of an unforeseen event. And that guarantee that your risk is covered brings peace of mind.
For example, let’s suppose you die an untimely death at a time when you still have several milestones to achieve, like your children’s education, their marriage, a retirement corpus for your spouse, etc. Also, there is debt such as a housing loan. Your untimely demise can put your family in a hand to-mouth situation. But, if you had bought term insurance considering all these factors, your family would be able to sail through during the hard times.
Insurance reduces stress during difficult times.
No matter how hard you try to make your life better, an unforeseen event can completely turn things upside down, leaving you physically, emotionally, and financially strained. Having adequate 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 example, suppose you or someone in your family had a heart attack and needed immediate hospitalization. Such treatments at good hospitals can cost lakhs. So having health insurance, in this case, saves you the worry and stress of arranging money. With insurance in place, any financial stress will be taken care of, and you can focus on your recovery.
Bottom Line:
Having insurance—life, health, and liability—is an essential part of financial planning. It can save you from financial hardship in the event of any unforeseen circumstances. However, the decision to buy insurance should be determined by three factors: the requirement, the benefits you get from the policy, and your ability to pay the premium.
