Having the right type of insurance is the essence of sound financial planning. Some of us may have some form of insurance but very few fully understand what it is and why you should have it. For many Indians insurance is an investment or a good way to save taxes. Ask the average person about their investment and they will proudly tell you about the insurance product as part of their main investment. About 5% of Indians are insured and the number of insured is very low. There are very few insurance insurers like that. Perhaps no other financial product has seen such a widespread sale at the hands of highly motivated brokers selling products linking insurance to investments that pay them oil commissions.
What Is Insurance?
Insurance is a means of propagating a significant financial or personal risk to a large group of people or business entities in the event of a aforementioned adverse event. The cost of obtaining insurance is a monthly or annual compensation paid by the insurance company. With the purest form of insurance if the aforementioned event does not occur until the prescribed period the amount paid as compensation can be refunded. Insurance is a good way to spread the risk among many people who are insured and lighten their financial burden in the event of a shock.
Insurance and Insurance
If you want to be protected from financial risk and enter into an agreement with an insurance provider it becomes insurance and the insurance company becomes your insurance.
In Life Insurance this is the amount that the insurer promises to pay when the insurer dies before the specified time. This does not include bonuses included in the case of non-temporary insurance. For non-life insurance this guaranteed amount can be called Insurance Cover.
To protect the financial risk of the insurance provider, the insurer must pay compensation. This is known as premium. They can be paid annually, quarterly, monthly or as stipulated in the agreement. The total amount of premiums paid is several times lower than the insurance cover or it would not make much sense to claim insurance. Factors that determine the premium cover, the number of years the insurance is required, the age of the insurer (individual, car, etc.), to name a few.
The beneficiary defined by the insurer to obtain a guaranteed amount and other benefits, if any is proposed. In the case of life insurance it should be for someone other than the insured.
The number of years you want to be protected is the policy period. The term is determined by the insurer at the time of purchase of the insurance policy.
Certain insurance policies may offer other features such as extensions other than actual cover. This can be achieved by paying extra premiums. If those items were purchased separately they would be very expensive. For example you can add to a passenger personal accident with your life insurance.
Commitment Amount and Value Payment
If you want to get out of the policy before its expiration you can stop it and get your money back. The amount the insurance will pay you for this is called the commitment amount. Policy no longer exists. Instead if you stop paying premiums in the middle of the way but don’t withdraw the money that fee is called paid. At the end of the term insurance is paid in proportion to the amount paid.
Now that you know the terms this is how insurance works in clear terms. The insurance company puts the premiums into a large group of people who want to prevent some kind of loss. With the help of its researchers the company comes up with a statistical analysis of the probability of actual losses occurring in a certain number of people and corrects premiums considering other factors as mentioned earlier. It applies to the fact that not all insurers will lose at the same time and many may not experience any loss at all during the contract.
Types of Insurance
Likely any financial risk can be prevented. To protect loved ones from financial loss due to premature death can be life insurance. To protect yourself and your family from unforeseen medical expenses, you can opt out of the Mediclaim policy. To protect your car from being robbed or injured in an accident you can have car insurance. To protect your home from theft, damage from fire, floods and other accidents you can choose home insurance.
This type of insurance provides financial security in the event of premature death of the insurer. There are 24 life insurance companies playing in this stadium where Life Insurance Corporation of India is a public company. There are several types of life insurance policies that are the easiest way is term term plan. Other complex goals are the endowment program, a lifetime plan, a rebate scheme, ULIPs and pensions.
All other insurance other than Life Insurance is under General Insurance. There are 24 general insurance companies in India of which 4 are National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd located in the public area.
The largest pie for non-life insurance in terms of written premiums was shared by car insurance followed by engineering insurance and health insurance. Other types of insurance offered by companies in India are home insurance, travel insurance, personal accident insurance and business insurance.
There are so many policies to choose from. Because we cannot see our future and stop unpleasant things from happening, having an insurance cover is a must. But you need to choose carefully. Don’t just go with what the agent tells you.
Read the policy documents to find out what is covered, what features are offered and what events are not covered by insurance.
1. Know Your Needs
Find out what property or event should be protected from loss / damage. Are you life, health, car, home? Next find out what types of damage or risk your assets may be exposed to. This will tell you what factors to look for in a policy. There will always be unpredictable losses and the cost of dealing with them can be very high. For example, no one can predict that they will never suffer from serious illnesses even if they are in good health at the moment.
The biggest mistake when it comes to buying insurance, especially life insurance is to view it as an investment. Clubbing insurance and investing in one product is a bad idea. You lose both of these entities because in the premiums you paid the extra money would not be available on the timeline and if the premiums were invested in better tools your profits could be several times higher.
Beware of agents who want to tell you that you have purchased unnecessary policies such as child life insurance, credit card insurance, unemployment insurance and more. Instead of buying separate insurance for certain assets or events look for policies that cover multiple events that may occur under the same cover. Whenever possible choose sensible riders instead of buying them separately. Unless there is a good chance the event is taking place you do not need its own insurance. For example, unless you are exposed to a lot of accidents and disabilities because of your job or other reasons you do not need Accident insurance. A good Life Insurance insurance with an accidental passenger or a premium passenger or a disability passenger will do the job.
2. Understand the Product Features and Cost
The worst way to choose an insurance product or insurance is to improperly follow the recommendation of an agent or friend. The best way to do this is to buy all the products that suit your needs and filter out those that offer lower premiums with the same criteria like age, cover price, etc. All the information you need about the product features and charges will be provided on the company website. Many insurance policies can now be purchased online. Buying online is very smart because the premiums are lower due to the elimination of agency funds. If you shop offline in the event of life insurance, tell the agent that you are only interested in time insurance.
Before you sign a contract make sure you understand what items are covered and what items are released on the cover. It can be very frustrating to read in the event of damage or loss if the item you hope to cover and insurance is actually removed. So many people rush to their insurance after treatment for a disease to see if a particular disease has been excluded. Understand details such as when the cover starts and ends and how claims can be filed and how losses can be reported.
Don’t choose an insurance company because your local friend is their agent and never let them persuade you to buy from them. Insurance premiums are valid for years and mean a large amount of money. In addition to the premiums charged see the service provided. In the event of an accident you want the collection of claims to be processed difficult by uncooperative employees in the insurance company’s office. Seek answers from people with more experience with the company with questions such as how the company has more customers and how much it responds when it comes to handling claims.
3. Evaluate and improve over time
As you move from one stage of life to another or when asset insurance changes your policies should be reviewed. Maybe your cover will need to be raised (or lowered) or you will need to lift it with the passenger. There are some situations where you need to update your cover when you get married, when you have children, when your income goes up drastically, when you buy a house / car and when you are responsible for your aging parents.