What is insurance?
In formal way, insurance means financial security against accidental and unforeseen events for a person and his family for a certain amount of premium! In casual language, a person pays a small amount of money every month/quarter/year to get financial security of bigger amount at the time of any mishap. this sector has lower penetration in India compare to some other nations around the world.
How people look at it?
India has highest population in the world, but lower proportion of people being insured. Main resone for this lower prpotion is, most of the Indian population focus on short needs first, they have too much to handle in that limited income. So a middleclass or lower middleclass person in India doesn’t think of getting insured. According to all financial planners and legal advisers and investment planners opinion, insurance is must have, and it should be treated as investment! In a popular opinion a person shall always first pay for the premium and then spend the rest of the income.
Let’s understand different type of insurance and its importance in life
- Life insurance
this is where the insurer gets the insurance cover for their whole life, or until he stops paying premium or he surrenders the policy. In life insurance the beneficiary of the insured whose name mentioned in the document, gets the sum insured at the time of death of the insured. In some polices there is option available to get the sum assured after certain age or after agreed time. Life insurance is probably the oldest n traditional instrument available.
- Term insurance
this is something same as life insurance but it is for shorter period of time e.g. for 10 to 20 years. The premium for term insuranc is very low compare to life cover. In life insurance it is sure that you are getting back the premium you paid, in term insurance if the tenure of cover gets over without need of claiming the money, you don’t get the premium back. That’s why term insurance gives larger sum of money in lower premium for shorter term. It can give certain part of insured amount to the insured if they met with and accident and become disabled of unable to earn further. And In case of the insured death within the term of policy, the beneficiary from the family gets the full sum insured.
- Health insurance
It helps an insured pay its medical bills in case of hospitalization in case of illness and critical health condition. It covers hospital bills, medical bills, diagnosis expenses and saves an insured from hefty expense at the time of illness.
Now lets see other than personal cover policy
- Car/Bike/Vehicle insurance
This is also known as third party insurance, which covers damages done to insured’s vehicle and also damages done by insured’s vehicle. It covers damages done to engine, damages done to body of the vehicle, damages done in case of fire, damages done in case of natural calamities; damages done to third party vehicle, injuries or death of the third party, damages done to third party property, and personal cover of the driver. The facilities available to third party insurance do vary with categories of vehicles e.g. car, truck, commercial vehicle, motorbike etc…
- Other insurances
In this world of uncertainty, good news is that almost everything important to human life can get insured! Business, boats, planes, cargo ships and the container it carries, gold ornaments, storage goods. properties, traveling, almost every precious thing can have insurance n protection against unfavourable scenarios and its outcome.
Why being Insured is essential, specially for middleclass a lower middleclass?
Middleclass and lower middleclass people’s main problem is they have less saving and more liabilities. In such situation if any medical expenses or accident expenses or in case of death of the breadwinner of the family can turn the world upside down for them. Having insurance to meet these unforeseen large expenses can help them having their life rhythm unaffected. Such events take toll on mental and social condition of person’s family.
Being insurred can give a person social security as well as financial and mental security. In case of disability due to accident, a person can get certain amount of insurance money, so they can meet the educational and fundamental needs of the dependents. In case of a person’s death by insurer’s vehicle, even they get compensation money to meet the social security of their family. Insurance is very important instrument to invest in.
Insurance premium always being calculated on insured’s capacity of earning and provide cover accordingly, so it’s never too expensive to afford for anyone.