How to Plan your Insurance & Insurance Tenure?
An individual’s life and assets are encircled by the risk of death, destruction or disability. These risk factors cause financial losses. Insurance is a practical way to minimize the burden of these losses which transfers the risk to an insurance company.
What is Insurance?
Insurance is termed as a legal contract between two parties – the insurer i.e., the insurance company and the insured i.e., an individual. The insurance company assures the insured to make good the losses occurred in case of happening of an uncertain event the insured. The uncertain event can be anything such as death of the policy holder, destruction of the property of the insured, etc. This uncertainty is termed as contingency. The insurer pays premium to the insurance company in return to this promise.
How does it work?
The insurer and the insured enter into a legal agreement called the insurance policy. It contains all the details and conditions of the insurance amount to be paid to the insurer at the time of maturity or in case of death along with nomination details. Taking insurance means securing yourself and your family from financial crises. The maturity amount is more than the premium paid over the entire period. The insurance company evaluates the applications and may decline proposals of high-risk individuals.
Kinds of Insurance
The name itself means insurance of one’s life. We purchase life insurance to secure our family in the event of an uncertain death. Life insurance is very important if you are the sole bread earner and the family is dependent only on your income. If the policy holder dies during the term of the policy then the family is entitled to receive the compensation.
Read also: Insurance and it’s different types
Every individual have different requirements at various stages of life. The thumb rule is when you become a parent, you should have enough coverage till your youngest child completes education. There are many financial challenges for the current generation. 25 years of education, 30 years of work and rest retirement. The tenure of your insurance plan is based on these factors. The longer your tenure the better and comfortable your retirement.
There are many factors that enables you to opt for life insurance as the first step to investment planning.
- Family Protection:
Life insurance enables protection and security to your family. They can enjoy almost the same standard of living and be secured from the financial hardships in uncertain events.
- Reduces stress during crisis:
We are unaware of what’s next in our lives. Unexpected tragedies injury, illness, permanent disability or even death leaves the family in a tremendous stress and emotional grief. Insurance will reduce the financial stress and one can concentrate on rebuilding their lives.
- Attain financial freedom:
Irrespective of what financial status you are maintaining today, an unforeseen event can disrupt everything. Insurance provides a pay-out that will aid you in your hard time and you and your family can move on without hassles.
- Inheritance to family:
With insurance you have a lump sum death benefit which will leave your children to accomplish their desired goals and dreams.
An insurance that covers medical cost for treating various illness is termed as Health Insurance. Different kind of health insurance plans cover different ailments and diseases. You can purchase a plan for specific disease or go for a generic health insurance plan. The health insurance policy premium covers all the expenses including medication, hospitalisation and treatment expenses. Health insurance plans comprise of
- Critical illness plan
In health insurance most basic plan is Mediclaim. It covers the treatment expenses when you hospitalised. It is paid as per the actual expenses incurred by submitting the original hospital bills. These plans mostly cover the whole family upto a specified limit.
Critical Illness Plan
Critical illness Insurance plans covers certain life threatening illness. These diseases usually require an elongated treatment and medication hence the pay-out is done on the basis of the critical illness cover selected by the insured and not the actual cost incurred during hospitalisation.
Need for health Insurance
Illness does not come with intimation and it can strike anytime. The cost of treatment of a major illness can cause strain on your finance and you might end up in debts or compromising on your child’s quality education. So to avoid such a situation smart people opt in for health insurance as early as possible. As age increases the premium increases or you might be denied of this facility.
General Insurance (GI)
General Insurance is termed as a contract between two parties – an insurer and the policy holder, wherein the former has financial interest in the property covered. The insurer is assured of financial protection in case of any damage or loss of that particular asset.
How does it work?
For example: While driving your car gets hit by another vehicle and causes a dent and damage on the bumper of the car. The cost of repairing the damage done to your car comes to Rs. 8000/-
In this case your car insurance will help you reimburse the amount incurred on the damage (conditions specified). Here your car is the asset in which you have financial interest.
GI in India comprises of Travel, Motor, Marine, commercial and Home Insurance. Each of these has a certain risk factor attached to it and thus requires a financial protection in case of any loss arising from natural calamity, disaster, accident, theft, etc.
Travel Insurance: It covers the financial loss arising due to medical or non- medical emergencies which includes loss of baggage, passport, accidental deaths etc.
Motor Insurance: To be eligible and legally drive in the country motor insurance is mandatory. It can be categorised into Third party Liability and Comprehensive Package Policy. Digit Insurance is another facet which acts as a shield to your vehicle.
Home Insurance: It is comprehensive policy that covers all the assets and valuables with respect to your home.
Commercial Insurance: It covers financial losses or damages arising in business operation. It may include, marine insurance, engineering insurance, property insurance, employee benefit plans etc.
From the above we can conclude that in our day to day life we can come across uncertain events related to our life, business or other assets. It is therefore very important to get yourself and your assets and property insured. It will reduce your financial stress to a great extent.