What is insurance? Why is it important and why is it necessary?
You must have heard about insurance that it is useful in case of a sudden accident. It is helpful in case of loss caused by any kind of accident like health insurance, car insurance, life insurance, home insurance. If you take any type of insurance then you get help in case of heavy loss due to accident or sudden incident. The insurance company covers the losses incurred due to insurance like third party, fire, natural disasters etc. This gives you financial help in case of heavy losses.
In this blog we will understand what is insurance, why it is important, and how you can choose the best insurance policy for yourself.
What is insurance?
Insurance is a type of relationship between you and the insurance company in which you pay premium (monthly or yearly) which also gives you financial assistance as per the insurance. Your insurance covers the heavy losses incurred in an accident and whether the loss is third-party or car/health/fire/travel etc. It also provides financial assistance along with relief in case of losses incurred as per the plan taken.
Irrespective of the reason for the loss incurred :-
- Accident ya injury
- Natural disaster (such as flood, fire)
- Health emergency
- Death
- Theft ya property damage
Having insurance helps in case of future accidents and provides financial help to your family.
Why is insurance necessary?
Emergency that happens in life never comes with any notice, hence only insurance helps in avoiding the loss that may occur.
These are some reasons why insurance is important :-
1. Financial Protection
This gives you financial help in case of maximum loss or hospital expenses in case of an accident.
2. Peace of Mind
You know that by taking insurance, you will be protected from any accident which will keep your mind calm and helps in case of any loss that may occur.
3. Legal Requirement
There are several types of insurance policies:
- Auto insurance is necessary to drive a car.
- Health insurance is mandatory in many places.
- Businesses are required to provide workers’ compensation insurance.
4. Economic Safety
Insurance helps stabilize not just individuals but the entire economy. Taking risks is easier when you know you are covered.
Types of insurance
There are many insurances in the market in which most plan types are mentioned.
1. Health Insurance
This plan covers medical expenses- expenses that may occur due to your health getting affected or due to an accident- hospital bills, medicines, surgeries etc. It covers heavy losses that may occur due to this and also gives you financial support. For this, it is very important to take health insurance here.
2. Car/Auto Insurance
Insurance is legally necessary for any auto or car to drive on the road. It covers any damage caused by any reason. It covers the cost of repairs, injuries or third-party damage in case of a car accident. It is legally required in India.
There are mostly two types of auto insurance, which are given below.
- Third-Party Insurance – Third-party insurance covers losses such as third person, property, fire, etc. Third-party insurance is a legal practice in the country and this insurance is unique in India.
- Comprehensive insurance – Comprehensive insurance is a type of comprehensive car insurance. It covers damage to the car due to accident, theft, fire, natural disaster, etc. and also covers third-party insurance. Taking a single insurance covers the major losses that you may incur, which gives you financial help.
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3. Home owners ya Renters Insurance
Your home is your dream that you share, but it covers damage caused by a disaster or accident – like fire, theft, or flood.
4. Life Insurance
Here the plan covers your death as you are the earning head of the family and at that time your family needs financial support.
5. Disability Insurance
If you are unable to work due to illness or injury, it provides you with income replacement.
6. Travel Insurance
In today’s time travelling means having to go for a fashion or some work in which case – the trip gets cancelled, luggage gets lost or any medical express coverage for your health.
7. Business Insurance
This is very important for business owners because it is also legally binding. It covers all the losses that may occur in your business like property damage, lawsuits, employee issues etc.
How to choose the best insurance?
Buying insurance can be a bit confusing, but with a few simple steps you can make the right decision:
1. Understand your needs
First of all, you should decide what you need protection for – health, car, life or home? And who are your dependents, then choose the insurance.
2. Understand the terms
- Premium – what you pay regularly
- Deductible – how much you will pay yourself first
- Coverage limit – how much maximum you will get
- Exclusions – what things are not covered
3. Compare
Take quotes from different companies and check the add-on and benefits offered in them.
4. Check the Company’s Reputation
Check the plan review of the company from which you are taking insurance, check its claim settlement ratio and also get an idea of its financial strength.
5. Review the policy regularly
Your life changes – marriage, child birth, job change – review your insurance every year as per your needs before purchasing it.
Common Insurance Myths
There are some wrong assumptions that people make when thinking about insurance:
- “I don’t need it right now.”
Emergencies don’t come with prior notice, and it is cheaper to buy insurance at a young age.
- “Companies reject claims.”
Many companies approve genuine claims on time.
- “I can’t afford insurance.”
Today’s plans are flexible. You can start with basic coverage.
- “All policies are the same.”
No! Coverage, premium, and terms are different for every company and plan.
Conclusion
Insurance may not be useful to you at this time, but it is a financial step. Getting the right insurance will help you and your family in financial crisis situations and this is your first priority.
Just do some research, understand your needs, and choose the right policy. When the need arises, you will thank yourself that you took insurance!