Insurance is a policy or a contract where the Individual or an entity gets financial protection from the Insurance company that aims to mitigate the impact of unforeseen events offering a safety net when life takes an unexpected and unfortunate turn.
- An entity which provides Insurance is known as Insurer, Insurance company or underwriter. A person who buys insurance is known as policy holder while the entity covered under the policy is called an insured.
- When you buy Insurance, you make payments to the Insurance company called Premiums. In exchange of premiums, you are covered from risks. The insurance company agrees to pay you for any losses incurred. Furthermore, it usually involves something in which the insured has an Insurable Interest established by ownership or possession.
- You can only insure against risks which are unpredictable in occurrence and magnitude.
WHY IS INSURANCE NEEDED:
- Provides financial safety for family: Insurance provides financial stability to families and helps them cover expenses like education, loans, housing, etc. They provide cover against life’s uncertainties and protect you against losses arising from different unexpected events in life like property damage and other similar costs.
- Long term wealth creation: Life Insurance plans like Unit-Linked Insurance plans(ULIPs) helps you accumulate wealth over time. These policies allow you to secure your financial future.
- Insurance helps protection to your home in the event of any unforeseen calamity or damage. Your home insurance plan will help you get coverage for damages to your home and pay for the cost of repairs or rebuilding, whichever is needed.
- Useful for retirement planning: After retiring at the age of 60, you can live up to 100. Life insurance pension plan can guarantee a regular income and also helps you to stay financially independent even during your retirement. They are low-risk plans that help you maintain your current lifestyle, meet medical expenses and meet your post-retirement goals.
- Insurance is support for the insured’s credit. It facilitates loans to organizations and individuals by guaranteeing the lender payment at the time when collateral for the loan is destroyed by an insured event. Thereby, reducing the uncertainty of the lender’s default by the party borrowing funds.