The Importance of IImportance of Insurance

There is no denying that you will have greater peace of mind if you know that you and your loved ones are financially secure from various unforeseen situations. Uncertainties in life could crop up at any moment, such as an unfortunate death or a medical emergency. These situations also include an accident or damage to your vehicle, property, etc.

Bearing the financial impact of these situations can burn a hole into your pocket. You may need to dip into your savings or your family’s hard-earned money. Thus, there is a pressing need of insurance for you and your family for proper coverage and financial support against all risks linked to your life, health and property.

Main Reasons Why Having Insurance is Necessary: -

1. Financially Security

No matter how much you are earning or how much you have saved; your financial position can be dented by an unexpected event in a moment. So, the best way to become financially secure is to cover yourself, your family, and your assets with insurance. You can buy or renew insurance online and receive a payout for financial support, in case there happens to be an unforeseen event.

2. Transfer of Risk

The contract of insurance works on the ‘principle of transfer of financial risk from the insured to the insurer’. As an insured, you pay premiums to receive compensation from the insurer, in case of occurrence of an unforeseen event. So, having insurance reduces the financial burden on your shoulders.

3. Complete Protection for You and Your Family

Family is the most important asset that you have and your family also depends on you for financial support. This is why it is important to make sure that you and your family are completely secure to face any emergency.

4. No More Stress or Tension During Difficult Times

None of us can see the future or predetermine the future events. Any unforeseen tragedy can leave you physically, mentally, and financially strained. So, if you have insurance to take care of the outcomes of such tragedies such as illness, injury or permanent disability, even death- you save yourself and your family from tension and stress. With insurance in place, any financial stress will be taken care of, and you can focus on your recovery.

5. Some Types of Insurances are Compulsory

Insurance is necessary because sometimes it is mandatory as per the law. An example of this is motor insurance. As per the Motor Vehicle Act of 1988, it is compulsory to have at least a third-party motor insurance for every motor vehicle plying on road in India. Motor insurances come in really handy during claims.

5. Peace of Mind

Having insurance offers you financial security and also peace of mind. No amount of money can replace your peace of mind. So, when you have insurance you know that you are secured against any unforeseen events in life, and this gives you complete peace of mind.

Benefits that different types of life insurance policies offer:

Following are the primary benefits of life insurance plans in India:

• Financial Security
• Life Coverage
• Long Term Savings
• Investment Options
• Tax Benefits under Section 80C & 10 (10D) of income tax act 1961. As per prevailing tax laws subject to change

Need for Insurance

Insurance plans are beneficial to anyone looking to protect their family, assets/property and themselves from financial risk/losses:

• Insurance plans will help you pay for medical emergencies, hospitalisation, contraction of any illnesses and treatment, and medical care required in the future.
• The financial loss to the family due to the unfortunate death of the sole earner can be covered by insurance plans. The family can also repay any debts like home loans or other debts which the person insured may have incurred in his/her lifetime
• Insurance plans will help your family maintain their standard of living in case you are not around in the future. This will help them cover the costs of running the household through the insurance lump sum payout. The insurance money will give your family some much-needed breathing space along with coverage for all expenditure in case of death/accident/medical emergency of the policyholder
• Insurance plans will help in protecting the future of your child in terms of his/her education. They will make sure that your children are financially secured while pursuing their dreams and ambitions without any compromises, even when you are not around
• Many insurance plans come with savings and investment schemes along with regular coverage. These help in building wealth/savings for the future through regular investments. You pay premiums regularly and a portion of the same goes towards life coverage while the other portion goes towards either a savings plan or investment plan, whichever you choose based on your future goals and needs
• Insurance helps protect 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. If you have coverage for valuables and items inside the house, then you can purchase replacement items with the insurance money

Types of Insurance

There are several types of insurance plans available. Some of the commonly preferred ones include the following:

• Life insurance :

Life insurance is what you can avail in order to safeguard your family in case of your death during the tenor of the policy.The most basic form of life insurance available to buyers is term insurance. Life insurance helps secure your family financially with a lump sum amount that is paid out in the event of the policy holder’s death within the policy period

• Health insurance :

This is purchased for covering medical expenses revolving around various health issues, including hospitalisation, treatments and so on. These insurance plans come in handy in case of medical emergencies; you can also avail of cashless facility across network hospitals of the insurer

Child Plans :

These insurance policies are savings instruments that help in generating lump sum funds whenever children reach a certain age for pursuing higher studies. In these plans, the life assured is that of the child or the recipient of the funds while the parents are the policy owners

• Home insurance :

These insurance plans cover any damages to the home on account of accidents, mishaps and natural calamities, among other such events

• Auto Insurance :

These are insurance plans for vehicles, including cars and bikes. These offer protection against natural calamities, damages to third parties (people who have incurred losses or been hurt in an accident with the policyholder’s vehicle) and also damages to the vehicle along with mishaps and accidents
Insurance is thus the need of the hour in today’s uncertain times -- evaluate your financial situation to choose a plan best suited to your future financial needs

Selecting the Right Insurance Policy 

The importance of insurance remains unchanged as it offers much needed financial shield. However, the benefits you avail of specific policies depend on some factors. You must be careful while selecting the right insurance policy.

Here are a few things you need to consider:

1. Adequate Coverage 

The importance of insurance will fall short in a time of need if you have inadequate coverage. It is crucial to analyze the objective of purchasing the insurance policy to optimize the benefits you receive.

2. Premium Paying Ability 

While you want to have adequate coverage in the future, you do not want to overestimate the ability to pay the present premiums. An indirect purpose of insurance is to provide the satisfaction of having financial protection. If you are worried about paying premiums regularly because it is straining your income, it will defeat its purpose.

3. Policy Tenure 

Depending on the type and importance of insurance, you must decide on a favorable policy tenure. For example, life insurance plans are typically long-term plans that are active for many years.

4. Personal Factors 

Your age, gender, and lifestyle are also factors that determine the type of policy you require. For instance, if you have a job that involves in high-risk activities, it is vital to strengthen the coverage accordingly. You may also choose to opt for suitable riders such as critical illness insurance benefit or accidental benefit to customize them to your needs

Main types of life insurance policies in India

A. Following are the different types of life insurance policies that are available in India:

• Term Insurance
• Term insurance with return of premium
• Unit Linked Insurance Plans
• Endowment plans
• Moneyback policy
• Whole life insurance
• Group life insurance
• Child Insurance Plans
• Retirement Plans

Q. What are the benefits that different types of life insurance policies offer?

A. Following are the primary benefits of life insurance plans in India:

• Financial Security
• Life Coverage
• Long Term Savings
• Investment Options
• Tax Benefits under Section 80C & 10 (10D) of income tax act 1961. As per prevailing tax laws subject to change

Life insurance tax benefits:

You can avail various tax benefits with several life insurance policies in India. Under Income Tax Act, 1961, you can avail deductions under Section 80C up to Rs.1.5 lakh on the life insurance premium paid. Also, nominee can claim tax deduction under Section 10 (10D) on the insurance payouts received.

Whole Life Insurance:

A whole life insurance is a type of insurance plan that provides an extended life coverage until the death of the policyholder. In most cases, a whole life insurance policy stays in force all throughout the policyholder’s life, given they regularly pay the premiums.

Under a whole life insurance policy, the sum assured or the life cover gets decided during the time of policy purchase, and the same is paid to the policy nominee at the time of claim – when the life assured (policyholder) dies.

Usually, for most whole life insurance policies, the standard maturity age is 100 years, and in case the policyholder passes away before completing 100 years, then the sum assured is paid out to the nominee. However, in case the policyholder outlives the age of 100 years, then the insurance provider pays out the matured endowment coverage to the policyholder.

Usually, whole life insurances have higher premiums when compared to term insurances. However, unlike term insurance, where the premiums increase at the time of renewal, with whole life insurance, the premiums stay the same for your whole life. 

Calculating premium for term insurance online:

Using an online insurance calculator to calculate premium for term insurance is very easy. When you calculate premium for term insurance online, you need follow a few, simple steps, that require your input, such as:

1. Personal Details (Name, Gender, Date Of Birth, Annual Income, etc,.)

2. Critical Insurance Values (Sum Assured, Policy Tenure, Premium Payment Duration, etc,.)

3. Choose Add-On Rider options (Accidental cover, Critical illness, future waiver of premium, premium break, etc,.)

By entering these information, you can effortlessly calculate premium for term insurance, and compare plan to buy the best one.

Riders in life insurance policy:

Riders are optional add-ons that you can avail in order to enhance your existing life insurance cover and they cannot be purchased independently. Some examples of riders in life insurance policies include accidental death, critical illness, future waiver of premium, premium break, etc. Opting for riders can increase the premium payable for the policy but these add-ons can provide you additional protection against various risks.

General Insurance

Following are the various types of general insurance in India:

• Health Insurance
• Motor Insurance
• Home Insurance
• Fire Insurance
• Travel Insurance

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