How insurance plays in an individual’s financial life ?
Risk is a chance related to expose to Danger. Risk is defined not only for the Management, but also for an individual. Risk Pertains anywhere though it should be planned and declared accordingly. Nowadays, there is a protection from risk called Insurance plays an important role in everyone’s financial life.
Dev Asish of stableinvestor.com was said about how the insurance impact in our life. One of his article he said, Yes. Buying Health Insurance protects your Wealth, not Health. So, generally insurance will very helpful to support your financial status. Coming to the nature of risk, the insurance which manages the risk and provide the protection from the loss of economic benefits that got from any assets.
In the modern days, we cannot avoid the loss of like disabilities or death. If the loss is an earning person in his or her family, it leads to risk. By avoiding this unexpected one, one should cover with an Insurance who leads or finance to their family. It will support to their family, in the event of any loss of human beings.
The risk can also be transferred, Insurance helps to transfer the risk from one to another. The person who transfer his or her risk is the beneficiary and the received person is an insurer, referred to as Insurance Firm. The Insurance company who undertakes to indemnify the beneficiary for the financial loss suffered. Beneficiary is also called as Insured.
There is a premium payable which depending upon the probability of the event during the period of time, known as a Contract. Insurance Products are available for the individual and also for the Company. It can be categorized with two types – Life Insurance and Non-life insurance.
Generally, Life insurance covers for the life of the insured one. on the other side, Non life insurance comes like as Medi claim (Health) Policy, Vehicle (Motor) Insurance, Travel insurance and so on. Non life insurance is also known as General Insurance.
Term Insurance, Endowment Plan, Money back, Unit linked insurance plan (ULIP), Pension plan, Whole life insurance and Variable insurance products and any riders are the Life Insurance Schemes. House property insurance, Health Insurance, Personal Accident Cover, Liability insurance, Critical illness and Travel insurance are the Non life insurance Schemes.
Role of Insurance in an Individual’s financial life:
- Rakesh who is a IT employee died due to cancer, where he had a wife with two kids. He is the only earning person in his family.
- Kamesh’s left knee fractured in an accident, who had a depending mother and father. He is unable to go for work for the next few years.
The above two situation tells how the insurance is so important in our life. We cannot avoid the unexpected loss, but we can protect our unexpected expenses and continue our existing financial life better. Insurance will support and to protect the income, if we take it earlier to avoid a huge loss. There are some basic steps before buying an Insurance product.
- Identifying the need of Insurance
- Calculate the required insurance amount
- Analyze the Policy and its schemes – Costs and features
- Review the bought insurance products periodically.
From Identifying the need of insurance, one must plan on their current financial situation. Income Replacement, Income Protection and Asset Protection are the commonly available options to buy an Insurance Product. For Calculating the amount of insurance required is a critical part that needs to stick with his regular income. For instance, Term insurance can be bought by 15-20 times of his annual income including liabilities.
There are so many products and schemes available with the Insurance Companies. You are not be borne by Insurance Agents. You are the only responsible person who really take care of you and family. Choose the right insurance schemes which will help to cover the maximum benefits. Reviewing the bought insurance is also a healthy for an Individual’s financial life. From Single to Married, having kids and upcoming retirement are the common situation for anyone, so plan it on the route.
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