People are always after their security. And, there is not even a single person to live here on earth who would not like the idea of living a secure and safe life. With a sense of security comes the fulfilment of basic necessities like clothing, shelter and food.
Economic security means satisfying his or her needs like medical care, shelter, food and more not only in the present but even in the near future. This always comes with the economic risk that is derived from the differences in the expected outcome.
The good thing is that economic risk is carefully managed by the insurance industry. In such a formal arrangement of insurance, insurance policyholder pools all his risks with other policyholders. But then, a particular policyholder is no longer required for establishing a direct connection with other policyholders.
Insurance is mainly a useful tool that helps in reducing all financial losses or hardships. This is mainly present because of the risks that come with it. Actually, all people may be considered as the victims of unexpected situations like theft, accidents, injury accidents, fire, severe weather, illness, lawsuits and many more. They are prone to risks at work, home, travelling and cars.
In buying a policy, you are also making regular payments like the premiums. If you will be making a claim, an insurer will be paying out for the possible losses that are covered under the policy. In the event that you’ll not be making a claim, you’ll not have the chance of getting your money. This will be pooled with all of the premiums from other policyholders.
In deciding on the type of insurance to choose from, you need to keep on thinking about:
Economic security means satisfying his or her needs like medical care, shelter, food and more not only in the present but even in the near future. This always comes with the economic risk that is derived from the differences in the expected outcome.
The good thing is that economic risk is carefully managed by the insurance industry. In such a formal arrangement of insurance, insurance policyholder pools all his risks with other policyholders. But then, a particular policyholder is no longer required for establishing a direct connection with other policyholders.
Insurance and its Main Function
Insurance is mainly a useful tool that helps in reducing all financial losses or hardships. This is mainly present because of the risks that come with it. Actually, all people may be considered as the victims of unexpected situations like theft, accidents, injury accidents, fire, severe weather, illness, lawsuits and many more. They are prone to risks at work, home, travelling and cars.
In buying a policy, you are also making regular payments like the premiums. If you will be making a claim, an insurer will be paying out for the possible losses that are covered under the policy. In the event that you’ll not be making a claim, you’ll not have the chance of getting your money. This will be pooled with all of the premiums from other policyholders.
In deciding on the type of insurance to choose from, you need to keep on thinking about:
- The Reason Behind Choosing for the Coverage
- Things to Include in your Coverage
- The Affordability
- The Length of the Coverage
The Specific Role to Play by an Insurance Advisor
You need to always remember that an insurance advisor has his or her essential role to play in terms of financial planning. He or she is the professional person to help you with your purchase of a policy. They are making a great and connection with the company and customers around.
An insurance advisor has his or her specific role to play in finding insurance solutions that are after meeting the needs of clients and building the sales of a company. Therefore, an advisor is required for playing his or her essential role. By getting the assistance of an insurance advisor, expect that you will also be getting the trust of a customer and an insurer.
Among the specific roles to play by an insurance advisor include understanding the investment and insurance protection needs of a person. Apart from it, he or she has the role of recommending and identifying the best solutions in meeting the clients’ needs. Product portfolios are also offered for the guaranteed satisfaction of all clients. Such formalities are also completed by an advisor for the policy to be issued completely.
Sifting through the odds and probabilities of insurance
When buying insurance look for a policy that meets your needs instead of forcing yourself with what the policy offers.
This might sound preposterous, but gambling and insurance are the same. Both depend on olds and probabilities. Actually, insurance is a type of gambling where the insurance company is betting that nothing bad will happen to you. However, you too take insurance hoping nothing bad happens to you, but it does occur, you create a financial cushion by way of insurance.
motor insurance because someone may hit your car, householders insurance to protect your home, and travel insurance in case something happen when you are travelling. The list goes on, depending on what you find valuable to protect.
Yet public perception of insurance has taken more beating than accolades, especially life insurance. The primary reason for perceiving insurance to be something of a rip-off stems from the gambling mentality. After all, in gambling on an average, the house (Casino) always wins, it is for the reason that most people often confuse themselves when it comes to insurance and either go uninsured or land up taking insurance without clarity and remain under-insured.
Insurance is actually the only financial instrument that transfer financial risk from you to itself. So, when you purchase an insurance policy, a specified risk of loss is passed from the policyholder to the insurer. You pay a cost, which is nothing but the premium and is similar to a wager in case of gambling, and you are on. Insurance company pool the premiums they receive from several people and protect themselves against catastrophic or by further insuring themselves with insurance.
Everyone with financial dependents definitely needs a Term Plans do not offer any returns. And, because there is no return on surviving the term of the policy, people do not see the opportunity and now offer term plans, which return the premiums if one survives the tenure.
As financial complexities have grown, so have the offerings from insurers have come up with a wide range and mixture of plans. Naturally, this has meant that policies have got complex and there is difficult to understand and is put-off. Most individuals need to know about the health, life and motor insurance options. If they own a house, they need to consider insurance for their home.
Fear is an ally of insurance, you fear things will go wrong and hence you take insurance. It's again somewhat akin to gambling, where the lure of desire works. The first step to understanding insurance is to undergo a needs analysis. For each type of insurance, think about whether your fear is rational. If it doesn't keep your money in your pocket. This way you will not only know whether you need insurance or not, but you will also be able to evaluate how much risk you are exposed to, how much you can take on your own, and how much necessarily needs to be transferred to an insurance policy.
Insurance is a financial instrument to transfer risk and should be seen in that vein and no more.
MYTH
I am too young to need any form of insurance at this stage in life. My family does not need life insurance, as I am in good health now, which means any payment towards a life insurance policy is an utter waste of money. I am also insured by my employer as part of a group life insurance, which takes care of my need for life insurance, so why should I waste money over life insurance on my own? Anyway, the best way to arrive at the amount of insurance cover I need is to multiply my income by 10-12 times.
I have a group health insurance policy from my employer, which takes care of my healthcare needs. I am healthy and in no hurry to fall sick, instead of putting money in a health insurance policy, I would rather spend it more productively. Health insurance anyway comes with several exclusions, making it an expensive proposition that pays out in few cases only.
The tax benefits from insurance are really worth it to take both life and health insurance. In case of life insurance, you can avail of tax deductions under Section 80C of the Income Tax Act for up to Rs.1,5; lakh in a financial year. I also stand to gain from the tax-free status of the proceeds from a life insurance policy at the time of its maturity, which why I look for a savings and investment policy. Similarly, if I opt for health insurance, I could avail of tax deductions under Section 89D of the Income Tax Act up to Rs25,000 and Rs30,000 (for senior citizen).
REALITY
Life insurance is a good idea for people who have sizable assets, debts and financial dependents. The quantum of life insurance cover that you will need depends on your life stage, income, liabilities and other factors. There is no one-size-fits-all-model or rule of thumb to determine how much cover you need. Every individual's life insurance needs vary significantly and it's completely plausible that two people with exactly the same annual incomes will have drastically different life insurance needs due to individual factors such as the dependents, risks, assets, and more. Undergo a needs analysis to arrive at the right amount of insurance that you need.
Group insurance works as long as you are part of the group. So, if you quit your job, the insurance stands cancelled with effect from the day you leave the organisation. The premiums on both life and health insurance depend on your lifestyle. Typically, the healthiest individuals see the lowest premiums, but other factors that affect cost include lifestyle choices like smoking as well as your occupation and hobbies.
There are different types of policies and each covers different types of risks. Analyse the risk you are exposed to and how much of it you can retain and how much of it you can transfer to an insurance policy. Take insurance based on your needs, and not because there is a tax benefit that comes when you take a policy. At best, the tax benefit should be an added advantage and not the prime reason for taking any form of insurance.
Insurance fables
Insurance is a financial instrument to transfer risk and should be seen in that vein and no more.
MYTH
I am too young to need any form of insurance at this stage in life. My family does not need life insurance, as I am in good health now, which means any payment towards a life insurance policy is an utter waste of money. I am also insured by my employer as part of a group life insurance, which takes care of my need for life insurance, so why should I waste money over life insurance on my own? Anyway, the best way to arrive at the amount of insurance cover I need is to multiply my income by 10-12 times.
I have a group health insurance policy from my employer, which takes care of my healthcare needs. I am healthy and in no hurry to fall sick, instead of putting money in a health insurance policy, I would rather spend it more productively. Health insurance anyway comes with several exclusions, making it an expensive proposition that pays out in few cases only.The tax benefits from insurance are really worth it to take both life and health insurance. In case of life insurance, you can avail of tax deductions under Section 80C of the Income Tax Act for up to Rs.1,5; lakh in a financial year. I also stand to gain from the tax-free status of the proceeds from a life insurance policy at the time of its maturity, which why I look for a savings and investment policy. Similarly, if I opt for health insurance, I could avail of tax deductions under Section 89D of the Income Tax Act up to Rs25,000 and Rs30,000 (for senior citizen).
REALITY
Life insurance is a good idea for people who have sizable assets, debts and financial dependents. The quantum of life insurance cover that you will need depends on your life stage, income, liabilities and other factors. There is no one-size-fits-all-model or rule of thumb to determine how much cover you need. Every individual's life insurance needs vary significantly and it's completely plausible that two people with exactly the same annual incomes will have drastically different life insurance needs due to individual factors such as the dependents, risks, assets, and more. Undergo a needs analysis to arrive at the right amount of insurance that you need.
Group insurance works as long as you are part of the group. So, if you quit your job, the insurance stands cancelled with effect from the day you leave the organisation. The premiums on both life and health insurance depend on your lifestyle. Typically, the healthiest individuals see the lowest premiums, but other factors that affect cost include lifestyle choices like smoking as well as your occupation and hobbies.
There are different types of policies and each covers different types of risks. Analyse the risk you are exposed to and how much of it you can retain and how much of it you can transfer to an insurance policy. Take insurance based on your needs, and not because there is a tax benefit that comes when you take a policy. At best, the tax benefit should be an added advantage and not the prime reason for taking any form of insurance.
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