Having the best type of insurance is central to sound financial planning. Some people may have some type of insurance but not many really know what it's or why one must have it.health insurance For most Indians insurance is a questionnaire of investment or an exceptional tax saving avenue. Ask a typical person about his/her investments and they will proudly mention an insurance product included in their core investments. Of the approximately 5% of Indians which are insured the proportion of the adequately insured is a lot lower. Very several insured view insurance as purely that. There's perhaps no other financial product that has witnessed such rampant mis-selling at the hands of agents who are over enthusiastic in selling products linking insurance to investment earning them fat commissions.
What is Insurance?
Insurance is just a method of spreading out significant financial danger of a person or business entity to a large group of an individual or business entities in the occurrence of an unlucky event that is predefined. The cost of being insured is the monthly or annual compensation paid to the insurance company. In the purest type of insurance if the predefined event doesn't occur before period specified the cash paid as compensation isn't retrieved. Insurance is effectively a means of spreading risk among a pool of people that are insured and lighten their financial burden in case of a shock.
Insured and Insurer
Once you seek protection against financial risk and make an agreement having an insurance provider you feel the insured and the insurance company becomes your insurer.
Sum assured
In Life Insurance this is the quantity of money the insurer promises to cover once the insured dies ahead of the predefined time. This does not include bonuses added in the event of non-term insurance. In non-life insurance this guaranteed amount may be called as Insurance Cover.
Premium
For the protection against financial risk an insurer provides, the insured must pay compensation. This is known as premium. They might be paid annually, quarterly, monthly or as decided in the contract. Total level of premiums paid is several times lesser than the insurance cover or it wouldn't make much sense to find insurance at all. Factors that determine premium will be the cover, quantity of years for which insurance is sought, age of the insured (individual, vehicle, etc), to name a few.
Nominee
The beneficiary who's specified by the insured to receive the sum assured and other benefits, if any may be the nominee. In the event of life insurance it should be another person apart from the insured.
Policy Term
How many years you would like protection for is the term of policy. Term is decided by the insured during the time of purchasing the insurance policy.
Rider
Certain insurance policies may offer additional features as add-ons independent of the actual cover. These can be availed by paying extra premiums. If those features were to be bought separately they'd become more expensive. For example you may add-on an individual accident rider with your life insurance.
Surrender Value and Paid-up Value
If you want to exit a policy before its term ends you are able to discontinue it and get back your money. The quantity the insurer will pay you in this instance is named the surrender value. The policy ceases to exist. Instead if you simply stop paying the premiums mid way but don't withdraw money the total amount is known as as paid-up. At the term's end the insurer pays you in proportion of the paid-up value.
Now that you realize the terms this is how insurance works in plain words. An insurance company pools premiums from a large band of people who would like to insure against a specific sort of loss. With the help of its actuaries the organization pops up with statistical analysis of the possibility of actual loss happening in a specific amount of people and fixes premiums taking into consideration other factors as previously mentioned earlier. It works on the fact not absolutely all insured are affected loss at once and many might not suffer losing at all within enough time of contract.
Forms of Insurance
Potentially any risk that may be quantified in terms of money can be insured. To safeguard loved ones from loss in income as a result of immature death you can have a life insurance policy. To protect yourself and your household against unforeseen medical expenses you are able to choose a Mediclaim policy. To guard your car or truck against robbery or damage in accidents you could have a motor insurance policy. To guard your property against theft, damage because of fire, flood and other perils you can choose a home insurance.
Hottest insurance forms in India are life insurance, health insurance and motor insurance. Apart from these you can find other forms as well which are discussed in brief in the next paragraphs. The insurance sector is regulated and monitored by IRDA (Insurance Regulatory and Development Authority).
Life Insurance
This kind of insurance provides cover against financial risk in case of premature death of the insured. There are 24 life insurance companies playing in this arena which Life Insurance Corporation of India is a public sector company. There are several types of life insurance policies the simplest form of that is term plan. Another complex policies are endowment plan, whole life plan, money-back plan, ULIPs and annuities.
General Insurance
All other insurance policies besides Life Insurance come under General Insurance. You can find 24 general insurance companies in India which 4 namely National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd have been in the public sector domain.
The largest pie of non-life insurance when it comes to premiums underwritten is shared by motor insurance followed closely by engineering insurance and health insurance. Other types of insurance offered by companies in India are home insurance, travel insurance, personal accident insurance, and business insurance.
Buying Insurance
You will find an umpteen amount of policies to select from. Because we cannot foresee our future and stop unpleasant things from happening, having an insurance cover is really a necessity. But you need to decide on carefully. Don't simply go with what the agent tells you. Read policy documents to learn what's covered, what features are offered and what events are excluded from being insured.
1. Know your Needs
Know what asset or incident must be protected against loss/damage. Is it you life, health, vehicle, home? Next determine what kinds of damage or danger exactly would the assets be most likely be exposed to. This can tell you what features you should be searching for in a policy. Obviously you will have losses which can't be foreseen and the expense of dealing using them can be quite high. For instance nobody can predict that they'll never suffer with critical illnesses no matter if they're perfectly healthy at present.
The greatest mistake whilst it comes to purchasing insurance, particularly life insurance is to see it being an investment. Clubbing insurance and investment in one single product is really a poor idea. You lose on both fronts because for the premiums you're paying more cover could've been got in a term plan and if the premiums were invested in better instruments your returns could've been several times more.
Keep clear of agents who want to talk you into buying unnecessary policies like child life insurance, credit card insurance, unemployment insurance and so on. Instead of shopping for separate insurance for specific assets or incidents search for policies that cover a number of possible events beneath the same cover. Wherever possible choose riders that make sense instead of buying them separately. Unless there's a fair chance of an event happening you may not need insurance for it. As an example unless you are very susceptible to accidents and disability because of your nature of work and other reasons you don't need an Accident Insurance policy. A good Life Insurance plan with accidental death rider or waiver of premium rider or an impairment income rider will do the job.
2. Understand Product Features and Charges
The worst way of choosing an insurance product or insurer would be to blindly follow the recommendation of a real estate agent or a friend. The good way to do it's to search around for products that suit your need and filter the ones offering lower premiums for similar terms like age, level of cover, etc. All details you'll need about the item features and charges is going to be provided on the business's website. Many insurance policies is now able to be bought online. Buying online is smarter because premiums are lower because of elimination of agent fees. If buying offline in the event of life insurance, tell the agent that you're interested only in term insurance.
Before you to remain the contract ensure you have understood what items are covered and what items are exempted from the cover. It would be so devastating to learn in case of damage or loss that them you hoped to cover with the insurance was actually excluded. So many individuals rush for their insurers after being treated for diseases only to appreciate that the specific disease was excluded. Understand details like when the cover begins and ends and how claims could be filed and losses be reported.
Don't choose an insurance company because your neighbourhood friend is their agent and never let them coax you into buying from them. Insurance premiums run for years and it indicates a significant number of money. Independent of the premiums charged look for the service provided. When you're faced with a peril you want the claims collection processed to be complicated with non-cooperating staff in the insurance company's office. Seek answers from those who have had previous experience with the business for questions like how customer friendly and responsive the company is in regards to handling claims.
3. Evaluate and Upgrade in Time
As you walk from life stage to another or once the asset insured changes your policies should be reviewed. Perhaps your cover will have to be increased (or decreased) or you may need to top it up with a rider. Some instances when you need to review your cover are when you getting married, when you yourself have children, when your income increases your decreases substantially, when you're investing in a house/car and when you're responsible for your ageing parents.
Comments
Post a Comment