Insurance refers to a contractual arrangement in which one party, i.e. insurance company or the insurer, agrees to compensate the loss or damage sustained to another party, i.e. the insured, by paying a definite amount, in exchange for an adequate consideration called a premium.
Insurance provides protection from financial loss. It is one kind of risk management process primarily used to hedge against the risk of a contingent, uncertain loss.
The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured. The amount of money charged by the insurer to the Policyholder for the coverage set forth in the insurance policy is called the premium.
Why Should I Buy Insurance?
All assets have some economic value attached to them. There is always a possibility that these assets may get damaged or become non-operational as they face risks like breakdowns, natural calamities, fire, theft, and accident, etc. Human life is exposed to the added risk of death. Insurance ensures retention of economic value against all these risks.
“If there is anyone dependent on your income – parents, children, relatives – you need life insurance.” – Suze Orman
Nothing is certain in life except death, but what is not certain is the time of death. If a family loses its breadwinner then it would hit the family’s financial condition drastically as the family’s income ceases. Life insurance offers respite to the family from financial distress. The goal of life insurance is to provide financial security for the family. It is a continuation of one’s income for the family in case of an emergency.
Health insurance is a type of insurance coverage that covers the cost of an insured individual’s medical and surgical expenses. Depending on the type of health insurance coverage, either the insured pays costs out of pocket and receives reimbursement, or the insurer makes payments directly to the provider. Medical expenses are rising day by day and are only expected to go further up. Health insurance serves as a hedge against medical expenses.
Disability Insurance often called DI or disability income insurance, or income protection is a form of insurance that insures the beneficiary’s earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work.