Insurance importance, types and benefits-insurance plays a crucial role in providing a level of assurance and protection to one’s life. A variety of insurance options are available. Insurance plans come handy and provide financial protection in the event of death, unanticipated medical expenses, an accident, a fire or unpredicted event.
In this post we will discuss insurance importance, types and benefits.
Table of Contents
What is Insurance?
Basically, insurance is a protection cover/shield against financial losses. Insurance comes into action in case of any unanticipated event with a person such as accident, medical issues etc.
Insurance Meaning & importance
Insurance is a legal contract between two entities i.e. the insurance company and the insured person.
Here, the insured person promises to pay a certain sum of money(premium) to the insurance company and the insurance company promises to pay a lump sum payment in case an unfortunate/unwanted event happens with the insured.
Importance of Insurance
Insurance importance lies in the fact that insurance saves you against financial losses in case of unfortunate events. Insurance also saves you from burning a hole in your pocket when things go wrong.
For instance, if you fell ill and are covered under medical insurance. Your medical bills will be taken care by health insurance policy. Similar is the case with other insurance plans also.
Benefits of insurance
Financial Protection
Insurance provides financial protection in case of an unfortunate event occurrence. Although money is not everything.But financial protection comes in handy, when things/situation is not favourable.
For example, in case of car insurance, in case of any accident, the company pays the repair charges and other third party insurance proceeds to the insured. Similar is the case with fire insurance etc.
In case of life insurance, the company pays a death claim to the nominee in case of unfortunate demise of the insured.
Provides Certainty
Insurance plans provide certainty and mental relaxation at a difficult time. Life is uncertain, but insurance give money payment certainty at worst time.
In addition, it also provides a lump sum benefit at maturity in case of life insurance plans, critical illness plans.
Risk Sharing
Insurance works on the principle of risk pooling or sharing. The risk of dying from an illness or naturally, accident mishap is shared commonly with a large group of people.
Therefore, the person can share his life related risk with the insurance company thereby relaxed for an unwanted event financial burden.
Protection Against Risk
Every person has some risk associated with life, health issues, expenses, theft risk, accident risk etc. If such a risk event occurs then insurance provides financial assistance to the person.
For example if a person dies, life insurance proceeds provide financial support to the family. In case the person fell ill, than hospital expenses are covered under health insurance, if car Meets an accident than car repair etc are covered under car insurance, if person fell ill during travel, than hospital expenses are paid under travel insurance, in unfortunate event of flood, fire, theft can be taken care of property insurance.
Types of Insurance
Life Insurance
Life insurance basically provide financial protection in case of unfortunate death of insured person. For example Mr. Ram purchase a life insurance policy for 25 years. Suppose he survive the duration of policy i.e. 25 year then he will get sum assured and bonus.
In case of unfortunate event of death of Mr. Ram, his family will get sum assured and other benefits.
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Health Insurance
Health Insurance covers the medical expenses incurred due to hospitalisation.
Health insurance plans either pay for medical expenses incurred in treating illnesses or injuries, or they refund such expenses. Various insurance policies cover various medical care costs.
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Accidental Insurance
Accidental insurance provide financial protection against accidental death and accidental injuries ( temporary or permanent.
Critical Care Insurance
Critical Care insurance provide lump sum payment if diagnosed with a critical illness. If a critical illness is diagnosed, the company pay a lump sum payment to the insured.
Home Insurance
A home insurance coverage provides full protection for both the structure and contents of your home against any physical damage or destruction.
In other words, this sort of insurance will offer protection against any calamity, whether natural or caused by humans, including fire, earthquake, tornado, burglaries, and robberies.
Fire Insurance
Fire insurance policies, provide a sum insured to cover any damages by the outbreak of a fire. These insurance policies typically offer a sizable amount of coverage to assist people and businesses in reopening their locations after suffering severe fire damage.
These insurance products also cover losses from riots, war, and other unrest.
Motor Insurance
Insurance policies for motor vehicles provide financial support in case your automobile or motorcycle is involved in an accident. Motor insurance coverage covers various insurance such as:
1) Auto Insurance: This plan covers privately owned four-wheelers. Third-party insurance and comprehensive cover policies are two examples of vehicle insurance types.
2) Bike Insurance: These are the kinds of insurance policies that provide coverage for accidents for privately owned two-wheelers.
3) Commercial vehicle insurance: This sort of insurance covers any vehicle used for business purposes.
Travel Insurance
Travel Insurance provides financial security while travelling. It covers losses such as loss of baggage, flight cancellations, loss of passport, personal and medical emergencies etc.
Final thoughts
The advantage of insurance is that it stops you from losing money in unusual circumstances. It offers you financial support for your damages and losses.
All sorts of insurance coverages serve the fundamental purpose of preventing damage to the insured by enlisting the help of numerous persons who are willing to pay to assume their risks.
The fund is additionally employed for capital generation through market investing. This aids in the settlement/adjustment of claimants’ claims and helps insurance firms remain operational. In a way it also helps the economy.
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