Insurance – Why do you need it?
Understanding Insurance and Financial Risk Management
In today’s world, financial risk is something that is associated with individual, a company or an object, it always carries a certain standard of risk. Equally so, it is important that for the risk to be protected.
Insurance is one such solution that protects from several financial risks that a person may possibly come across.
Many would take insurance for the sake of having one or for the sake of the advice received to buy some and it does not mean we are entirely secured.Taking insurance should be in line with the requirement to cover up the risk involved. Only then you would be adequately insured.
Insurance is a complex subject, so there’s a lot of scope for misunderstanding and misselling. The persistency ratio measures how long someone stays with their insurance policy. On an average, 50% of people abandon their life insurance policies after 5 years and only 10% to 20% remain with their policies after the 12th year. We understand that insurance is a long-term commitment. We will help you select the best term life insurance plans and general insurance policies that make you and your family feel safe and secure.
What is Insurance
Insurance is meant to protect you from the financial costs associated with uncertainties. You can insure tangible assets like your vehicle and home and insure intangible assets like your life and health. There is a financial number associated with both tangible and intangible assets.
Remember, the purpose of insurance is protection, not profit. So, you can only insure up to the actual value of the asset.
Reduces Stress during tough times
Secure future goals and dreams
Enjoy financial stability
Complete protection to you and family
Transfer of Risk
- +How does it work?
When you enter an insurance contract, you agree to pay the insurance company premiums at regular intervals for risk protection from a specific event (for example, hospitalization or an accident or damage to property). If the event occurs, the insurance company will compensate you for the financial loss subject to the terms and conditions of your agreement. If the event does not occur, you continue to pay premiums. Certain life insurance products mix insurance and investments, so there may be other returns/benefits. In some general insurance policies, you may accrue a no claim bonus.
- +What does insurance not cover?
Each policy is unique and will explicitly state the risks it covers. Talk to an agent or an insurance expert to understand the fine print.
An insurance policy is not meant to be profitable. Let’s say you have four health insurance policies with sum assured Rs. 1 Lakh, Rs. 2 Lakh, Rs. 1 Lakh andRs. 3 Lakh. If your hospitalization expense totals to Rs. 5 Lakhs, from all policies together, you can’t claim more than Rs. 5 Lakhs.
- +How much does insurance cost?
- Your premium is a function of risk and the insurance cover. For instance, someone who has health complications like diabetes or hypertension will pay more for health and life insurance.
- +What are the tax deductions associated with Insurance?
While insurance policies must not be chosen purely to maximize tax savings, it is important that you are aware of the deductions applicable on various policies. For Life insurance premiums, you can claim upto Rs. 1,50,000 per year within the overall limit under section 80C. For Health Insurance premiums, you can claim upto Rs. 25,000 per annum under section 80 D. This limit can be further increased if you pay premiums for your parents as follows: additional Rs. 25,000 (if parents <60 years of age) and additional Rs. 50,000 (if parents are senior citizens).