Summary: Nothing can be said with absolute certainty for the very next
moment. The entire day may get spent smoothly, but that does not guaranty
evening to be the same. Any untoward incidence might occur at any time. There
was the time when loss of life of a person or his/her belongings had little
significance. But, with the passage of time, the need was felt.
Insurance,
though does not and cannot provide any mishappenings, but it certainly proves
to be a shock absorber if and when it occurs. The term insurance takes care of
loss(compensation), but not the sufferings. Nowadays, there are myriads of insurance
plans available that help the insured appreciably.
Knowing
about insurance will be illogical without knowing about the risk.
Risk is involved in any situation in
which some kinds of loss or misfortune is possible. The loss might involve any
one of the following:
·
Financial
·
Physical
·
Material
Insurance
is designed to protect against risk, because individuals who buy insurance
are financially compensated in case of loss. Individuals who are concerned
about the potential risks pay insurance companies for protection against
specific types of risks, such as flood, medical costs, car accidents, and many
others. It is important to note here that purchasing insurance does not remove
risks. It merely provides compensation for the loss and spreads the cost of
sharing the risk.
Why Insurance is important?
There was the time when even human
loss has no any value. People used to get killed as it was so desired by their
ruling kings or their chieftains. But, as the time changed and feudal forces
subsided, some values start getting attached with the loss of human beings and
their belongings.
Given below are some of the reason why
insurance is important:
Ø It compensates financial loss: Though insurance cover cannot protect
you from the loss, it certainly will prove to be a shock absorber. You
financial loss will get compensated by the insurance companies you have
opted for. In case of human loss, the compensation is just a fig leaf, but it
certainly proves to be of certain help in the form of finance.
Ø It gives you a sense of security: Let me give you an example to understand
this heading. Suppose you are earning handsomely, but you are the sole earner
of your family. If you have insurance cover, you will get a sense of
security for your family, if anything untoward (god forbids) happens to you in
the days to come.
Ø Very helpful in medical emergency
management: Suppose you have health
insurance and suddenly you get diagnosed with an illness that is chronic in
nature. Though it is not life threatening, but it necessitates huge expenditure
in terms of surgery and the subsequent medical bills. At such a time, insurance
is like most trusted friend of yours.
Ø You can insure even your belongings: For most of the people, the term insurance
means insurance against death/loss of a human being. But, contrary to
what they think, the term insurance not only pertains to the loss of life
of human beings, but it also covers their belongings.
Ø Cultivates sense of savings: Every insurance comes with premiums,
either monthly, quarterly, half yearly or yearly. So, in order to arrange for
its premiums, you will have to cultivate a sense of frugality in your family.
More premiums for insurance means more savings.
Ø High Returns: There are some term plans that insure very
high returns in case any casualty occurs. This term plan is both good and bad.
If the insured loses life, his/her dependant family members will get high
return in. But, if no harm is caused to the insured, the premium will not attract
any return.
Comparing
Types
Term Life Insurance
|
Whole Life
|
Universal Life
|
|
Type
of coverage
|
covers
you for a particular period of time, usually 5, 10, 20 or 30 year periods
|
Remains
in effect your whole life as long as you pay premium on policy
|
Remains
in effect your whole life
|
Builds
up Cash Value
|
No
|
Yes
|
Generally
yes, but value tied to cost of insurance and stock market risk.
|
Cost
|
Generally
least expensive for terms of up to 20 years.
|
More
expensive and not widely available because insurance company takes most of
risk.
|
Generally
more expensive over the short term but less expensive over whole life.
|
Offered
by most carriers
|
Yes,
widely offered and rates are competitive.
|
No.
|
Yes.
|
Death
Benefit
|
Fixed
death benefit in a specific amount.
|
Outstanding
loans on policy deducted from death benefit, which is set to endow at around
100
|
Flexible
death benefit amounts
|
Can
borrow against policy.
|
No
|
Yes
|
Yes
|
Policy
can lapse
|
No
|
No
|
Yes
if cash amounts aren't enough to cover costs of insurance and administration
of policy
|
Administration
Expenses
|
Rolled
into premium.
|
Not
easy for consumer to know.
|
Transparent
and available.
|
Tips to
Get the Best Deal in Life Insurance
The
cost of life insurance is broadly based on some of the important
factors, such as age, health as well as the lifestyle. Given below are some of
the tips to get the best deal in life insurance:
Ø Be a Teetotaler: In
order to grab the best deal on life insurance, it will be prudent from
your part, if you become a teetotaler. Mind, no insurance company will sell you
insurance plan without a check-up on your health. And if you are not refraining
yourself from drink and/or smoke, chances are you will not be found hale and
hearty at the time of check up.
Ø Be Mindful of your Age: It is important to note here that the quantum of the premium of your
insurance is decided by your age. So, the early in your life you decide to take
an insurance plan, better it will be.
Ø Don’t be in any dangerous jobs: There are jobs that involve greater health hazards or is even life
threatening. If you are in any such job, either relinquish it, or do not expect
much lucrative insurance cover.
Ø Do your homework: If
you fulfill all the criteria mentioned above, you will require good homework. Extensive
research on the insurance plan of a particular company and then juxtaposing it
from that of others will surely help you get an insurance plan that will be up
to your highest expectations.
---Sushmita Jha
