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An insurance policy is one of the most valuable instruments that allow us to enjoy such benefits. It is crucial to realize the importance of insurance and understand how they can positively impact our lives. Depending on your life stage and financial profile, the purpose of insurance may vary. You must understand the importance of insurance and its relevance to you in particular.
Let us discuss the role and importance of insurance in detail to have a better understanding.
Need for Life Insurance
Managing your finances through different stages in life can be challenging in various ways. It is necessary to chart a plan that evaluates how your income needs to be distributed to have a beneficial financial portfolio. Through the different short and long-term life goals, the need for financial protection remains constant.
When you are younger, insurance plans may not be one of the top things on your mind. However, once you start earning and there are family members who depend on you for their well-being, the importance of insurance becomes clearer. Life can be too uncertain at times, but it can be immensely helpful to be prepared in terms of money.
If you are the breadwinner of your family, it is crucial to understand why insurance purchase is vital to protect your loved ones’ interests. These decisions ultimately determine the quality of their life in later years.
Also Read: What is Insurance?
Why is Life Insurance Important?
Apart from life coverage, which is the primary purpose of insurance, insurance policies provide other benefits. The importance of insurance in your life is not limited to financial protection in the event of an unfortunate incident. There is a range of insurance policies that offer varying features best suited to your requirements.
As the policyholder, you can accomplish several financial goals by choosing the right policy. Here are a few reasons that will better explain insurance importance in your life:
1. Corpus-Creation
Various insurance policies allow a combination of investment and coverage within one plan, such as Unit Linked Insurance Plans(ULIPs) and other life insurance plan. The importance of insurance in life is evident because it can aid in wealth-creation. Along with saving and creating a corpus for future needs, multiplying wealth is an advantage that is desirable to several policyholders.
2. Clearing Debts
In the unfortunate case of the policyholder’s early demise, there is a possibility that the family members face a substantial financial burden due to outstanding loan payments. In an emotionally distressing time, debt payments will only add to their worries. The insurance importance in life is even more remarkable because it can help deal with such debts.
3. Fulfilling Long-Term Goals
It is essential to recognize the importance of insurance in fulfilling long-term goals in life. You do not want your loved ones to compromise on their dreams in your absence. An
insurance policy's payout can cover substantial expenses such as higher education or marriage if you choose carefully.
While calculating the coverage amount, remember to factor in various parameters or goals and consider the importance of insurance in meeting such goals.
3. Fulfilling Long-Term Goals
It is essential to recognize the importance of insurance in fulfilling long-term goals in life. You do not want your loved ones to compromise on their dreams in your absence. An
insurance policy's payout can cover substantial expenses such as higher education or marriage if you choose carefully.
While calculating the coverage amount, remember to factor in various parameters or goals and consider the importance of insurance in meeting such goals.
4. Achieve Retirement Goals
Retirement planning constitutes a significant part of a sound financial plan. You may not realize the importance of insurance in creating a comprehensive retirement plan, but it can help substantially.
Certain insurance policies can ensure a regular income source after retirement. The role of insurance in life after retirement depends on how you invest in the present.
5. Tax Benefits
When you are working hard for your income, you want to save as much of it as possible. The importance of insurance extends to providing relief in current expenses. Insurance policies are one of the financial instruments that are eligible for tax benefits under the Income Tax Act, 1961. Tax benefit are as prevailing tax laws subject to change.
6. Peaceful Life
If you always worry about managing income to meet the expenses, it disrupts your peace of mind significantly. For some people, financial troubles may even lead to serious health issues. There is immense importance of insurance in preserving your peace of mind.
5. Tax Benefits
When you are working hard for your income, you want to save as much of it as possible. The importance of insurance extends to providing relief in current expenses. Insurance policies are one of the financial instruments that are eligible for tax benefits under the Income Tax Act, 1961. Tax benefit are as prevailing tax laws subject to change.
6. Peaceful Life
If you always worry about managing income to meet the expenses, it disrupts your peace of mind significantly. For some people, financial troubles may even lead to serious health issues. There is immense importance of insurance in preserving your peace of mind.
Types of Insurance
There is a multitude of options when it comes to insurance policies. It is so because insurance providers understand that each individual has a distinct financial profile. Furthermore, you need different insurance plans to have coverage for other things in life.
Here are the common types of insurance policies.
1. Life Insurance
Life insurance policies are fundamental instruments that offer life coverage. In case of the policyholder's demise, the death benefit is payable to the nominee as per policy terms. The importance of insurance is unmistakable when it comes to protecting the financial interests of your loved ones.
There are various life insurance policies, such as Endowment Plans, Whole Life Plans, Term Plan, and more that offer distinctive benefits. It is up to you to decide the features that are desirable for your family members.
2. Health Insurance
The importance of insurance is particularly relevant when it comes to protecting your health. Health Insurance is one of the fastest-growing segments in the insurance industry due to the rising costs of healthcare in India. Buying insurance is important in life because it ensures that you have ample financial support to receive quality healthcare.
3. General Insurance
Apart from your life and health, the importance of insurance also extends to other valuable assets in life. The motor or home insurance policies provide financial support in case of damage to your property arising out of specified conditions such as fire, accidents, human-made or natural calamities, and more. Such policies may have a shorter tenure, but they can be renewed frequently.
2. Health Insurance
The importance of insurance is particularly relevant when it comes to protecting your health. Health Insurance is one of the fastest-growing segments in the insurance industry due to the rising costs of healthcare in India. Buying insurance is important in life because it ensures that you have ample financial support to receive quality healthcare.
3. General Insurance
Apart from your life and health, the importance of insurance also extends to other valuable assets in life. The motor or home insurance policies provide financial support in case of damage to your property arising out of specified conditions such as fire, accidents, human-made or natural calamities, and more. Such policies may have a shorter tenure, but they can be renewed frequently.
Selecting the Right Insurance Policy
The importance of insurance remains unchanged as it offers much needed financial shield. However, the benefits you avail of specific policies depend on some factors. You must be careful while selecting the right insurance policy.
Here are a few things you need to consider:
1. Adequate Coverage
The importance of insurance will fall short in a time of need if you have inadequate coverage. It is crucial to analyze the objective of purchasing the insurance policy to optimize the benefits you receive.
2. Premium Paying Ability
While you want to have adequate coverage in the future, you do not want to overestimate the ability to pay the present premiums. An indirect purpose of insurance is to provide the satisfaction of having financial protection. If you are worried about paying premiums regularly because it is straining your income, it will defeat its purpose.
3. Policy Tenure
Depending on the type and importance of insurance, you must decide on a favorable policy tenure. For example, life insurance plans are typically long-term plans that are active for many years.
4. Personal Factors
Your age, gender, and lifestyle are also factors that determine the type of policy you require. For instance, if you have a job that involves in high-risk activities, it is vital to strengthen the coverage accordingly. You may also choose to opt for suitable riders such as critical illness insurance benefit or accidental benefit to customize them to your needs
Frequently Asked Questions (FAQs)
Q. What Is A No Claim Bonus?
A. A no claim bonus is applicable on your health or general insurance plan if you do not file a claim for settlement in a year. It is relevant every year for as long as various policies are in force.
Q. Should I Consider Claim Settlement Ratio While Choosing An Insurer?
A. Claim settlement ratio refers to the number of successfully processed claims against the total number of claims that an insurer makes receives. It is essential to consider this ratio as it gives you an idea of the chances that your claim may get rejected.
Q. What Is The Waiting-Period Of An Insurance Policy?
A. The waiting period of a policy is the period before which the insurer does not entertain claims. Generally, they last for 30 days after the commencement of the plan but, confirm with your provider at the time of purchase to avoid any confusion later.
Note: please read policy terms and conditions
Q. What Is The Frequency Of Premium Payment?
A. It may vary with different types of insurance policies and their tenure. However, in general, you can opt to pay the premiums on a monthly, quarterly, half-yearly, or annual basis.
Q. Do I Receive The Premium Amount Back In Case Of No Claim?
A. There are other health and general plans available – please read the policy terms and conditions.
ARN No.- Aug21/Bg/17
