A Beginner’s Guide to Insurance

It is central to good financial planning to have the right kind of insurance. Some of us may have some sort of insurance, but very few really understand what it is or why it needs to be given. Insurance is a form of investment or a superb tax saving avenue for most Indians. Ask an ordinary individual regarding their savings, and as part of their core investments, they would proudly mention an insurance policy. Of the approximately 5% of Indians who are insured, the proportion of those insured properly is much smaller. Very few of the insured consider insurance to be exactly that. Perhaps no other financial product has experienced such systematic mis-selling at the hands of brokers who are excessively excited about selling insurance-to-investment products that earn them fat commissions. Have a look at – find more to get more info on this.

What does insurance mean?

Insurance is a means of distributing the substantial financial risk of a person or business organization in the event of a predefined unfortunate event to a wide number of individuals or business entities. The monthly or annual compensation paid to the insurance provider is the expense of being covered. In the purest type of insurance, the money paid as coverage is not recovered if the predefined occurrence does not occur before the time stated. In the event of a shock, insurance is essentially a way of distributing risk across a pool of people insured and lightening their financial burden.

Insured and Insurance

You become insured when you seek cover against financial liability and enter into a contract with an insurance broker, and the insurance firm becomes your insurer.

Sum guaranteed

In Life Insurance, this is the amount of money that the insurer agrees to pay until the predefined time when the insured passes. In the case of non-term insurance, this does not include the benefits applied. This guaranteed amount may be referred to as insurance protection for non-life insurance.

Premium

The insured must pay premiums for the protection against financial risk that the insurer offers. This is considered a premium. They can be charged on an annual, quarterly, monthly basis or as agreed in the agreement. The average amount of premiums charged is many times less than the insurance cover, or pursuing insurance at all does not make any sense. The cover, the number of years for which insurance is sought, the age of the insured (individual, car, etc), to name a few, are factors that decide the premium.

The nominee

The beneficiary to whom the insured is stated to receive the insured sum and other benefits, if any, is the candidate. It must be another guy, apart from the insured, in the case of life insurance.

Term for Policy

The policy term is the number of years for which you want security. The word is determined by the insured at the time of the insurance policy purchase.