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Monday, March 8, 2021

What is insurance? Why should it be taken?

 What is insurance?  Why should it be taken?

What is insurance?  Why should we take it?  These are questions that most people have misconceptions about.  If you ask, the only answer is that he has invested in LIC, ULP, endowment policy, money back policy.  For the last 20 years we have been buying life insurance but have not understood its importance.  Most people only use it as a tax saving tool or investment tool.

 What is insurance?  : This is an agreement between the insured and the insurer in which the insurer promises to protect the insured against its financial risks.  This risk can also be of vehicle, property etc.  Instead of effectively giving your risk to the company, the company charges you a small amount known as an insurance premium.

 What is the requirement?  : We set many goals in our lives.  Responsibilities like family, business, education, marriage etc. have to be taken up.  In such a situation, if something happens to the head of the family, all his responsibilities remain unfulfilled. 

 Insurance protects your family against such unforeseen events.  It provides financial security to the family after the death of the insured.  If you buy the wrong insurance it may prove to be insufficient for your family.  It can also cause your goals and responsibilities to remain unfulfilled.

 Separate investment and insurance: Many people consider life insurance to be an investment.  So they buy expensive products like endowment, money back or ULP.  It benefits the insurance company and its agent and earns more commission.  If you go to an agent to buy insurance, he insists on buying certain products. 

 He will not talk to you about a pure policy that is beneficial for you and when you buy insurance you should ask yourself two questions why am I buying this insurance?  Secondly, what product am I buying?  If you ask these two questions, you will avoid buying expensive insurance products - you will understand the value of life insurance.

 Importance of insurance: The tallest building 'Burj' which is located in Dubai.  The foundation has been dug 1,050 feet below the ground to make the building about 6 feet high.  It costs a lot to build such a tall building behind its foundation but you can never see this foundation on which the whole building stands.  

ગુજરાતીમાં વાચવા માટે અહીંયા ક્લિક કરો

In the same way a pure life insurance works to protect your family.  So the costs incurred behind the insurance prove to be really useful.-The author is a Certified Financial Planner and a member of The Financial Planners Guild India.

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