What is Insurance?
On buying insurance one receives the right to obtain monetary compensation for a financial loss incurred due to an event covered by such insurance contract.
The concept behind insurance is the sharing the risk of calamity. Many people pool in an amount at periodic intervals (premium), and all of them are covered/insured (for a total amount called sum assured) against the risk an event (as per contract) which could be financially devastating. The premium is generally calculated based on the probability of the insured event happening.
Why do individuals and organisations need insurance?
Most individuals and organizations by virtue of their existence provide monetary support to others. When an event happens 1Example:
death – the dependents would no longer receive the financial cushion from such person’s income,
major health issue – requires significant spending on treatment,
legal liability – involves huge obligations for legal fees and compensation (if any),
damage to stock/consignment – affects business profitability,
fire at site – damages assets and inventory, put the existence of the business in doubt that hampers their potential to do so, it can negatively affect the lives of many, including their own. If such an even occurs, one’s insurance offers them the monetary support required to get through it.
How does one pick between various product offerings?
One’s knee-jerk reaction is always to think about which policy is the cheapest. But that’s a naïve way to go about it. It’s important to consider the following –
Sum assured – the total amount that the insurer may be liable to pay under the insurance contract. It’s important to buy insurance for an amount more than or equal to the value of the asset.
- Premium – the amount paid by the insured to receive coverage under insurance contract.
- Period of insurance – the time frame for which the contract of insurance provides coverage.
- Coverage – the range of risks that are covered under the contract of insurance, and whether they have a capping of amount of coverage offered.
- Exclusions – the risks which are specifically excluded from being covered.
- Vested interest – Unfortunately, a buyer can’t always be sure that the seller is offering something that is in the best interest of the buyer, sometimes, sellers may push a product which gives them a better payout. So, one must always buy from a reliable insurance company employee/agent, or an independent broker that they can rely on. If not, they must do the required due diligence before buying.
Who is responsible for insurance regulations in India?
Insurance is regulated by the IRDAI (Insurance Regulatory & Development Authority of India) in India. Insurance Companies, Brokers, Agents, and Marketing firms, all get their licences from IRDAI.
When can I be sure that I’m buying a good insurance product?
If you have on your hands an insurance product – from an insurer whose service you can trust, the policy terms of which are clear, the premium of which when compared with other like products is reasonable, and the person you’re dealing with is genuine, then you can go ahead and buy. There seems to be a lot of scepticism in people’s minds about insurance products, because of the rampant misspelling that has gone on in the past. We assure you that, in this regard we’ll never give you a reason to complain.
Where from can I get to know more?
Please get in touch with us about your insurance needs, and we’ll come back to you with options.