Financial Literacy – Insurance

Insurance has been a subjective matter, but factors like increase in financial literacy, awareness and increasing risk in every aspect of life, changes in lifestyle etc. are responsible for making insurance, one of the undeniable needs for every individual. Life has become so uncertain that nobody knows whether he/she will see the next day’s Sun, nobody knows when any serious illness will be diagnosed, nobody knows till when his vehicle keeps running without any accident or any mishap and finally nobody knows till when his assets like home etc. will remain intact. This means that we are living life full of uncertainties and in that situation whatever assets and improvements, one can create in his life that must remain functional/working. Therefore insurance is no more a luxury, but a necessity. Insurance though pinches, when the premium is to be paid, but in case of any miss-happening, the insurance turns out to be a big help. So, one needs to change his mind set and takes insurance as part of their annual or monthly expense rather than as a burden or avoidable expense. Many examples can be seen where the person died in an accident but, he did not have any insurance, he did not get any compensation. Likewise cases are the other types of insurance are also seen, where just because of knowledge or complacency, there was a big loss but no compensation of help could be possible. Four types of insurances are available and every individual must take these insurances.

These are:

Life Insurance

Health/Medical Insurance

Vehicle Insurance

Home Insurance

Life Insurance

Life expectancy is definitely gone up that means average age of people has gone up by 10 to 15 years and so is the uncertainty of life. Nobody knows or can say with guarantee that he/she will be there tomorrow and in case some unfortunate thing happens where the individual dies and there is no insurance the family may get into great financial difficulty. If nothing else, the insurance must be considered at least for the sake of his/her family members. The money that is received by the family as sum assured may help in the following ways:

• Pay the loan amount or any other heavy financial obligation
• Meet regular monthly expenses, particularly if there is no other earning member in the family
• May help to meet some future expenses like child higher education or marriage
• Etc.

Health/Medical Insurance 

The saying “Health is wealth” is rightly said and perfectly fits in today’s world. This clearly means a healthy person can do anything but an unhealthy or a sick person will keep thinking all the time about his health related problems, So be healthy and think healthy. This does not mean that one will never have any health problem or issues. Various reasons are there because of which one needs medical help/advise and even hospitalisation, if required. It is also well known how medical expenses are increasing, and if for some reason one needs to get hospitalised for some ailment, it may literally burn your pockets irrespective of how deep they are. The heavy expenses that one needs to incur may affect the family’s financial position. 

In view of this, it is necessary that one must go for the insurance of a reasonable amount; so that if required, he need not spend much from his/her own pocket and all the expenses are covered by the health insurance policy. Health insurance should be considered as a saving in those unforeseen situations rather than taking as an unnecessary expense.

Vehicle Insurance

Like health insurance, vehicle insurance is also very important. Vehicle being on the road almost every day is prone to accident. The accident may happen because of other person, but the problem will be yours. So, if the insurance of vehicle has been taken at least you will not have that much worry. In case any damage to vehicle , one can always go for claim and get substantial amount, if not 100%, paid by the insurance company , so that will be big relief to the individual. Some of the Governments have made it mandatory, that no vehicle can run on the road without insurance and any vehicle is found without insurance, a fine will be imposed on the owner of the vehicle. Therefore it is compulsory to have vehicle insurance done.

Home Insurance 

Home insurance, generally gets least priority. People also have some sort of complacency in this regard. Home insurance may help in situations where theft, burglary, flood etc. are likely to occur frequently. One can also insure household goods along with insurance of the house. That will enable the insurer to get compensation not only for house damage but also the assets like TV, refrigerator, Computers etc. Thus, in case such eventuality one can rebuild the house along with the assets that he had.