- Why do I need Insurance? - Health Insurance
- NAV ULIP Schemes - Auto Insurance
- Life Insurance - Property Insurance
Insurance – Why do I need one?
Insurance is one of the most important financial topics in today’s complex world. Failure to have sufficient insurance coverage is the quickest and easiest way to accrue mass debt. Nothing will make your business, car, house, family, or self more vulnerable or susceptible to financial strain than a lack of adequate insurance. However, paying too much for insurance can be a financial strain in itself. And paying for insurance that is not needed is just money down the drain.

Many people have a preconceived notion that insurance is just a waste of money, something that is not necessary. This is not true. Almost everyone needs insurance. How do you know? If you own anything that cannot be easily replaced without economic hardship, it should be insured. If your house burned down, what would you do? If you became disabled at work, would there still be food on the table? Or, in the worst case, would your family be provided for if you passed away?

These are tough scenarios to imagine, but they happen every day. It is important to understand the consequences and to be prepared for the worst. Some people tend to think of insurance as a luxury, but this is not true at all. Insurance is simply a way to avoid an impoverished state.

Like many things in life, the decision to purchase insurance or not is based on a system of risk/reward. Unfortunately, consumers often look at the reward and ignore the risk altogether. This can impede the process of making an educated decision. For example, the lottery is a very popular system of risk / reward. In this case, the risk is generally small, but the reward can be great, making it a popular choice. Gambling in casinos is another example. In this case, some people become so fixated on the reward that they forget the risk of losing. Think of insurance as an inverted version of the lottery. The reward (not paying for insurance and therefore saving an immediate expenditure) is miniscule compared to the possible risk (losing everything you own and being in debt for the rest of your life). And sadly, the chances of your number coming up in the insurance game are a lot greater than your chances of winning millions.

Hopefully, you now realize that insurance is a necessary part of today’s world. So let’s move on. There are four questions you should have in mind when you set out to purchase insurance.

  • What kinds of insurance do I need?
  • How much of each kind do I need?
  • Who do I insure from?
  • How do I get the best deal?

There is also a fifth question that you should continually ask yourself when deciding about your insurance needs.

What happens if I’m not covered?

What really happens if you aren’t covered, whether it’s not enough of a particular type of insurance or none at all? Imagine a scenario and play it out in your head. Will it even affect you? Can you recover from it at all? We will go through some basic scenarios together and you can decide for yourself.

For more information or any other assistance,
please contact us. We will be happy to help you.
Life Insurance
If you live by yourself and have no family or people dependent on you, you probably don’t need life insurance. But for most people, life insurance is absolutely necessary. If you die, would your family be able to survive without you? Would they be well taken care of? Would they be in debt over funeral costs? Life insurance is relatively inexpensive compared to most insurance, and the payout (which depends on how much your premium is) is usually pretty high. This sum, which is awarded to your family or whomever you name as your beneficiaries, can be vital in allowing them to recover and become financially independent. Remember that life insurance isn’t for the people who die, it’s for the people who live.
Health Insurance
One of the most important types of insurance is health insurance. The cost of healthcare is continually increasing, and without insurance this cost can be unbearable. If others are dependent upon you – spouse, children, or parents – then providing health insurance for your family is absolutely necessary. If you are only providing insurance for yourself, then it should be purchased if it can be afforded. It is important to remember that health insurance does not just cover you when you get sick. Even if you feel that you never get sick (and you may be right), you are still susceptible to falling and breaking your arm. Insurance is not a way to get checkups with the doctor. Health insurance is a way to avoid debt from an unforeseen circumstance.

Scenario – Karan works for a construction company. He passed up an opportunity to get insurance through his work and failed to get health insurance for his family. His daughter is 9 years old. Karan always pays the doctor bills himself when she gets sick. However, she recently came down with a bad case of pneumonia. Karan knows that pneumonia can be life threatening, so he takes it very seriously. His daughter is so bad that he takes her to the emergency room. She stays in the hospital for two days. The prescription drugs needed to treat his daughter are thousands of rupees apiece, and she must be treated for several months to ensure there is no relapse. The stay in the hospital costs thousands. Karan doesn’t know where he will get the money, so he decides to rob a bank.

Ok, just kidding, Karan doesn’t rob a bank. But hey, he’s got to get the money somewhere, right? Insurance is a way to prepare for the unexpected or unforeseen things that happen in life. When it comes to the health of a family, insurance is absolutely necessary. On the priority list, it should fall behind only food and shelter, and should be first on the priority list of insurances.

Auto Insurance
Most people figure that if they’re going to skimp on insurance somewhere, auto insurance is the most logical place to do so. The fact is, everyone who drives is required by law to carry liability insurance, meaning they are insured if they hit someone else and cause damage. However, when you hit someone else, the insurance company will not pay to fix your own car if you only carry liability. You must carry comprehensive coverage to ensure that you yourself are covered. Some people figure that their car is not worth much anyway, so what’s the point? Well, it is important to remember that comprehensive auto insurance usually covers the physical injury as well as that to your car. In fact, you must carry physical injury insurance for anyone that your harm by your own fault.

Scenario – Arjun has a 1990 Honda Accord. It’s not in very good shape, so Arjun figures he will only get liability insurance. After all, liability is Rs. 10,000 a month and comprehensive is Rs. 15,000 a month. Arjun saves Rs. 5000 a month by not insuring his own car. He also pays the bare minimum for liability coverage. There are several negative things that can happen from this scenario.

Option 1 – Arjun spaces out and runs a red light, causing a nasty collision with another car. Luckily, no one is injured, but both cars are totaled. Arjun’s insurance covers the repairs to the other car, but Arjun suddenly finds that his own car is not insured, and at last grasps the gravity of this risk. Arjun has no car and no means to purchase another. His transportation to work is gone. He barely has enough money saved up to pay the rent, let alone purchase another vehicle. This situation seems pretty bad, but it could have been a lot worse.

Option 2 – Arjun spaces out and runs a red light, causing a nasty collision with another car. The driver of the other car is severely injured, and seems to be unconscious. It turns out the driver will need years of surgery to repair the damage that has been done. Arjun’s bare minimum policy covers the driver of the vehicle up to 5,00,000 Rupees. However, within a month, the cost of the driver’s surgeries exceed this amount, and continue to pile up. Arjun is in debt a lac rupees within the year, effectively ending any plans to purchase anything but food and shelter for the rest of his life.

This option may seem extreme, but it is not. When you pick the bare minimum on an insurance policy, you are still taking a risk, even though insured. Accidents happen every minute of every day, and many of these people are injured. With the rising costs of medical care, it is vital to make sure that you are covered through a decent amount of physical liability. Many insurance companies seem to offer you a great rate, but it is important to understand just what you are being insured on. Sometimes, you can purchase an “umbrella” policy, which will cover all of these things. This, too, seems like a great deal, but usually the coverage is very limited.

Homeowner’s/Property Insurance
The general rule is to insure what you can’t afford to lose. Valuable property that cannot be replaced without financial hardship but that would need to be replaced should absolutely be insured. Your house, if you own one, should always be insured. Homeowner’s insurance will usually cover all possessions within your house, so in case of a fire, everything you own inside your house would be insured. This is a very good idea if your house is filled with valuable possessions. Renter’s insurance is the equivalent of this for people who rent. Sadly, many people don’t choose to carry insurance on their house, and the results can be crippling, financially and emotionally. All it takes is one fire and your life as you know it is gone.
For more information or any other assistance,
please contact us. We will be happy to help you.
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