• Here’s when insurance comes into play. Insurance cannot eliminate risk; instead, it assists you in minimizing risks by shifting them to the insurance provider. The benefits of insurance are limitless.

Why is Insurance Essential?

• Whether it’s a business or an individual’s personal life, the necessity for insurance, especially life insurance policies, is crucial in alleviating risk and minimizing financial setbacks. It aids in evaluating, managing, reducing, and transferring risk to the insurer. Let’s explore the advantages of insurance or the significance of insurance in depth.

Supports Economic Development

• Individuals and businesses pay premiums to secure insurance coverage. These premiums are aggregated, and then a certain portion is further invested.

• The funds are typically invested in low-risk, long-term assets such as government bonds that yield consistent returns. In this manner, the government can finance large-scale infrastructure and various projects that further contribute to the country’s economic development.

Generates Long-Term Wealth

• Let’s examine an instance of life insurance. You pay premiums for maturity or death benefits. The annual premiums are manageable, but when they are combined or gathered over time, it aids in wealth accumulation. Upon the maturity of the policy or the passing of the insured, these funds are delivered to him or his beneficiaries.

Provides tax benefits

• The premiums you pay and the assured amount you receive assist in minimizing your tax burden both now and in the future. This is typically applicable in life insurance. Various sections of the Income Tax Act 1961, like Section 80C and Section 10 (10D), permit tax deductions on payments made for life insurance premiums and benefits. These tax deductions may differ from one policy to another. Thus, it is an excellent financial instrument as well.

Supports Families in Medical Emergencies

• Life’s uncertainties can result in hospitalization, and significant medical expenses can create a strain on your finances. This often causes anxiety and adds to the burden on your loved ones. In such situations, health insurance is the solution. While you care for yourself or your family, insurance companies handle your bills. Recovery becomes simpler when financial matters are managed.

Need for Insurance

• We frequently hear individuals talk about the significance of insurance and how it is no longer optional. However, no one truly clarifies why. So, let’s explore why you genuinely need an insurance policy. Life insurance for future goal planning Everyone desires their future to be secure and their finances to be organized. This is where appropriate life insurance plans can assist you. In return for premiums, it allows you to create a corpus. Your investment supports you in the future or provides for your family in the event of your passing. It may also help you enjoy a comfortable lifestyle during your retirement years. You can utilize it to purchase a home, plan for your children’s wedding, or start a new business. That’s how life insurance contributes to planning for your future.

Types Of Insurance

• By now, you already know the importance and need of getting insurance. Let’s discuss the types of insurance policies available for different circumstances/needs.

Life insurance

• Life insurance is where you pay premiums to insure your life. In exchange for your premiums, the insurance company provides a maturity benefit/death benefit. It offers two benefits: insurance and wealth creation.

• In case of your demise, the sum assured is paid to your beneficiaries or nominees. If you outlive the plan, the maturity amount is given to you. You can also add riders1  to the policy to increase the coverage.

• For example, adding a critical illness rider1 will take care of your finances if you are diagnosed with any critical illness while your policy is active.

Child insurance plan

• A child insurance plan is specifically dedicated to your child’s needs. Its main aim is to provide insurance and act as an investment for children’s financial security.

• The funds accumulated can be utilised towards the child’s future education or marriage or even buying them their favourite instruments.

Term insurance plan

• It is a pure insurance plan that only provides insurance for a specific term, depending on your needs/requirements. Most term insurance plans in India offer death benefits only. If the insured dies while the policy is active, the nominees would get the sum assured.

• If the insured outlives the policy, no maturity benefit is given, and the insured must renew the policy. It is preferred because of its affordability and the ability to provide financial cover to your loved ones from your unexpected demise.

Health insurance plan

• Health insurance provides financial coverage and protects you from big medical bills. It provides protection in cases of hospitalisation, medical treatments and more as per your sum insured amount.

• If you get yourself treated by the network hospitals of the insurance company, you may not need to pay in cash. The cashless facility available ensures smooth treatment and financial well-being.

Unit-linked insurance plan

• ULIPs offer life cover along with return on investment benefits. One portion is further invested to generate returns, and the other portion is used to offer life insurance coverage.

• The policyholder receives the aggregate maturity amount from all the funds upon the policy’s maturity. It also offers tax benefits2 along with wealth creation.

FAQs On The Importance Of Insurance

How to select the appropriate insurance plan?

• To select the suitable policy and an exact insured value, you need to evaluate your objectives, needs, lifestyle, dependents, policy length, premium cost, policy coverage, etc.

What is the waiting period for an insurance policy?

• The waiting period is the timeframe during which an insured individual must wait before the policy’s coverage starts or takes effect.

What is the significance of insurance?

• It serves as a safety net and shields against unforeseen events such as accidents, theft, illness, job loss, etc. It also aids in saving on yearly income tax and accumulating wealth.

Which insurance is mandatory to purchase in India?

• Car insurance is obligatory in India. Given the frequency of accidents, motor insurance has been mandated for all.

What is the schedule for premium payments?

• It denotes the intervals or time frames after which you are required to make premium payments for the insurance policy. These may be monthly, quarterly, semi-annually, or annually. It can differ from one policy to another.