Life Insurance

What is Insurance?
It is a contract between the insured and the insurance company whereby the insured financial risk is covered by the insurance company. The risk can be of your vehicle, property, legal etc. So effectively, you pass on the risk to the insurance company and they charge you a nominal sum of money for taking that risk which is called  Insurance Premium.

What Happens in Real Life?
The answer to this lies in 2 questions “why did I buy this insurance?” and “what product I bought?”.  Typically you buy insurance product as investment and not insurance.  That is why we say that Indians have actually not understood insurance in the right sense.  First of all less than 5% of the Indian have insurance policy and add to this, out of those who are insured, the average life insurance cover is less than Rs. 90000/-.
We all understand insurance as an investment and land up buying EXPENSIVE Product.  We all buy Endowment Money Back. ULIPs etc.  Now when you buy an expensive product, you will actually be the loser and the manufacturer and the middlemen will be the winner.  Is it not?  All one need is to have a simple Term Insurance Policy/Term Life Insurance Plan.

There are Two types of Insurance -
1.  Life insurance is insurance on human beings.  Though Human life cannot be valued, a monetary sum could be determined which is based on loss of income in future years. Hence in life insurance, the Sum Assured (or the amount guaranteed to be paid in the event of a loss) is by way of a ‘benefit’ in the case of life insurance. Life insurance products provide a definite amount of money to the dependants of the insured in case the life insured dies during his active income earning period or becomes disabled on account of an accident causing reduction/complete loss in his income earnings.
 An individual can also protect his old age when he ceases to earn and has no other means of income – by purchasing an annuity product.
 There are a number of life insurance products which offer protection and also coupled with savings.  Products must fit you well as per your requirement.
2.  General Insurance - Insuring anything other than human life is called General Insurance. Examples are insuring property like house, vehicle, shop and belongings against fire and theft or vehicles against accidental damage or theft. Injury due to accident or hospitalisation for illness and surgery can also be insured. Your liabilities to others arising out of the law can also be insured and is compulsory in some cases like motor third party insurance.  It is really a funny to observe that now a days, people are more concerned with their vehicle insurance rather than their own life coverage.