Insurance is one of the least understood modes of investment. Most people scoff at the idea because they think that they will only get access to the benefits while taking their last rites! Nothing can be further from the truth.
So what is the concept of insurance all about?
Insurance protects you, your car, your business i.e. whatever you wish to protect against potential losses or damage. For instance if you insure your car or your house, in the event of an accident or a fire, you can stake a claim to a certain amount of money, which will bail you out of financial worry.
As the consumer, youpay a premium (a certain amount of money) to the insurer to transfer the risk.The insurer pools all its premiums into a collective fund. When any policyholderhas a loss, the insurer draws out from the fund pool to accommodate the loss.
While insurance coverage is essential, how much and what type of insurance you need depends on your circumstance. For instance the amount and type would depend on whether you are single or married, have a huge family to support (especially if you are the only earning member) etc.
Nowadays, insurance isvery affordable because you pay the premium in installments, and accessible,because there are so many players in the market. The earlier you get aninsurance policy, the better.
