Importance of Insurance

Importance of Insurance

Insurance is an arrangement which undertakes to compensate a specific loss, illness or damage incurred within a certain specified period.

Origin of Insurance:  Insurance originated in Babylonia where the traders frequently faced loss due to ship wreckages.  In these days technology has grown luckily to enable us to predefine limit for risk.  In apps like BTC profit, the automated trading robot does trading up to the predefined limit.  But in those days people were helplessly watching huge losses.  They could neither control the quantum nor the reasons for the losses.  This gave rise to the idea of insurance.

In ancient days, the insurance concept was prevalent in London and New york also.

Why insurance? Insurance is the concept of sharing losses of few by many.  The traders contributed an amount collectively to meet the loss of those who lost their ships.

Types of Insurance:

Life insurance:  Death of dear one brings emotional grief as well as financial loss.  Emotional grief can never be compensated.  But life insurance compensates the financial loss. Generally, the premium is paid in the monthly/half yearly/annual mode for a certain number of years for life insurance.

General Insurance:  Any loss to assets owing to natural calamities like cyclone, earthquake etc. and due to accidents like fire, theft etc. are compensated by general insurers. The annual premium is paid and these policies are generally renewable every year.

Health Insurance:  Healthcare is becoming costly day by day.  Hence hospitalization expenses are taken care of by health insurers.  These are similar to general insurance policies and have to be renewed every year.  Health insurers offer cashless benefits.  If a person falls sick, all the hospitalization expenses will be settled directly by the insurer to the hospital and hence the sick person is relieved from payment worries.

Benefits:  Insurance compensation comes to timely help for needy people who are affected by some grief in the form of death, loss or sickness.  This will protect their quality of life and comforts.

Comparison with other investments:  No other investment option  like bank deposit, mutual fund or shares cover the risk.  Only insurance covers risk.  It is advantageous in so many ways.  Insurance offers tax benefit, loan benefits and can always be surrendered by the insured in case if he is not able to continue the policy.  In that case, a nominal surrender value will be paid to the insured.

Insurance policies offer lumpsum amounts which help the investor to meet expenses and spend retired life without financial worries.