What is Insurance ?

It is a contract between the Individual/Company & Insurance Company, in which the Individual/Company pays a certain amount on periodic basis to Insurance Company and in exchange, the Insurance Company protects or gives back Amount to you in case of any unforseen event (which was insured ).

Important Terms  :-

(a) Premium – Amount paid by you/entity to Insurance company on periodic basis for a certain period.

(b) Sum Insured/Assured – Amount given by Company to you/your Nominee in case of some unforseen event.

(c) Policy – It is the copy of that contract. (very important to preserve)

(d) Policyholder – The person who purchases the policy and pays premiums.

These are simple terms to know, but there are many other terms as well and those are policy specific and changes from policy to policy.

Its Different Types  :-

(a) Life Insurance

(1)  Term

(2)  Endowment

(3)  Whole Life

(4)  ULIP (Units Linked Insurance Plan)

(5)   Child

(6)  Retirement Plans

(b) General Insurance

(1)  Health

(2)  Home

(3)  Motor

(4)  Travel

Let’s not discuss in detail. But, I welcome you if you are interested & want to know. Comment Below & we will reply to your comment as soon as possible.

Who should get it ?

Once, I was in conversation with one of my friend (very intellectual person).

Sitaram (me) – How much Life Insurance cover do you have ?

My Friend – Do you know Sitaram? Ambani does not have Life Insurance. And I follow what rich people do.

(First of all, I appreciated his effort of knowing about Ambani’s Insurance*. Actually, I  could have replied him the real reason about Why Ambani does not have a life insurance & Why should he have it ? But, I wanted him to learn something new.)

Sitaram  –  Do you have any sort of insurance ? if yes, which one?

My Friend – Yes, Zero Dep * ! (said proudly) and Car Insurance.

Sitaram – Why do you have car insurance ?

My Friend – Sitaram , you know it that car accidents are common. And, in driving, sometimes you had to bear the cost because of the other person’s mistake.

Sitaram – Whom do you love more, Your car or Your Family?

My Friend – Sitaram (speaking angrily)! Obviously, my family. How can you even ask me question like that one?

Sitaram – Calm Down buddy, but your actions compelled me to ask such question. Because, if anything can happen to your car then anything can happen to you as well. In turn he replied, yes. I said then why your car has Insurance and You do not have. What if, tomorrow something happens to you (Nothing  should happen to anyone, but personal finance is such a dark topic that it compels us to think such things). Who will be the bread earner of your family ? What about the financial conditions of your family ? Your Investments are not sufficient enough to let them live a healthy life and you have many liabilities (like your son’s education, daughter’s marriage & new house construction). These questions let my friend in deep thinking and because of his intelligence, he asked me to get a life Insurance for him and I advised him a good Term Life Insurance (depending on his situtaion) at not much costs.

Why to get it ?

It looks very foolish to us, thinking , Why would somebody pay us some amount (in crores) if something bad happens to us? & we skip discussing Insurance anymore. But my dear friends, To err is Human & That’s very normal if you also had such thoughts into your mind when you heard of Insurance. Because, our mind only guides you on the basis of its knowledge that you provided to it and gives you responses on the basis of it only. That’s why someone said,

“Employ your time in improving yourself by other men’s writings so that you shall come easily by what others have labored hard for.” — Socrates

Mind knows that life cover is very important but you were never provided any content related to it (like reading books to it). But, you should have no worries if you believe onto us. That’s our job, to make your financial life healthy and wealthy.

How much cover to have ?

Well, this is very personal question and its reply depends on individual to individual. But let me give you a rough calculation.

Your Cover = Amount on which you will get safe returns per year (these returns when converted to monthly Amount, that should be sufficient for your family to live life happily) – Assets + Other Liabilities

Happy Investing from meriSIP.com