What is insurance?

1. Financial protection Insurance plans safeguard your financial interests in case of loss and damage. They offer financial protection against the uncertainties of life and ensure you have the means to move on and overcome any losses with adequate compensation.
2. Risk management Insurance serves as a powerful tool for managing risks. Insurance for assets, such as your house, car or other precious possessions, lowers the risk of loss or damage. In case of any untoward incident, you can claim the insurance payout and cover the losses. Similarly, in the case of health or life insurance, the payouts can be used to cover medical expenses and can help a grieving family minimise the risk of loss of income.
3. Peace of mind Regardless of whether you ever need to make a claim, purchasing insurance provides peace of mind. The knowledge that you have a financial safety net to rely on can be immensely reassuring, as it offers you a sense of security and stability.
4. Legal compliance Purchasing the appropriate insurance plan ensures legal compliance and helps avoid potential legal complications. While not all types of insurance are mandatory by law, certain ones are required in specific situations. For example, according to the Motor Vehicles Act in India, motor insurance is obligatory for all vehicle owners. Similarly, many countries mandate travel insurance with a specified coverage amount as a requirement for obtaining a travel visa.
5. Access to healthcare Medical expenses can quickly deplete a large portion of your savings. Factors such as food adulteration, pollution, sedentary lifestyles and rising stress levels contribute to the increasing prevalence of diseases. Coupled with medical inflation, these factors can create a barrier to accessing necessary healthcare when needed.
6. Promotes economic stability Adequate insurance provides a crucial safety net and eliminates the need to dip into your savings or compromise on your planned and unplanned financial needs in the event of an unforeseen circumstance. With the appropriate insurance plans in place, you can minimise losses without deviating from your financial journey.
7. Stimulates investment and innovation Some insurance plans provide the opportunity to invest your money while also securing an insurance cover. These plans are designed to facilitate wealth creation and can assist you in preparing for numerous future goals, like retirement, house purchase and others while protecting your family in case if an unfortunate event.

Read the policy wording, keep payment records and understand the claim process. Missed premiums can affect cover; check your policy's grace-period and reinstatement rules.