Purpose and need of insurance

Life of everyone is full uncertainties. Nobody knows what is going to happen in next moment. This element of unknown situation always hounds around the mind of a person and keeps him worried to think as to what will happen in future in case of any mishappening. This worry is to think about the future of the person and his family. Among a number of worries the main and very important is economic uncertainty of himself or his family.

If anyone is satisfied with his present earnings, he also thinks whether or not his present day capacity of earning will last for long. Perhaps there remains an iota of fear that it may not last for the long. On this very point everyone thinks about to secure his future.

Under the impression of securing future one thinks about the adoption of saving and investment plans. . He not only thinks about himself but also about his family. In case of any miss happening everyone is worried as to what shall happen to his family.

Everyone knows that there is no substitute in case of death of an earning member of the family and no compensation is able to fulfil the gap in case of death of the earning member. But for supporting economically upto some extant the method adopted is known as insurance.

The life insurance is such a cover that provides security to the family of insured in case of his death. Life Insurance in such cases provides some solutions to the worries of family members.

Once upon a time it was very difficult to convince people for getting an insurance cover but today it has become a need of the day. Today the life insurance does not cover the risk of life only but also provides many added benefits also in the field of saving and investments.

People need insurance because the unexpected does happen. Whether it is a fire, a car wreck, illness or a death, the financial consequences can be devastating if you are uninsured. Insurance helps people have peace of mind when life’s unexpected events happen.

In Case Of Non-Life Insurance Also The Life Is Full Of Uncertainties:

Other than life there are many fields which create a lot of worries in every one’s life. After insuring life or purchasing a life insurance policies no one is absolved of the entire worries of life.

There remains many fields to worry about. Every field need some security cover and to ensure such security cover one is not able to apprehend the future unfortunate happenings. It therefore becomes prudential to get insured for visual or un-visual events one is able to foresee.

Such event may be conceived:

1. You never know what is going to happen:

This is the main reason for having insurance. If you are covered and someone breaks in to your home and steals something you get it replaced, if you break your hip you get it replaced etc. This is how insurance should work.

2. You can’t trust nature:

Recently in 2010 a cloud burst in Himachal Pradesh took life of hundreds of people and thousands of persons were left as homeless people. In a situation of terrorists regime any one is exposed to the risk of life and business. These are just for example of the destructive forces of nature. Add storms, hurricanes, tornadoes, earthquakes, tsunamis, floods etc. into the mix and it becomes very clear that insurance is still very necessary!

3. You can’t trust other people:

Accidents happen to everyone, but there are people who cause accidents through negligence, a drunk driver for example. Not being insured doesn’t mean you can’t sue them, but at least you are covered from the start!

4. It’s not as expensive as you might think:

Insurance plans can seem expensive, but there are always ways to save money, like bundling different types of insurance together for example.

5. For your peace of mind:

Knowing that you (and your family) are covered by an insurance policy if something unfortunate does happen can help put your mind at ease.

The need of insurance is well felt when one has to bear the losses from his own pocket. When pocket does not allow to bear the expenses incurred on losses the insurance come to rescue.

Insurance is purchased to protect you from a catastrophic loss when you KNOW you wouldn’t be able to afford the loss. For example, health event/condition such as serious accident/stroke/cancer/heart attack and everything in between that would cause you to be out of work temporarily or permanently, home fire that burns down half the home, car accident that could be in lacs to a total loss, death and now family is on the street, property stolen, business liability when someone sues you…etc..

Either one bears all such expenses from his pocket or gets these reimbursed from the insurance company is matter of fact that insurance cover has become a need of the day. . One pays a very small amount of money for the promise that a LOT of money is pledged in the event of a covered loss.

Characteristics of Insurance:

1. Any Insurance is a contract between insurer and insured for compensating the losses.
2. For any insurances contract not only premium is charged but it also obligatory to pay the premium in time.
3. Payment to insured in the event of loss as per the agreement and terms of policy purchased by the insured.
4. Insurance is a simple contract based on good faith.
5. Insurance contract is one that provides benefits to both the insurer as well as insured. In other words it is a contract for mutual benefits.
6. All other contracts are based on present day situation whereas an insurance contract is one for compensating future losses.
7. The insurance concept being based on pooling funds by many and distributing among few for their losses is a social security also.