A Beginner’s Guide to Insurance

Getting the right kind of insurance is central to appear financial planning. Some of us may have some form of insurance but few really understand what it is or why one will need to have it. To get most Indians insurance is a form of investment or a superb duty saving avenue. Ask an average person about his or her investments and they will proudly mention an insurance product as part of their core investments. Of the approximately 5% of Indians that are covered the proportion of those adequately insured is much lower. Few of the insured view insurance as purely that. There is perhaps no other financial product that has seen such rampant mis-selling at the hands of brokers who are over fervent in selling products connecting insurance to investment getting them fat commissions. Affordable

What is Insurance?

Insurance is a way of distributing out significant financial risk of a person or business entity to a huge group of individuals or business entities in the occurrence of an sad event that is predetermined. The expense of being insured is the monthly or gross annual compensation paid to the insurance company. In the purest form of insurance if the predefined event does not occur before the period specified the money paid as settlement is not retrieved. Insurance is effectively a means of spreading risk among a pool of men and women who are insured and whiten their financial burden in the event of a shock.

Insured and Insurance firm

When you seek elimination of financial risk and make a contract with an insurance agency you become the insured and the insurance company becomes your insurer.

Sum assured

Is obviously Insurance this is the amount of money the insurer promises to pay when the insured is disapated before the predefined time. That is not include bonuses added in the case of non-term insurance. In non-life insurance this guaranteed amount may be called as Insurance Cover.


For the protection against financial risk a provider provides, the insured must pay reimbursement. This is known as premium. They may be paid annually, quarterly, regular monthly or as decided in the contract. Total amount of premiums paid is a couple of times lesser than the insurance cover or it wouldn’t make much sense to seek insurance at all. Factors that determine premium are the cover, period of time for which insurance is wanted, age of the covered (individual, vehicle, etc), to name a few.


The beneficiary who is specified by the covered with insurance to get the sum reassured and other benefits, if any is the nominee. In the event of life insurance it must be another person in addition to the insured.

Policy Term

Period you want protection for is the term of policy. Term is made the decision by the insured at the time of purchasing the policy.

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