What is Insurance?
In this blog, we dive into the terms related to insurance and the importance of it in this world.
Insurance :
Insurance is a contract in which an insurance company promises to give financial protection or reimbursement for certain kinds of losses to the person taking the insurance
The word ‘insurance’ means protection against some kind of loss or damage to a person, their family or their property
It can be loss of property, something you own, like a mobile phone or a car. It can mean being faced with a serious illness which is very expensive to treat. It can also mean dealing with your property being destroyed by an accidental fire, or even, loss of someone’s life
Importance of Insurance :
People need financial help in certain situations. For example, if you lose your mobile phone, you would need to buy another one but you may not have the money to pay for it. If your mobile phone is insured, the insurance company will pay the cost of your replacement phone
Health insurance :
A health insurance policy gives you help in case you or someone in your family suffers from any of the diseases covered by the policy.
How does their business model work?
An insurance company charges a fee from every person who wants to get himself or his property insured. That fee is called ‘premium’
What happens to the money if nothing uncertain happens?
The insurance company doesn’t refund the premium of everyone who didn’t need to make a claim against their policy, or else how would the insurance company run? The premium amount is their source of income
Is Insurance mandatory?
In some cases, insurance is a must as per the government’s rules, like in the case of vehicles.
In some cases, people get an insurance on their own, as they prefer taking precautions. Sometimes, people realize the need after something bad happens. Like when someone falls sick and the hospital bills are huge, the first thing the hospital will ask is whether the patient has insurance. So, even if someone didn’t know it before, they learn from their experiences
Note : I intend to share what I learn through this blog. Since these are mostly notes, I have tried not to be extra creative with my sentences. The phrases are mostly extracted from the source, as they were. Due credits go to TCSiON Reference Material for Financial Literacy
