Insurance is a legal agreement between two parties – the insurer and the insured, also known as insurance coverage or insurance policy. The insurer provides financial coverage for the losses of the insured that s/he may bear under certain circumstances. Let’s discuss in detail what is insurance and how it works, the insurance benefits, and types.
Insurance Covers Losses: Life is filled with uncertainties, hence when the worse happens, Insurance comes forth to cover losses insulating you against the shocks of losses.
An insurance policy performs various functions and comes with multiple benefits. Below are some of its most fundamental advantages, along with some of the secondary, and the rest are additional ones. The basic functions of insurance coverage are:
- Financial Stability: Relevant insurance policies guarantee financial stability for a policyholder — monies that could have been expended by a policyholder due to loss is taken care of by the insurer.
- Provision of Economic Protection: It protects you against unexpected losses that can affect your finances.
- Maintains Standard of Living: Insurance gives you a level of protection that ensures you maintain your standard of living.
- Grants/Loan: The insurance policy can be used to apply for a loan as a security
- Protects Against Tragedy: Events such as floods and fire caused by lightning which are not caused by humans can also be protected with insurance.
- Confidence: With insurance, you have a certain level of peace of mind that your future is guaranteed against unexpected loss.
- Recognized by The Law: Some government policies/regulations required having insurance. A good example is compulsory Third-Party Motor Insurance.
- Eliminates Dependency: Life insurance policies help the family to move on with financial support after the demise of the breadwinner.
- Tax Benefits: Certain policies can have tax relief that the insured can benefit from.
To conclude, shield your life and important assets against all uncertainties with the help of insurance. Know what insurance coverage you need, compare, and invest wisely. It’s important to understand that the need for insurance is to secure what you love.