We have seen a lot of television advertisements for insurance. We know what insurance is, but do we know how insurance benefits us, or is it even beneficial? Insurance is a financial product that we can use to safeguard ourselves from the damage that potential risks can cause. Insurance is not a one-size-fits-all thing.
It depends on the requirements of the individual, and depending on it, he may decide whether he needs a policy. People usually neglect insurance. They need to learn the pros and cons of having insurance. They consider insurance merely a financial product that an agent is trying to sell for his profits but is not only confined to that.
Insurance needs for everyone are very subjective. People of different ages, different stages of life, different financial goals, and different requirements will have additional requirements for insurance. Insurance is not a must-have necessity, but it is essential to have.
What are the Pros and Cons of Having Insurance?
The pros and cons of having an insurance are explained below:
What are the Advantages of Insurance?
Insurance is an essential financial product to have in your portfolio. Insurance has its own set of advantages over other financial products. It can be essential in your wealth creation journey if used wisely. Here are some pros of buying insurance:-
Financial Security
The foremost benefit of insurance is that it provides financial support to the individual as it covers all the expenses that can occur due to any unwanted devastating event. Insurance acts as a safety net so that if something goes wrong, the individual does not experience any financial crisis. It helps us keep our plans on track between the disturbances caused by the mis happenings.
- Protection Against the Unexpected Events
The course of life is very unpredictable. You should use insurance to keep you and your plans intact in such an unpredictable environment. Many unexpected events like accidents, natural disasters, or health crises can happen anytime.
So, you have to keep yourself prepared for all the potential problems. Plus, you also get tax benefits with insurance. Under Section 80C, you can claim a deduction of up to a maximum of ₹1.5 lakh for premiums paid for life insurance premiums. You can check the advantages and disadvantages of term insurance for more details.
- Peace of Mind
Think of yourself enjoying your vacation outside of the town at such a time. Do you want to take the stress about your house and other belongings that you left behind, or would you like to enjoy your vacation with a free mind? Of course, no one wants to worry about anything when on holiday with our families. Insurance gives you peace of mind; even if some misfortune happens, your loss can be recovered by insurance coverage.
Health Benefits
Today, we all have a very unhealthy lifestyle compared to our parents or grandparents. Today, we all have many health problems from a very young age. Medical bills can cost a lot. Even a single visit to the doctor is costly today. Here are some health benefits that insurance provides:-
- Managing Medical Expenses
As per the National Sample Survey Organisation or NSSO surveys, 7% of India's population is forced into poverty every year due to the high healthcare costs. In India, out-of-pocket medical expenses were over 63% of healthcare spending. Health Insurance can help you manage your medical expenses.
It also provides additional benefits like no cash hospital benefits, regular checkups, etc. Medical bills can cost a lot, whether a simple checkup or a major surgery. Health insurance ensures that a significant portion of your expenses is covered without burdening you.
- Preventive Care
Health Insurance also provides some health regimes that provide benefits such as regular check-ups, vaccinations, screening, etc. Many health insurance policies cover many preventive services that encourage an individual to have a healthy lifestyle. For a more detailed explanation of the advantages and disadvantages of health insurance, check here.
Protection of your Assets
As you grow your wealth, the risk of having a loss because of some damage due to an unwanted event also increases. Events like natural disasters, burglary, or fire can cause very heavy damage to your property, but if you have insured all your assets properly, you must not fear any such event. Home/property insurance provides you the coverage to recover the damage caused to your assets.
- Safeguarding Homes and high-value financial belongings
For most of the Indians, our home is one of the most significant financial investments for us. Our home is not only a financial investment but also an emotional investment for us. Unforeseen events like natural disasters, accidents, etc can cause heavy damage to property, so it becomes essential to safeguard it.
- Securing Businesses and Mitigating Financial Losses
While running a business, several risks are involved, such as property damage, liability claims, business interruption, natural disasters, accidents, legal issues, etc. Any of these can put the existence of your business at risk. Having your business insured against such events mitigates the risk of a financial crisis.
Legal Protection
While operating in the corporate world, legal matters can arise at any point in time. These legal cases can cause a lot of financial strain.
- Liability Coverage
If by chance you cause damage to the company or fail to deliver an adequate amount of work to the company, in such case you become liable to the company. If you do not have any insurance, facing such a situation can put you in a huge financial problem.
- Legal Defense Costs
This coverage will cover legal expenses, court fees, and other related bills so that the individual has enough resources to defend himself.
What are the Disadvantages of Insurance?
Buying insurance also brings up specific problems. People not from a financial background know little about the technical terms. This is why they have difficulty dealing with financial operations related to insurance.
- Cost of Premiums
Premiums are the monthly payments that an individual gives to the company in exchange for coverage. Yes, these policies have many benefits, but do they fit into the individual's budget? People have many plans according to which they make their investments and also have many daily life expenses. So, managing the cost of the premiums on such a tight budget becomes very difficult to manage.
- Coverage Limitations
Insurance does provide many benefits, but it also has many limitations. Coverage offers financial help to a certain extent only. There are gaps in all types of policies. All insurance policies have specific exclusions in their plan.
For example, many health policies do not give coverage if the individual is admitted to the hospital twice in 30 days, or the home insurance policies do not include coverage against certain events. These small exclusions might not bother you but can create problems during claim settlement.
- Complex Policies
Insurance policies have a very complex language. The contract papers are often full of technical terms. These terms are essential for clarity in the contract, but these make the contract more complicated to understand.
- Risk of Denied Claims
There are many reasons why your claims can be denied. Many points are listed in the terms and conditions section, because of which your claims can be rejected. People usually have trust problems with insurance companies because of cases where people had insurance and paid all their premiums. Still, in the end time, companies refused to pay the insurance.
That completes a detailed explanation of the pros and cons of having insurance. There are points in the debate about whether or not to buy insurance policies. But if we consider the situation, we can easily conclude that the benefits of insurance outweigh the disadvantages. In some situations, it is unnecessary for anyone, but insurance is a must-buy in most cases.
