Buying insurance should be the very first step for every person who has saving goals. You must buy insurance before you even think about doing anything related to finance. In order to do so, you need to have an understanding of what is the real meaning of insurance and how much insurance coverage you need.The dictionary meaning of insurance is- an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.The definition of insurance regarding life insurance is – an arrangement by which a company will compensate your survivors if you die, in return for payment of a specified premium. This is one and only valid definition of insurance.
Before you buy health insurance, always compare mediclaim insurance plans offered by various insurance providers.
The question is, how much insurance coverage is adequate? There are various ways that could lead us to the answer but the basic one is the ten times your current income. For obvious, the sum insured will vary as per the income of the other family members, house, assets etc.
Now, the next question is- Do you have sufficient insurance coverage? For most of us, the answer is a big NO. There are so many people out there who pay insurance premiums annually but they have no clue about the money their family would get after they will die. This is so unusual because the life insurance sector is optimized by collecting premiums. Instead of how much the policyholders are secured for, how much premium the policyholder is paying is considered as the hallmark of success.
Not just the insurance providers but the insurance regulator IRDA offically measures the success of insurance industry by computing the premium amount collected by the policyholders. Ideally, they should measure the success of insurance companies based on how much insurance insurers have delivered to how many policyholders. IRDA’s annual report and any published report in our country don’t reveal the actual insurance coverage of the policyholders. IRDA uses ‘insurance density’, that is the per capita premium collected from the policyholders along with the premium as the GDP ratio.
Nothing in these reports provides us the credible information regarding how much insurance coverage is delivered, this is the question that we actually want to be answered. A policy buyer is least interested in how much the insurance industry has collected from its premium. Policyholders are more interested in knowing how much monetary benefit the family of policyholder will get at the time of his sudden demise. The ratio of the total collected premium to the total coverage provided etc. It is very shocking, this information doesn’t exist, at least for the policyholders.
When the potential policyholders don’t know how much coverage the insurance companies have provided to its policyholders, they are unable to make a fair decision. The right way to select or reject an insurance provider is on the basis of the provided coverage.
Every insurance provider makes promises, knowing how many promises up to which extent are fulfilled helps to buy the insurance plans in right and fair way.