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What is Insurance, why is it required and how relevant it is in India?

To state simply, insurance is the necessary assurance that a company provides to the insured, guaranteeing compensation against the damages occurred in pre-determined situations, for which the coverage is offered by the company against a specific premium amount to be paid on an annual basis by the individual. However, to completely understand what is insurance exactly, one needs to be well aware of the different dynamics of its functioning along with all its varied features on offer.

Thus, insurance is a more holistic term that encompasses different types of covers provided by an insurance provider to the insured after thoroughly analyzing the given circumstances of the individual and his needs in correspondence to the same. However, that doesn’t take away from the fact that insurance is essentially an intangible thing and is primarily a promise of providing an individual financially in case of an emergency, stated to be covered in advance by the company.

In a country like India that is still developing despite the tremendous progress achieved over the years, insurance can prove to be immensely beneficial, given the extent of the unlikely adverse circumstances prevalent in the country. What is insurance, how it is perceived and defined, becomes certainly way more relevant and critical in a setting of a third world country like ours, where the health industry, the economy and infrastructure are still not at a point where they should be.

There are some aspects that make insurance a must in the country, which include the following points, justifying its requirement.

  • Economic Back in Financial Urgencies- Insurance is extremely useful when it comes to one being caught up abruptly in a financial mess and that too one already coupled with enough emotional stress such as in case of an accident, an illness or injury, death of the primary earning member in family, damage to one’s property or vehicle etc. In such situations, insurance can prove to be a real savior for one and can shield an individual from having a big hole in one’s future savings or being in a helpless state.
  • Easier to Facilitate Funds- When it comes to landing an investor for lending funds, either for your business or for one’s individual purpose, having an adequate insurance policy for the said thing, such as the property in question, makes it much easier for the lender to invest money without any doubts in mind. Insurance makes investing much safer.
  • Compulsory in some cases- That’s another important factor, which is not possible to ignore that insurance in some cases is made compulsory by the Government. For instance, motor insurance has been mandatory to have for an individual owing either a two wheeler or a car in most of the states in the country. This is because of the nature of the insurance, since owning motor vehicles poses along a certain degree of risks, no matter what.
  • Tax Exemption at some points- Insurance can also be easily utilized as a tax exemption tool in many cases, wherein one want to show their respective amount of investment to save up on the high amount of tax one is liable to pay.