Cost of Ignorance is Greater Than The Cost of Insurance Author: Fintuned | Date: April 15, 2016

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This post has been written by our guest contributor Tarun Bachhawat, with help from the Fintuned Editorial team.

“If you live each day as if it were your last, someday you will most certainly be right” – Steve Jobs

When I sat down to write an article on insurance policies (just because I recently bought one) a strange but hard-hitting thought donned upon me. I wondered how to tell people about the significance of insurance, the tax benefit people get from paying premiums etc. A second later, I rubbished all the thoughts.

WANT TO KNOW WHY? Because I realized something – buying an insurance policy is the simplest of decisions one has to take and whether you like it or not, it is absolutely naive to ignore it. Think about it. When questions like – “What will happen to my family when I am not there”, “What if I meet with an unfortunate accident” etc. come to your head, how can you ignore taking an insurance policy??

Honestly, you don’t need articles or someone like me to tell you about the significance of purchasing insurance. You just need to have compassion and common sense. That’s it.

But, there is a problem…

So as I mentioned, I am not going to harp on the importance of insurance. So, what really is in the article?

That’s a great question. Assuming that you have settled on the decision to get an insurance policy, the real work comes hereafter. So, the problem statement is not really the decision to buy a policy but because of the umpteen number of choices available while picking a policy, it becomes a complex, uninteresting affair.

Pick the winner for you

Now you have come to the essential part of this article (no, what you read was equally significant). In my opinion, while picking an appropriate insurance policy the first thing that one should keep in mind is that the beneficiaries of the policy i.e. your family shouldn’t face any difficulty for getting the amount that rightfully belongs to them. More often than not, we see that in distressed situations, family members have to go through unnecessary visits and paperwork for receiving the claim. As such, it is extremely important that you do 100 percent research on the insurance company before buying the policy. Ask people, check Google, and visit forums etc. before you fix on the purchase. In my view, the national insurance companies which are managed pay off the money due to their holders with reasonably less hassle.

• For me, insurance premium comes as an expense and therefore, it is prudent to do a quick cost benefit analysis before you buy. The advent of sites like policybazaar has made it unimaginably easy to browse through different plans, quotes etc. For example, if you are looking out for higher benefit at lower premium, a term plan is suitable for such need. However, you wish to receive some amount on the maturity of the policy, you can look for a good endowment policy. In one of my next articles, you will have a comprehensive study of various plans that widely adopted so as to enable insightful decision-making.

• It is significant to note that the premium and risk cover can vary from person to person depending how much amount they can pay on a regular basis as premium. Alongside the premium, the risk cover can also vary from person to person or family to family and that should be kept into mind before making an investment.

• As you might already be aware, the insurance premium paid of self, spouse and/or two children is tax deductible under section 80C giving us an additional tax saving benefit.

• Most important of all points, one should take an insurance policy as early as possible. Starting early will result in lower outflow of premium for a decently high life cover. Further, life is full of uncertainties and if the person buying the insurance is the only earning member in the family so getting him/her insured as early as possible is in everyone’s interest.

Conclusion

In my view buying an insurance policy is an absolute necessity for every individual whether on a salary or in business, irrespective of his current earnings and net worth. The earlier one starts the better it is. There are a variety of options and companies available to choose from so go and get yourself insured suiting your requirement and stay tuned for more on the topic.