Life Insurance and Health Insurance: Why to get insured and which cover is essential?

by Joseph K. Clark

Taking insurance aims to get financial protection against a risk, where uncertainty is there about the timing and/or occurrence of an insurable event. For example, death is inevitable, but no one knows when. This uncertainty causes two types of risks – dying early and the chance of living too long.

The risk of dying early would put the financially dependent persons in great financial difficulty and make their life miserable.

Life Insurance

On the other hand, the risk of living too long may result in a person using all the retirement corpus, resulting in financial difficulty for the person themself.

Life Insurance

While the risk of living too long may be managed by buying a life-long pension plan and other plannings for the best utilization of the retirement corpus, the risk of dying early poses a more significant uncertainty.

This is because a person cacan’tccumulate enough corpus to replace their entire future earnings. Moreover, with the uncertainty of how early a person would die, it is also uncertain how long would be the remaining earning life to start accumulating a corpus.

As insurance companies are in a better financial position to manage such risks, a person transfers the risk to the insurer by taking insurance. To accept the risks, insurance companies charge premiums from the insured persons.

So, for every individual having financial dependents, itit’sery essential to take life insurance cover. As term life insurance products cover the only pure risk of death, itit’she the cheapest life insurance product. So, itit’sdvised to take term insurance to solely protect the risk of dying early.

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