Principle 19. Insurance is a must.


One interesting fact about insurance in India is that it’s never bought for the right reasons. In fact it’s wrong to say that it’s bought; it’s actually ‘sold’ by advisors with much strain and effort. Some consider it as an investment; others buy insurance to reduce their tax burden (because of certain tax benefits that’s offered by the Indian income tax Act) some people buy a piece of insurance just to get rid of that advisor who keeps appearing politely every morning at their door step ‘n some buy it because it’s difficult to say ‘no’ to that known guy who could be you relative/banker/friend/ acquaintance.

Indians are a bit reluctant to buy insurance. We haven’t searched for the reasons. The reality is that insurance is a must for everyone – simply because it provides security and safety. It doesn’t come free; you have to pay for being safe.  The amount you pay is called premium.

Insurance can only compensate for the financial loss that occurs due to death of an earning member or serious health issues that requires huge money out flow or loss /theft/damage of expensive assets. Some insurance companies sell policies like ‘child policy’, ‘marriage endowment policy’ etc. These are nothing but life insurance polices in different name and form.


Insurance falls into three categories and we are listing it out in the same order of importance- life, health and then, your assets.

  • Life insurance
  • Medical or health insurance and
  • General insurance.

Life insurance keeps a family safe from the sudden fall in finances just in case something inevitable happens to the earning member of that family.

The second one is to protect your wealth. The cost of hospitalization and medical treatments are going high every day with advancement in medical sciences. A health policy gives the financial support required for availing medical treatments.

The last one, is to protect all your assets and belongings against damage, repairs etc.

Insurance companies have also come up with innovative products like stock market linked policies. Such policies combine the risk and benefits of stock investments along with insurance protection. But these instruments should be opted after very careful analysis. It is always better to stick to traditional or simple insurance schemes which you can understand.


Selecting a policy is not a simple task. A financial planner would be the right person to advice you on this.We advice so because, before taking insurance, a lot of factors have to be taken into consideration. For example – while opting for life cover, one should carefully estimate his present liabilities, the standard of living that he would like to maintain for his family in his absence etc.. So, it’s no simple task to work out the right mix of life, medical and general insurance for a person.


If you have already opted for insurance, that’s a very positive step you’ve taken

Apart from opting for insurance, there are three more important steps to do from the practical point of view. First, All the policy documents must be kept in a file, with a summary written on top of it. Secondly, it should also contain the agent’s number, local office contact number and the 24 hr helpline number of the insurance company. The summary can also contain a description of the steps to be taken in case of an emergency. Finally, you have to teach your nominees about how to make a claim from an insurance company. These steps are very important because, when something happens to you, your family would already be in very tensed and vulnerable situation and that may not be the right time for your loved ones to go clueless on where the documents are kept and how to go about with the claims. It’s no easy process to make a claim. There are several documents to be produced, especially in the case of death claims. It’s more complicated if it’s an early death claim (claim within 3 months). So knowing all this would avoid a lot of stress at that time.

You may like these posts:

  1. Principle 18. Safeguard your documents.
  2. Principle 5: Cash reserves and idle cash.
  3. The Income statement :Understanding Depreciation

4 Responses to “Principle 19. Insurance is a must.”


June 29, 2013 at 12:25 am

good article

Manish Gupta

October 11, 2013 at 4:52 pm

Nice One Good Job Done Mr. Victor


March 28, 2014 at 12:39 pm

Thanks for the article.

My view – Life insurance is not required by everyone and at every age. It is essential only for those who have people dependent on them for food, clothing and shelter.
In my case (presently) all family members (including mother, spouse and child) are financially independent. After the few existing 20 yr policies matured, I do not see the need to buy any more life insurance policies.


July 12, 2014 at 1:31 am

good article !!

Leave a Comment