Insurance

Insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company.

A pool is created through contributions made by persons seeking to protect themselves from common risk. Premium is collected by insurance companies which also act as trustee to the pool. Any loss to the insured in case of happening of an uncertain event is paid out of this pool.
Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risk of similar type.

Definition

Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance.

The party bearing the risk is known as the insurer or assurer and the party whose risk is covered is known as the insured or assured.

Concept of Insurance / How Insurance Works

The concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums.

WHY SHOULD I BUY INSURANCE?

All assets have some economic value attached to them. No person can deny that there is also a possibility that these assets may get damaged/destroyed or become non-operational due to risks like breakdowns, fire, floods, earthquake etc. Different assets are exposed to different types of risks like a car has a risk of theft or meeting an accident, a house is exposed to risk of catching fire, a human is exposed to risk of death/accident. Insurance is needed because of following reasons:

Social Security Tool

Insurance acts as an important tool providing a sense of security to the society on a whole. It is the right of every human-being to have basic amenities like food, clothing, housing, medical care, standard of living necessary for his personal and family is well being, and right to security in case of unemployment, disability, sickness or any other circumstances out of his control.

In case the bread earner of a family dies, the family suffers from direct financial loss as family is income ceases. As a result, family is economic condition gets affected unless there are other arrangements to rescue the family from this situation. Life insurance is one alternate arrangement that offers some respite to the family from financial distress. Otherwise this family would have been pushed into the lower strata of the society, which would be an additional cost to the society. This is because subsidies would have to be given to the family so as to enable it to survive and enjoy the basic rights at par with other people. Moreover, a poor family is generally seen to have a large family size with family members being illiterate. This on a whole affects the society and is a cost to the society. Therefore, insurance compliments the state in social management efforts.

Uncertainty

The basic need of insurance arises as risks are uncertain and unpredictable in nature. Getting insurance for an asset does not mean that the asset is protected against risks or its exposure to risk is reduced, but it actually implies that in case the asset suffers any loss in value due to such risk, the insurance company bears the loss and compensates the insured by making payment to him.

Economic Development

The premium paid by people to the insurance companies is a part of their savings. Insurance, thus, acts as a useful instrument in promoting savings and investments, particularly within the lower-income and middle-income families. These savings are ultimately used as investments fuelling economic growth.

General Purposes of Insurance

Insurance is widely popular and beneficial because of its following general purposes:

  • These plans are best suited for people aged upto 35 years as it provides higher protection at low cost. These plans are also beneficial for a person whose income is low and want to secure their family from financial default in case of his death.Protection or safety (Term insurances)
  • Marriage or education of the child (Children plans)
  • Speedy growth of money & risk cover (Unit Linked Plans)
  • Saving and Protection (Endowment type plans)

Introduction of Medicalim

The last decade has been favorable for the medical industry. A stupendous rise in the gamut of medical services in the wake of medical advancement has made this industry one of the significant contributors to the gross domestic product of the Indian economy.

On the darker side, there is a steep rise in the cost of medical services thereby making it difficult for people to afford medical treatment. There have been cases of people committing suicide after giving in to the excessive financial burden. In extreme cases, people prolonged taking medical treatment to an extent that it became very late. Moreover, some of the bed-ridden patients even attempted suicide to relieve their family from medical expenses. Such problems are normally faced by poor and middle economic strata of the society.

To overcome such a situation, medical insurance, commonly known as mediclaim and health insurance, was introduced on a large scale. Insurance companies aggressively promoted this new facility to people and easily found many takers. Mediclaim is a complete health package that provides many medical benefits to people in order to ensure their well-being at any stage of life. Different insurance companies offer various mediclaim policies with varying premiums and benefits. You can easily compare the plans and choose the one that covers your health risks at the cheapest premium amount. Family health insurance is normally highest in demand as it extends the benefit to the entire family.

Mediclaim is a boom in the health sector that has made it possible for everyone to take the best medical treatment without fearing the expenses. This has gone a long way in saving the lives of many due to timely and proper medical care at the right medical center.

Recently, government has also included ayurveda, unani, homeopathy, and other alternative systems of medicine under insurance cover. This favorable move has brought those people within the insurance bracket who have faith in such medical systems.

Women health during pregnancy and infant care are one the neglected areas in our society. Therefore, insurance companies offer special mediclaim packages that cover the hospital expenses of delivery and post-natal services as well as the well-being of a new-born baby.
Saving, protection & liquidity (Money back plans)The above purposes apply for life insurance. In case of General insurance the basic purpose is to protect the insured against financial loss suffered by him or creation of liability, due to the causes covered by the policy.

  • MF News
  • Market News
  • IPO News


HDFC AMC and Nippon life – Should investors consider these AMC stocks? NULL
Fri, 22 May 2020 09:26:01 +0530


Mutual fund flows in April hold up despite redemptions in credit risk funds NULL
Fri, 08 May 2020 21:17:38 +0530


Exclusive | LT Mutual Fund: GA-backed IIFL Wealth, HDFC AMC, Blackstone and DSP Group in the fray The engineering to software conglomerate, which houses LT Mutual Fund under listed arm LT Finance, had put the mutual fund business on the block earlier in a renewed attempt to find a suitable buyer
Wed, 29 Apr 2020 23:49:59 +0530


RBI lifeline to mutual funds will calm investors The liquidity facility will help avoid a one-off event snowballing into systemic risk
Mon, 27 Apr 2020 13:28:44 +0530


Axis Securities picks 10 stocks that could deliver 10-50% returns in a year The earnings season to date with a significant number of companies yet to declare results has been tepid with more negative surprises
Thu, 04 Jun 2020 13:47:52 +0530


Dependables: PMSes allocate more than 5% of portfolio to these 50 large  midcaps A recent poll conducted by Moneycontrol with 13 experts last week highlighted that almost 54 percent of them favour large and select midcaps as their preferred bets for the next one year.
Thu, 04 Jun 2020 10:12:09 +0530


Ashish Chaturmohta If Nifty slips below the 9,600 support, selling pressure could take the index towards 9,400 levels where rising trend line support is seen.
Thu, 04 Jun 2020 08:48:57 +0530


Basant Maheshwari advises investors to look at ‘Atmanirbhar’ companies When the coronavirus outbreak hit, investors moved from financials and took shelter in defensive names such as FMCG and pharma stocks.
Wed, 03 Jun 2020 12:22:20 +0530


10-year data show June belongs to bulls; will COVID-19 spoil the party in 2020? Historically, bulls have controlled the D-Street in the last six out of ten years in the month of June
Wed, 03 Jun 2020 10:10:02 +0530


Gaurav Bissa On the monthly chart, the index has bounced every time it has entered in ‘Ichimoku’ cloud area. It first entered cloud area in 2008-2009 after which it witnessed a fresh high life level.
Wed, 03 Jun 2020 09:33:52 +0530


S Hariharan The biggest risk to market sentiment emanates from geopolitical developments in relation to China.
Tue, 02 Jun 2020 14:10:38 +0530


Declining trend in FO turnover suggests caution, traders avoid leveraged bets Market participants are afraid of taking leverage positions at current levels amid a rise in volatility, and the other possible reason is an increase in the margin requirement.
Tue, 02 Jun 2020 10:24:08 +0530


Moody’s downgrade to negatively impact D-Street sentiment, may cap upside near 10,100: Experts Experts are of the view that Moody’s downgrade is unlikely to take the Nifty to a new low because the market seems to be climbing a wall of worries on the back of strong liquidity
Mon, 01 Jun 2020 22:02:42 +0530


D-Street Talk podcast | This ‘once in a century’ event could create wealth if investors have 3-5 years Kshitij Anand talks to Devang Kakkad – Head, Research Advisory – Equirus Wealth
Mon, 01 Jun 2020 16:27:15 +0530


Prashanth Tapse Important lines to watch out would be on quarterly earnings management comments from across the sectors which would play a key guiding point to assess future outlook of the respective business.
Mon, 01 Jun 2020 15:06:33 +0530


Rakesh Jhunjhunwala on COVID-19  markets: 14 key takeaways for investors From a strong bull, Rakesh Jhunjhunwala, partner RARE Enterprises has turned into a hopeful bull amid the outbreak of COVID-19 and feels that money will return to equities on the back of fall in interest rates.
Mon, 01 Jun 2020 14:10:30 +0530


Rakesh Jhunjunwala: PM Modi spoke about land and labour but nothing has been done so far Jhunjhunwala feels that even though the GDP may be negative this year, but the stock market may not be as impacted by the economic contraction.
Mon, 01 Jun 2020 12:44:12 +0530


These lucky 7 midcaps turned largecaps in the last one year; time to buy? As many as 7 stocks are now trading with a market-cap of more than Rs 20,000 crore, including Abbott India, Adani Green, Ipca Lab and Tata Consumer
Mon, 01 Jun 2020 10:15:06 +0530


Gaurav Bissa The Nifty Metal index is showing strong signs of multi-month outperformance compared to Nifty as well as the broader market going ahead.
Mon, 01 Jun 2020 09:43:59 +0530

Schedule A Meeting With Us


Financial Video