Beginner’s Guide to Insurance

Recently while buying my new hatchback in my freshman year, my dad instructed me to get auto insurance for the same as soon as possible. I was a bit apprehensive to shell out few more bucks just to protect my car from any damage (as if I am going to let anything happen to my Baby !!!!)  But my dad just wasn’t ready to listen to me. He forced me to get auto insurance the moment I lay my hands on my Chevy.

His persuasion made me think it over and read further about Insurance and what role it plays in our lives in today’s “risky” world. Starting today, I, a complete novice in the field of Insurance (till few months back), will play your guide and explain to you the various terms and nuances of a sector which some of us find too Herculean to explore.  But let me assure you, it’s way too simple and interesting how a whole trillion dollar sector is working day in and day out, protecting us from losses which none of us can predict or comprehend.

Insurance for Dummies:

In a world in which nothing is certain, every one of us is seeking a guarantee, an assurance that the things we value will remain safe from any unforeseen event. It’s here that Insurance comes into the picture. It acts as the assurance or guarantee which we are looking for. Here I would like to point out that an insurance policy may not always be voluntarily bought as sometimes getting it is a contractual obligation which we need to fulfill. Mortgage Companies makes it compulsory for homeowners to buy a policy in order to protect their investment.

Buying insurance, voluntarily or involuntarily, is a good step for securing yourself and objects you value. Personally, I feel many of us lead a very carefree life and enjoy it as if no wrong can ever happen to us. We fail to comprehend the various risks that linger over us. Thus, we never feel the need to get any sort of guarantee for our valuable assets. Frankly no one prepares themselves for any medical emergency till it really strikes! Through insurance, you may not get back what you have lost but it will at least ensure that you get a financial aid equivalent to your loss.

With this backdrop I would like to start explaining what insurance is and what roles it plays for an individual and an organization. Broadly, there are four roles that insurance plays:

  • A risk management tool meant to manage risk exposures for a company or an individual.
  • A risk transfer mechanism wherein one party transfers its chances of loss on to the other party.
  • Insurance as a business which tries to remain profitable even after paying thousands of claims it receives every year.
  • Insurance as a contract which binds two parties to take care of each other’s interests. We as insurers pay a premium regularly and in return insurance company gives us a guarantee to take care of any loss we may have during the term of policy.

I will be explaining all these Roles of Insurance in detail in the following article as one needs to understand them clearly to get a hang of this vast world of insurance: a world which provides security to every one of us in one way or the other.

You may also like to read:

Benefits of “Pay as You Drive” Car Insurance
What is covered under car insurance?
Types of Car Insurance
3 Types of Insurance you should avoid

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