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What Is Insurance? Understand the Need of It

What is Insurance?
January 23, 2023
Everyone wants to be financially secure and wishes to protect her/his family from any kind of financial contingency at all times. Relying on savings is never enough. Savings corpus comes from dedicating a part of the regular income and building up the amount over a period of time. However, in case of any unforeseen emergency or after retirement, when there is no regular income, savings dwindle fast. This can lead to a serious financial threat and jeopardize not only your own goals but also the future of your loved ones. This is where the importance of insurance comes in. Insurance is the system in which the provider (insurer) covers the costs involved(depending on variable parameters) in case of any emergency or after the term for the plan is over, in return for a regular payment of premiums that the insured person (policyholder ) is liable to pay. It acts as a cushion in times of monetary requirement and in fact, in its combined form with investment, if offers financial coverage as well as investment benefits.

Every insurance company has a dedicated department for the upkeep, maintenance and sorting of the records pertaining to insurance claims and there are responsible officials and data managers for this purpose. Whenever a claim is filed by a policy holder, these officials of the claims department segregate the claims based on the severity of the claim and further allot the specific claims to respective adjusters. The claim is then quantified (in terms of the settlement lump-sum or break-up of the amount to which the policy holder is entitled). A due process of detailed investigation follows and the claim query/record is verified with reference to the terms and conditions stated in the policy document. The claim adjuster verifies the claim and ensures that the amount of the claim can processed in favor of the policyholder.

Alternately, there are provisions that allow the policyholder to seek the services (in return for due monetary compensation) of a public /neutral adjuster. A public adjuster is not on the payroll of the insurance company and acts as an intermediary between the policyholder and the insurer for claim compensation. The whole segment, therefore, can be said to work on the basis of quantifiable risk i.e. the degree of tangibility of the risk (this is also one of the basic crux of why claims pertaining to natural disasters or "Act of God" claims are not entertained by the insurer). Generally speaking, any risk that can be quantified can potentially be insured.

An insurance policy lists out the broad details about the occurrences that are covered by the policy. There are risks that have been traditionally covered and then there are certain types of insurance coverage that are fairly new and latest in this booming market. Nature and scope of coverage given varies from one plan to another and the subject of insurance. For instance, a cancer-specific policy covers the incidence, diagnosis and treatment of cancer and may not cover the costs incurred for lodgings of the patient's relatives. Alternately, there may be a home insurance policy which may offer due coverage to the property but may not offer coverage for additional damages (for instance, to a garage that was built after taking out the policy and was not specified). There are cases where popular singers or performers have sought insurance for their throats or the limbs on which the potential livelihood depends. Therefore, it can be safely stated that the mutual comparison of insurance plans is a diverse and wide domain and as such depends on a person's specific needs. This also emphasizes the importance of detailed study and understanding of terms and conditions offered by the insurer at the very outset so that no anomaly occurs afterwards.

Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or annuity (post retirement). Needless to say that this is a primary form of secured monetary and capital benefits that comes in handy in one's absence and the core finances of the family are left untouched and the overall risk is mitigated. This leads to effective financial core strength in times of need.

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HDFC Life offers online life insurance plans that have been formulated for the core benefits of your loved ones and for negating the effects of financial risks in case of any unforeseen occurrence. For details, click on the mentioned link: https://www.hdfclife.com/life-insurance-plans

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.