It is all about protection.
Insurance provides protection against the risk of an occurrence which leads to a financial loss. It is noteworthy to understand the types of risk that can be insured against and the product types that are available to protect an individual against such risks.
For life and health insurance, the typical insurable risks are the risk of death, old age, illness, accident and disability. The unexpected occurrence of such events may cause financial burden to an individual or his dependants. Hence, life insurance is designed to replace the financial loss caused by unexpected events to a personal life and not for the purpose of a financial gain.
In the event of premature death, a breadwinner may leave behind unfulfilled financial obligations which can only add on to the emotional distress of the surviving family members. Such financial obligations may include outstanding debts, home loans, ongoing family expenses, children's education expenses, unsettled medical or hospitalization bills and even funeral expenses.
Life insurance product types like term life insurance or whole life insurance can be used as the instrument to replace part or all of the income loss. With proper planning, the sum assured that is paid out from the insurance policy should help to cover most of the expenses of the dependants and other unfulfilled financial obligations as mentioned.
In contrast to the risk of premature death, the risk of living too long is not without its problems. This is especially so when an individual does not have enough financial resources for retirement expenses. The rising cost of living or undesirable events later in life may accelerate the depletion of one's savings as well. This can pose a problem to him as well as the family members who may have to provide for his living expenses.
An annuity type of life insurance policy provides protection against such risk of living to a long age, leading to financial exhaustion, by paying the insured person a regular income for life. An endowment insurance policy, on the other hand, can be designed to mature for a lump sum payment to be made to the insured person at his retirement age.
Poor Health, Accident and Disability
A visit to the family doctor or polyclinic would probably suffice for common colds, flu or fever with the cost of treatment which may still be affordable. However, when struck with severe illnesses which require prolonged treatments and hospital stays or when met with the unfortunate event of an accident, treatment cost may come to much larger sums due to the additional healthcare resources required. A severe illness or accident may also lead some to stop working, which may inevitably result in the loss of income while daily expenses and the medical bills obligations still need to be fulfilled.
The advancement in medical science and use of sophisticated technology and medications, amongst others, have also given rise to rising healthcare cost over the years. Hence, when faced with such undesired events, the ones suffering may be facing more than just physical or mental burden but a financial one as well.
Therefore, health insurance plans that provide Hospitalisation and Surgery, Dread Disease, Terminal Illness, Personal Accident or Disability coverage, are amongst those that can help reduce one's financial burdens when such situations are encountered.
There are many products offered by insurers with benefits and coverage for the types of insurable risks that we have mentioned here. Be sure to understand what your needs are and that the benefits offered by these products can meet them sufficiently.
It is recommended to get a qualified financial adviser to assess your financial needs and explain the benefits, conditions as well as coverage offered for the various products available in the market. Take time to go through the product details and make careful considerations as buying an insurance product can involve a long-term commitment.
Now that you may have a better understanding about the personal risks that one may face, the kind of risks that are insurable as well as some of the insurance product types that can help reduce or replace the financial loss in the event of those undesired occurrences, it is time to take charge and get protected.