Playstore Icon
Download Jar App

What is the Role of Insurance in Financial Security (2024)

April 21, 2023

Table of Contents

    Table of Contents

      Insurance is the first lesson of personal finance 101. Let's look at how it can help in achieving financial safety and becoming your mini-money manager.

      If you are ever skeptical about why we need an insurance, you need to know how approximately 930 million people worldwide (12.7 per cent of the world's population) incurred catastrophic health spending because they provided at least 10 per cent of their household budgets to cover healthcare expenses .

      There are still 90 million people living in "extreme poverty" (1.2% of the world's population) because they have to pay for their health care, according to data released by the World Health Organisation (WHO) in 2019.

      In this blog, we will explain the vitality of Insurance for your financial planning- so you can be your money manager!

      As your life stages change, so do your financial needs. Money is necessary to make it through the various stages of life, whether it's your marriage or your retirement years.

      Insurance aims to prepare you for unforeseen expenses and help meet these requirements. Having insurance allows you to take care of your loved ones with financial security. You must consider insurance into your life early to reap its benefits.

      During the past few decades, insurance has transformed from protecting to managing risks.

      The difference between risk management and insurance is that risk management addresses an individual's overall insurance needs rather than pooling risks and funds.

      It is possible to insure many things, but some require adequate tools to manage risk to be appropriately protected.

      A health insurance policy, a life insurance policy, and a property insurance policy are typically included in this category.

      Financial security is created by insurance, which reduces the financial impact of unforeseen events.

      An essential aspect of risk management is insurance, which protects families' present and future lifestyles. It is the sole purpose of insurance to provide protection and mitigate risk.

      Why Insurance is the Building Block for Financial Security

      The purpose of insurance has changed from protection to risk management over the years.

      Although almost anything can be insured, certain things require appropriate risk mitigation tools. The most common types of insurance include life insurance, health insurance, and property insurance.

      Through insurance, financial security can be achieved by reducing the financial impact of unforeseen events.

      Insurance is an essential financial security tool for ensuring your family's current and future lifestyle. The primary purpose of insurance is to mitigate risk and provide protection.

      Personal Finance 101: Be An Early Bird When It Comes To Insurance

      As soon as you start earning, you should buy at least one life insurance policy. There are several advantages to doing so.

      As a result, you add a crucial asset to your financial portfolio and also ensure that your family's financial situation is not adversely affected in the event of an untimely death.

      Furthermore, the premium amounts are lower when you start young.

      Adding another policy to your insurance portfolio can always be done at a later stage in life based on changing financial needs.

      Reviewing your life insurance policy is an essential process.

      Financial Security and Stability

      We believe that life is full of contingencies that must be dealt with. Life insurance safeguards your family and their financial requirements in the event of a tragic and/or untimely death.

      The maturity benefit of a few insurance policies can also contribute to your family's financial stability.

      With an insurance cover equal to the discounted future value of all expenses and financial obligations, traditional term insurance plans, unit-linked insurance plans, and whole life insurance plans can be considered to manage your family's financial needs.

      As a general thumb rule, we recommend insuring a sum multiple of the insured's annual income, according to your age.

      If your age falls between 20-30, you should have life insurance coverage worth 20 times your annual income. If in case you are around 40s, you should have coverage worth 9-15 times your annual income.

      In addition, a minimum of 6 per cent of your family's annual income, as well as an additional 1 per cent for each dependent, should be spent on life insurance premiums.

      Protect your business

      If you are a business owner, there is insurance for you as well to protect your brainchild from liabilities. Like limited liability companies, little liability insurance protects each partner's investment in a business. Individually purchasing this type of insurance policy is the responsibility of each partner.

      Makes your retirement lesser difficult on the pocket

      The life spans of people are expanding significantly due to the thousands of amenities available in healthcare.

      Despite the good news for financially secure families, medical expenses are undeniably quite burdensome as well. If you have to worry constantly about finances, even in retirement, then it isn't the best way to spend your golden years.

      When it comes to retirement planning, life insurance is quite a useful tool.

      The tax-free benefits of term life insurance can be acquired when the policy matures or vests. Both the term life and permanent life insurance premiums are tax-free, and there are so many options to choose from. It is also possible to get good returns from an early age by investing in gold at a meager starting amount of Rs 10.

      Buying gold online and investing in it is one of the best alternatives to low returns giving fixed deposits (FDs). Investment in gold keeps your money safe and growing as well.

      Personal Finance For Women: Protect Your Assets From Unwanted Claims

      A married woman's property can be transferred to the Married Women's Property Act 1874. The insured's assets may be availed by creditors if he dies. The court can attach the sum assured for debt repayments in such a situation, even if the creditors claim it.

      Under the Married Women's Property Act 1874, this can be avoided by simply purchasing life insurance. As with a traditional life insurance policy, the process is the same. When filling out the policy form, the applicant must select "Policy under MWP Act 1874".


      We believe that the ideal time to start thinking about insurance is as soon as possible. The best way to ensure you get the best plan at the minimum possible premium is by getting coverage as early as possible.

      As a customer, you can choose the level of coverage and premium that fits your needs and budget, and then you can successfully adjust the level of coverage with time to suit your changing lifestyle and goals as they change.