The biggest certainty is life is uncertainty. And uncertainty brings risks, which need to be taken care of in one or the other form. In simple words, insurance is a way to address the risks arising out of various uncertainties in life.

It could be in the form of risk to your vehicle, property or even a smart-phone these days. It could also be in the form of risk to your health, your family-members’ health, your life and the lives of those around you.

In a nutshell, insurance is a risk management tool or product to protect you against the economic loss due to some unexpected or unforeseen events. For instance, your ability to earn an income could be impacted due to an illness or due to death. Similarly, a business could lose its ability to run operations and earn an income due to an accident at the business location. In such cases, if the individual or the business have themselves insured against those unexpected events, the financial loss they could face can be avoided or minimised.

If you think about it, we are all surrounded by risks around us. It could be the risk of losing a job, getting caught in an accident, or catching a disease or being diagnosed by a critical illness. All these situations can lead to financial stress for you and your near and dear ones. So, is an insurance available to cover all these risks?

Types of insurance

From an individual consumer point of view, insurance is broadly classified as non-life insurance and life insurance.

As the name suggests, non-life insurance deals with everything other than the loss of life. The most popular forms of non-life insurance around us are motor insurance and health insurance. Increasingly, travel insurance, property insurance as well as cyber insurance too is becoming popular.

Life insurance policies, as the name suggests, cover the financial risk arising out of loss of a life. While there are multiple types of policies available in the market that are promoted as Life Insurance, it is important to note that only Term Life Insurance is a pure life insurance. The other forms of life insurance policies are investment products with an insurance cover added to it. From a financial planning and management perspective, these other forms of life insurance policies are not advisable. The reason being that these policies come with relatively higher costs and are often not very transparent. Moreover, the life insurance component in these policies is also very limited, that too at a high cost.

So, as a consumer, what should you do? A thumb rule for any financial product to be followed is to ask yourself what you intend to achieve from the product. If you are looking for a life insurance, which ideally means providing financial protection to your family and dependents in case of your untimely demise, then you should only choose pure term life insurance policies.

If the answer to question is getting returns or something on those lines, then you are looking for an investment, and not insurance. It merits a separate discussion altogether.

Get a Term Insurance

Coming back to term life insurance: The idea behind this product is simple. In case of the untimely death of the policyholder, the nominees are given the pre-defined pay out. In a way, you as a policyholder, are in a position to determine the pay out that your nominees would receive in case of an untoward incident. This helps you in ensuring that major expenses like higher education of children, their marriage or your spouse’s retirement are taken care of even in your absence. Even an ongoing repayment of a home loan does not become a burden on your dependents in your absence if you have an adequate term insurance.

If you are someone having dependents or have liabilities, you should not delay any further and get a term life insurance with an adequate coverage.