Role of insurance in personal finance FINANCIAL PLANNING

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Insurance plays an important role in a solid personal finance plan. There are different types of insurance that protect you and your loved ones from unforeseen and unplanned costs such as accidents, illnesses, disabilities and deaths.

Without insurance protection, such costs / losses can upset personal finances. So if you stay prepared, you can achieve your goals even after a crisis.

The insurance decisions you make should be based on your family size, age, family and income. Life insurance is a virtual necessity if you are married and have children. In addition, the other types of insurance you should consider include car, homeowner, health and disability insurance.

Life insurance:

Life insurance ensures that your relatives are financially covered in the event of an unfortunate event. In life insurance, the policyholder’s family receives financial compensation for the sum insured if the policyholder expires during the term of the policy.

Life insurance products consist of pure “term policies” that only cover the mortality risk, while “hybrid policies” such as money-back policies and endowment policies combine protection against mortality risks and financial savings. Hybrid life insurance policies regularly transmit the savings component + the accrued bonus amount to the policyholder during his lifetime.

Health insurance:

You can take out both general health insurance and a policy for certain diseases. The health insurance premium usually covers the costs of treatment, hospitalization and medical examinations. Since large and unforeseen medical expenses are borne by the health insurance company, you can continue with your financial plan and your investment plans without any problems.

Car insurance:

Car insurance will replace car damage in the event of accidents or natural disasters such as floods and earthquakes. This also applies to liability towards third parties if you have to compensate other vehicle owners for accidents caused.

Homeowners insurance:

Homeowners insurance is another type of insurance that you can include in your financial plan. It helps protect against expensive costs if a home disaster is damaged. In other words, it can help cover losses or damage caused by accidents like fire or natural disasters like floods and earthquakes in your home. Typical homeowner insurance policies cover 50% to 75% of the value of your home.

Insurance is a necessary part of your financial plan. Insurance would help maintain your emergency assets in an emergency.

A personal finance plan consists of components such as budgeted savings, investment plan and risk management. If the risks are too great, you should take out insurance to cover these risks.

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