Insurance is one of life’s necessities and probably the least-understood financial product. Buying an insurance policy simply means buying a “promise” to protect you against certain “perils”, be it illness, accident, natural disasters or whatever causes financial loss. At the same time, it can encourage prevention and safety measures, protect investment capital, lend money, and help to reduce anxiety for society at large.

General insurance products are designed to cover tangible assets (motor and home) as well as intangible assets (health) of individuals. Ideally, insurance should be taken out as soon as the tangible assets are acquired. For instance, a home insurance policy should be taken out as soon as the owner of the house takes possession of the property.

All these covers provide protection against unforeseen events that might lead to heavy financial strain on an individual/family. They also provide protection for their assets against unforeseen hazards such as fire, terrorism, etc.

In the past, non-life covers were more an exception than the rule, and there was considerable lack of awareness of any insurance that did not mention ‘life.’ People simply refused to look at the risks they faced in everyday life. With the entry of private insurers, the scenario is slowly changing, with these companies taking on the onus of spreading awareness about their products.

One event that helped people to understand the importance of non-life covers was the deluge that engulfed Mumbai and surrounding areas on July 26, 2005. Disasters like this, and more recently those in Chennai and Bangalore, are events which insurance is truly meant to cover because it is the only defence against unforeseen perils.

Many homeowners under-estimate the real value of their homes and its contents when it comes to insurance. A householder policy is a means to protect investment in the event of loss due to an unforeseen and/or catastrophic loss. Understanding the customer’s personal needs, insurance company can put together a package of different covers to provide as much protection as necessary.

Home insurance provides homeowners with a financial safeguard, should their valuable assets be struck by disaster or their possessions damaged or stolen. Anyone who owns a home, both building and contents, can insure his home against perils.

Equally important for the Indian consumer, is to take out a health insurance policy. Although health insurance has been available in India for many years, the penetration has been quite low. However, there is a great potential for this sector. Health insurance protects against financial loss due to illness, injury, or medical bills.

There are sensible ways to save money on insurance, but skipping coverage isn’t one of these. The escalating cost of medical treatment today can put a big dent in bank accounts. The increasing life span, too, will magnify this uncertainty and cause the current generation of working class to think about a prudent mix of investment and risk covers.

During times of crisis, it is generally observed that an average household may find cash difficult to come by. And, small families may have the additional problem of not being able to focus on that one thing they need to, the person undergoing treatment, when it is most required, because of financial stress. This is quite common in rural India, where people usually borrow money or sell their assets to cover health expenses.

Keeping these reasons in mind, the importance of taking medical insurance is strengthened further, as it provides a buffer against medical emergencies. Taking medical insurance at a young age is preferable as the premium is lower and the bonus is high.

It is not just essential to make home and health insurance obligatory, but it is equally important to create awareness of these products. Lack of awareness has been one great challenge in spreading both home and health. Less than 1% of the total population in rural and urban India is insured. The Indian consumer needs to know that insurance offers some measure of protection for them, their families, their health and homes. It also holds great potential for growth in the future.

(www.financialexpress.com)