Shopping around for Insurance

Insurance is defined as a promise of reimbursement in case of loss. The insurance policy is kept alive by regularly paying the ‘insurance premium’. Until a few years back, insurance was provided by very few companies, making it simpler for the common man to choose. But with the recent trends of globalisation and world markets, the number of available choices has exploded. Many insurance companies cover specific niche areas. When the complicated terminology of insurance policy is multiplied with sheer number of options, it can leave anyone who has to make a choice with a headache.

It is easy to get sucked into a plan because it offers a lot of additional features. What most people don’t realise is that most of those additional features are extras for a reason, you don’t really need them! The two main parameters that have to be considered before choosing the plan are your needs and your budget. 

Many people in the UK are now submitting ppi claims because they have been mis-sold a payment protection plan. It just goes to show that insurance isn’t always necessary or suitable for some people. 

Consider the case of a family where both the husband and the wife earn well. In this scenario, it would not make sense to get a costly life insurance plan on either of them. If one of them passes away, the other can still hold on to their job and make sure the family remains functional. Instead, they can spend their money on other forms of investment or save it for retirement. A costly life insurance plan will only make life harder for them, as it requires regular premiums.

 So before you choose your plan, consider your needs. Do you really need to pay a sizable portion of your regular income in order to cover for that remote possibility of your demise? Looking at this from the other side of the field, consider if you can lead a normal happy life with just a part of your income. In almost all cases, unpaid premiums get compounded and have to be paid along with an interest. And if, for some reason, you are unable to afford it, it might lead to termination of the insurance plan. This means all the premiums you have already paid are lost forever.

So, what are the various items you can insure? Almost everything! David Beckham, the famous soccer player, has his legs insured for more than a million pounds. Wise decisions have to be made while choosing insurance, especially payment protection insurance. A family with kids or old people is better off with reasonable health insurances, while a real estate business firm should go for property insurance. Most families have their houses and cars insured, as this covers any cost that is incurred by accidental damage. In many countries, vehicle insurance is compulsory for the owner of the vehicle. 

Another factor is the company offering the insurance. Newer companies come up with fancy plans to attract more customers, but tend to fold under their own weight. Older the firm, stronger its bases are and safer your money is with them.
Insurance is a great way to lead a secure life financially. But if the right choice is not made on the plan, it might end up getting in the way of your life.