Pros and cons of insurance policies

After the Indian government allowed private companies into the insurance sector in 2000, the sector has seen predictably rapid growth. And with more and more consumers realizing the importance of having insurance, especially now with the global pandemic, the insurance industry is looking to reach even greater heights.

That said, many people continue to see it less as an insurance policy and more as an investment, despite the best efforts of finance advisors against it. So, it's important for you to realize that and treat it as such.

That said, an insurance policy comes with its pros and cons, and it's important to look at both halves of the equation before you begin to use an insurance policy.

Pros of insurance policies

First let us delve into the pros of insurance policies:

Tax benefits: No matter which insurance policy you go in for, you are allowed to claim tax benefits of up to Rs. 1.5 lakh (under Section 80 of Income Tax Act, 1961). This is an important plus for a lot of people.

Coverage for your family in case of your untimely demise: Life can be unpredictable sometimes, and it is important to ensure your family is taken care of in the event of your passing. Having the best insurance policy will provide your family with the necessary help when you are not there to support them.

Benefit of compensation: While any financial loss due to untimely demise is compensated by your insurance, should the unthinkable happen before the tenure is completed, the financial loss covered under the policy can be claimed without having to jump through any major hurdles. It helps cut down on the mental strain following the incident.

Post-retirement financial support: Understandably, there are special insurance policies which are designed to support the individual post-retirement. As you reach the age where you're unable to earn an income, you're still financially taken care of to a fair degree. But it's important to purchase insurance at a young age so as to keep it on the cheaper side in the long run.

Helping a business run smoothly: In any business, due to a number of factors, unexpected losses can certainly occur. Having an insurance can help cover that loss. Also, an insurance policy taken for the employees of that workplace proves them with motivation, and thus smooth operation of the company.

Insurances for specific purposes: Any given insurance, be it for health, home, vehicle, or as applicable, has been specifically designed for that purpose. So, you won't have to deal with a one-size-fits-all situation.

Cons of insurance policies

Long-winded legal formalities: Regardless of the type of insurance you've applied for, you could be in for long-winded legal procedures first by the insurance company before you can claim the money.

Confusing terms and conditions: Often, in insurance policies, stipulated terms and conditions are written in tricky legal parlance such that at the time of claiming the insured sum, you could be denied a considerable amount. Of course, the onus falls on you to read the fine print before signing on, or consult a legal expert to go through it for you first.

Deliberate crimes: Sometimes, the beneficiaries of a given insurance policy could resort to wrongdoing to manually bring about the conditions needed for disbursement of the sum, such as deliberately setting fire to one's property or worse.

Insurance is, by and large, a useful tool to have at your disposal. Life throws unexpected curve balls at us when we least expect, and it's good to have the means to tackle those situations in some capacity, at least. 

Similarly, at mPokket, we realize that despite your prudent financial planning, from time to time, you might face a financial emergency of some form. During those trying times, you'll need a trusted friend by your side, someone who will not just provide moral support but will help you out financially as well.

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