How Insurance Works

Insurance is a financial product sold by insurance companies that safeguard you or your assets from damage & loss.

How it works

When you buy a policy you make regular payments (called premiums) to the insuring company. These premiums can be paid monthly, quarterly, half-yearly and annually, depending on the insurance company.

If you make a claim and it ticks all the conditions, the insurance company will pay for the loss that is covered under the policy.

If you don’t claim it, then you don’t get your money back. That money is pooled with the money or premium of other policyholders of the same company.

How is the premium calculated?

It’s simple. The higher the probability of the event, the higher will be the risk for the insuring company. Thus, higher will be the amount of your premium.
The conditions can be calculated by considering numerous factors.
For example, life insurance of a fit and young person will have a lower premium as compared to an older person with diabetes. As the younger person is less likely to face fatal consequences than the diabetic person.

Should you buy a policy?

Well, that completely depends on your plans with life. Generally, it is safe to have a policy done.