Insurance is a contingent expense. Many of us do not wish to go for insurance until and unless pressed upon the same. The idea of life insurance or general insurance might occur only when most of us face the issues of tax returns or calculating the risk-loss metrics. Insurance is not yet viewed as a product in India. Rather, it is viewed either as a saving instrument or as an expense.  

Let’s throw some light and have clarity on different steps involved in getting insurance and different insurance schemes. 

Steps for Getting Insurance: For getting insurance, we have to pay a certain amount of premium to the insurer who promises to return us a set sum of money on occurrence of an event (death, accident, fire, theft, loss etc). Insurance companies ‘underwrite’ the risk that you might incur and the price so charged by them becomes the premium. So what is the role that you are to play? You can stay alert and can judge whether the amount of premium decided by the insurance company suits you or not. You can also decide as to which of the several insurance policies you would want to go with. You should not completely rely upon the insurance advisors as they are just like any other salesman trying to sell the product. To ensure that you do not get over-insured, you should follow the following steps: 

• Risk Identification: You should make a self check to find out that whether you want to go for life insurance or a specific insurance against any particular illness or theft, disablement, etc.

• Probability Estimate: You also need to calculate the probability of occurrence of the specified event. Illness is more likely to occur than death. Premium will be higher for cases where the probability of occurrence is greater.

• Loss Estimate: You also need to calculate the loss that you would suffer from if the insured event occurs. You might loose your life in an accident while on the other hand, you might only loose goods in case of theft

• Estimating the Cost of Insurance: You need to estimate the cost of insurance vis-a-vis the loss estimate

• Judgement: You should apply your own judgement by weighing the cost against the proposed benefits of getting insurance

You need to go through each and every step as a part of planning process for insurance. Risk management is essential. Hence, you first need to understand the risk and the loss associated with risk. Once you have decided upon the insurance policy to follow, you should decide upon the sum assured and the nominee. 

• Sum Assured: The insurance company along with you will have to decide upon your fixed annual income. Once this process has been completed, you need to fix the sum assured. This would be based upon certain assumption of returns and corpus and accordingly sum assured is decided.

• Nominee: After deciding the sum assured, you need to decide the nominee who will receive the sum. In case of life insurance, the nominee can be any family member or relative. In case of general insurance, nominee can be self.

Insurance can become a profit making activity with a little planning and vigilance on your part. A correct and well researched procedure followed would give you the best benefits.