Definition of Insurance

It is a contract between the insured and the insurance company, whereby the insured’s financial risk is covered by the insurance company. The risk can be of vehicle, property, life, legal etc. So effectively, one passes on the risk to the insurance company and they charge a nominal sum of money for taking that risk which is called Insurance Premium.

If we look at the financial life pyramid it can be divided broadly into 3 parts. The foundation is protection or risk management (Insurance), in middle it is wealth accumulation & top of it is the wealth distribution.

We all know that in life unexpected is always expected. Our life is full of uncertainties with lot of goals, short term goals, long term goals, known goals – unknown goals. We are all born with some responsibilities to fulfill,but we do not know how much time we will get to fulfill those responsibilities.

What if anything goes wrong to us, who will provide financial security to the family? Who will fulfill all the dreams that you would have thought for. This is where insurance can help you. Mixing insurance and investment is something we should totally avoid.