To Insure or Not To Insure


2016-05-03 12:19:00 UTC


Insurance has today become one of the most inevitable purchases in our lives. Most people generally have at least one policy, whether it is a motor policy, a life insurance policy (maybe through a tax saving investment plan) or a health policy (perhaps through their employer or even their credit card).

Insurance has never been something people have been actively interested in buying. In general people see it as a “cost” rather than a “hedge”. Which means people treat insurance as a necessary evil that you have to bear with in order to go about your life; either due to government regulation or due to your mom pointedly reminding you to renew your policy.

This perception exists primarily because the benefits of insurance are only felt by a few (those who experience loss and make claims). The majority of people who purchase insurance don’t derive any tangible benefit from it, apart from the assurance of safety. From their point of view, they have just paid some hard earned money to “protect” their asset, and then they have to pay again to renew, even though nothing has happened to their asset. Some even compare it to extortion.

What insurance does is provide a hedge to your asset; by taking an insurance policy, you are basically betting against your asset. Should said bet be right, you get a payoff (either as a lump-sum or a steady stream). The asset could be anything, from a vehicle, to a home, valuable possessions, or of course the policy taker himself.

Between predominant sentiments, and the complexity of insurance products, people are generally indifferent, or at times even hostile to the concept of insurance.

This attitude leads to a market where sellers just focus on dumping the cheapest policy on customers, and customers just do whatever they have to do, to pay the lowest amount for the policy.

The sellers disappear until its time to renew the policy, and the buyer is ignorant of the inadequacies in his policy until it is too late.

For many people it works out; but some people end up suffering when a claim situation arises. And this ‘suffering’ could happen to anyone with misfortune of being in an accident; ie anyone at all.

So what is the solution?

As a customer, the best way to ensure a good all round experience is to focus on buying the product that will help you the most, from the seller who will help you the most.

As far as insurance sellers are concerned, the best practice is to rely on brokers over agents. Insurance agents are people who have been contracted by the insurer to help get them business while brokers are intermediaries who are hired by the customer to provide them with an appropriate cover. As the broker ideally has the customer’s best interest at heart, it is a safer bet to go with an insurance broker.

Very broadly speaking, when you buy insurance you have two steps to follow:


1. Identify what benefits you want covered first. It is very probable that the insurance policy you currently have may not be appropriate for you.

2.See which company offers the best price for the benefits you want covered (rather than taking the cheapest policy blindly).


There is a very high chance that the cheapest policy does not have all the benefits you may want. Cheap policies often don’t value your asset at the amount you expect it to be, so if your car policy premium is cheap, it’s probably because as per the contract your vehicle is valued at 50% of fair market value. This will affect the compensation you will receive when you make a claim.

Another problem prospective customers have to deal with is the complexity of insurance products. There are a lot of products with subtle differences, and no one generally has the time to put the effort and do the research needed to understand them.

This blog was started with the intention of educating customers on every aspect of insurance. Over the next few weeks, we will explore in detail the nuances of buying insurance, with posts separated sector wise (guides on how to buy motor, health, life, etc.)

We intend to keep the blog as generic as possible, and deal in layman terms. Insurance ELI5(Explain Like I’m 5), so to speak. Later we intend to go into other aspects of insurance; the basics of claims, the various add on benefits for each policy type, the advantages and disadvantages of said benefits etc.

So subscribe, comment, and let us know if you want us to talk about anything in particular!