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personal finance | IST

Financial Quotient: Experts discuss why insurance is important

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In this episode of ‘Financial Quotient’, Sumaira Abidi spoke to Sarbvir Singh, CEO, Policybazaar.com and RM Vishakha, MD & CEO, IndiaFirst Life Insurance to discuss why insurance should matter and what is the purpose that insurance should serve in a woman's life.

In this episode of ‘Financial Quotient’, Sumaira Abidi spoke to Sarbvir Singh, CEO, Policybazaar.com and RM Vishakha, MD & CEO, IndiaFirst Life Insurance to discuss why insurance should matter and what is the purpose that insurance should serve in a woman's life.
In simple terms, insurance is an assurance against uncertainty. It reduces the effect of loss caused by certain kinds of risk.
Vishakha said, “The insurance is all about risk. The expansion of risk is what is required to be made very clear. We will think of risk only in terms of dying too early. There is also a risk of living too long and there is also a risk of volatility. I am not sure how many people understand that life insurance policies are the only policies in the financial markets today, which don't have a call option. So basically, if in the first life guarantees, you have a 6 percent return for the next 25 years, irrespective of how the markets are willing to pay you that and that is a risk of volatility of interest rates, it is volatility to market. So, all these three risks are what needs to get covered. Plus, it should serve everybody who is dependent that is what it is meant for."
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On health insurance and life insurance, Singh said, “I think health insurance is of course, very important but life insurance is also equally important, even if a person is a homemaker. Let me explain why - see if there is an unfortunate event and there is a loss of the homemaker and that has an emotional and sometimes even financial impact on the breadwinner as well. So, the breadwinner may now have some constraints and he/she may not be able to earn as much as he/she was earning earlier and that is essentially a loss of income for the family. Now, this is an insurable risk and I think this is something not as well-known as it should be. But homemakers can get insurance, there are two ways to do it. One is through a joint life policy, which is with the breadwinner. The second is through a separate policy which can be done only for the homemaker, which requires, essentially runs off the salary of the breadwinner, and the fact that the breadwinner has insurance. So, there are two ways to get it.”
Vishakha said, “I think we need to make a very clear distinction here between who is insured versus who needs insurance. Who is the beneficiary of an insurance policy is very different from who is the person and who is being insured, right. So, the person being insured has definitely got to have some kind of monetary value. Yes, why housewives can also be insured is because it is monetary value, even though it has not been monetized to that extent. So, there is a monetary value attached to the services that omega is providing."
Watch accompanying video for more.