Insurance is a financial contract in which a person or organization pays a certain amount of money (premium) to cover potential future risks. It helps in removing uncertainty related to life, wealth, business or health.
In this article we will discuss in detail the definition, types, functionality, benefits and importance of insurance.
What is insurance
Insurance is a risk management system where a certain amount of money is paid to reduce the probability of loss to an individual or organization. Generally, insurance companies collect this amount and provide compensation subject to certain conditions.
For example, if someone insures a car and there is a loss due to an accident, the insurance company pays a fixed amount to cover the loss.
Types of Insurance
Insurance can be mainly divided into two categories:
- Life Insurance
Life insurance is a contract where the insured’s family or nominee receives compensation in case of death. It also usually works as a long-term investment.
Types of Life Insurance:
Term Life Insurance: Provides insurance coverage for a specified period of time.
Whole Life Insurance: Provides coverage for the entire life and comes with savings benefits.
Endowment Plan: Pays a fixed amount after a specified period of time or at the time of death.
- General Insurance
This type of insurance provides coverage for personal and property related damages.
General Insurance Types:
Health Insurance: Helps to cover medical expenses.
Car Insurance: Provides coverage in case of car accident or theft.
Fire Insurance: Provides compensation in case of property damage due to fire.
Travel Insurance: Helps in case of accidents or other risks while traveling.
Importance of insurance
The main objective of insurance is to ensure financial security and provide assistance in case of sudden calamities. Some of its main advantages are:
- Financial Security:
Insurance ensures financial security of individuals and families. For example, life insurance helps maintain the family’s standard of living even in the absence of the individual.
- Reducing medical expenses:
Health insurance reduces the burden of medical expenses and facilitates patient access to treatment.
- Business Protection:
Businesses take out insurance to mitigate various risks. It helps them to run sustainable and safe business operations.
- Protection of Assets:
Home and auto insurance protects owners from property damage.
- Savings and Investments:
Several life insurance plans provide opportunities for saving and investing in the future.
Important points before taking insurance
Before taking the insurance it is important to check some things
Reliability of Insurance Company: Reliable company should be selected.
Premium amount: It is important to know how much the monthly or annual installment will be.
Terms and coverage: What risks will be covered and under what circumstances compensation will be provided should be read carefully.
Claim Process: The claim process of the insurance company should be easy and fast.
Insurance sector situation in Bangladesh
The insurance sector in Bangladesh is gradually improving. Government and private organizations are offering different types of insurance services. But still many people are not aware about insurance.
At present Bangladesh has the following two regulatory bodies:
Insurance Development and Regulatory Authority (IDRA) – It is the government agency responsible for regulating the insurance sector.
Bangladesh Insurance Association (BIA) – It works to protect the interests of insurance companies.
Conclusion
Insurance is a safe financial arrangement that helps in dealing with future uncertainty. This is important in both personal and business contexts. But before taking insurance one should research well and select reliable company.
There is a need to increase awareness about insurance in Bangladesh, so that everyone can take its benefits. Taking the right insurance plan will ensure financial security in the future.
