Some individuals may believe they have sufficient wealth to replace their losses in the event of an unexpected event. However, the harsh reality is that unforeseen expenses often arise following an accident, disability, or the loss of a loved one. This is precisely why insurance is a crucial component of financial planning.
Insurance is a transfer of risk that shifts the responsibility for loss to professional insurance companies, which manage the risk by dispersing it across a pool of people or businesses. Insurance can help cover unforeseen events such as theft, illness, or property damage. In exchange for a premium, the insurance company will compensate you for the value of the lost property or provide life insurance to support your loved ones in the event of your passing.
Why get insurance? Insurance can shield you from financial ruin in the event of an unexpected event. Accidents and disasters can and do occur, and without adequate insurance, you risk financial devastation. When you purchase insurance, you transfer the risk of loss to the insurance company in exchange for a premium. Insurance companies invest your money securely, allowing it to grow and be available to pay claims as they arise.
Types of insurance include:
– Motor insurance (mandatory for car owners in Pakistan): This covers car repair costs in case of an accident or pays out insurance benefits if your car is stolen. It also protects against losses caused to third parties.
– Life insurance: This provides a death benefit to support your loved ones in the event of your passing.
– Comprehensive insurance: This is the most comprehensive type of insurance, covering accidental vehicle loss, theft, and liability claims.
Tips for buying car insurance:
– Carry insurance when buying a new or used car.
– Note that previous owner’s insurance becomes invalid upon vehicle repossession.
– The sum insured depends on the vehicle’s value.
– Excess coverage applies if the sum insured is lower than the required vehicle value.
Before purchasing insurance, consider the following:
– The value of the insurance or sum insured depends on the value of the vehicle required.
– The maximum amount you can accept is the required car value.
– If the sum insured is lower than the required vehicle value, excess coverage applies.
To get started, contact an insurance company from the list of registered companies available on the SECP website ((link unavailable)).
Remember, insurance is an essential part of financial planning, and it’s crucial to understand the different types of insurance and their benefits to make informed decisions.
