Some people never see the importance or need for an insurance cover until disaster strikes. But that's too late.
Insurance is one of the ways that you reduce the financial impact of a risk occurring. While an insurance policy does not remove a risk, it provides financial protection against a loss arising out of happening of an uncertain event such as loss of life or physical assets.
All assets have some economic value attached to them. There is a possibility that these assets may get damaged or destroyed due to risks like fire, floods, earthquake etc.
Different assets are exposed to different types of risks like a car has a risk of theft or getting involved in an accident, a house is exposed to risk of flood or catching fire, you are exposed to risk of death or accident.
Most of the time recovering from these incidents is very difficult. Incorporating risk management in your personal financial planning becomes an important activity to undertake.
Insurance is broadly classified into two parts covering different types of risks. There is the Life Insurance and the General Insurance. The former is directly related with a person's life. On the other hand, the later deals with plans which are not related to the life of the person but provides protection against loss to a person's assets or health.