We all know our wealth is prone to various kinds of risk. The more the wealth, the higher the risk and thus it is necessary to protect your wealth. It takes lifetime to build your wealth and a few wrong decisions can destroy your wealth in a short period of time. It is better to save your wealth from any mishap, by insuring your wealth. when you protect your wealth through insurance, you save yourself from any unforeseen loss.
How Managing Insurance
The insurance sure compensates when the damage has been done, but it allows you to claim the loss and go back to the state, before loss.
Ways in Which Insurance Management Affects Your Wealth Insurance management can affect your wealth in various ways; few of them are listed below-
1. Preservation of Real Estate-
Real estate can be your land or building which carries risk of being affected by different kinds of natural calamities or risk of catching fire or theft or any other factor. Having an insurance management will let the policy holder get the actual value of the asset, in case of any loss.
2. Maximize your Estate-
Any asset that you own can be termed as estate. When you insure your assets, you are saved from any kind of serious damage. It is wise to have assets for a longer time as it increases their value over time.
3. Minimize your Tax-
Insurance policies like life insurance exempts the amount invested as premium from tax and thus saving tax for policy holder.
4. Maximize your Wealth-
When you take a life cover plan at an early age in your life, it increases the total worth of policy holder after a considerable number of years. Every insurance policy carries a specific value, in terms of sum insured. The policy holder has to pay premium regularly which maximizes your wealth and assets.
Insurance management helps you get done with financial payouts when needed. Insurer pays the obligations likes taxes and mortgage bills, when the insurance holder is not able to pay them off.
6. Income Generation-
A person can carry on with his or her life even in the case of disability, if he or she holds insurance like an accident policy. It acts as a source of financial protection when the person is unable to generate any income.
Mr. Jain bought car insurance to protect his car. The car got stolen after a few weeks, unfortunately. Since, he has his car insured, he need not to worry. He can raise a claim to insurer to get the amount equal to the value of his car.
The claim amount will be the actual value of car after deducting the depreciation amount from the amount the car was bought at. This way, even after losing his car, the car policy saved Mr. Jain from incurring complete loss of the entire amount. Thus, Mr. Jain was able to get a value which was nearly equal to the actual value of the car.
Cost of Insurance-
Apart from insurance being the source of enhancement in wealth, it is important to consider the other side of insurance as well, i.e. the cost of insurance. The cost of insurance is a major factor that helps in deciding whether to buy the insurance or not. Whater the insurance, it doesn’t have to be cheap. For example, a lot of people who have recently passed their driving test are are on the look out for their first car. But as they have found, car insurance can be quite high. By looking into the prices of cheap car insurance, you’l be able to find the best rates and deals for you in order to help save money. Be sure to do your research into this before anything. When an individual or the organization opts for risk coverage, the cost of insurance affects the level of wealth too.
Suppose you buy a new house worth Rs. 30, 00, 000. After 6 months, when you get insurance cover for your house, the sum assured would be decided keeping in mind the depreciation amount and the premium would be a part of sum insured.
Now, imagine the total value of the assets you have is Rs. 100, 00, 000 and the premium amount per annum is Rs. 1, 00, 000. When you pay the premium, there is no loss to the building insured, the value of the total assets or wealth will be Rs. 99, 00, 000 (100, 00, 000- 1, 00, 000) at the end of the year.
In case the building is damaged entirely, you will be paid claim of Rs. 25, 00,000, and then your wealth will be Rs. 94, 00, 000 (100, 00, 000-30, 00, 000-1,00,000+25, 00, 000).
If in case, you do not buy nay insurance cover for your newly bought house worth Rs. 30 lacs, on suffering the loss, the value of wealth you will be having is Rs. 70, 00, 000 (100, 00, 000-30, 00, 000). The amount of Rs. 1, 00, 000 you incurred as cost for protecting your asset, but it saved you from losing a large part of your wealth.
Thus, the cost of insurance when there is no loss is less than the benefit the policy holder receives when there is loss.
Manage your wealth wisely because it takes a longer time to build your wealth, but a shorter time and a wrong decision to destroy all that you had. Put insurance management to work to get your wealth insured and managed.