What Most People Don’t Understand About Insurance, Even Though Almost Everyone Has It

Think about your own home for a moment. Almost every Indian family has at least one insurance policy tucked away in a drawer. Some have five. Some have ten. Many of these policies were bought because a neighbour suggested them, or an uncle said it was a good idea, or an agent convinced someone in the family to sign quickly because it was the “last day of offer.” In many homes, policies are renewed year after year without anyone knowing what they actually cover.

Why Insurance Is Sold More Than It Is Explained

You will be surprised how common this is. Women often tell me, “Haan policy toh hai, par exactly kya cover karta hai, mujhe nahi pata.” And this is not because we are incapable. It is because insurance in our country has been sold more than it has been explained. But now that you and I are on this journey together, this is a topic we must understand clearly. Because insurance is not just a product. It is protection. And protection only works when we know what we are protected from.

What Insurance Really Means

Insurance simply means transferring a risk. In simple words, if something goes wrong, someone else will bear that financial burden for you. There are two major risks that can shake a family. Illness. And loss of life. That is why there are two pillars of insurance that every woman must understand: health insurance and life insurance.

Health Insurance: The First Line of Defence

Let us begin with health insurance. Medical costs in India are rising faster than almost anything else. A small surgery can cost tens of thousands. A major hospitalisation can cross lakhs. Even families with savings can struggle when faced with sudden medical bills. Health insurance shields you from that shock. It pays for hospitalisation, tests, medicines, and sometimes even pre and post hospital care.

What to Check Before Trusting Your Health Policy

When you buy a health policy, pay attention to a few important things. Look at the room rent limit because choosing a higher room than your policy allows means you pay the difference yourself. Check the waiting period for pre-existing conditions. Read the list of exclusions. Ensure the sum insured is big enough for today’s medical costs. A five lakh policy may feel sufficient, but in many cities, it is not. Health insurance is not luxury. It is the foundation that protects your savings from being wiped out by one illness.

Life Insurance: Where Confusion Is the Greatest

Now let us talk about life insurance. This is where the confusion is the greatest. Many families mistake life insurance for investment. A friend will say, “Isme bonus milta hai.” An agent will say, “Yeh policy retirements ke liye perfect hai.” Someone else will tell you, “Issme paisa double ho jayega.”

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Insurance vs Investment: One Question That Changes Everything

But ask yourself one simple question. What is the purpose of this money. Is it meant to protect your family if something happens to you. Or is it meant to grow. Because it cannot do both well. Insurance is an umbrella. Investment is a vehicle. An umbrella will never take you far, and a vehicle cannot protect you from rain. When we mix the two, we end up with an expensive product that neither protects strongly nor grows efficiently.

Why Term Insurance Works Best

The most effective form of life insurance is term insurance. It is simple. It is affordable. You pay a small premium, often just a few thousand rupees a year, and in return, your family gets a large cover if something happens to you. There are no bonuses. No returns. No hidden surprises. It is pure protection. And protection is exactly what life insurance should do.

ULIPs and Market-Linked Policies Explained Simply

You may have heard of ULIPs or market linked policies that combine insurance with investment. They sound convenient but tend to be expensive. For many women, a far more cost effective approach is to take a simple term policy and then invest separately in a mutual fund SIP. One product protects. The other grows. This clarity helps you track your goals and money far better.

This Week’s Laxmi Step

This week, I want you to take one important step. Take out every insurance policy you or your spouse or your parents have. Read the first two pages. Note the sum insured, nominee, premium, and what the policy actually covers. You do not need to become an expert. You only need to become aware. If you have questions, ask. You can even write to me at [email protected] and we will address them in future columns.

The Quiet Shield of Financial Stability

Protection may not look glamorous, but it is the quiet shield that allows everything else in your financial life to grow safely. Laxmi blesses the home where wisdom and protection walk together.

Next week, we will talk about another shield every woman needs. Your emergency fund and how to build it step by step.

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