Life and health insurance have been known for a long time to be important parts of a person's or family's financial plan. A sense of family responsibility in a modern society meant that life and health insurance would become more important.
Even now, life and health insurance are still important parts of the process of making a financial plan.
The goal of this article is to give an overview of this process and show how life insurance and health insurance can help people reach their financial goals.
Personal financial planning can be thought of as the process by which a person or family decides to make and carry out an integrated plan to reach their goals. The most important parts of this idea for financial planning are figuring out what your financial goals are and making a plan to reach those goals.
We all know that people face a lot of serious dangers, such as losing their homes in fires and windstorms and losing their lives or becoming disabled. Even though people can't completely predict or stop these dangerous things from happening, they can protect themselves financially from them. The purpose of insurance is to protect against these kinds of bad luck by paying for the losses of a few unlucky people with the money of many other people who face the same risk.
Insurance is all about sharing losses and trading a known, small loss (the premium payment) for an unknown, large loss.
If the risk is death, life insurance can help reduce the amount of money lost. If the risk is instead becoming disabled, the health insurance can make up for the financial loss.
There are two ways to look at insurance: from the point of view of society and from the point of view of the individual. From a social point of view, life or health insurance can be seen as a way for individuals to transfer the financial risks associated with death or illness to a group of individuals. This involves the accumulation of funds. This means that insurance exists when an individual transfers a risk to the group.
From the person's point of view, life or health insurance is an agreement in which one party pays a set amount of money (the premium) to the other party (the insurer). In exchange, the insurer agrees to pay a set amount of money if the person whose life is insured dies or gets sick before a certain time.
