Most people wonder why they should buy cheap insurance as they assume the odds of actually requiring it are very low. That's the “not me” factor that suggests that all's well and will continue to be well forever more.



But there are several arguments in favour of why you should buy insurance. First think about your circumstances. People usually opt for a life insurance policy if the feel their life is at risk and they have dependents who could use the money from the insurance policy.

Buying a medical insurance policy is important, especially as you grow older. Medical bills can be crippling and the money could ease your financial worries and allow you to concentrate on doctor's prescriptions instead.

Then again, if your home is located in or near a disaster-prone area, home insurance would almost certainly protect you against bankruptcy. Imagine losing your home worth hundreds of thousands of dollars and then having to buy or rent a new one. Most people can't even crunch these numbers, never mind trying to raise that kind of money.

Kinds of Policies

There are also short-term insurance policies that cover special or specific situations such as travel insurance. This kind of insurance covers any loss you may suffer during a flight or a medical condition you may develop while flying.

Also, companies in some countries like India have begun to issue insurance against terrorism. It's a new concept and an example of how the insurance business as well as mindsets are changing. Some companies post their employees in areas prone to kidnappings, hijackings and attacks and insure their employees against any eventuality.

If you're an employee of a large corporate organisation, your firm might have a group medical insurance policy. It's a great idea to sign up because the premium is minimal as companies get special discounts. The same goes for student and religious organisation which tie up with insurance companies. Signing up through these organisations will get you a discount.

So step number one is assessing your risk perception and needs. The kind of insurance you need will vary with these factors.

Step number two is deciding whether to buy insurance through an agent or approach an insurance company directly. Both have their pros and cons. If you buy insurance directly, you pay less because you eliminate the agent's commission. But agents can be valuable because they can be a one-stop shop to all your queries.

Beware of Fraudsters

Make sure you research your agent before you finalise a deal. Make sure he or she is recommended and has a good reputation. You don't want to take any chances with scamsters looking to make a quick buck.

Make sure you do a thorough background check on the company you or your agent plans to sign up with. There are different kinds of policies for the same kind of cover and the fine print can vary considerably. The clauses in some might suit you and in others might not.

Another consideration while buying insurance is to determine how much insurance you need, the kind of premiums you can pay and in what instalments.