Misunderstanding about Insurance

Young Stressed Asian Couple Managing Finances, Reviewing Their B

In the context of economic development and the steadily improving living standards in Cambodia, personal financial management is becoming a vital life skill for everyone: An indispensable part of financial management is insurance.

Presently, the insurance premium ratio to Cambodia’s GDP stands at approximately 1.14%, with an ambitious target set to reach 5.5% by 2030. For context, it is currently about 3.35% in ASEAN, 5.37% in Asia and the 6.3% of the world. Achieving this goal is feasible through education, as there are prevalent misconceptions about insurance among many Cambodians, which hinders them from fully utilizing the benefits that insurance offers.

The first common misconception about insurance is that it is exclusive to the wealthy Cambodians. However, in reality, insurance is essential for individuals across all social classes, as everyone is susceptible to risks. For those with modest or middle incomes, insurance becomes even more crucial. It serves as a protective shield for their finances, guarding against unforeseen events. Even a seemingly minor incident can significantly impact the financial stability of low-income individuals, and insurance plays a vital role in easing this burden during such situations.

Furthermore, instances of non-transparency in the sales process and the settlement of insurance claims have eroded people’s trust. When faced with challenges in receiving compensation, insurance participants often lose faith in the insurance system, suspecting that they have fallen victim to a scam. However, it’s essential to recognize that the policy wording contains all the terms and conditions, which should be thoroughly understood.

It is common behavior for people to overlook matters that do not directly impact their daily lives. Insurance, much like education, is a long-term investment. Its benefits may not be immediately evident in the short term; rather, they gradually manifest over time. Unfortunately, this lack of immediacy often leads people to dismiss insurance, mistakenly believing it to be unnecessary.

In addition, there is a common tendency to underestimate personal risks and assume that accidents and illnesses will not happen to oneself. This subjective mindset often leads individuals to neglect insurance, overlooking its role in safeguarding themselves and their families against unforeseen risks.

Many individuals lack a clear understanding of the various types of insurance, its mechanisms, and its advantages. This gap in knowledge fosters skepticism and erodes trust, particularly when required to invest funds without witnessing immediate returns. It is advisable for people to seek professional consultation to receive guidance and select the most suitable insurance products. Such informed decisions have the potential to significantly improve their lives.

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