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Introduction
The life and property of an individual are surrounded by the risk of death, disability or destruction. These risks may result in financial losses. This is when insurance comes into the picture, as a way of managing risks. Insurance is a prudent way to transfer such risks to an insurance company. When you buy insurance, you transfer the cost of a potential loss to the insurance company in exchange for a fee, known as the premium. Insurance companies invest the funds securely, so it can grow, and payout when there’s a claim.
Insurance can be defined as a contract, which is called a policy, in which an individual or organisation receives financial protection and reimbursement of damages from the insurer or the insurance company. As part of the contract, the insurance company promises to make good the losses of the insured on happening of the insured contingency. The life insured pays a premium in return for the promise made by the insurer.
Different Types of Insurance Policies
Here are the different types of insurance policies. Know the various insurance plans to select the right one at the right time:
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Life Insurance: Life insurance is what you can avail to safeguard your family in case of your death during the tenor of the policy. Term insurance is the most basic form of life insurance available to buyers. Life insurance helps secure your family financially with a lump sum amount that is paid out in the event of the policy holder’s death within the policy period. There are primarily seven different types of insurance policies when it comes to life insurance. These are:
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Term Plan - The death benefit from a term plan is only available for a specified period, for instance, 40 years from the date of policy purchase.
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Endowment Plan - Endowment plans are life insurance policies where a portion of your premiums go toward the death benefit, while the remaining is invested by the insurance provider. Maturity benefits, death benefit and periodic bonuses are some types of assistance from endowment policies.
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Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a part of your insurance premiums goes toward mutual fund investments, while the remaining goes toward the death benefit.
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Whole Life Insurance - As the name suggests, such policies offer life cover for the whole life of an individual, instead of a specified term. Some insurers may restrict the whole life insurance tenure to 100 years.
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Child’s Plan - Investment cum insurance policy, which provides financial aid for your children throughout their lives. The death benefit is available as a lump-sum payment after the death of parents.
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Money-Back - Such policies pay a certain percentage of the plan’s sum assured after regular intervals. This is known as survival benefit.
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Retirement Plan - Also known as pension plans, these policies are a fusion of investment and insurance. A portion of the premiums goes toward creating a retirement corpus for the policyholder. This is available as a lump-sum or monthly payment after the policyholder retires.
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Health Insurance: This is purchased for covering medical expenses revolving around various health issues, including hospitalization, treatments and so on. These insurance plans come in handy in case of medical emergencies; you can also avail of cashless facility across network hospitals of the insurer. There are eight main types of health insurance policies available in India. They are:
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Individual Health Insurance - These are healthcare plans that offer medical cover to an individual policyholder.
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Family Floater Insurance - These policies allow you to avail health insurance for your entire family without needing to buy separate plans for each member. Generally, husband, wife and two of their children are allowed health cover under one such family floater policy.
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Critical Illness Cover - These are specialised health plans that provide extensive financial assistance when the policyholder is diagnosed with specific, chronic illnesses. These plans provide a lump-sum payout after such a diagnosis, unlike typical health insurance policies.
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Senior Citizen Health Insurance - As the name suggests, these policies specifically cater to individuals aged 60 years and beyond.
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Group Health Insurance - Such policies are generally offered to employees of an organisation or company. They are designed in such a way that older beneficiaries can be removed, and fresh beneficiaries can be added, as per the company’s employee retention capability.
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Maternity Health Insurance - These policies cover medical expenses during prenatal, post-natal and delivery stages. It covers both the mother as well as her newborn.
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Personal Accident Insurance - These medical insurance policies only cover financial liability from injuries, disability or death arising due to accidents.
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Preventive Healthcare Plan - Such policies cover the cost of treatment concerned with preventing a severe disease or condition.
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Child Plans: These insurance policies are savings instruments that help in generating lump sum funds whenever children reach a certain age for pursuing higher studies. In these plans, the life assured is that of the child or the recipient of the funds while the parents are the policy owners.
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Property Insurance: These insurance plans cover any damages to the property on account of accidents, mishaps and natural calamities, among other such events. Here are some types of property insurance policies available in India:
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Home Insurance - With such a policy, you remain free from all financial liabilities that may arise from damage to your home or contents inside due to fires, burglaries, storms, earthquakes, explosions and other events.
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Shop Insurance - If you own a shop, which acts as a source of income for you, it is integral to protect yourself from financial liability arising from the same. Whether the liability occurs due to natural calamities or due to accidents, with these plans, you can immediately undertake repairs to the shop.
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Office Insurance - Another type of property insurance policy, office insurance ensures that the office building and all the equipment inside are significantly protected in the event of unforeseen events. Generally, office spaces include expensive equipment, such as computers, servers and much more. Thus, availing these plans is essential.
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Building Insurance - If you own a complete building, opting for home insurance may not be sufficient. Instead, you can purchase building insurance to cover the entire premises.
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Auto Insurance: These are insurance plans for vehicles, including cars and bikes. These offer protection against natural calamities, damages to third parties (people who have incurred losses or been hurt in an accident with the policyholder’s vehicle) and also damages to the vehicle along with mishaps and accidents.
FAQs
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On what basis should I choose an insurance provider?
You should check coverage, accessibility, quality of customer service and support, number of cashless service providers associated and other smaller details, besides claim settlement ratio and reputation
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Why is life insurance useful?
Life cover is useful to ensure the financial stability of your family in case you are unable to earn due to an accident or illness. The policy also pays the benefits to your beneficiaries in case of an untoward event. Procuring such coverage ensures that your family can to meet their expenses and sustain their lifestyles even in your absence.
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Are different options available to pay the premium?
Yes, insurers provide several options for premium payment. You may choose monthly, quarterly, semi-annually, or annual payment options. Some policies are available with a one-time premium.
End Note
Insurance policies provide you with a shield against various uncertainties in life. Different insurance policies come with a different set of benefits and features. While health insurance can safeguard you from financial difficulties if you suffer from any diseases, an accident cover can help you cover the treatment costs in case you meet with an accident.