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Insurance

 

Insurance is the transfer of risk by an individual, such as yourself, or an organisation, such as your business, to the insurance company. You or your organisation will thus be known as the policy owner. The insurance company receives payment in the form of premium and will compensate you in the event of losses or damages sustained by you.

All too often we hear about various types of insurance policies without really understanding what they are and more importantly, what they protect. The truth is, there are two main types of insurance, namely life insurance and general insurance which covers different aspects in your life.

Types of Insurance

There are two broad types of insurance:

  • Life Insurance
  • General Insurance

Types of Insurance

Life Insurance

General Insurance

Term Life

Money-back policy

Unit-Linked Insurance Plan

Pension Plans

Motor Insurance

Home Insurance

Health Insurance

Fire

Insurance
 

What is Life Insurance

Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. 

Life insurance can help you support your family even after retirement. Depending on what it covers, Life insurance can be classified into various types:

Term Insurance

- It is the most basic type of insurance.
- It covers you for a specific period.
- Your family gets a lump-sum amount in the case of your death.
- If, however, you survive the term, no money will be paid to you or your family.

Whole Life Insurance

- It covers you for a lifetime.
- Your family receives a certain sum of money after your death.
- They will also be entitled to a bonus that often accrues on such amount.

Endowment Policy

- Like a term policy, it is also valid for a certain period.
- A lump-sum amount will be paid to your family in the event of your death.
- Unlike a term plan, you get the maturity proceeds after the term period.

Money-back Policy

- A certain percentage of the sum assured will be paid to you periodically throughout the term as survival benefit.
- After the expiry of the term, you get the balance amount as maturity proceeds.
- Your family gets the entire sum assured in case of death during the policy period. This is regardless of the survival benefit payments made.

Unit-linked Insurance Plans (ULIPs)

- Such products double up as investment tools.
- A part of your premium goes towards your insurance cover.
- The remaining amount is invested in Debt and Equity.
- A lump-sum amount will be paid to your family in the event of your death.

Child Plan

- This ensures your child’s financial security.
- In the event of your death, your child gets a lump-sum amount.
- The insurer pays the premium amounts after your death.
- Your child will continue to get a certain sum of money at specific intervals.

Pension Plans

- This helps build your retirement fund.
- You can get a regular pension amount after retirement.
- In the case of your death, your family can claim the sum assured.


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What is General Insurance?

A general insurance is a contract that offers financial compensation on any loss other than death. It insures everything apart from life. A general insurance compensates you for financial loss due to liabilities related to your house, car, bike, health, travel, etc. The insurance company promises to pay you a sum assured to cover damages to your vehicle, medical treatments to cure health problems, losses due to theft or fire, or even financial problems during travel.

Simply put, a general insurance offers financial protection for all your assets against loss, damage, theft, and other liabilities. It is different from life insurance.

What are the types of General Insurance available?

You can get almost anything and everything insured. But there are five key types available:

  1. Health Insurance
  2. Motor Insurance
  3. Travel Insurance
  4. Home Insurance
  5. Fire Insurance

Health Insurance

This type of general insurance covers the cost of medical care. It pays for or reimburses the amount you pay towards the treatment of any injury or illness.

It usually covers:

  • Hospitalisation
  • The treatment of critical illnesses
  • Medical bills prior to or post hospitalisation
  • Day care procedures like Cataract operations

You can also opt for add-on benefits like:

  • Maternity cover: Your health insurance covers you for the costs related to childbirth. This includes pre-delivery check-ups, hospitalisation during delivery, and post-natal care.
  • Pre-existing diseases cover: Your health insurance takes care of the treatment of diseases you may have before buying the health insurance policy.
  • Accident cover: Your health insurance can pay for the medical treatment of injuries caused due to accidents and mishaps.

Your health insurance can also help you save tax.

Motor Insurance

Motor insurance is for your car or bike what health insurance is for your health.

It is a general insurance cover that offers financial protection to your vehicles from loss due to accidents, damage, theft, fire or natural calamities

You can also get motor insurance for your commercial vehicles.

In India, you cannot drive or ride without motor insurance.

Let’s look at the two key types:

1. Car Insurance

It’s precious—your car. You paid lakhs of rupees to buy that beauty. Even a single scratch can be painful, forget about bigger damages.

Car insurance can reduce this pain for a few thousand rupees.

What the insurer will pay for depends on the type of car insurance plan you purchase

2. Two-wheeler Insurance

This is your bike’s guardian angel. It’s similar to Car insurance.

You cannot ride a bike or scooter in India without insurance.

How it works:

As with car insurance, what the insurer will pay depends on the type of insurance and what it covers.

Types of Motor Insurance:

Third Party Insurance

Comprehensive Car Insurance

Compensates for the damages caused to another individual, their vehicle or a third-party property.

Covers all kinds of damages and liabilities caused to you or a third party. It includes damages caused by accidents, sabotage, theft, fire, natural calamities, etc.
 

You can increase your insurance protection with these Add-on covers for your car and bike insurance.

A travel insurance compensates you or pays for any financial liabilities arising out of medical and non-medical emergencies during your travel abroad or within the country.

There are two types of Travel Insurance.

Single Trip Policy

Annual Multi Trip

It covers you during a trip that lasts under 180 days.

It covers you for several trips you take within a year.
 

What all does travel insurance usually cover?

  • Loss of baggage
  • Emergency medical expenses
  • Loss of passport
  • Hijacking
  • Delayed flights
  • Accidental death

Home Insurance

Home insurance is a cover that pays or compensates you for damage to your home due to natural calamities, man-made disasters or other threats.

It covers liabilities due to fire, burglary, theft, flood, earthquakes, and sabotage. It not only offers financial protection to your home, but also takes care of the valuables inside the property.

Some of the common types of home insurance are:

Standard fire and special perils policy

This covers your home against fire outbreaks and special perils.
The dangers covered are:
- Natural calamities like lightening, flood, storm, earthquake, etc.
- Damage caused due to overflowing or bursting of water tanks, pipes, etc.
- Damage caused due to man-made activities such as riots, strikes, etc.

Home structure insurance

This protects the structure of your home from any kinds of risks and damages. 
The cover is also extended to the permanent fixtures within the house such as kitchen and bathroom fittings.

Public liability coverage

The damage caused to another person or their property inside the insured home can also be compensated.

Content Insurance

This covers the content inside the insured home.
What’s commonly covered: Television, refrigerator, portable equipment, etc.
 

Fire Insurance

Fire insurance pays or compensates for the damages caused to your property or goods due to fire.

It covers the replacement, reconstruction or repair expenses of the insured property as well as the surrounding structures.

It also covers the damages caused to a third-party property due to fire.

In addition to these, it takes care of the expenses of those whose livelihood has been affected due to fire.

Types of fire insurance

Some of the common types are:

Valued policy

The insurer firsts value the property and then undertakes to pay compensation up to that value in the case of loss or damage.

Floating policy

It covers the damages to properties lying at different places.

Comprehensive policy

This is known as an all-in-one policy.
It has a wide coverage and includes damages due to fire, theft, burglary, etc.

Specific policy

This covers you for a specific amount which is less than the real value of the property.
 

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