The Master Guide to Understanding Different Types of Insurance Policies

In life, unplanned expenses are a bitter truth. Even when you think that you are financially secure, a sudden or unforeseen expenditure can significantly hamper this security. Depending on the severity of the problem, such situations may also land you in debt. While you cannot plan ahead for contingencies arising from such incidents, insurance policies offer a semblance of support to minimize financial liability from unforeseen occurrences.

You can see below, insurance policies, whether life insurance or otherwise, is always necessary.

So, before you determine to get one, learn more about the various insurance options.

A policy is a contract between you (the client) and the provider. It states that in return for the stated premium amount, the insurer will provide financial security in the event of an emergency. Several insurance policies are offered in the Indian market.

Two broad categories of insurance exist:

1. Life Insurance
2. General Insurance

These insurances are further categorized:

Under Life insurance.

Under General Insurance.

Also check out a write up on Difference between Digital insurance Vs Traditional insurance

Life Insurance: What Is It?

A contract for life insurance provides financial compensation in the event of death or disability. Some life insurance policies may provide cash rewards upon retirement or after a set period of time.

Hence, life insurance enables you to ensure your family’s financial stability even after your passing. While acquiring a life insurance policy, you can choose to pay the insurer in one single sum or over time. They are referred to as premiums.

In return, your insurer agrees to give your family an assured sum in the case of your passing, becoming disabled, or at a certain time

Even after retirement, life insurance might assist you in providing for your family. Life insurance can be divided into several categories based on what it covers:

• Term Insurance – Term insurance is the most fundamental sort of insurance. It protects you for a set length of time. -In the event of your death, your family receives a lump sum payment. However, if you live through the period, no money will be given to you or your family.
• Whole Life Insurance – It insures you for a lifetime. Upon your death, your family receives a specific amount of money. They will also be eligible for a bonus based on the amount.
• Endowment Policy – Like a term policy, it is only valid for a set period of time. In the case of your death, your family will get a lump sum payment. Unlike with a term plan, you receive the maturity funds at the end of the term period.
• Money-back Policy – As a survival benefit, a specific proportion of the sum guaranteed will be reimbursed to you on a regular basis during the term. – When the period has expired, you will get the remaining amount as maturity proceeds. – If you die during the insurance time, your family receives the whole sum insured. This is irrelevant of the amount of survival benefits paid.
• Unit-linked Insurance Plans (ULIPs) – These plans also serve as investment vehicles. A portion of your premium is used to cover your insurance. – The balance is invested in debt and equity. -In the case of your death, your family will get a lump sum payment.
• Child Plan – This protects your child’s money future. In the case of your demise, your kid will receive a lump sum payment. The premiums are paid by the insurer after your demise. Your kid will continue to receive a set amount of money at regular times.
• Pension Plans – This helps develop your retirement money. After retirement, you can receive a monthly pension sum. In the event of your death, your family is entitled to the amount guaranteed.

Tax Advantages

• Life insurance not only guarantees the well-being of your family, it also provides tax benefits.
• The premium you spend can be subtracted from your overall taxable revenue.
• However, Section 80C of the Income Tax Act limits this to a maximum of Rs 1.5 lakh.
• The tax-deductible premium amount should not surpass 10% of the total guaranteed.

What exactly is general insurance?

A general insurance policy is a contract that provides monetary recompense for any loss other than mortality. It covers everything except reality.

A general insurance policy compensates you for financial losses caused by liabilities linked to your home, vehicle, cycle, health, travel, and other assets. The insurance company pledges to give you an amount guaranteed to cover car damages, medical treatments to cure health issues, losses due to theft or fire, and even financial difficulties while travelling.

Simply stated, a general insurance provides financial security for all your possessions against loss, injury, theft, and other liabilities. It is not the same as health insurance.

Let us assist you in better understanding:

As you can see, General Insurance can be the solution to many of life’s issues. However, you must first choose the appropriate protection from among the numerous options accessible.

What kinds of General Insurance are available? / What can be insured?

Almost anything and everything can be covered. However, there are five major varieties available:

• Health insurance
• Travel insurance
• Home insurance
• Motor insurance
• Fire insurance

Health Insurance

This form of general insurance pays for medical expenses. It provides for or reimburses the cost of treatment for any accident or sickness.

It typically includes:

• Hospitalization
• The care of life-threatening diseases
• Medical expenses incurred previous to or following hospitalization.
• Cataract surgeries are examples of day care techniques.

You can also choose additional advantages such as:

• Maternity coverage: Your health insurance will cover the expenses of delivery. This covers pre-delivery check-ups, delivery hospitalization, and post-natal treatment.
• Pre-existing illness coverage: Your health insurance policy covers the treatment of maladies you may have had prior to purchasing the policy.
• Accident cover: Your health insurance can pay for the medical care of injuries produced due to incidents and mishaps.

Health insurance can also help you save money on taxes. Your premium contribution may be deducted from your taxable revenue.

Individuals over the age of 60 are considered senior citizens.

Also see: What Is the Distinction Between Life Insurance and Health Insurance?

Automobile Insurance

Vehicle insurance is similar to health insurance in that it covers your automobile or motorcycle.

It is a type of general insurance that protects your cars from financial loss due to mishaps, damage, theft, fire, or natural disasters.

Motor insurance for business cars is also available.

You cannot travel or ride in India unless you have car insurance.

Let’s take a peek at the two main types:

Car Insurance

Your vehicle is valuable. That gem cost you thousands of rupees. Even a single scrape can be excruciatingly agonizing, let alone larger damages.

For a few thousand dollars, car insurance can alleviate this suffering.

It works in following steps:

Pay annual premium > Pay annual premium > Insurer pays for damages during the whole year.

What the insurer will pay for is determined by the sort of auto insurance policy you buy.

Also, read: Sell a Vehicle Without Legal Insurance

Motorcycle Insurance

This is your bike’s protector cherub. It’s comparable to auto insurance.

In India, you cannot operate a motorcycle or scooter without protection.

It operates as follows:

Decide between one-year or three-year insurance > Pay the premium amount > Insurer pays for liabilities for 1 year or 3 years.

What the insurer will pay, as with auto insurance, is determined by the sort of insurance and what it covers.

Various types of car insurances:

You can boost your insurance security with the following add-on covers for your motorcycle and vehicle insurance:

Click here for more information on Auto Insurance.

Also, out our blog on Credit Score and Automobile Insurance

Travel Insurance

A travel insurance policy rewards you or pays for any financial obligations incurred as a result of medical or non-medical crises while travelling overseas or within the nation.

Travel insurance is classified into two kinds.

What is typically covered by travel insurance?

• Baggage misplacement
• Medical costs in an emergency
• Passport theft
• Hijacking
• Flight delays
• Death by accident

Home Insurance

Home insurance is a policy that provides for or compensates you for harm to your property caused by natural catastrophes, man-made disasters, or other threats.

It protects against obligations resulting from fire, robbery, theft, flood, earthquakes, and mischief. It not only protects your house financially, but it also protects the assets inside the property.

The following are some examples of popular kinds of home insurance:

Standard fire and specific hazard insurance –

This protects your house from fires and other natural disasters. The risks mentioned include: -Natural disasters such as lightning, flood, typhoon, earthquake, and so on. -Damage caused by overflowing or breaking water containers, pipelines, and so on. -Damage created by man-made actions such as riots, protests, and so on.

Structure protection for your home –

This safeguards the framework of your house against all dangers and damages. The coverage also includes permanent fixtures in the home, such as cooking and restroom fixtures.

Municipal liability insurance

Damage done to another individual or their belongings while inside the insured home is also covered.        

Content Insurance

This includes the items inside the insured house. What is frequently covered: TV, refrigerator, movable tools, and so on.

Protection against fire – Fire insurance

Fire insurance policy covers or settles for the harm caused by fire to your property or products. It includes the costs of replacing, reconstructing, or repairing the insured property as well as the neighboring buildings. It also includes third-party property harm caused by fire.

In addition, it covers the costs of those whose income has been destroyed by fire.

Fire insurance types

The following are some examples of popular types:

Valued strategy

The insurer determines the worth of the property and then agrees to pay recompense up to that amount in the event of loss or harm.

Floating policy

It includes harm to properties located in various locations.

Comprehensive policy

This is referred to as an all-in-one strategy. It covers a broad range of losses, including arson, robbery, and burglary.

Specific Policy

This covers you for a set sum that is less than the property’s true worth.

How Do I Get Insurance?

You can purchase in four easy steps:

Step 1:

CONSIDER WHAT YOU REQUIRE

Understand the materials you require based on your particular needs.

Gather all pertinent information. In the case of auto insurance, for example, obtain information such as the vehicle’s production date, engine specs, and so on. Check whether you need health insurance for yourself or for the complete family.

This preliminary evaluation will give you an idea of the covering you require.

Step 2:

• Look out the available options
• Examine the advantages provided.
• Examine the available add-ons.
• Remember to understand the limitations.
• What is the guaranteed sum?
• Are there any additional services available?

Step 3:

• SELECT THE BEST PLAN
• Choose the option that best meets your needs.
• Contact the business that is providing the package.

Step 4:

• PREMIUM PAYMENT
• Complete out the registration and pay the fee.
• You can do so through the insurer’s website.
• You can also purchase through a middleman or a store.

What does insurance exclude?

In some cases, your insurance may not cover obligations. These are referred to as omissions.

Let us look at a few of them.

• Life: If a person dies as a result of alcohol or substance addiction, war or terrorism, suicide or self-inflicted injuries -Extreme laziness or neglect.
• Car:  Damage to a vehicle that is not covered. Damage caused by driving without a licence. Damage caused by driving under the influence of alcohol or narcotics. Damage caused by battles, rebellion, or nuclear dangers.
• Bike – War, rebellion, or radioactive danger damage. Normal wear and tear, as well as normal ageing -Perforations in the tire or tube. (However, if your two-wheeler is also damaged, you will be reimbursed for 50% of the expense of repair or replacement.). Mechanical or electrical failure, Any loss or harm that occurs outside of India
• Health – Hospitalization as a result of conflict or related actions. Medical disease caused by intoxicants or hallucinogenic drugs misuse. Any pre-existing medical problem during the waiting time -non-allopathic treatments such as acupuncture, yoga, naturopathy, etc. Charges for diagnostic tests if the results do not prove the presence of the covered illness. -Injuries caused by oneself
• Travel- Traveling against the doctor’s advice, Baggage delay of less than 24 hours -Psychological sickness or self-inflicted injuries while travelling, War or political disturbance in foreign countries, Participation in dangerous activities such as bungee leaping, parachuting, and so on.
• Home- Willful destruction of the property -Damages incurred due to wear and strain. War damages include the loss of money stored on the land. Loss of a building that has been vacant for an extended length of time.
• Fire- Property loss or destruction produced by nuclear hazards, war, or related activities. Contamination or pollution, Mechanical or electronic failures.

What is the expense of insurance?

Your insurance expenses are determined by the quantity of premium you pay. This premium number is determined by a variety of variables that vary by insurance. Here’s an example:

Security for life

• Age and Wellness (past and current)
• Your line of work
• The sort of insurance/plan
• Your alcohol and smoking practices
• The amount guaranteed.

Automobile Insurance

• Vehicle make and model.
• The sort of insurance/plan
• The worth and age of your car

• Your previous claim history

Travel Insurance

• The amount guaranteed.
• The sort of insurance/plan
• Your wellbeing as you age
• The journey destination

Heath Coverage

• Your family’s medical background
• The amount guaranteed.
• The sort of insurance/plan
• Your gender and birthdate
• Your medical background

House Insurance

• The dimensions of your house
• The sort of insurance/plan
• The age of your house and the equipment it contains the position of your house.
• The amount guaranteed.

You can also verify the premium amount using internet calculators.

How should the insurance money be spent?

You must file a claim with your insurance company.

• hare specifics about the damage you experienced. This varies depending on the insurance policies.
• Send bills/proof of harm, loss, hospitalization, and so on.
• Your claim would be verified by the insurance provider.
• The payment will then be paid, or you will be reimbursed for your loss.