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Types of Insurance

Unexpected expenses are an unfortunate reality of life. Even if you believe you are financially secure, a sudden or unforeseen expense can jeopardize this security significantly.

Depending on the severity of the emergency, these situations may also leave you in debt. While you cannot plan for contingencies resulting from such incidents, insurance policies provide some measure of protection against financial liability resulting from such occurrences. There are numerous insurance policies available, each of which is designed to protect specific aspects of your health or property. There are eight distinct types of insurance, namely:

Life Insurance 

Motor insurance 

Health insurance 

Travel protection insurance

Property insurance 

Mobile insurance 

Cycle insurance 

Bite-size insurance

Simply being aware of the various insurance policies available is insufficient. Rather than that, you must understand how each of these plans operates. Without adequate knowledge of each of them, you may be unable to safeguard your financial well-being and that of your family members. Continue reading to learn everything you need to know about insurance policies.

1. Life insurance

Life insurance is a term that refers to a policy or cover that allows the policyholder to ensure financial independence for his or her dependents after death. Assume that you are the sole breadwinner in your family, providing for your spouse and children. Your death would financially devastate the entire family in such a case. By providing financial assistance to your family in the event of your death, life insurance policies ensure that this does not happen. The Different Types of Life Insurance Policies

When it comes to life insurance, there are primarily seven distinct types of policies. These include the following:

Term Plan: A term plan's death benefit is only available for a specified period, for example, 40 years from the policy's purchase date.

Endowment Plans: Endowment plans are types of life insurance policies in which a portion of the premiums are applied to the death benefit and the remainder is invested by the insurance provider. Endowment policies provide assistance in the form of maturity benefits, death benefits, and periodic bonuses.

  • A portion of your insurance premiums is invested in mutual funds, while the remainder is used to pay the death benefit.
  • Whole Life Insurance: As the name implies, these policies provide coverage for an individual's entire life, rather than a specified term. Certain insurers may limit the term or whole life insurance to 100 years.
  • A child's plan is a combination of investment and insurance that provides financial assistance to your children throughout their lives. After the death of parents, the death benefit is payable in a lump sum.
  • These policies make periodic payments of a specified percentage of the plan's sum assured. This is referred to as a survival advantage.
  • Also referred to as pension plans, these policies combine investment and insurance components. A portion of the premiums goes toward the policyholder's retirement corpus. This benefit is available as a lump-sum payment or every month following the policyholder's retirement.

Life Insurance's Benefits

If you own a life insurance policy, you can take advantage of the following benefits.

Tax Benefits: If you pay life insurance premiums in full, you may be entitled to tax benefits under Sections 80 (C) and 10 (10D) of the Income Tax Act. Thus, you can save a significant amount of money on taxes by purchasing a life insurance policy.

Encourages Saving Habits-Because premiums must be paid, purchasing such an insurance policy encourages the habit of saving money.

Protects the financial future of your family: The policy ensures that your family's financial independence is preserved even after your death.

It aids in retirement planning. Certain types of life insurance policies can also be used as investment vehicles. For example, pension plans provide a lump-sum payout upon retirement, assisting you in finding your retirement.

Now that you're familiar with life insurance policies, continue reading to learn about the various facets of other types of insurance policies.

2. Motor insurance 

Motor insurance is a term that refers to policies that provide financial assistance in the event of a car or motorcycle accident. Motor insurance is available for three types of motorized vehicles, including the following:

Car Insurance:

This type of policy covers privately owned four-wheeler vehicles.

Two-wheeler Insurance: These plans cover privately-owned two-wheeler vehicles, such as motorcycles and scooters.

Commercial Vehicle Insurance:

If you own a vehicle that is used for commercial purposes, you must obtain commercial vehicle insurance. These policies ensure that your business automobiles remain in excellent condition, significantly reducing losses.

Different Types of Automobile Insurance Policies

Motor insurance policies are classified into three categories based on the extent of coverage or protection provided, namely:

Third-Party Liability: In short, this is the most fundamental type of motor insurance coverage. According to the Motor Vehicles Act of 1988, this is the bare minimum requirement for all motorized vehicle owners. Due to the limited financial assistance available, premiums for these policies are also typically lower. These insurance policies cover only the financial liability of the third party harmed by the mishap, ensuring that you avoid legal complications as a result of the accident. They do not, however, provide financial assistance to policyholders for vehicle repairs following accidents.

Comprehensive Coverage: In comparison to third-party liability insurance, comprehensive insurance plans provide a higher level of protection and security. Apart from third-party liabilities, these policies also cover the costs of repairing the policyholder's vehicle following an accident. Additionally, comprehensive plans provide coverage if your vehicle is damaged by fire, man-made or natural disasters, riots, or other similar events. Finally, if your bike is stolen, you can recover the cost of the bike if you have comprehensive insurance. Additionally, one can choose from a variety of add-ons for their comprehensive motor insurance policy to round it out. Several of these optional coverages include zero depreciation, engine and gearbox protection, consumable coverage, and roadside assistance.

Own Damage Coverage: This is a specialized type of automobile insurance offered by insurance companies to consumers. Additionally, you are only eligible for this plan if you purchased the two-wheeler or car after September 2018. The vehicle must be brand new, not a pre-owned vehicle. Additionally, you should keep in mind that you can only purchase this standalone property damage insurance policy if you already have a third-party liability motor insurance policy in place. With your damage cover, you receive essentially the same benefits as with a comprehensive policy, but without third-party liability coverage.

The Benefits of Automobile Insurance

Regulations

Automobiles and bicycles are becoming increasingly expensive with each passing day. At such a time, failing to obtain adequate insurance can result in severe financial losses for the owner. The following are some of the benefits of purchasing such a plan.

Avoids Legal Difficulties-Assists you in avoiding traffic fines and other legal entanglements that you would otherwise have to bear.

The insurance policy assists you in meeting all third-party liability requirements. If you injure someone or cause damage to someone else's property in a vehicle accident, your insurance policy will assist you in effectively recouping your financial losses.

Following an accident, you will be required to spend considerable sums on your vehicle repairs. Insurance policies limit such out-of-pocket costs, allowing you to immediately begin repairs.

Coverage for theft/loss: If your vehicle is stolen, your insurance policy will assist you in reclaiming a portion of the vehicle's on-road cost. Similar assistance is available if your vehicle is damaged beyond repair as a result of an accident.

Additionally, individuals who own a commercial vehicle/two-wheeler may qualify for tax benefits if they pay the vehicle's premiums.

3. Health insurance 

Health insurance is a type of general insurance that assists policyholders financially when they are admitted to hospitals for treatment. Additionally, some plans cover the cost of treatment received at home, either before or following hospitalization. Due to rising medical inflation, health insurance has become a necessity. Consider the various types of health insurance plans available before proceeding with your purchase.

Health insurance policies come in a variety of forms.

In the U.S., there are eight distinct types of health insurance policies. They are as follows:

Individual Health Insurance: These are health insurance policies that cover a single policyholder.

Family Floater Insurance: These policies allow you to obtain health insurance for your entire family without having to purchase separate policies for each member. Generally, a husband and wife, as well as two of their children, are covered under one of these family floater policies.

Coverage for Critical Illness: These are specialized health plans that provide substantial financial assistance to policyholders who are diagnosed with a specific, chronic illness. Unlike traditional health insurance policies, these plans pay a lump-sum benefit following such a diagnosis.

Senior Citizen Health Insurance: As the name implies, these policies are designed specifically for individuals aged 60 and over.

Generally, such policies are available to employees of an organization or business. They are designed in such a way that older beneficiaries can be removed and new ones added, depending on the company's ability to retain employees.

Maternity health insurance: These policies cover medical expenses incurred during pregnancy, delivery, and the postpartum period. It protects both the mother and her infant.

Personal Accident Insurance: These medical insurance policies cover only financial liability resulting from accident-related injuries, disability, or death.

These policies pay for treatment aimed at preventing a serious disease or condition.

Health insurance benefits

After reviewing the various types of health insurance available, you're probably wondering why you and your family need to enrol in one. Consider the following reasons.

Medical Coverage: The primary advantage of this type of insurance is that it protects you financially against medical expenses.

Cashless Claim: If you seek treatment at one of the hospitals with which your insurance provider has a relationship, you may be eligible for a cashless claim. This feature ensures that your insurer and the hospital directly settle all medical bills.

Individuals who pay for health insurance premiums may qualify for income tax benefits. Under Section 80D of the Income Tax Act, individuals can claim a tax deduction of up to Rs.1 lakh on their health insurance premium payments.

Additional benefits may exist, depending on the insurance provider.

4. Travel insurance

When discussing the various types of insurance policies, it's important to keep in mind the importance of travel insurance plans. Such policies protect a traveller's financial security during a trip. Thus, in comparison to other types of insurance, travel insurance provides only short-term coverage. Travel insurance, depending on the provider you choose, may provide financial assistance in a variety of situations, including baggage loss, trip cancellation, and much more. Consider the following examples of the various types of travel insurance policies available in the country:

Domestic travel insurance protects you financially while travelling within the U.S. However, if you intend to leave the country for vacation, such a policy would be useless.

International Travel Insurance-If you are travelling outside of the country, you should purchase international travel insurance. It enables you to cover unexpected expenses that may occur during your trip, such as medical emergencies, baggage loss, or passport loss, among others.

When you travel with your family, your home is left unguarded and unprotected. Burglary is always a possibility, which can result in significant losses. Fortunately, home holiday insurance plans, which are frequently included in travel policies, protect you financially from such occurrences as well.

Travel Insurance's Benefits

Travel insurance policies cover the following aspects:

Cover Flight Delay-Passengers can suffer significant financial losses as a result of flight delays or cancellations. If you purchase travel insurance, you can make a claim against the insurer for such financial losses.

Baggage Loss/Delay: Travel insurance entitles you to financial assistance if your flight is delayed or if you lose your luggage during your trip. You can purchase some of the necessary items with this amount.

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