In today’s fast-paced lifestyle, insurance emerges as the most preferred way of keeping life elements particularly in regard to finance. Be it any expensive item like car, mobile phone, home, office, or even health, taking up an insurance policy for the same gives a kind of assurance that he can rest assured if something wrong happens to these items or him. If you want to know more about insurance and its types in India, this post is especially meant for you. Let’s get to know more about different types of insurance in this post.
What does Insurance mean?
Put simply, insurance refers to a kind of contract or agreement that is signed between two parties – the insurer and the insured. The insurer is obliged to provide financial support against the loss born by the insured under specific scenarios. The insurer or the insurance company is liable to provide the said sum to the insured if he suffers a loss or damage to the insured item or person.
To get this kind of financial back up in the form of insurance, the insured party needs to deposit a certain amount to the insurance company, which is known as premium. The insurer or the insurance company promises that it would protect the policyholder’s damages with respect to specific terms and conditions. The amount paid as premium determined the assured sum for insurance cover or ‘policy limit’.
Must Read: Names of Key Plans Offered by HDFC Life
Types of Insurance
Insurance is India is broadly classified into two types – life insurance and general insurance. General insurance also means non-life insurance. Both these types of insurance are further divided into several other types of insurance. You will get to know more about them in the following part of this post.
Life Insurance
Among different types of insurance schemes, life insurance refers to a financial contract between a personal and the insurance firm. In this case, the insurance company is liable to give out a lump sum amount to the beneficiary in the case of the death of insured person. This assumed amount is commonly known as the death benefit sum assured. The beneficiaries can choose to utilize this amount to primarily manage their daily expenses and pursue other goals in their lives.
In order to get such a life cover, the insured person is supposed to pay a fixed amount monthly, quarterly, semi-annually or annually, known as the insurance premium, to the insurance firm or insurer. There is also an option to pay the premium in one pay out. Till the time a person keeps paying the insurance premium, he or she can get avail life insurance coverage.
Some examples of life insurance are term insurance, child insurance, retirement plans, whole life insurance, etc. Let’s get to know each of them in detail below.
1.Term Insurance
It is one of the most popular types of insurance in India at present. The biggest reason behind its popularity is its affordability and complete life cover. In this type of insurance, the beneficiary is liable to get the entire sum assured if the insured person becomes dead while paying the premium.
A term insurance is great for people who care for their family even if when they are not in this world. This way, they can keep the future of their loved ones secure after their death.
2. Endowment Life Insurance
Along with offering the people with death benefit, endowment life insurance plans come with guaranteed maturity welfares as well. If the insured person goes past the policy term, he or she will be liable to get the definite maturity payouts at the culmination of the policy term. These maturity disbursements can be given in the form of a lump sum amount, fixed episodic payments, or a mix of the given two.
3. Whole Life Insurance
Whole life insurance falls in the lien with an endowment life insurance scheme. However, the single most difference between the two lies with the tenure of the insurance policy. Endowment plans tend to give coverage for a fixed tenure, usually up to the age of 60 or 65. Whole life insurance, on the other hand, is designed to offer life insurance coverage till you attain 99 or 100 years of age.
Child Insurance
This type of insurance is to help the policy holders in protecting their child’s future. A child insurance policy provides the policy holders a complete life cover along with a guaranteed lump sum delivery at the time of policy maturity. It helps a policy holder to ensure that his or her child never falls short of the crucial financial assistance at different states of life such as higher education and wedding.
ULIP
These stand for unit-linked insurance plans. It is actually a combination of two features – insurance and investment. Aside from providing the policyholders with a life cover, a specific section of premium goes towards a ULIP in which the money is invested in a chosen mutual fund. At the timeof maturity, the overall fund value, including the accrued profits, is given to the policy holder in the form of a lump sum amount.
Retirement Plan
Commonly called annuity plans, retirement plans are meant to deliver timely payments to the policy holder after a fixed period. The person can make the use of these payments to manage his daily and monthly expenses after the retirement.
Immediate annuity and deferred annuity are two retirement plans available in India. In the case of an immediate annuity plan, the policy holders starts getting the pay-outs right after the purchase of the policy. However, in a deferred annuity plan, he or she can expect to get the regular pay-outs only after the attainment of the retirement age.
General Insurance
As opposed to life insurance, a general insurance is meant to cover the losses related to non-living things like a car, bike, home, office, smartphone. In this type of insurance coverage, the insurance company is liable to pay a certain percentage of the overall value of the insured product to the policy holder in the case of loss, theft, and damage.
In most cases, a person takes this type of insurance to protect high-value items such as car bike, property, etc. A general insurance policy gives a kind of assurance to the policy holder that he will get the financial reimbursement if something wrong happens to the insured item.
A few examples of general insurance are health insurance, motor insurance, travel insurance, home insurance, etc.
1. Motor Insurance
A motor insurance policy is taken against a vehicle that could be personal or commercial. Since vehicles are meant to be on road, they tend to face accidents, suffer damage, get stolen, and many things alike. A motor insurance policy helps the vehicle owner in getting a compensations against these incidents.
Be it a bike, car, bus, truck, or any other vehicle, taking a motor insurance policy has been mandatory by the Government of India.
2. Health Insurance
A health insurance policy is meant to help the people in covering the expenses related to various health issues that arise. If you have a health insurance plan and you get hospitalized due to an illness, all your medical bills will be covered by the insurance company. As human life is uncertain particularly after the times of COVID, having health insurance has become a necessity among people these days. such a policy would cover travel expenses, diagnostic tests, surgical expenses, medicines, and other treatment-related expenses.
3. Home Insurance
Home insurance is as of now considered the most underrated type of insurance in the general insurance category. Home insurance schemes are meant to protect your home against theft or damage.
In addition, the pay-out from the insurance company can be used by the homeowners to repair any damage to the home or its construction occurring from riots, natural disasters, burglaries, explosions, or fires.
4. Travel Insurance
One major objective of taking travel insurance is get insured against the hazards related to travel. This covers, among other things, airline cancellations, lost luggage or passports, unexpected medical costs when travelling, and delays in flights.
The Conclusion
So, as of now, you have thorough knowledge of all the major types of insurance plans available in India. At a time when life expectancy has become too low, taking an insurance policy has become the need of the hour.
If you are looking to buy any kind of insurance in coming days, it is strongly advisable to explore all the available insurance plans before deciding on a specific one.
FAQs
What is No Claim Bonus (NCB)?
‘No Claim Bonus’ refers to a kind of discount on premium paid that is provided by the insurance company at the time of policy renewal to inspire policyholders stay fit and avoid making claims. If the policyholder didn’t make any claim in the previous year, a NCB benefit is provided to the insured party.
What are TPA?
TPAs or third-party administrators refer to mediators that between insurance firms, hospitals, and policyholders. A TPA helps policyholder can help a policy holder settle a claim easily by smoothening the communication process between the policyholder, the respective hospital and the insurer.
Can I give back a health insurance policy after purchase?
Yes, if you disagree with any of the terms and conditions, you may return your health insurance policies during the free-look period, which is 15 days after obtaining the policy paperwork. You must provide a justification for your return. This feature is included in insurance for a minimum of three years, in accordance with IRDA rules. Nonetheless, insurers are able to offer this service even for shorter-term contracts.