Different Types Of Insurance Policies

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  • 16 Oct 2023
Different Types Of Insurance Policies

Key Highlights

  • General insurance and life insurance are the two main categories of insurance policies.

  • Life insurance policies provide a predetermined sum to the policyholder or his family. Term life insurance, endowment plans, unit-linked plans, and whole life insurance are the major types of life insurance policies.

  • General insurance includes policies such as health insurance, travel insurance, fire insurance, and home insurance. These policies offer protection against specific risks and provide financial compensation in case of losses. .

  • While choosing an insurance policy, it's important to consider the coverage, premiums, and the claim settlement ratio.

The many insurance coverage options offered in India may be roughly split into two groups.

1. General Insurance

Insurance is a crucial financial instrument that safeguards against life's uncertainties and risks. In the event of damage or the death of the insured or guaranteed, it pays a benefit amount to the policyholder (in the case of general insurance) or nominee (in the case of life insurance). Here are a few of the general insurance options offered in India:

  • Health Insurance
  • Travel Insurance
  • Fire Insurance
  • Home Insurance

2. Life Insurance

A life insurance policy is a contract in which the insurer agrees to pay a predetermined sum of money to the person's beneficiaries or family in exchange for a series of payments over time. These payments are called premiums. When an insured person passes away unexpectedly, life insurance ensures a lump sum payout to the insured's family. There are several kinds of life insurance policies, such as;

  • Pension Plans
  • Endowment Plans
  • Unit-Linked Insurance Plans
  • Child Plans
  • Whole Life Insurance

Let's take a closer look at the various types of insurance policies.

The most typical kinds of life insurance policies offered in India are as follows:

Term Life Insurance

Among all life insurance plans, term insurance is the simplest and most cost-effective option. Term life insurance simply provides risk protection. As a result, the premium price is very low, given the size of the sum insured.

You may provide your family with a sufficient life insurance amount for a small price. Your family may continue to live and accomplish their goals even if something were to happen to you. Many kinds of term insurance policies are offered in India:

1. Regular Period Insurance Plans: This type of insurance is very cost-effective and provides substantial life insurance for a lengthy policy period.

2. Term Plan with Return of Premium: Term return of premium plans offer a maturity benefit at the conclusion of the policy that is equal to the premiums paid during the policy. The returned value does not include any applicable GST or other small adjustments.

3. Plans with Full Premium Refund: Customers who want to cancel their term plans early will receive a full refund of all premiums paid up to the policy's expiration. However, the policyholders can only terminate the plan within a certain time frame.

Endowment Plans

An endowment plan protects your money from taxes and inflation with tax-deductible investments and an exempt maturity value. You can get financial protection from life's risks with these plans as well. You receive a lump sum payout if you live out the insurance period. The insurance provider pays the nominee the sum promised if something unfortunate occurs you while the policy is in effect.

Whole Life Insurance Policy

A whole life insurance provides coverage to the policyholder for the duration of their life. This implies that the insurer will guarantee benefits to the nominee after the policyholder's death and offer coverage for up to 99 or 100 years, depending on the specifics of the policy. In times of financial difficulty, these policies include a borrowing option that the policyholder may use. In addition to the death payment, the plans may accumulate incentives.

Unit Linked Insurance Plan (ULIP)

ULIPs, also known as unit-linked insurance plans, are types of life insurance that assign units against your investment. With ULIPs, you may invest in a combination of debt and equity funds while receiving all the tax advantages.

You receive two benefits from these plans: investment opportunities and insurance advantages. Your premium goes towards market-linked debt and equity securities in part. You will receive life insurance for the term of the policy with the remaining funds.

Pension or Annuity Plans

Plans for a pension or annuity are crucial to your post-retirement lifestyle. These programmes assist you in using your sizable retirement fund to generate a consistent income or annuity. Additionally, these types of insurance policies give you a safety net for your post-retirement years. You and your spouse can invest separately or jointly in pension schemes. With joint pension plans, your spouse will still get a pension after you pass.

Child Insurance Plans

Another type of insurance plan that provides financial stability for the policyholder's kid is a child insurance plan. The purpose of this insurance is to provide for the needs of the kid in the tragic event that the policyholder passes away during the policy term. The child may utilise the amount of the reward to cover their further education costs and wedding expenses.

The insurance covers your child's aspirations if something occurs to you prior to them. If you live on, the savings will increase and help you realise your aspirations.

The following are the major types of general insurance policies.

Health Insurance

Health insurance is a ty pe of insuranceplan that pays for costs associated with receiving medical attention. Health insurance programs either pay for medical expenses incurred in treating illnesses or injuries or refund such expenses. It often provides protection against:

a) Hospitalization b) Treatment of critical illnesses c) Medical bills post-hospitalization d) Daycare procedures

A few different kinds of health insurance policies also pay for resident care and pre-hospitalization costs. Rising healthcare expenditures in India are making obtaining health insurance mandatory. Reputed financial houses like Kotak Securities offer a variety of health insurance policies. They are as follows.

1. Individual health insurance: This type of insurance plan protects just one person. 2. Family floater insurance: This enables your complete family to receive protection under a single plan, often covering the husband, wife, and two kids. 3. Critical Illness Cover: This sort of specialised health insurance protects a variety of life-threatening conditions, including cancer, renal failure, heart attack, stroke, and other conditions comparable to these. At the time of a critical illness diagnosis, policyholders get a lump sum settlement. 4. Senior Citizen Health Insurance: These insurance policies are available to anybody over the age of 60. 5. Group health insurance: It is a benefit that organisations offer to their employees. 6. Maternity Health Insurance: This sort of insurance protects both the mother and the child by covering medical costs associated with the prenatal, postnatal, and delivery stages. 7. Personal accident insurance: It protects against financial liabilities incurred due to unintended harm, injury, or death.

Motor Insurance

It is an insurance that provides financial aid in the event that your automobile or bike is involved in an accident. Auto insurance policies types include the following varieties:

Auto Insurance: This policy covers privately owned four-wheelers. The two main forms of auto insurance are comprehensive cover plans (which insure both third-party and own damage) and third-party insurance, which solely covers losses involving a third party.

Bike insurance: It protects privately owned two-wheelers against mishaps. Insurance for business vehicles is available and protects all commercial vehicles.

Home Insurance

Home insurance coverage offers complete protection against physical damage or destruction to your home's structure and contents. All disasters, both natural and caused by humans, such as fire and robbery, will be covered.

Home insurance coverage comes in several forms, including:

Home structure/building insurance: This insurance policy safeguards the home's structure from harm in the event of any catastrophe.

Public liability insurance: This protects against injuries to visitors or other parties when they are at an insured residential property.

Standard Fire and Special Perils Policy: For damages brought on by fire outbreaks, disasters caused by nature (such as landslides, earthquakes, floods, etc.), and immoral human behaviour (such as vandalism), see the Standard Fire and Special Perils Policy.

Personal Accident: Financial protection for an individual and his family in case of his death or permanent dismemberment or death.

Insurance against burglary and theft and payment for items taken

Contents Insurance: This gives compensation for loss of furnishings, automobiles, appliances, etc., due to fire, theft, flood, or riots

Tenants' insurance: It protects occupants of rented housing from any loss of personal goods.

Landlords' insurance: It protects them from unforeseen events like public liability and loss of rent.

Marine Insurance

A contract between the insured and the insurer governs marine insurance. Marine insurance offers protection from maritime risks. Examples of maritime perils include ship collisions with underwater rocks, pirate attacks, and shipfires.

Ship hull, cargo, and freight insurance are the three forms of insurance that marine insurance covers.

Ship or hull insurance: Insurance for the ship's hull protects against losses brought on by damage to the ship, which is subject to several risks at sea.

Cargo Insurance: A ship transporting cargo is at risk for a variety of things, including cargo theft and lost items, whether at sea or in port. Therefore, cargo insurance is crucial to provide coverage for these kinds of damages.

Freight Insurance: The shipping firm is not reimbursed for the freight costs in the event that the cargo is lost or damaged during transit and does not make it to its destination. Freight insurance aids in compensating for the loss of freight resulting from such occurrences.

Travel Insurance

As the name suggests, a travel insurance plan provides financial protection for expenses, including medical, incurred during domestic or international travel. A typical travel insurance policy will typically cover the following:

  • Baggage loss
  • Flight delay/cancellation
  • Passport loss
  • Hijacking
  • Sudden medical contingencies
  • Accidental deaths

You may acquire a student travel insurance plan, a family travel insurance plan, or an individual travel insurance plan based on your interests.

FAQs On Types of Insurance Policies

The primary difference between general insurance and life insurance is that general insurance protects against hazards that might harm a person's health, property, house, automobile, and a variety of other things, whereas life insurance offers protection against the danger of death.

Yes. The IRDAI (Insurance Regulatory and Development Authority of India), which reports to the Ministry of Finance, oversees insurance products in India.

Policies for life and health insurance in India give holders certain possibilities to request tax exemptions. Sections 80(C) and 10(10D) of the Income Tax Act allow you to receive tax advantages for life insurance. Under Section 80D, you may receive a tax break on the premium payment for health insurance of up to Rs. 1 lakh.

When selecting an insurance policy provider, it's important to consider factors like coverage, history, service and support quality, client feedback, cost, claim settlement percentage, etc.

To choose an insurance type or an insurer, you should consider the claim settlement ratio. The ratio of all claims paid out by an insurance company to all claims received from customers is known as the claim settlement ratio or claim paid ratio. To make sure that neither you nor your nominee encounter any problems during claim settlement, you should examine the claim settlement ratio.

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