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What Are The Different Types of Insurance? Research Team | Posted On Tuesday, February 19,2019, 05:31 PM

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What Are The Different Types of Insurance?



What is Insurance?

Insurance is an agreement by which the insurer agrees to provide a guaranteed amount (sum assured) for a specified loss, damage, illness or death, provided the insured pays a specified amount called premium each month. Insurance is risk protection. An entity which provides insurance is known as an insurer and the policy holder is known as the Insured.

How does insurance work?

Insurance is a contract that transfers the risk to a person or business, to the insurance company. The insurance company collects money in the form of premiums each month, quarter or year. The insured is compensated with a lump sum when the need arises (The insured event occurs).

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What Are The Different Types of Insurance?

How to buy insurance:

To buy an insurance policy follow the simple steps mentioned below:

  • Know what you need: identify the kind of insurance policy you need, based on personal requirement and get all the important details.
  • Check for the options available: compare the different policies available in the market. Check the inclusions, exclusions and the policy terms and conditions carefully. Compare them with other policies.
  • Pick the right plan: Select the plan that suits your needs and reach out to the insurer, offering the plan.
  • Pay premium: Fill the application form and submit all the necessary documents. Avail the insurance policy by paying the premium. You can also avail the policy online on the insurer’s website. 

Types of Insurance:

Insurance can be divided into two categories: general insurance policy and life insurance policy, which can be further classified into the following:

Types of insurance policies

Life insurance policy

General insurance policy

Term insurance policy

Money back insurance policy

Unit linked insurance plan

Endowment plans

Motor insurance

Health insurance

Travel insurance

Home insurance

What is life insurance?

Life insurance is an agreement between the insured and the insurer, where the insurer agrees to pay compensation in case of death or disability of the insured, provided the insured pays monthly premiums and the event occurs within the term of the plan.

Life insurance helps your family remain financially stable and is something that dependents can fall back on, in case something untoward happens to the policy holder.

SEE ALSO:Health Insurance Benefits

What are the types of life Insurance available?

The different types of life insurance available in the market are as follows:

Term insurance plan: The term insurance plan provides coverage to secure the financial needs of the policy holder’s family, in case of sudden demise of the policy holder. In this type of policy, there is no saving component like an endowment policy.  Premiums of the term insurance policy are affordable, compared to other life insurance policies. If the policy holder dies within the term of the plan, then a death benefit is given to the nominee. This makes term insurance a pure indemnity plan, as there are no survival benefits.

Money back life insurance plan: In money back policy, a certain percentage of the sum assured is paid out at periodic intervals, within the term of the policy as a survival benefit (This could be tailored to meet important milestones). If the insured dies within the term, sum assured is paid, irrespective of survival benefits already paid.

Unit Linked Life Insurance: In ULIPs, you get insurance and the investment benefit. A part of your premium is set aside for life cover and the other part is invested in debt, equity or a mix of both. Returns in ULIPs are market linked and depend on the stock markets.

Child insurance policy: A child insurance policy is a combination of insurance and investment, which ensures a financially secure future for your child. The child insurance plans are designed to financially secure the child’s future, in case of untimely demise of the parent, as well as build a corpus over a period of time. These plans provide flexible payouts at important milestones like child’s education or marriage. Avail waiver of premium riders with child insurance plan.

SEE ALSO:Review Your Insurance Plans With IndianMoney

What is General Insurance?

General insurance is an agreement between the insurer and policyholder, that offers compensation on any loss, other than death from a particular financial event. A general insurance compensates for financial loss due to liabilities related to house, car, bike, travel or home. The premiums of general insurance depend on the type of general insurance as well as the tenure of the policy.

What are the types of General Insurance available?

  • Motor insurance: Motor insurance compensates for the loss or damage to motor vehicle. The insurance includes two-wheeler, three-wheeler and four-wheeler vehicles. The damage caused to the vehicle can be due to natural calamity, accidents or loss by theft. 
  • Health insurance: Health Insurance covers the insured's medical/hospitalization and surgical expenses. Depending on the policy terms and conditions, the insurer either reimburses cost of hospitalization or offers a cashless facility at network hospitals (The insurer has a tie-up with network hospitals to offer cashless medical treatment). The insurer settles the hospital bills and you don’t have to pay a rupee from your pocket. Certain benefits offered under Health Insurance Plans are:
  • Pre and Post Hospitalization Benefit
  • Cashless Treatment
  • Day Care Treatment
  • Travel insurance: this is a general insurance policy that covers for trips abroad, or within India. Travel insurance covers all types of losses and damages related to travelling. Most travel insurance plans are package plans that include coverage like trip cancellation, trip interruption, trip delay, lost or delayed baggage, medical coverage, and medical evacuation.
  • Home insurance: Home insurance is a form of property insurance that covers loss or damage to the structure of house and the contents within the house. A householder’s package policy covers the structure of the house and the contents within, up to a certain limit.

SEE ALSO:How to Make Claim on a health Insurance Policy?

How much does insurance cost?

The cost of insurance depends on the amount of premiums paid. The premium amounts differ across insurance policies. Among life insurance plans, term insurance has low and affordable premiums.  Among the general insurance plans, health insurance and motor insurance are the most popular ones. The cost of insurance depends on various factors like the age at which you avail the policy, your income, the sum assured, the type of coverage provided by your insurer. (additional rider’s availed increase the cost of insurance).  

How to use the insurance money?

To get sum assured, you have to first make a claim. To claim sum assured, follow the steps given below:

  • You have to first make a claim against insurance policy.
  • Provide details on loss or damage. This differs across insurers.
  • Submit proof of damage along with other documents supporting your claim.
  • The insurer verifies claim.
  • After proper verification, you are compensated for the loss.

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