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What is Insurance ? All Types & Benefits

You may think that you are financially secure and safe. Then up comes an unforeseen and sudden expense which derails your savings plan and financial security. Yes, life is weird that way. You never know what it might throw at you next. 

That is why, instead of wondering, thinking and believing you are financially secure, you need to make sure you actually are. There is no way to foresee and thus plan for emergencies and accidents, but one can prepare for them from beforehand. The way to do this is through insurance. These offer some support to minimize your financial problems due to unforeseen circumstances. 

Here are the various types of insurances: 

  • Property insurance

  • Mobile insurance 

  • Life Insurance

  • Motor insurance

  • Health insurance

  • Travel insurance

  • Cycle insurance

  • Bite-size insurance

Just knowing these types won’t help you. Instead, it helps to know how these work. This is because without enough knowledge you may choose the wrong insurance plan, or have a wrong idea about insurance plans together.

A Fact of Life - Life Insurance

Life Insurance is a type of insurance plan in which a policy holder invests for the financial benefit of his or her family after death. These plans are essential if you are the only earning member of your family or if there are dependents on you. For instance, your wife and children depend on you for finances each month. 

Your death can devastate your family, not just emotionally, but financially as well. Even if you are not the sole earning member of your family, your death can result in a big gap of income loss. Life insurance policies make sure these things do not happen to your loved ones after your demise.

Various types of life insurance policies

There are many types of life insurance policies. These are: 

  1. Term plan: A term plan’s benefit can be availed only after a specific period originally agreed on, such as 40 years after you bought the policy. The downside here is you can’t get it sooner if you need it.

  2. Endowment plan: These are life insurance policies in which a part of your premiums go towards your death benefit. The amount that remains is invested. This life insurance policy type gives you benefits like periodic bonuses, death benefit, and maturity benefit.

  3. ULIP: These stand for Unit Linked Insurance Plans. These are quite similar to Endowment Plans. In the case of ULIPS, a part of the premiums are invested in mutual funds and the rest go towards your death benefit.

  4. Whole Life Insurance: These policies cover the entire life of a person. They are not for a specified term. However, some insurance companies can restrict the tenure to 100 years.

  5. Child’s Plan: This is a type of investment and insurance policy. It gives financial help to a child of your choice after a certain interval. After the death of parents, the child gets a lump sum payment.

  6. Money Back: This is a type of survival benefit in which a part of the sum assured is paid to you at regular intervals.

  7. Retirement Plan: Known as pension plans, these fuse insurance and investment plans. A portion of the premiums given by you go towards the development of a retirement corpus. After the policyholder’s retirement, he or she gets a lump sum or monthly payment.

Benefits of Life Insurance

There are several benefits in getting life insurance: 

  1. Tax benefits: You get tax benefits if you pay LIC premiums in India after the Section 80(C) and 10 (10D) of the Income Tax Act. 

  2. It encourages the habit to save: When you pay premiums at regular intervals, you develop the habit of saving money.

  3. It secures your family’s financial future: With a life insurance policy, you won’t need to worry about what shall happen to your family after your demise.

  4. It helps plan for your retirement: A big benefit of certain insurance plans is that you can save for your retirement, which can otherwise be very difficult without any type of saving plan.

Now that you know about life insurance plans, let us learn about...

Run out of steam - Motor Insurance

Motor insurance or car insurance is a type of insurance which, as the name suggests, protects vehicles only. You can use this to protect your cars or bikes. You can get motor insurance from most lenders. Motor insurance is of three categories: 

  1. Car insurance: It caters to your personal vehicles.

  2. Two-wheeler insurance: This is for bikes and scooters. 

  3. Commercial vehicle insurance: This is for commercial vehicles as the name suggests.

Types of motor insurance policies

  1. Third-party liability: This is the most basic type of motor insurance. In fact, the government won’t even let you drive if you do not have this basic car insurance. This is as per the 19888 Motor Vehicle Act. Don’t worry, the premiums for this policy won’t be high due to limited financial assistance. So why should you get a third-party liability insurance? That is because in case of a car accident which involves you, your policy will pay for damages caused to the third party.
    Thus, you won’t need to face legal hassle nor have to give all that money from your own account. The downside is that if there is an accident, you yourself won’t get any money from your own policy! But hey, at least it saves you from legal hassles which can be a lot more expensive.

  2. Comprehensive cover: This gives you a much better protection cover and security. It covers third-party liabilities and your own liabilities arising from any road accident. Comprehensive cover plans also give you a payout if your car or vehicle is damaged by fire, natural calamities and man-made mishaps.
    If your vehicle is stolen, you get the comprehensive cover. One benefit of this type of motor insurance plan is that you can get add-ons to personalize the policy.

  3. Own damage cover: This is a special type of motor insurance cover. You can get this only if your vehicle was purchased after September 2018. However, it needs to be brand new. So if your car is second-hand, you’re out of luck. Another thing to remember is that you can get your can own damage cover if you have a third party liability motor insurance already.

Several benefits of a motor insurance policy

  1. Prevents legal hassles: Having a motor insurance policy means you’ll be able to avoid traffic legalities and fines.

  2. It takes care of all third-party liabilities: If, in case of a traffic accident, if a third person is injured, your insurance policy shall take care of the person’s financial loss.

  3. It takes care of your vehicle’s repair needs: It pays for your car’s damages after a vehicle accident.

  4. It pays you if your vehicle is lost: If your vehicle gets stolen, the insurance policy shall aid you by giving a part of the vehicle’s road price. This is also viable if the vehicle is beyond repair due to an accident.

You’re the light of someone's life - Health Insurance

Health insurance is a type of general insurance. It gives you support when you are sick and are in a hospital. It therefore is of invaluable help when you require treatment involving a lot of money. Of course, very few of us are able to give so much money just like that. For instance, if the cost of a treatment is Rs. 2, 00,000, it may not be easy for you to give it away within a short time. But if you have been paying premiums for some time, it is totally possible that you won’t need to pay a dime! There are even some plans that cover home treatments before being hospitalized, or the home treatment costs after being discharged from a hospital. Let’s face it: medical treatment costs are increasing each day. Make your life easier with health insurance.

Several types of health insurance

  1. Individual health insurance: As the same suggests, these cover just one single policyholder.

  2. Family floater insurance: This is a real cost saver! With a Family Floater Insurance, you won’t need to buy health insurance for each member in your family. Generally, you your spouse and two children are covered under this plan.

  3. Critical illness cover: These cover just a certain chronic illnesses, such as cancer. The benefit here is that if the insured is diagnosed with the covered illness, the person gets a lump sum payment for treatment from the policy providers. This feature is not available in other health insurance policy types.

  4. Senior citizen health insurance: These are for people at and beyond the age of 60.

  5. Group health insurance: These are typically given to all employees of a company from the organization itself.

  6. Maternity health insurance: These cover the insured person’s expenses during prenatal, during delivery stage and during postnatal stage. A maternity health insurance covers both the mother and the child. 

  7. Personal accident insurance: These take care of your healthcare expenses during disability, injuries and death caused due to accidents. 

  8. Preventive healthcare plan: These cover treatment costs associated with the prevention of severe conditions and diseases.

Benefits of health insurance

There are several benefits of getting a health insurance: 

  1. You get a medical cover: In times of sudden medical expenses and hardships, you don’t need to pay anything. Your policy will take care of the treatment costs.

  2. You get a cashless claim: In case you take treatment at a medical facility which has tie-ups with your insurance provider, you can get a cashless claim benefit. This benefit makes sure your medical bills are all taken off between the insurance provider and the healthcare provider.

  3. You get tax benefits: Under Section 80D of the Income Tax Act, you can save tax till Rs. 1 lakh on paid premiums on health insurance policies.

Off the beaten track - Travel Insurance

Take a fight or train journey, and you’ll see that the airlines website or the third-party travel website is offering optional travel insurance. Travel insurance is taken seriously by people traveling abroad since there is  the likelihood of missing flights, losing baggage and other things can be more costly abroad. Getting travel insurance done eases all the problems. It makes your trip safer. 

Various types of travel insurance

  1. Domestic travel insurance: These are for safeguarding your money when you are travelling within India.

  2. International travel insurance: These are for when you are travelling abroad. 

  3. Home holiday insurance: These are for when you are travelling with your family and thus your home remains unprotected. This protects your finances from burglary.

Benefits of travel insurance

  1. Cover flight delay: This is a common type of travel insurance. If your flight is delayed, your policy will protect you from any financial loss.

  2. Baggage loss or delay: This is a common benefit of travel insurance. If you lose your baggage, you can claim monetary assistance through the insurance plan. 

  3. Reclaim lost travel documents: This gives you replacement travel documents if you lose your old ones. As you can see, this can help you out a lot.

  4. Trip cancellation cover: There are many things which may cause your trip to be cancelled. If it happens, a trip cancellation cover can take care of your financial loss cause due to the cancellation.

A home truth - House Insurance

This is one of the biggest fields of insurance. If you own a home or a commercial property, you want it to remain protected too. You can insure any building or immovable structure. In case of any damage to these, insurance companies shall take care of required financial assistance. These plans have the added benefit of safeguarding all the content inside the insured property as well.

Several types of property insurance

  1. Home insurance: If your insured home is damaged due to storms, fires, explosions, earthquakes and various events, you won’t have any financial liability. The insurance company shall give you a lump sum you need.

  2. Shop insurance: If you have a shop and wish to keep it safe, this is the insurance type for you. Having a shop means it gives you income, and thus it is natural that you want to insure it. If your shop gets damaged due to accidents or natural calamities, the insurance company shall give you money enough to rebuild or repair your shop.

  3. Office insurance: This is just like a shop insurance. If you have an office which gives you income, then you want to protect it from unforeseen events or circumstances. You may want to do so even more if your office has servers, computers, electronics, etc.

  4. Building insurance: If you own an entire building, use this plan to insure it. 

Benefits of property insurance

Property insurance protects you from various types of circumstances: 

  1. Protection from fire: Insurance policies may not prevent fires, but they will reimburse you in case your property is damaged due to the same. 

  2. Protection from burglaries: Property insurance protects your property from burglaries.

  3. Protection from floods: A property insurance protects your property against floods.

  4. Protection from natural calamities: A property insurance protects your property from natural calamities.

What a steal! - Mobile Insurance

The cost of mobile phones is only rising. Thus, it hurts you when you lose one! And not just financially, but emotionally as well. A mobile phone contains all your personal details, records, photos, passwords, credit card details, your address, contacts of your loved ones, and much more. That’s why it feels terrible when you lose your phone. 

Now, mobile insurance may not bring your lost phone for you, but it can give you the funds to buy a new one. (To look for your lost phone, you need to make an FIR and hope the police can find it. And tell your mobile phone company as well to disable the SIM card.)

Here are the benefits of getting a mobile insurance:

  1. Full protection for new devices: The value of a new phone decreases as soon as it is bought. But if you insure it before buying, its value remains unchanged when you ask for a claim.

  2. Protection against screen damage: Your smartphone’s screen is very vulnerable to damage despite protection. If you have this insurance, you get paid to repair the damage.

  3. Protection against robbery or theft of smartphone: You get a lump sum if your phone is stolen or robbed.

Pedal to the metal - Bicycle Insurance

If you have a bicycle, it may be a good choice to insure it. And here’s why!

A bicycle insurance not just protects your bike, but also acts as a life insurance in case of your demise. In that case, the insurance shall give a lump sum payment to your surviving family members. 

Here are the benefits of having this insurance:

  1. Worldwide coverage: No matter in which corner of the world you are with your bicycle, if it is damaged, you’ll get financial aid.

  2. You get protection against riots and fire: This is a top cause for damage caused to bicycles. Insurance protects you from these.

  3. Accidental death benefit: In case of your demise due to a bicycle accident, your family gets a lump sum amount.

Bite-sized plans

Bite-sized insurance plans are for short terms like 1 year and generally cover one thing. For instance, if the area you live in is earthquake-prone, it is a good idea to get your car and home insured for 1 year. These plans protect against both threats, diseases and damages.

Benefits of bite-sized insurance:

  1. Its premiums are very low.

  2. You get coverage with very little investment

Hold on to your seatbelts

Before you jump in and start putting your money on an insurance plan, there are a few things you need to know.

  1. Service benefits: Look at all the service benefits you’ll be getting. Are they giving 27/7 customer support, a wide network of cashless garages and pick-and-drop benefits?

  2. Pick the desired sum insured: This ensures that in case of an emergency, you remain covered by the plan.

  3. Speed of getting funds: How soon can you get the money in case of making a claim? 

  4. Best value: Does this plan give you the best value for money?

 

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