We all understand that risk is everywhere in our life and we are surrounded by the risk of death, falling ill or involved in an accident.
We can reduce this risk by buying an insurance policy and ensuring that the risk is transferred to insurance companies. Lets now understand the meaning, types and benefits of it.
TABLE OF CONTENTS
1. What is Insurance?
2. Nature
3. Types of insurance
4. Benefits
5. Conclusion
What is Insurance?
It is a legal agreements between two parties
1. The company – Insurer
2. The individual firm- Insured (policyholder)
In this agreement (policy) , Insured pays a fix amount of premium contingency to uncertainty risk (Financial loss in future ), then company will be liable to pay all the amount to insured person (As per rule & regulation / conditions)
NATURE
1. Share of risk
It is a way to share the financial losses which might fall on an individual or his family on the happening of a specific event.
2. Co-operate device
- An insurer will not be able to pay for all the losses from his capital.
- So you can purchase policies for multiple people so the loss is less.
- But there is no compulsion on anybody to purchase the policy.
3. Value of Risk
You can evaluate risk through several factors.
- Higher expectation of loss if insurance policy is not purchased.
- Higher premium may be charged if you get late in buying an policy.
- Probability of risk/loss is calculated at the maturity of policy.
TYPES OF INSURANCE
1. LIFE INSURANCE
A life insurance is a contract signed between a policy holder and an insurance company. This contract determines the amount to be paid to the nominee after the policyholder’s death.
TYPES OF LIFE INSURANCE
(I) TERM LIFE: This is the purest form of life insurance, premium is very low. Claim is paid only if the insured person dies within policy term.
(ii) WHOLE LIFE: This is a policy that gives you cover for whole life (upto 99 years). This also gives maturity benefits .
(iii) ENDOWMENT PLANS: This is an insurance cum investment plan , it is generally bought for certain financial Goals like child education , buying a new house etc
(iv) UNIT LINKED INSURANCE PLANS : This is popularly known as ULIP plans. ULIP provides protection as well as the benefit of investing in the capital market. This comes with a lock in period of 5 years
(v) PENSION PLANS: These life policies help you build a retirement corpus so that you can enjoy your post -retirement life.
2. GENERAL INSURANCE
All insurance other than human life is considered as general. Health/Medical is also a type of general insurance.
TYPES OF GENERAL INSURANCE
(i) HEALTH: Health or medical insurance is a type that covers the whole or a part of the risk of a person incurring medical expenses.
(ii) MOTOR: In India vehicle insurance is compulsory. Financial assistance is provided in the event of accidents , damage , theft Motor Vehicles Act of 1988
(iii) MARINE : Oldest form of insurance
- Cover damages to ship
- Cover the loss of freight
- Provide coverage to cargo against any damage , loss , of misplacement (goods)
- Cover life of crew members and others on ship . ( peoples who work on boats and ship )
(iv) FIRE : Each and Every loss due to fire comes under fire insurance, covering the charges till installation .
(v) TRAVEL: Such policy ensures the financial safety of a traveler during a trip.
- It is for short term.
- Time limit : Start journey to end journey
- It is available just in rupees 1 or 2
(vi) SOCIAL INSURANCE: To protect and uplift the weaker section of society. Government provides social insurance to the masses.
- Pension plan(old age)
- Disability Benefits $ insurance
- Unemployment Benefits
BENEFITS
1. FINANCIAL PROTECTION
It provides financial protection against potential losses or damages , such as those caused by accidents ,illnesses , natural disasters , death.
2.RISK MANAGEMENT
It allows individuals and businesses to transfer the risk of potential financial losses to an insurance company.
3. SECURITY
The company guarantees the insured person to compensate the loss on occurance of uncertain event.
4. FORCED SAVING
The life insurance premium to work as forced saving as the person goes for it for saving the tax.
Conclusion
When it comes to insurance you can buy insurance online and offline. As there are agents offline, you can also buy insurance online through websites and apps of companies. Before investing and choosing a policy make sure that you do your proper research.