Insurance is a bond between an Individual or an entity in form of policy with the insurance company to protect from any financial losses. It also provides reimbursement against losses.
One needs to pay certain amount as premium to the insurer which will be returned back with certain benefits if any unfortunate event occurs.
Now a days vehicle and property insurance have become mandatory in many countries as per the government order.
Components of Insurance
Any insurance company provides various number of insurances. Customers can purchase the type of insurance they need according to the amount they can afford and based on the benefits attached to it.
Premium can be paid monthly, quarterly, half yearly or in annual basis depending upon the policy they have chosen.
It is the maximum amount the insurance company can pay for the losses to the customers.
Depending upon the maximum limit the premium Payable changes. For higher coverage the premium will also be higher.
It is the definite amount payable to the customer or the nominee at the end of the policy.
Similarly any insurance company does not provide 100% coverage for the losses. Certain amount of margin need to be taken care by the customer itself.
Basic Types of Insurances are:
There are several types of insurance, let’s see them in detail:
In life insurance customer pays premium for certain number of years and there will be certain lock in period and after that period is over the customer receives lump sum amount or after the death of the customer the nominee receives the payment. There are various types of life insurance. It acts as financial security to meet any unexpected expenses.
This also acts as long-term savings schemes. It is used to safeguard our self as well as our family member as amount is paid to nominee in case the insurer is dead.
Health insurance is used to claim medical expenses in case the individual is hospitalized.
In medical insurance they have certain criteria for preexisting diseases such as diabetics, Blood pressure etc.
For e.g. the claim related to above mentioned disease can be done only after 6 months of insurance is paid and so on.
There are some insurance companies providing health cards to customers, hence one need not pay the amount and the claim bill will be deducted at the initial stage itself.
This type of insurance is for losses related with vehicles such as Two wheelers, Four wheelers, commercial trucks and so on. It is mandatory for any vehicle holder to take this insurance.
If any accident occurs and if the vehicle is insured certain amount will be paid depending upon the premium for repairing or replacing the components of vehicles.
Even if the vehicle is lost and if it is insured claim can be done.
This also provides accidental coverage for the drivers.
This type of insurance is used to protect the residence from any natural calamities such as Earth quakes, floods and cyclones.
It includes losses due to fault wiring and kitchen fires. Theft at house is also covered in this type of policies.
Travel insurance provides financial assistance in case something goes wrong while we travel.
This includes theft of passport or luggage’s, accidental , sick or medical aid and so on.
This type of insurance is used to protect the crops from natural disasters such as floods, cyclones or due to decline in price of the crop which leads to revenue loss.
More than 27 types of crops can be insured in this type.
These are some of the basic and mostly used types of insurance across the world.
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There are also certain other types of insurance, they are:
Pet insurance – It covers the medical treatment for the pets.
Social insurance – It is a government scheme according to which certain group of people’s are insured.
Example for social insurance are disabled insurance, unemployment insurance.
Marine insurance – This type of insurance are used to meet the losses during the transport of goods via ships. This covers the losses of cargos, ships, freight etc.
Credit insurance – It covers loans or credit card when an individual is not able to do the payment due to reasons such as unemployment or death.
Another main advance of insurance is it can be claimed as tax saving deduction under section 80C and 80D.
Nowadays various numbers of insurance companies are started and they are providing very good service. Service may vary for the same premium and same policy type from one company to another. Kindly select the type of insurance you need according to the premium which can be paid.