Insurance kya hota hai । What is Insurance । Types of Insurance 2023

What is Insurance : We all have heard a lot about insurance. As a general notion, insurance is something that protects you or the things you have insured from facing heavy financial loss. But there’s more to it than just a cover that you think is capable of taking damage. We will provide detailed information on this.

What is insurance ? In technical terms, it is a form of risk management in which the insured entity transfers the cost of a potential loss to another entity in exchange for a small monetary compensation. This compensation is called premium.

In simple words, it is like paying a lump sum amount to an entity, in order to protect itself from possible future losses. Thus, when something unfortunate happens, the insurer helps you deal with the situation.

Why do we Need Insurance ?

Why do we need insurance: This question is in everyone’s mind. Do I Really Need Security? Life is full of surprises; Some good, some bad. You need to be prepared for the worst case scenario that may come your way. It helps you to have a sense of security and peace.

There can be many reasons where you may need help, such as critical illness, natural calamity, unexpected death of loved ones, etc. In such situations, being adequately insured goes a long way in helping your financial situation. Thus, one should opt for the right type of security as per their requirements.

Types of Insurance

We all have heard of the term insurance. We take an insurance policy to protect ourselves and our family from any unforeseen accidental loss in the future. While taking an insurance policy, it is important to carefully analyze your needs and identify which type of insurance policy would be best suited for you.

The analysis is necessary because each policy has different offerings and benefits. In this article, we will learn about the different types of insurance policies available in India.

There are two types of insurance policies available in India. ,

• life insurance policy
• general insurance policy

First of all, we will know about life insurance policy in detail.

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life Insurance Policy

In a life insurance policy, a fixed amount is paid to the beneficiaries on the death of the policyholder. In a life insurance policy, the cover is provided for more than one year. You have to pay a premium for this monthly, quarterly or annually. There are many types of life insurance policies available in the market. Let us learn about some of them.

life Insurance

Term life insurance is the most common and popular type of life insurance policy. The term life insurance provides insurance cover against the risk of death for a specified period of time. In case of death, the life insurance company pays the policy benefits to the nominee. No payment is made if you survive and exceed the policy term.

Unit Linked Plan (ULIP)

Unit linked plans provide the benefits of insurance and investment in a single policy. In this type of policy, the premium paid by you is used by the insurance company in two ways. Firstly, it is used to cover your risk and secondly it is invested in low risk and high return investments. You can choose a ULIP plan based on your risk appetite and investment potential.

Endowment Plan

Endowment plans offer a combination of both insurance and savings in a single life insurance plan. In this plan, a fixed amount is used to cover your life and the remaining amount is invested by the life insurance company. Some endowment plans offer bonus over a specified period. This plan is good for long term.

Money Back life Insurance

Money back life insurance is a type of insurance policy in which you get back a fixed percentage of the money from time to time in the form of survival benefit. You also get the benefit of bonuses declared by the insurance company from time to time.

Max Life Insurance Offcial Webiste : www.maxlifeinsurance.com

Whole life Insurance

As the name suggests, whole life insurance provides insurance for the entire life. Its maturity period is up to 100 years. The nominee is paid the sum assured in the policy along with the bonus payable at the time of death.

Child Plan

Child plan will help your children in your absence. It helps in wealth creation and income protection.

Child plans have a provision to pay in the form of installments or in lump sum after the age of 18 years. If the parent of the child/child passes away, the insurance company will make an immediate payment to the child/child.

Retirement Plan

Retirement planning helps you build a corpus after retirement. Retirement plans provide you with annual or lump sum payouts after 60 years. They are best for long term savings and retirement planning.

The above plans come under life insurance. Now we will know and understand about general insurance.

General Insurance

General insurance is also known as non-life insurance. It protects you from unforeseen losses and damages that are not covered by life insurance. General Insurance will cover the financial loss incurred in relation to your car, house, bike, travel, health etc.

Following are the popular types of general insurance available in the market.

Health Insurance

This is the most popular type of general insurance. It reimburses the expenses that you pay for the treatment of any kind of illness or injury.

This type of insurance covers hospitalization expenses, treatment charges for critical illness, medical bills, operations, etc. Apart from this, you can include various add-on benefits like maternity cover, accident cover, etc.

Vehicle Insurance

Vehicle insurance provides financial protection to your vehicles against damages, accidents, theft, natural calamities or fire. There are two types of vehicle insurance; Car insurance and two wheeler insurance.

Travel Insurance

Travel insurance covers your financial liabilities arising out of medical or non-medical emergencies during any trip. There are two types of travel insurance; Single trip policy and annual multi-trip policy.

Travel insurance generally covers accidental death during travel, emergency medical expenses, loss of passport, delayed flights, kidnapping, etc.

Home Insurance

Home insurance covers the expenses incurred or damages caused to your home due to man-made calamities, natural calamities etc.

Some popular types of home insurance are home structure insurance, standard fire and special peril policies, contents insurance and public liability coverage.

Fire Insurance

Fire insurance protects you against damage caused by fire to your property or loss of goods caused by fire. Fire insurance covers not only the insured property but also the reconstruction, repair or replacement costs of its surroundings.

This also covers third party damages. Some of the common types of fire insurance policies are specific policy, comprehensive policy, valuable policy and floating policy.

What Are The Benefits of Insurance

• The sum assured is invested in various initiatives like water supply, energy and highways, which contribute to the overall economic prosperity of the country.
• Rather than focusing on a single individual or organization, the threat affects a variety of people and organizations.
• Insurance protects you and your family against various risks that might otherwise put you or your family in financial trouble.
• It encourages risk control action as it is based on risk transfer mechanism.
• Insurance policies can be used as collateral for loans. When it comes to home loans, having insurance coverage makes it easier to get a loan from a lender.

How Does Insurance Work ?

The most basic principle behind the concept of insurance is ‘Risk Pooling’. A large number of people are ready to get insurance for a particular loss or damage, and for that, they are ready to pay the desired premium.

This group of people can be called insurance-pool. Now, the company knows that the number of interested people is huge and the possibility of all of them needing insurance cover at the same time is almost impossible.

Thus, it allows companies to collect money at regular intervals and also settle claims as and when such situations arise. The most common example of this is auto insurance. We all have auto insurance, but how many of us have made a claim for it?

Thus, you pay for the possibility of damage and get insured and you will be paid when a given event occurs.

So when you buy an insurance policy, you pay a regular amount to the company as premium for the policy. If and when you decide to make a claim, the insurer will pay the damages covered by the policy.

Companies use risk data to calculate the likelihood of the event – ​​you are seeking insurance – happening. Higher the probability, higher will be the premium of the policy.

This process is called underwriting i.e. the process of evaluating the risk to be insured. The company only looks for the actual value of the unit which is insured as per the insurance contract entered into between the parties.

For example, you have insured your ancestral house for 50 lakhs, the company will only consider the actual value of the house and will not entertain any emotional value you have in the house, as it is almost impossible to put a price on emotions.

There are different terms and conditions for different policies, but three main general principles remain the same for all types:

• The cover provided for a property or item is for its actual value and does not consider any sentiment value.
• The probability of a claim should be spread across policyholders so that insurers are able to calculate the probability of risk to determine the premium for the policy.
• The damage should not be intentional.
• We covered the first two points above. The third part is a bit more important to understand.

FAQs: What is insurance / Insurance kya hota hai

1. Why should I buy insurance ?
A- With the help of an A-policy, you can effectively transfer the potential loss to the insurance company. You can do this in exchange for a fee called ‘insurance premium’. The advantage of insurance is that it protects your savings in the event of unforeseen expenses.

2. Who will benefit if I buy insurance ?
A- When you buy an insurance policy, both the insurer and the insured are benefited. As the insured, you are secure in the knowledge that you will be protected from potential losses. Similarly, the insurance company uses the money you pay as premium to build a better business model and asset.

3. What is the importance of health insurance ?
A- A health insurance policy or medical insurance will protect you against unprecedented medical or hospitalization expenses. If you buy medical insurance, your savings will be protected in case you need to be hospitalized suddenly.

All expenses, such as doctor’s fees, hospitalization charges, ambulance charges, OT charges and medicine, will be covered under the insurance policy. Thus, your savings will be safe.

4. What is insurance premium ?
A- Insurance premium is the amount that the insured person has to pay from time to time to the insurance company to buy the policy. When you buy an insurance policy, the risk is transferred to the company. Hence, the company charges a fee, which is known as insurance premium.