Skip to content Skip to sidebar Skip to footer

Insurance : Importance, Types and Benefits

The life and property of an individual are surrounded by the risk of death, disability or destruction. These risks may result in financial losses. Insurance is a prudent way to transfer such risks to an insurance company.What is Insurance?

Insurance is a legal agreement between two parties i.e. the insurance company (insurer) and the individual (insured). In this, the insurance company promises to make good the losses of the insured on happening of the insured contingency. The contingency is the event which causes a loss. It can be the death of the policyholder or damage/destruction of the property. It’s called a contingency because there’s an uncertainty regarding happening of the event. The insured pays a premium in return for the promise made by the insurer.  How does insurance work?

The insurer and the insured get a legal contract for the insurance, which is called the insurance policy. The insurance policy has details about the conditions and circumstances under which the insurance company will pay out the insurance amount to either the insured person or the nominees. Insurance is a way of protecting yourself and your family from a financial loss. Generally, the premium for a big insurance cover is much lesser in terms of money paid. The insurance company takes this risk of providing a high cover for a small premium because very few insured people actually end up claiming the insurance. This is why you get insurance for a big amount at a low price. Any individual or company can seek insurance from an insurance company, but the decision to provide insurance is at the discretion of the insurance company. The insurance company will evaluate the claim application to make a decision. Generally, insurance companies refuse to provide insurance to high-risk applicants.  What are the types of insurance available in India?

Insurance in India can be broadly divided into three categories:Life insurance

As the name suggests, life insurance is insurance on your life. You buy life insurance to make sure your dependents are financially secured in the event of your untimely demise. Life insurance is particularly important if you are the sole breadwinner for your family or if your family is heavily reliant on your income. Under life insurance, the policyholder’s family is financially compensated in case the policyholder expires during the term of the policy.  Health insurance

Health insurance is bought to cover medical costs for expensive treatments. Different types of health insurance policies cover an array of diseases and ailments. You can buy a generic health insurance policy as well as policies for specific diseases. The premium paid towards a health insurance policy usually covers treatment, hospitalization and medication costs.  Car insurance

In today’s world, a car insurance is an important policy for every car owner. This insurance protects you against any untoward incident like accidents. Some policies also compensate for damages to your car during natural calamities like floods or earthquakes. It also covers third-party liability where you have to pay damages to other vehicle owners.  Education Insurance

The child education insurance is akin to a life insurance policy which has been specially designed as a saving tool. An education insurance can be a great way to provide a lump sum amount of money when your child reaches the age for higher education and gains entry into college (18 years and above). This fund can then be used to pay for your child’s higher education expenses. Under this insurance, the child is the life assured or the recipient of the funds, while the parent/legal guardian is the owner of the policy. You can estimate the amount of money that will go into funding your children’s higher education using Education Planning Calculator.  Home insurance

We all dreaming of owning our own homes. Home insurance can help with covering loss or damage caused to your home due to accidents like fire and other natural calamities or perils. Home insurance covers other instances like lightning, earthquakes etc.  What are the tax benefits on insurance?

Apart from the safety and security benefits of buying insurance, there are also the income tax benefits that you can avail.

  • Life insurance premium of up to ₹1.5 lakh can be claimed as a tax-saving deduction under Section 80C
  • Medical insurance premium of up to ₹25,000 for yourself and your family and ₹25,000 for your parents can be claimed as a tax-saving deduction under Section 80D

These claims have to be made at the time of e-filing income tax returns.  Conclusion

Be it life insurance, health insurance or general insurance, you can buy an insurance policy offline as well as online. Just like there are insurance agents who will help you buy a policy, there are websites as well that you can buy a policy from. Ensure that you have done your research before choosing and investing in an insurance policy.  All Articles

  • Should You Insure First or Invest First

    Insurance and investment are two of the essential parts of personal finance. Know which of the two are picked up based on varying preferences of a person.

  • Claim Settlement Ratio of Life Insurers: All you need to know

    The claim settlement ratio of an insurer is the number of claims settled against the number of claims filed: higher the ratio, better the insurer.

  • LIC Login – A Step by Step guide on LIC Portal login

    LIC Login- Life Insurance Corporation of India is the oldest and largest life insurance companies in India. Read more to know about LIC login Online.

  • Two Wheeler Insurance- The smart and safe way to go about

    Detailed explanation on two wheeler insurance which contains types, benefits, & process on how to apply for two wheeler insurance online. Read on to know more about it.

  • LIC Online Payment

    LIC Online Payment - LIC offers numerous methods through which customers can pay for their policies premiums. Payments for LIC policies can be done online on the LIC website, banks, franchises, LIC agents and Paytm.

  • Child Insurance

    Child insurance isgreat way to secure the financial future of your child in your absence. Read on to know the features and benefits of child insurance.

  • Car Insurance Online – Applicability, Benefits, Exclusions & more

    Car Insurance covers the losses that you might incur in case your car gets damaged or stolen. Read this article to know about its renewal, comparison, applicability, benefits, exclusions, documents required, coverage, FAQs & points to consider before buying a car insurance.

  • Home Insurance

    Home Insurance is an arrangement in which the company undertake a guaranty for loss arising from insured property. Read on to know why its important.

  • National Health Protection Scheme

    The final Union Budget of the NDA Government for the current electoral term, Arun Jaitley lived up to the government’s promise of delivering National Health Protection Scheme

  • Post a Comment for "Insurance : Importance, Types and Benefits"