Insurance Policies
A Detailed Guide about Different Types of Insurance Policies
In life, unplanned expenses are a bitter truth. Even when you think that you are financially secure, a sudden or unforeseen expenditure can significantly hamper this security. Depending on the extent of the emergency, such instances may also leave you debt-ridden.
Simply knowing the various insurance policies does not help. Instead, you must know how each of these plans work.
1. Life Insurance
Life Insurance refers to a policy or cover whereby the policyholder can ensure financial freedom for his/her family members after death. Suppose you are the sole earning member in your family, supporting your spouse and children.
In such an event, your death would financially devastate the whole family. Life insurance policies ensure that such a thing does not happen by providing financial assistance to your family in the event of your passing.
Retirement Plan - Also known as pension plans, these policies are a fusion of investment and insurance. A portion of the premiums goes toward creating a retirement corpus for the policyholder. This is available as a lump-sum or monthly payment after the policyholder retires.
Benefits of Life Insurance
If you possess a life insurance plan, you can enjoy the following advantages from the policy.
Tax Benefits - If you pay life insurance premiums, you are eligible for tax benefits in India, under Section 80(C) and 10(10D) of the Income Tax Act. Thus, you can save a substantial sum of money as taxes by opting for a life insurance plan.
Encourages Saving Habit - Since you need to pay policy premiums, buying such an insurance policy promotes the habit of saving money.
Secures Family’s Financial Future - The policy ensures your family’s financial independence is maintained even after your demise.
Helps Plan Your Retirement - Certain life insurance policies also act as investment options. For instance, pension plans offer a lump-sum payout as soon as you retire, helping you to fund your retirement.
Now that you know all about life insurance policies read on to understand the various facets of other general insurance policies.
2. Motor Insurance
Motor insurance refers to policies that offer financial assistance in the event of accidents involving your car or bike. Motor insurance can be availed for three categories of motorised vehicles, including:
Third-Party Liability - This is the most basic type of motor insurance cover in India. It is the minimum mandatory requirement for all motorised vehicle owners, as per the Motor Vehicles Act of 1988. Due to the limited financial assistance, premiums for such policies also tend to be low. These insurance plans only pay the financial liability to the third-party affected in the said mishap, ensuring that you do not face legal hassle due to the accident. They, however, do not offer any financial assistance to repair the policyholder’s vehicle after accidents.
Comprehensive Cover - Compared to the third-party liability option, comprehensive insurance plans offer better protection and security. Apart from covering third party liabilities, these plans also cover the expenses incurred for repairing the damages to the policyholder’s own vehicle due to an accident. Additionally, comprehensive plans also offer a payout in case your vehicle sustains damage due to fire, man-made and natural calamities, riots and others such instances. Lastly, you can recover your bike’s cost if it gets stolen, when you have a comprehensive cover in place. One can also opt for several add-ons with their comprehensive motor insurance policy that can make it better-rounded. Some of these add-ons include zero depreciation cover, engine and gear-box protection cover, consumable cover, breakdown assistance, etc.
Benefits of Motor Insurance Policies
Cars and bikes are increasingly more expensive with each passing day. At such a time, staying without proper insurance can lead to severe monetary losses for the owner. Listed below are some advantages of purchasing such a plan.
Prevents Legal Hassle - Helps you avoid any traffic fines and other legalities that you would otherwise need to bear.
Meets All Third-Party Liability - If you injure a person or damage someone’s property during a vehicular accident, the insurance policy helps you meet the monetary losses, effectively.
Financial Assistance to Repair Your own Vehicle - After accidents, you need to spend considerable sums on repairing your own vehicle. Insurance plans limit such out of pocket expenses, allowing you to undertake repairs immediately.
Theft/loss cover - If your vehicle is stolen, your insurance policy will help you reclaim a portion of the car/bike’s on-road price. You can expect similar assistance if your vehicle is damaged beyond repair due to accidents.
Additionally, individuals who own a commercial car/two-wheeler can also avail tax benefits if they pay premiums for that vehicle.
3. Health Insurance
Health insurance refers to a type of general insurance, which provides financial assistance to policyholders when they are admitted to hospitals for treatment. Additionally, some plans also cover the cost of treatment undertaken at home, prior to a hospitalisation or after discharge from the same.
With the rising medical inflation in India, buying health insurance has become a necessity. However, before proceeding with your purchase, consider the various types of health insurance plans available in India.
Types of Health Insurance policies
There are eight main types of health insurance policies available in India. They are:
Individual Health Insurance - These are healthcare plans that offer medical cover to just one policyholder.
Family Floater Insurance - These policies allow you to avail health insurance for your entire family without needing to buy separate plans for each member. Generally, husband, wife and two of their children are allowed health cover under one such family floater policy.
Critical Illness Cover - These are specialised health plans that provide extensive financial assistance when the policyholder is diagnosed with specific, chronic illnesses. These plans provide a lump-sum payout after such a diagnosis, unlike typical health insurance policies.
Senior Citizen Health Insurance - As the name suggests, these policies specifically cater to individuals aged 60 years and beyond.
Personal Accident Insurance - These medical insurance policies only cover financial liability from injuries, disability or death arising due to accidents.
Preventive Healthcare Plan - Such policies cover the cost of treatment concerned with preventing a severe disease or condition.
Benefits of Health Insurance
After assessing the various kinds of health insurance available, you must be wondering why availing such a plan is essential for you and your loved ones. Look at the reasons listed below to understand why.
Medical Cover - The primary benefit of such insurance is that it offers financial coverage against medical expenditure.
Cashless Claim - If you seek treatment at one of the hospitals that have tie-ups with your insurance provider, you can avail cashless claim benefit. This feature ensures that all medical bills are directly settled between your insurer and hospital.
