Life is unpredictable, be it in terms of health, family, relationships, work or financials, and this uncertainty can be either positive or negative. And when faced with one of life’s unpleasant surprises, having a well-thought-of and strategised plan feels like a comforting hug.
The plan in question here is Insurance, which works as a protective net and safeguards you against unforeseen emergencies. It is represented in the form of a contract or policy through which the individual or entity is financially protected and receives reimbursement against losses from the insurance company.
With the insurance market being flooded with an array of policies, it is very important to understand how insurance policies are categorised.
By and large, there are 2 main types of insurance – Life Insurance and General Insurance.
1. Life Insurance
Offers financial protection to the insurer’s family upon his/her demise. In order to make a well-informed decision, it is important to understand the different types of Life Insurance.
a) Term Plan
Under this, one gets to choose the policy term according to their needs. It is also very economical as it offers a low premium rate with a high coverage rate.
b) Unit Linked Insurance Plan (ULIP)
In this plan, the insurer gets the dual benefit of life coverage and an investment opportunity. It can be linked to stocks, bonds, and equity where profit can be earned according to market trends.
c) Permanent Life Insurance
There is no defined policy term in this plan and a regular premium must be paid until the insurer’s death.
d) Endowment Plan
Under this policy, a lump sum amount is paid to the insurer in the case of death or maturity, whichever comes first.
e) Money-Back Plan
This plan guarantees a part of the sum to be received at regular intervals. If the insured outlives the policy term, he receives the remaining amount as a maturity benefit.
f) Children’s Plan
A policy that works as a saving plan to help fulfil your child’s life goals like education and marriage.
g) Retirement Plan
Yet another type of savings policy where regular monthly premium is paid to secure your life post-retirement.
2. General Insurance
Covers all events and situations which are not life and death related. For ease of use and understanding, they are broadly categorised into the following types.
a) Health Insurance
Under this policy, medical and surgical expenses are covered which can be later reimbursed through claims. They are maintained based on the person’s age and current medical condition.
b) Motor Insurance
This plan provides coverage to the vehicle in case of financial loss due to theft or damage from accidents. Motor Insurance is compulsory to drive in India.
c) Travel Insurance
A policy that provides protection in case of travel emergencies stemming from the loss of luggage, medical situations and ticket cancellations.
d) Home Insurance
Also referred to as property insurance, it covers the structure as well as the content of your house. Additional cover can be taken under this policy to gain protection against theft and natural calamities.
e) Commercial Insurance
This policy is for business entities and commercial industries and is further categorised based on occupation type, risk exposure, and financial value.
While dealing with insurance, it is important to carry out full-fledged research and understand all the aspects of the insurance policy you want to take. And with so many types of policies to choose from, it only reiterates the fact that it is better to be safe than sorry.