Insurance in India is mainly of two types: Life Insurance and General Insurance or Non-Life Insurance.
Life insurance as the name suggests is insuring your life. But it is not insurance for yourself but for your family members. With the life insurance policy, after the death of the policy holder, the sum assured is given to the beneficiary. Death can be by any means, like any ailment, because of old age, any accident, or any other mishap.
A life insurance policy ensures that the persons family members lead a near-normal life as far as the household finances go.
It’s basically a long term investment and requires periodic payments, either monthly or quarterly or annually. The insurance companies provide different policies or schemes that every individual can take benefit of.
Basic types of Life Insurance policies:
- Term Plans: These plans are for specific period i.e. the life is insured in only that particular period. After that the policy ends even if the person is alive. It does not offer any profits. If the person dies in the period specified in the policy, the beneficiary gets the sum assured but if the person survives, there is no pay out. It has lower premiums.
- Endowment Plans: They differ from Term Plans in the way that they have maturity benefit. These plans pay out the sum in both case – death and survival. They have higher premiums as compared to Term Plans.
- Whole Life Policy: As the name suggests, this policy is for the whole life of the person i.e. the validity is not defined. The premiums are paid until the death. The policy expires on the event of death of policyholder.
- Money Back Policy: In this policy, regular premiums are paid. After some time, a portion of sum assured is paid out at regular intervals. In case the policyholder survives, he gets the balance sum assured. And in case of death, the beneficiary gets the full sum assured.
Other than life insurance, all other insurances come under General Insurance like property insurance, automobiles insurance, health insurance, theft insurance, etc.
Nothing can be predicted on this unpredictable planet so the general insurance aims to protect the economic value of your assets.
Basic types of General Insurance policies:
- Property Insurance: The home is most valuable possession for everyone. With this insurance you can get insured your house. The policy covers the risks in case of any natural calamity like earthquake, floods, fire, etc. It also insures other valuable properties.
- Travel Insurance: It covers all the risks which can happen while travelling abroad. Like when you are on a family or business trip, any mishap can happen to your property, also in the event of loss of your luggage, passport, etc.
- Motor Insurance: According to Motor Vehicle Act, every motor vehicle running on the road has to be insured. It insures your vehicles and thus covers the risk in case of any damage to vehicle, loss of vehicle, etc.
- Health Insurance: It covers all medical expenses in case of any ailments from paying your medicine bills to pay the hospitalization charges. Of all the forms of general insurance, only Health Insurance comes with tax benefits. As per section 80D of the income tax act 1961, the premium paid for a health insurance plan qualifies for tax deduction from your total income.