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5 Main Types of Insurance Policies you Need in India

April 21, 2023

Table of Contents

    Table of Contents

      If you care about your loved ones, you must buy an insurance plan today. Check out the different types of insurance and buy the one for you today.

      Insurance - a term rather uncommon amongst Indians. Despite increasing financial literacy and the spread of awareness regarding the importance of different types of insurance, Indians are still reluctant to buy insurance plans.

      Even if they do plan to buy, the scope is limited to life insurance only. They tend to completely ignore the existence of term insurance and health insurance plans. According to a report by the  Economic Times, nearly 30% of Indians do not have health coverage insurance. 

      Where does this lead us to? Instability - both economical and social. Insurance can create financial security in this ever evolving world where life, property, and health are always at sheer risk. Insurance doesn’t only guarantee the protection of an individual, but his or her whole family.

      Even when the sole breadwinner meets an untimely death, insurance promises to take care of the grieving family financially. 

      You must have heard about life insurance plans. They are one of the many types of insurance plans that you can choose from whenever the need arises.

      Insurance companies like LIC, GIC, etc., are common names when discussing insurance plans. The government is taking up initiatives on a national level to promote insurance policies.

      Policies like Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Life Cover Under Pradhan Mantri Jan Dhan Yojana (PMJDY), etc., the Indian government to make insurance a habit in young Indians. 

      Let’s take a look at different types of insurance schemes and learn all about them!

      General insurance

      General insurance is one of the two broad categories of insurance. A general insurance policy provides you protection against losses other than the death of the insured person.

      Your liabilities, like your car, property, health, etc. are protected under general insurance. General insurance policies have many varieties:

      1. Health Insurance

      A health insurance policy gives you coverage for the expenses incurred due to hospitalization charges or any other medical-related expenses. This insurance policy can save your money from going into hospitalisation, medication of critical diseases, daycare expenses, and even post-hospitalisation expenses.

      Due to accelerating hikes in medical charges, healthcare has become quite expensive. Even well-off people lose all their savings in hospital bills. Therefore, one must buy a health insurance plan.

      • Individual health insurance: This type of health insurance covers the expenses related to the health of just an individual.

      • Family floater insurance: It usually covers a small family- husband, wife and 2 children. It covers the health of the entire family under a single plan.

      • Critical illness cover: You can buy this specialised insurance for life-threatening problems like kidney failure, strokes, heart attacks, etc. the insured person generally receives a lump sum amount for the treatment.  

      • Group health insurance: This is given by an employer to its employees. 

      • Senior citizen insurance: It caters to individuals above the age group of 60 years. 

      2. Motor insurance

      A motor insurance covers the risk involved in accidents involving your bike or car. Motor insurance is generally of the following types:

      • Car insurance: Third party insurance (compulsory for vehicles in India) is involved in this plan along with other comprehensive plans. 
      • Bike insurance: Under this insurance plan, individually owned two-wheelers are covered. 
      • Commercial vehicle insurance: For any vehicle that is used for commercial purposes is covered under this plan. 

      3. Home insurance

      Home insurance covers the damage caused by natural and manmade calamities like earthquakes, fires, etc. It offers a comprehensive cover against any physical damage or destruction. The different types of plans under home insurance are as follows:

      • Home building insurance: It covers the damage that might happen to the structure of your house in case of fires, quakes, floods, etc.
      • Public liability coverage: It provides the damage cover to a third-party on the insured residential property. 
      • Standard fire and special peril policies: It insures you against fire calamities, natural calamities, and other man-made anti-social problems like riots, etc. 
      • Burglary and theft insurance: If you lose your goods or if they are stolen, this policy will cover the damage. 

      4. Travel insurance

      Travel insurance ensures that you have a peaceful journey wherever you go. In case you face damages like loss of baggage, ticket cancellations, loss of passports, personal medical emergencies, etc. 

      There are different types of travel insurance:

      • Domestic travel insurance
      • International travel insurance
      • Individual travel insurance
      • Family travel insurance
      • Student travel insurance

      5. Life insurance

      A life insurance policy provides coverage for unfortunate events like the untimely death or disability of the breadwinner. Along with providing financial assistance, some types of life insurance policies enable the policyholder to invest in equity funds or debt funds to increase their savings. 

      Since this type of insurance entails large sums, long terms, and gives financial assistance to your family in case of your absence, this is definitely a must-have! The following are the various types of life insurance coverage:

      • Term insurance plans

      A term insurance plan is bought for specified terms. The buyer generally pays a low premium amount, making term insurance one of the most affordable types of life insurance plans. If anything wrong happens to the policy holder during the tenure of the plan, his/her family receives the entire amount as financial assistance.

      However, if you survive through the policy term, you might not get anything—the reason why term insurance has no maturity time. The policy holder generally gets to choose a payout option.

      You can choose how you want to receive the assured sum; multiple payout options are available too. 

      • Whole life insurance plans

      In contrast to term insurance plans, whole life insurance is a traditional insurance plan where the individual pays the premium for their whole life. In the event of his/her demise, the family receives the assured sum.

      Basically, this insures the policy holder’s entire life-the maturity of the plan is only at his/her death. 

      Besides getting a death benefit, there is a savings component involved in the plan in order to accrue a cash value throughout the tenure of 100 years. If the individual lives longer than 100 years, the whole plan itself becomes a mature endowment. 

      • Endowment plans

      An endowment plan, along with providing life coverage, enables the policyholder to save regularly over a certain period of time. If you survive the term of the plan, you will receive a lump sum amount to meet your expenses.

      However, if you die of an uncertain death, the beneficiaries (your family members) get the complete assured sum. 

      • Unit linked insurance plans

      Unit linked plans  are one of the best life insurance plans. They help you get insured, along with opening several paths to investment under a single contract.

      In simple words, a part of the premium that you will pay against your plan will be used to make an investment in market-linked equity and debt funds. The rest of the premium amount is, obviously, used to make up a life cover for the policyholder.

      This investment-cum-insurance plan lets you decide the allocation of the premium amount as per your market risk appetite. 

      Everyone must buy an insurance plan based on their individual needs.

      This is necessary not just for you, but for your loved ones too. Insurance ensures that the lives of the people close to you don't get disrupted even if you meet a sudden end. Therefore, buy insurance and get your life going!

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