Insurance & Finance

What is Insurance in Simple Words and 5 Best Benefits of Insurance

What is Insurance
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What is Insurance?

Everyone knows the word insurance but not many people have complete information about insurance. Let us know in this article what is insurance? What are the types of insurance? And What are the benefits of insurance?

Insurance is linked to every person. People worried about many things ex. for their life, for car, house, property, etc, and the only solution to this is insurance so that their future will be safe. We need to know exactly what is insurance?

What is Insurance (2)

What is Insurance (2)

What is insurance?

Insurance is a tool that can help you offset financial losses. Or insurance means planning for the risks involved. These risks can be worries about your life, damage to your home, or damage to your property. Insurance guarantees for damage from hazards.

What is insurance – Insurance is a contract between the insuring company and the insured person which protects against any future risk of loss.

When we buy one of the insurance, we have to pay the installment of a certain amount on a fixed time, or sometimes we have to pay the full amount in one plan at a time which is specified in the written contract with the insurance company.

Whenever in the future there is any loss in the thing related to that insurance, the insurance company has to compensate that loss as per the written contract of insurance.

 

Type of Insurance?

There are generally two types of insurance:

  1. Life Insurance
  2. General Insurance

 

  1. Life Insurance-

Life insurance carries risks from accident to death. This means that in case of accident or death of the insured, the insured or his nominee gets compensation from the insurance company.

 Types of life insurance

  1. Term life insurance –

As the name implies it is for a fixed period. This period can be 10 years, 20 years, or 30 years. If the insured dies within this time interval, a fixed amount is given to the nominee. The peculiarity of this life insurance is that its premium is very low.

  1. Unit-linked insurance plan –

ULIP is a mix of investment and insurance that benefits insurance, wealth creation, and tax-saving investment. The money that is given in the form of premium in ULIP is partly invested in the fund (i.e. in bonds and shares) and partly in risk cover. However, the insured is free to decide how much money he wants to invest in stocks and how much money is in bonds. There is no guarantee of a fixed return as the return depends on the fluctuations of the market.

  1. Endowment Policy –
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Like ULIP, it is a mixture of investment and insurance. But the difference is that it covers the risk of a certain period and at the end of that period the fixed amount is returned to the insured with a bonus. And if the insured dies during that period then the fixed amount is refunded to the person nominated by him but without the bonus.

  1. Money-back insurance policy –

This life insurance is also a mixture of investment and insurance like the above two insurance policies. But the difference is that Assured Sum starts getting in installments only during the policy period. The last installment is received at the end of the policy term. If the insured dies during the policy term then the sum assured is given to the person nominated by him.

  1. Whole Life insurance policy –

There is no fixed term for this insurance. That is, as soon as you die (regardless of your age) the Assured Sum will be given to the person nominated by you. Its premium is very high.

  1. Retirement Plan –

This type of insurance plan helps to build enough capital to live a worry-free retirement life. A fixed amount is paid as a pension to the insured after a fixed period or to the person nominated by him after his death. This payment can be on a monthly, half-yearly, or yearly basis. You can choose between an annual payment or a single payment after the age of 60.

  1. Child insurance policy –

These plans are designed keeping in view the needs like education expenses of children, study abroad, marriage, etc. Most child insurance policies offer a single payment or annual payment to a child after the age of 18. If the parent dies during the policy term, the child or family is paid. Some insurance companies waive the premium in case of the death of the policyholder and pay a lump sum after the maturity period.

What is Insurance

What is Insurance

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2. General Insurance –              

  1. Home Insurance –

If you insure your home with a simple insurance company, it protects your home. If there is any damage to your house after buying the insurance policy, the insurance company pays the compensation.

This insurance policy covers any damage to your home. Damage to the house due to natural calamity includes damage due to fire, earthquake, lightning, flood, etc. Artificial disasters include burglary, fire, fights, etc. damage to the house.

  1. Motor Insurance –
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In India, it is very important by law to ensure a vehicle running on the road. If you drive your vehicle on the road without insurance, the traffic police can find you. According to the motor or auto insurance policy, the insurance company compensates for any damage to the vehicle. If your vehicle is stolen or has caused an accident then an auto insurance policy can help you a lot.

The biggest benefit of an auto insurance policy is when someone is injured or killed by your vehicle. It is covered under Third Party Insurance. If you also have a two-wheeler/tricycle or car then it must be insured.

  1. Health Insurance –

The cost of treatment is increasing very fast nowadays. In case of illness when taking health insurance, the insurance company covers the cost of treatment. Under a health insurance policy, the insurance company pays for the treatment of any illness. The limit of expenses incurred on an illness depends on your health insurance policy.

What is Insurance

What is Insurance

  1. Travel Insurance –

Travel insurance protects against losses during a trip. If a person goes abroad for work or travel and gets injured or loses luggage, the insurance company compensates him. A travel insurance policy is valid from the start of your journey until the end of the journey. The condition of different insurance companies for the travel insurance policy may vary.

  1. Crop Insurance –

According to the existing rules, every farmer who takes an agricultural loan is required to buy crop insurance. Under the crop insurance policy, the insurance company compensates the farmer in case of any loss to the crop. Under a crop insurance policy, compensation is given by the insurance company in case of crop failure due to fire, flood, or any disease.

Due to the very strict conditions of crop insurance policy and non-receipt of compensation in terms of cost, farmers are not very enthusiastic about crop insurance at present. To compensate for crop failure, insurance companies survey all the farms around the farm, and compensation is given only when most of the farmers ’crops have been damaged.

  1. Business Liability Insurance –

Liability Insurance is actually to compensate the customer for the loss caused by the operation of a company or a product. In such a case, the entire cost of the penalty and legal action incurred by the company is borne by the Liability Insurance Company.

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How to take insurance –

There are many ways to get insurance, such as getting insurance from an insurance agent of an insurance company, getting insurance from an insurance company yourself, getting insurance online from an insurance company’s website, and getting insurance by registering on an online broker’s website, etc.

If required, we can claim the insurance policy in all these ways, i.e. in case of any loss related to the insurance policy for which we have insured, demand from the insurance company for the amount to be received instead of insurance. Can do

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Benefits of insurance –

What is insurance – Today everyone insures to protect the lives of themselves and their loved ones, life insurance policy provides protection, getting insurance is a great way to save in a way and you can guarantee any of your insurance policies. You can also apply for a loan from a bank.

When comes to general insurance, provides financial security in a way. We can insure anything in it because there is no trust in anything today, any accident can happen anytime. Can easily control any problem.

  1. Peace of mind –

Since insurance protects you from various uncertainties that can put you or your family in a financial crisis, having insurance gives you peace of mind and a sense of security.

  1. Risk reduction –

seeks to reduce the risk of an accident or an unforeseen event with financial help.

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  1. Easy loan –

Especially in the case of a home loan, having insurance cover increases the scope for an easy loan from the lender.

  1. Saving habit –

Many life insurances come with investment cum protection benefits. Policies like Endowment Insurance help in achieving long-term financial goals.

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  1. Providing tax benefits –

Providing tax benefits on premiums paid in many types of insurance. For example, premiums paid for life insurance plans are exempt under section 80C of the Income-tax Act. Similarly, premiums paid for health insurance schemes are exempted under section 80D of the Income-tax Act.

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