What You need to know about Insurance

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What is Insurance?

Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.

Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party.

Types of Insurance

Life Insurance

The insurance that covers the risk of the life of the insured is called Life insurance. In this, the nominee will get the policy amount, upon the death of the insurer. This is also called as an Assurance, as the event, i.e. death of the insured is certain. The payment of the policy amount on the maturity will be made in one shot (lump sum) or periodical instalments, i.e. annuity. Whole life Assurance: Whole life assurance, is one in which the policy amount becomes due for payment on the death of the insured. Term Life Assurance: The insurance policy in which the amount has to be paid on the maturity of the specified term, for instance, 10 years or 15 years, then it is called as term insurance policy. Annuity: When the policy gets matured, the amount is paid in regular instalments, rather than in lump sum.

Health insurance

Health insurance is bought to cover medical costs for expensive treatments. Different types of health insurance policies cover an array of diseases and ailments. You can buy a generic health insurance policy as well as policies for specific diseases. The premium paid towards a health insurance policy usually covers treatment, hospitalization and medication costs.

Car insurance

In today’s world, a car insurance is an important policy for every car owner. This insurance protects you against any untoward incident like accidents. Some policies also compensate for damages to your car during natural calamities like floods or earthquakes. It also covers third-party liability where you have to pay damages to other vehicle owners.

Education Insurance

The child education insurance is akin to a life insurance policy which has been specially designed as a saving tool. An education insurance can be a great way to provide a lump sum amount of money when your child reaches the age for higher education and gains entry into college (18 years and above). This fund can then be used to pay for your child’s higher education expenses. Under this insurance, the child is the life assured or the recipient of the funds, while the parent/legal guardian is the owner of the policy.

You can estimate the amount of money that will go into funding your children’s higher education using Education Planning Calculator.

Home insurance

We all dreaming of owning our own homes. Home insurance can help with covering loss or damage caused to your home due to accidents like fire and other natural calamities or perils. Home insurance covers other instances like lightning, earthquakes etc.

General Insurance

Any insurance apart from life insurance comes under general insurance. In this type of insurance, the policyholder gets the compensation only when the loss is caused to him, due to the reasons indicated in the policy. It is also called as non-life insurance. It is classified into three categories: Fire Insurance: A contractual arrangement in which the insurer promises to indemnify the loss caused to the goods and property of the insured due to fire, up to an agreed amount. Marine Insurance: When in an insurance contract, the insurer undertakes to compensate the ship or cargo owner against the risks associated with the marine adventure, it is called as marine insurance. It is further divided into cargo insurance, hull insurance and freight insurance. Miscellaneous Insurance: Apart from those discussed above, there are other types of general insurance business which cover different types of risks. It includes burglary insurance, credit insurance. Motor vehicle insurance, loss of profit insurance, fidelity insurance etc.

The life insurance and general insurance differ in the way that life insurance covers the life risk, whereas general insurance does not cover the risk of life. Secondly, the premium is paid at regular intervals in life insurance, but in general insurance, the premium is paid in lump sum for the year.

What can you insure?

You can buy different types of insurance policies that cover a range of risks, depending on what you are insuring.

Insurers offer policies with different features, so make sure you choose a policy that is right for you.

What is an insurance policy?
You and the insurer agree on what is being insured. This is written in a legal agreement (contract) called an insurance policy.

The insurance policy sets out exactly:

what is being insured and the risk being insured against (terms and conditions) any exclusions how much the insurer will pay if you make a claim how much the policy will cost you (premium).

The premium can depend on things like where you live or what you and the insurer agree will be the cost of replacing something if it’s stolen or damaged. The premium is less than the total cost of what you are insuring.

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