Insurance: What is insurance? Benefits, Types of policies

What is insurance?

An insurance policy is a legal contract between the insurance company (the insurer) and the person (Policyholder), business, or entity being insured (the insured). As per contract, the insured (Policyholder) pay regular amounts of money as premiums to the insurer, and the insurer (Provided) pay you the sum assured if an unfortunate event arises. The policyholder pays a certain amount as a 'premium' to the insurance company against which the latter provides insurance cover. The insurers provide financial coverage or reimbursement in many cases to the policyholder.

Types of policies

There are many types of insurance policies below are some of them:-

General Insurance: 

Non-life insurance is also known as general insurance that include insurance coverages for Home, Motor/Auto/Vehicle, education, etc. as mentioned below:

Health Insurance: Some insurance companies have tie-ups with hospitals. You can buy health insurance for yourself or for your family that may include your spouse, parents, siblings, and children. You can claim reimbursement for hospitalization and treatments.

Motor/Auto/Vehicle Insurance: This is one of the important policies at present time. It's a contractual agreement between the insured (vehicle owner) and the insurance company. it protects your valuable asset against road accidents or any other damage and covers the losses. Secondly, the traffic rules suggest you carry insurance papers while driving.

Travel Insurance: It typically covers a range of potential risks associated with travel, including trip cancellations, medical emergencies, lost luggage, and other unexpected incidents. You can claim for baggage loss, trip cancellation, or delay in flight.

Education Insurance: Education insurance, also known as educational insurance or children's education insurance. It is an investment scheme. You pay premiums by the time your child is 18 years of age or attains a certain age as decided by the insurance policy. You can have a lump sum with imposed regulations that you can use for a child’s educational purposes and not any other. The parent/ foster parent/legal guardian is the owner of the policy.

Home/Property Insurance: If man-made or natural calamities damage your valuable property then this policy can cover the financial loss and provide monetary aid. Losses due to theft, floods, or any other mishaps can be alleviated.

Benefits of insurance policy

Financial Protection: Insurance provides financial protection against unexpected events, risks, and losses.

Risk Management: An insurance company pools in collective risks and premiums because it covers a large number of risk-exposed people.

Saving Habits: Insurance policies help inculcate saving habits among individuals. It not only equivalently spreads the risks but also promotes trade and commerce by utilizing the fund.

Provides Protection: It not only protects the insured from financial loss but also helps in checking mental stress arising out of it.

Value of Risk: Insurance coverage can be provided for medical expenses, vehicle damage, property loss/damage, etc. depending on the type of insurance.