Insurance is a tool to cover the losses suffered due to specific eventualities. Though it will not eliminate or remove risk, insurance helps to reduce its financial impact. The insured has to pay a certain amount called a premium for the insurance company to provide coverage. Insurance contracts are called policies. The value of the policy is called the sum insured. Insurance coverage will cater to only losses due to events detailed in the policy and when claims are raised by the insured. Losses due to other eventualities will not be compensated. Following are the common types of insurance.
Types of insurance
This type of insurance covers the loss of life. It is generally taken to secure the future of the insured person’s dependents in their absence.
Health insurance provides coverage for medical expenses like hospitalisation, surgery, illness treatment, ambulance charges, etc.
Vehicle insurance is applicable for personal, transport and commercial vehicles to cover the expenses due to accidents, breakdowns, theft, repairs, etc. Insurance cover for the damage caused to a third party is mandatory for all vehicles.
As the name suggests, this type of insurance is taken for a defined group of people. Insurance taken for a company’s employees to cover workplace hazards is an example of group insurance.
Employee medical claims are group insurance policies explicitly catering to the employees’ health. When compared to individual health insurance policies, mediclaim policies may not cover pre-hospitalization expenses.
Superannuation refers to pension payments after retirement. Companies opt for group superannuation policies to provide this facility to their employees.
Unit Linked Insurance Plan (ULIP)
ULIP is a combination of insurance and mutual funds. It is an innovative product where a portion of the policy holder’s premium goes towards insurance, and the other part goes towards market-driven investments.
Getting yourself insured, at least to cover all your loans and regular expenses, is a must. Doing so will assure you that the people dependent on you won’t have to bear a financial burden in your absence in case of any untoward event. There are numerous products in each type of insurance. Some of them offer the flexibility of additional coverage, called riders, with an increase in the premium. Except for ULIP, insurance is not an investment that will fetch you returns. It is an investment in mitigating risks in your investments.