Insurance Coverage

What is Insurance Coverage? 

Insurance coverage is the risk cover for a person by way of insurance services. It helps an entity or an individual to protect themselves from unfortunate events. Insurance cover acts as a protective net that protects the policyholder and his/her family from unexpected conditions. 

In order to be covered under the insurance plan, an individual is required to pay a small amount yearly or monthly for a specific period. In exchange for this, the insurer will pay for all the financial damages in case the individual or object insured is damaged. One can easily transfer the financial risk by paying a small premium to the insurance company. 

Why Insurance Coverage is Important? 

As we have discussed, availing of insurance in a world full of unforeseen events is very important. Businesses, individuals, motors, properties, cars, and others are exposed to different levels of risk. Most of them include health issues, loss of life, loss of property, accidents, etc. It is not always possible to avoid these kinds of losses; so, one can compensate for such losses by insurance coverage. Here’s a quick laydown of reasons why insurance coverage is considered so important: 

1. Offers security and balance in life 

   Insurance companies provide protection against unfortunate events. Every person and business faces unpredictability at every phase of their life and insurance protects them from these risks. A risk-mitigating system is used by insurance against any event that destroys the individual’s life balance. 

2. Provides support to the family 

   Medical emergencies can strike you anytime anywhere. Though financial advisors suggest that an emergency fund is to be required, not all hospital expenses are covered by this fund. With increasing medical inflation, even one treatment procedures cost you a lot. Medical insurance helps a family in critical times and to meet unexpected hospital expenditures. 

3. Promotes growth economically 

   Insurance cover not only helps businesses and individuals but also promotes the economy to a large extent. 

4. Produces long term resources financially 

   Insurance is a long-tenure commitment. Hence, when insurers gather premium amounts from thousands of policyholders, they can select to invest them in long-term projects that help in developing and growing the nation. 

Types of Insurance Coverage Policies 

There are a wide variety of insurance coverage policies available that aim to safeguard certain aspects. Following are the different types of insurance: 

1. Life Insurance

   Life Insurance is a protective cover or policy that ensures the financial security and protection of your loved ones. In case of the policyholder’s demise, the family would get devastated both financially and mentally. In such cases, life insurance coverage provides beneficiaries with money. The beneficiary is the one appointed by the policyholder such as it can be a friend, child, spouse. The main objective of life insurance is to help the family financially after the death of a dear one, by providing funeral expenses, or paying for their outstanding loans. There are different types of life insurance available: 

   Types of Life Insurance Policies 

   • Term Insurance Plan: Term insurance is the purest and simplest form of life insurance. It offers financial protection to your family at pocket-friendly rates. In this, you can also receive a large amount of cover or sum assured at a comparatively low premium rate. The amount of benefit in term insurance plans is paid out to the nominee in case of the life assured’s demise during the policy term. 

   • Endowment Policy: Endowment plans are the type of life insurance policy in which a part of your paid premiums goes towards the death benefit, and the rest is invested by the insurer. Death benefit, maturity benefits, and periodic additions are also provided by the endowment plans. 

   • ULIPs or Unit Linked Insurance Plan: In this, a portion of your premium goes for the MF (mutual fund) savings, while the rest part goes towards the death advantage. 

   • Whole Life Insurance: These whole life insurance policies provide life coverage for the entire life of a policyholder.  

   • Child Plan: This is an insurance cum investment policy that provides financial help for your children. The death advantage is also available in child plans as a lump sum after the parent’s demise. 

   • Money Back: These plans pay a fixed percentage of the policy’s SA after regular time intervals i.e., called survival benefit. 

   • Retirement/ Pension Plan: These plans are a combination of insurance and investment. A part of the premium goes towards forming a retirement amount for the insured. This is offered as a monthly or lump sum after the retirement of a policyholder. 

   Benefits of a Life Insurance Coverage 

   • Tax Benefits: You can enjoy tax benefits under sections 10(10D) and 80D of the ITA, 1961. Therefore, you can save a considerable amount as taxes by opting for this plan. 

   • Protects the financial future of the family: The plan ensures that your financial freedom is continued even after your death. 

   • Helps planning your retirement: Pension plans provide a lump sum payment at the time you get to retire, assist you to fund your retirement. 

   • Encourages the habit of saving: Since you are required to pay premiums on time, purchasing such an insurance plan promotes the habits of investing and saving money. 

2. Health Insurance

   Health insurance is general insurance that provides financial help to policyholders when they are suffering from medical emergencies or are admitted to hospitals for treatment. In addition to this, some policies also cover the treatment cost undertaken at home, before hospitalization, or after getting discharged from the same.

   There are eight different types of health insurance plans available in the market which are Individual health insurance, family floater insurance, critical illness cover, senior citizen health insurance, group health insurance, maternity, personal accident, and preventive healthcare insurance. 

3. Motor Insurance

   Motor insurance provides financial help in the event of an accident including a car or bike. Motor insurance can be purchased for 3 categories of motorized vehicles such as car insurance, two-wheelers insurance, and commercial vehicle insurance. 

4. Property insurance 

   Property insurance is a protection cover for immovable structures or properties. If any damage befalls these properties, then the coverage will compensate for it. This insurance also covers the content present inside the property. 

5. Travel Insurance 

   A travel insurance plan ensures the financial security and protection of the traveler during any trip. It is short-tenure insurance coverage, unlike most other plans. It provides coverage for baggage loss or delays in travel, flight delays, cancellations that might lead to the loss of a passenger. 

Steps to Choose the Right Insurance Coverage Policies 

1. Assess your requirements carefully: Before purchasing any policy, always consider certain factors such as the number of dependents, any other member sharing responsibilities, having young children whose education needs to be taken care of, or wedding in the family. 

2. Involved costs: Always consider the cost factor while purchasing insurance coverage policies. Check the premium rates, mortality charges (if any), riders, and how much is required to be paid. Compare different plans before making a decision. 

3. Claim Settlement Ratio: The main purpose of buying insurance is that your family members do not face any kind of financial hassle in case of your absence. Always check the CSR value. The higher the value, the more reliable the company is. 

Wrapping It Up!

Insurance plans come in a wide variety of sizes and shapes and claim different benefits, features, and prices. Choose carefully after reading the policy documents to be sure about the coverage and the cost. Always make sure that the policies you purchase are sufficient for your requirements.