Insurance is one of the most important financial products that provide coverage against the risks and eventualities of life. It pays a benefit amount to the policyholder (in case of general insurance) or nominee (in case of life insurance) in case of damage or death of the insured/assured. However, many skip buying insurance plans as they are unfamiliar with the various types of insurance plans available in India.Read more
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So to help you understand the importance of insurance, we have created a list of the different types of insurance plans you can buy in 2023.
Insurance is a contractual agreement between an individual or organization, known as the policyholder, and an insurance company. It is designed to protect the policyholder from financial loss or damage in case of unforeseen events or risks. In case the unforeseen event covered under the plan occurs, the insurer pays the benefit amount as compensation for the loss. To get the coverage and benefits listed under the plan, the policyholder has to pay the premiums regularly for the entire premium payment term.
Although there are many kinds of insurance plans available in India, insurance can be grouped into the following two groups:
Life insurance is a financial product that protects your loved ones financially by providing them with a death benefit in case of your unfortunate death during the policy term. In this, the policyholder is required to pay a certain amount as the premium charges of the policy while the insurance company provides the pre-determined life cover. The policyholder has to make regular premium payments to the insurer for a fixed number of years. Few life insurance plans also pay a maturity amount at the last of the policy tenure in case of the life assured’s survival.
General insurance is a financial tool that secures all non-life valuables like home, car, marine, travel, and health. Similar to life insurance, in general insurance too, the policyholder has to pay a fixed premium throughout the policy term to get the desired benefits and coverage under the plan. In the case of health and motor insurance, the plans are renewed every year, while other plans, like travel plans, have a specific policy term. These plans do not have any savings component and usually only have a lump sum payout option.
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Under the two groups of insurance, here is a list of all the different types of insurance plans available:
Term Insurance Plans
A term insurance plan is a pure protection life insurance plan that offers extensive coverage at a minimal cost for a limited time. These plans offer a large life cover at affordable premium rates for a long policy tenure. If the life assured dies during the pre-specified term of the policy, their nominees will receive the death benefit. There are several types of term insurance plans available in India:
Regular Term Insurance Plans: These are highly affordable and offer a large life cover for a long policy term.
Term Plan with Return of Premium: Term return of premium plans provide the premiums paid throughout the policy as a maturity benefit at the end of the policy. The returned amount excludes the applicable GST and some other nominal deductions.
100% Refund of Premium at No Cost: The 100% refund of premium term plans allow the customers to exit their term plan early and get a refund of all the premiums paid until the end of the policy. The policyholders can exit the plan only within a specific period as per the insurer.
Whole life insurance is a plan that offers coverage to the policyholder for their whole life. This means the insurer will provide coverage till 99 or 100 years as per the policy details and guaranteed benefits to the nominee on the policyholder's death. These plans offer a loan facility that the policyholder can avail in their time of financial crisis. The plans may also accrue bonuses which will be paid along with the death benefit.
Guaranteed Life Insurance Plans
Guaranteed Insurance Plans or endowment plans are plans that guarantee the value of maturity based on your investment amount. With these life insurance policies, you can achieve your financial objectives without worrying about the risks involved in the performance of market funds.
Unit Linked Insurance Plans (ULIP)
ULIPs are a type of insurance that secure a part of your premium amount for insurance while the other portion is invested in market funds with different levels of risk. These plans help you build your investment portfolio while allowing you to avail yourself of all the applicable tax benefits. These life insurance plans are right if you wish to multiply your wealth for a long investment time.
Child Insurance Plans
Child insurance plans are another type of insurance plan that offers financial security for the child of the policyholder. This policy is specially designed to meet the child’s requirements in case of the policyholder’s unfortunate death during the policy term. The child can use the benefit amount received to pay for their higher education and/or wedding.
These plans are designed to create wealth for your retirement years to enjoy financial freedom. In this, nominees will receive the instant payout in case of your unfortunate demise during the policy tenure. Else, you will get the maturity benefit on surviving the tenure.
Health insurance covers medical expenses, including pre and post-hospitalization charges, surgery costs, medications, and preventive care. It helps you manage healthcare costs and provides access to quality medical services in the event of a medical emergency.
Motor insurance provides coverage for vehicles against damages or theft, as well as liability protection in case of accidents. There are two types of motor insurance available: comprehensive and third-party motor insurance. It is a legal requirement in India to have a 3rd party motor insurance before driving on public roads.
Travel insurance offers coverage for unexpected events during domestic or international travel, such as trip cancellation, medical emergencies, lost baggage, or flight delays. It provides the traveller with the required assistance and compensation in case of unforeseen circumstances while travelling.
Businesses and traders often transport their goods in and out of the country. In such cases, marine insurance helps secure the goods against damages caused during the import and export of goods using road, rail, sea, and airways. There are 4 types of marine insurance available, and they are open cover, open policy, specific voyage policy, and annual policy.
Home insurance protects the policyholder’s home and its contents against unforeseen risks like fire, theft, natural disasters, and liability for injuries that occur on the property. With this plan, policyholders can get financial security in case of an eventuality regarding their home during the policy term.
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