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What are the Different Types of Insurance?

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. 

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What is the Definition of Insurance?

Insurance is defined as a legal agreement between an individual or organisation, 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. If 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

  • General Insurance

Let’s discuss them in detail:

  1. Life Insurance

    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 must 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 end of the policy tenure in case of the life assured’s survival.

    Some of the types of life insurance plans offered in India 2024 are as follows:

    • Term Insurance

    • Whole Life Insurance

    • Guaranteed Life Insurance

    • Unit-Linked Insurance Plans (ULIPs)

    • Chile Education Plans

    • Retirement Plans

  2. General Insurance

    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.

    The most common type of life insurance plans offered in India in 2024 are as follows:

    • Health Insurance

    • Automobile Insurance

    • Travel Insurance

    • Marine Insurance

    • Home Insurance

    • Fire Insurance

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What are the Different Types of Insurance Plans Available in India?

Under the two groups of insurance, here is a list of all the different types of insurance plans available:

  1. Life Insurance

    • 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:

      Note: Now that you know that what is term insurance you can easily buy any term plan for your loved ones.

      Let’s discuss further in detail about the types of life insurance plans:

      • 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.

        Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.

      • 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 Policy

      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.

    • Pension/Retirement Plans

      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.

  2. General Insurance

    • Health Insurance

      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

      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

      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.

    • Marine Insurance

      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

      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.

    • Fire Insurance

      Fire insurance is a type of property insurance that provides financial protection against losses or damages caused by fire. It typically covers the cost of repairing or replacing the property, as well as related expenses. Fire insurance policies may extend to structures, contents, and sometimes even additional living expenses incurred due to the fire. Policyholders pay regular premiums to the insurer in exchange for coverage, and the terms and conditions vary based on the policy and its coverage limits.

    Note: Check out the best term insurance plan in India and choose one that suits your requirements.

FAQs

  • Q: Which type of Insurance is the most important?

    Ans: Life insurance is one of the most important types of insurance that covers the life assured for a fixed term at affordable premiums. They provide financial security to the family of the policyholder by paying a death benefit in case of the policyholder’s unfortunate death during the policy term.
  • Q: What plans fall under general insurance?

    Ans: Here is a list of types of insurance plans offered in India are as follows:
    • Health Insurance
    • Automobile Insurance
    • Travel Insurance
    • Marine Insurance
    • Home Insurance
    • Fire Insurance
  • Q: What plans fall under life insurance?

    Ans: Here is a list of types of insurance plans offered in India are as follows:
    • Term Insurance
    • Whole Life Insurance
    • Guaranteed Life Insurance
    • Unit-Linked Insurance Plans (ULIPs)
    • Child Education Plans
    • Retirement Plans
  • Q: What is term insurance?

    Ans: Term insurance is a type of life insurance that provides coverage for a specified term or duration. If the insured individual passes away during the policy term, the beneficiaries receive a death benefit. Term insurance is known for offering a straightforward and cost-effective way to ensure financial protection for loved ones during a specific period, making it popular for those seeking temporary coverage.
  • Q: What is a child education plan?

    Ans: A child plan is a specialized financial product designed to secure a child's future by combining investment and insurance elements. Typically offered by insurance companies, these plans are tailored to provide financial assistance for a child's education, marriage, or other milestones. Child plans often come with a maturity period coinciding with key life stages of the child. They offer a dual benefit of life coverage and wealth creation, making them a popular choice among parents looking to ensure the financial well-being of their children.
  • Q: What is a health insurance plan?

    Ans: A health insurance plan is a financial arrangement that provides coverage for medical expenses incurred by the insured individual. It helps mitigate the financial burden of healthcare by covering costs such as hospitalization, surgeries, medications, and other medical services. Health insurance plans can vary widely in coverage and may include benefits like preventive care, maternity coverage, and emergency services. Policyholders pay regular premiums to the insurance provider, and in return, they receive financial protection and access to a network of healthcare providers.
  • Q: What is the key difference between General Insurance and Life Insurance?

    Ans: The key difference between general and life insurance is that life insurance provides coverage to one’s life against the uncertainties of life, and general insurance is a plan that offers coverage to all non-life objects like health, motor, travel, marine, and home.
  • Q: Where can one get the details about their policy coverage?

    Ans: One can get details about their policy coverage by visiting Policybazaar’s sign-in page and entering the required details. Once you log in, all the policies you have purchased from Policybazaar will be listed. You can select the policy you want to get the details of and learn more about its policy coverage.
  • Q: What are the 4 most common types of insurance?

    Ans: The 4 most common types of insurance are:
    • Life Insurance
    • Health Insurance
    • Motor Insurance
    • Home Insurance
  • Q: Is it important to consider Claim Settlement Ratio before selecting an insurance company?

    Ans: Yes, you should always consider the claim settlement ratio (CSR) of the insurance company before buying an insurance plan, as the CSR of the company gives an insight into the company’s claim settlement abilities. Ideally, the CSR of the company should be more than 95%, as that means the insurer settled most of the claims registered in the year.

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