What is Insurance and its types | Procedure | Benefits

There is a lot of risk prevailing all around us whether the risk is related to property or life; it causes a huge damage to life as well as dependents life.

Property is covered with several risks like theft, fire, natural calamities etc. and life is also at risk of any mishappening.

So the risk of property as well as of life may result in huge financial losses. So we will explain you in the following paragraphs, what is insurance and its types, benefits, procedure and disadvantages?

What is insurance and its types?

Insurance is an agreement between the insurer (company who gives insurance policy) and the insured (person to who takes Insurance policy).

In such an agreement the insurer gives a promise to make the good loss of property or life on happening of contingency.

For such insurance, you have to pay monthly fixed amount known as premium.

Amount of premium vary with policy to policy. Premium is based on your risk profile. More the risk more will be the premium and vice versa.

E.g. If life insurance policy is taken by the old age person then Insurance companies charge a high premium as the risk of mishappening is high.

 

Types of insurance policy

There are various types of insurance. Before taking insurance one should know which type of risk you want to cover and then decide which insurance policy is suitable to cover that risk.

So, here are the types of insurance:

 

Life insurance

It is the most recommended insurance which every individual has to take life insurance policy, especially those whose family is dependent on him.

If you are the only earner in the family then you must have to take life Insurance. In this your whole life is insured.

On death of the individual for whom life insurance was taken, a whole amount of insurance is given to the family or dependents.

For this there are various companies and various types of insurance policy are present, which offer you different types of plan and premium.

So in this way, life insurance makes the family financially secured in the event of any mishappening.

 

Insurance of vehicle

Vehicle can also be insured. It also covers various types of risks like damage to vehicles in case of accident, or damage due to natural calamity like earthquakes, floods, Tsunami and lightning etc.

 

Health Insurance

This type of insurance covers all types of medical expenses. On the happening of any disease, serious illness or in case of an accident. It covers all types of medical expenses.

 

Fire insurance

This Insurance covers damage of goods loss from fire. This insurance protects the insured assets like building, furniture etc. from financial loss due to fire.

If you purchase property along with fire insurance it helps to cover your cost of repair, reconstructions of property etc.

 

Home Insurance

It covers all types of damage occurring to your homes due to floods, theft, earthquake and fire etc. This type of insurance also covers your public liability.

In Home Insurance your valuable articles present in the home are also covered by this type of insurance. So this type of insurance protects your home from all types of risk.

 

What is the procedure of taking insurance policy?

Before taking any insurance you should consider the following steps:

 

Step 1: Identify the risk

First you have to identify the risk for which you would take insurance like if you have business and you have huge stock in your godown.

In this case, your stock can be damaged due to fire, floods, theft etc. So you need to take insurance for your stock because here is the risk.

Similarly if you have a luxury car then your car is also covered with various types of risk.

So, firstly you need to identify the risk for which you would take insurance.

 

Step 2: Choose the better insurance agent and company

There are many insurance agents who are just fake and they sell policy with a higher premium, on an unusual term and conditions.

So, you should be very alert for this point.

 

Step 3: Understand different alternatives

Once you choose the best insurance agent then the next step is to understand different alternatives / options properly.

Insurance agents offer you various alternatives / options of insurance policy with different premiums and policy amounts.

You have to clearly understand each and every alternative and choose the best policy to cover your risk.

 

Step 4: Choose the insurance policy

After examining the benefits and disadvantages (explain in the following paragraph) of each and every policy choose the one suitable policy to cover your risk and then buy the insurance policy and pay the premium on time.

 

What are the benefits of insurance policy?

 

Cover risk

Insurance covers all types of risk and makes you release from all the tensions.

After taking insurance you can easily concentrate on your goal by not wasting your time on risk of property or life.

Tax benefits

You can take tax deductions under section 80c of Income Tax Act, 1961 of life insurance premium of maximum rupees 1.5 lakh (in India).

Under section 80d of Income Tax Act 1961, deductions are allowed for medical insurance premium of upto rupees 25000 for an individual and his family and for his parents maximum upto rupees 25000 if age is less than 60 year and up to rupees 50,000 if age is above 60 years subject to maximum deductions.

So there are various tax benefits of taking insurance.

Flexible

Insurance policies are flexible means you can anytime change the premium by changing time period. So it is very friendly to the customer.

 

What are the disadvantages of insurance?

 

Fixed expenses

You have to set aside a fixed amount for premium from your income on a monthly basis. Sometimes due to higher premium and low income individuals trap into financial problems.

So you need to take policy amount keeping in mind your monthly income.

Denies claims

In some cases the claim is denied by the insurance company due to non-fulfillment of policy term and condition.

Pay claim amount slowly

On the happening of contingency, The Insurance Company examined the calculation of actual loss. It sometimes takes a lot of time to pay the claimed amount which delays your claim.

Sometimes the policyholder may not recover the premium amount paid if a policy surrendered.

 

Conclusion

In the current time, insurance has become an important part of life. Every individual takes insurance whether it is related to property or life.

The most important thing is that after taking insurance you release your tension and you can concentrate on your future goals.

But at the same time you should take care of the procedure of taking insurance and what is insurance and its types, which we discussed earlier in this article.

Be insured, be safe.

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