Insurance is a scheme that provides financial protection against potential losses a person may experience. There are various types of insurance and numerous insurance companies available. Simply put, insurance is a legal agreement between two parties: the insurance company (insurer) and the individual (insured).
In this agreement, the insurance company promises to provide compensation to the insured person in the event of a loss. This loss could be due to the death of the policyholder or damage to property. Insurance is primarily designed to help individuals prepare for unexpected incidents. The insured person pays a premium to the insurer to receive the benefits outlined in the policy.
How Does Insurance Work?
Insurance is a legal contract between the insurer and the insured, known as an insurance policy. This policy clearly outlines the conditions under which the insurance company agrees to pay the insured person or their beneficiaries. Insurance serves as a safeguard to protect you and your family from financial losses.
Typically, higher insurance coverage is available for a relatively low premium. The insurance company assumes the risk because only a small percentage of insured individuals actually make claims. As a result, it is possible to obtain substantial coverage at a low cost. Both individuals and businesses can request insurance from an insurance company. However, the final decision to provide coverage lies with the insurance company, which assesses the application before deciding. Generally, insurance companies may refuse coverage to applicants with high-risk profiles.
Types of Insurance in India
Life Insurance
As the name suggests, life insurance provides coverage for an individual's life. It is purchased to secure the financial future of loved ones in the absence of the policyholder. Life insurance is especially important if your family relies on your income. In case the policyholder dies during the policy term, their family receives financial assistance.
Health Insurance
Health insurance is purchased to cover medical expenses for expensive treatments. Different types of health insurance policies offer protection against various illnesses and conditions. The premium for a health insurance policy generally covers expenses like treatment, hospitalization, and medications.
3. Car Insurance
Car insurance protects you against unfortunate events like accidents. Some policies also cover damages to your car caused by natural disasters. Third-party liability, where you need to compensate another vehicle owner, is also covered under this insurance.
Education Insurance
Children’s education insurance is designed as a savings plan. It provides a lump sum amount when the child reaches college age, which can be used to cover higher education expenses.
Home Insurance
Home insurance protects your home from damages caused by accidents, fire, natural disasters, etc. It also provides coverage for incidents like lightning strikes or earthquakes.
