Insurance is an effective tool which helps to plan for future and reduce the adverse effects of any difficult situations. It promises us to pay a certain sum if a loss occurs.
Insurance helps us to protect the value of an asset. However, sometimes, due to any unforeseen event, the asset may be lost before its expected time period which may cause disruption in income.
For example: Sameer owns a building where he manufactures biscuits. There is a risk that the building and the machinery could be damaged in an earthquake, flood, or a fire. This can cause huge loss to him.
Consider another scenario in which Sameer dies in an accident or is permanently disabled. His family is dependant on him is in an undesirable situation.
Insurance compensates for these effects of misfortune. The payments provided are from funds contributed by holders of the individual insurance policies.
Individual risks are pooled and shared, with each policyholder making contribution to a common fund.
HOW INSURANCE CAN BE USEFUL?
Insurance can be beneficial in achieving several financial goals of the individual and his family.
Here are some of the important ones:
Financial security of the family against loss of life, which makes sure your family can support itself in your absence
Buying a house
Retirement benefits in the form of pension or regular income
Post-retirement income for NRIs
Tax Savings - Tax Benefits for the premium amount under Section 80D of the Income Tax Act.
Your goals must reflect in your insurance plan. Early start is better as life insurance premiums are lower at an earlier age. Term plans are the most affordable form of life insurance.
Term insurance, a basic form of life insurance, is the most affordable form as premiums are cheaper as compared to other life insurance plans. A fixed sum of money (sum assured) is paid to the beneficiaries if the policyholder expires over the policy term. If the policyholder survives, there is no pay out.
In India, the term insurance products are not as popular as they are globally. However, the concept is just catching up in India.
Endowment Plan is one of the most popular traditional life insurance policies bought in India. They combine risk cover with financial savings, thus, considered as an alternative for fixed deposits and other safe investments.
Unlike term plans which pay out the sum assured, along with profits, only in case of an eventuality over the policy term; endowment plans pay out the sum assured under both scenarios – death and survival.
Unit Linked Insurance Plans(ULIP)
ULIPs are a variant of the traditional endowment plan and are suited for individuals with risk-appetite. The performance of ULIP is linked to performance of stock market. They pay out the sum assured on death or on maturity. ULIPs are similar to mutual funds. However, they differ in one aspect; they are a combination of investment and insurance, while mutual funds are a pure investment avenue.
ULIPs also come with fund choices which policyholders can choose depending on their risk capacity.
Money Back Policy
Money back policies are a type of Endowment Policy. Over the years, money back policies have gained popularity in India because it gives periodic payments at specific intervals during the period of the policy.
A portion of the sum assured is paid at regular intervals. If the policy holder survives the term, he gets the balance sum assured. In case of death over the policy term, the beneficiary gets the full sum assured.
A comprehensive Car Insurance policy keeps it secure against damages caused by any calamities. One can avail Own Damage, Personal Accident and Liability cover all in one policy. In India, Car Insurance is governed by the India Motor Tariff and is mandatory to be renewed every year.
Many car insurance companies cover the damages including theft of parts and car accessories.
Insurance companies offer individual health insurance plans, family floaters and group health insurance policies for corporate.
Selecting the right insurance plan is a crucial step. One should take into consideration factors like age, and employment.
Here are some basic guidelines to select the best health insurance plan:
Buy health insurance when you are young and healthy to get the best deal
Choose an adequate sum insured based on your personal priorities
Understand the limits and exclusions
Review details regarding Hospital network of the insurance company
Gradual increase in sum insured as the medical expenses are increasing rapidly with rising inflation.
Health plans are plans which provide for medical expenses by offering fixed payout in case of health-related expenses, for a fixed premium. These expenses are hospitalisation expenses, surgical treatment expenses, etc. Health plans are available in both categories i.e. traditional and ULIP.
There are several health insurance plans in India. These can be divided into the following categories:
Hospitalization Plans: These health insurance plans cover medical expenses in case you are hospitalized. Within this category, products may have different heads of expenditure and payout structures.
Critical Illness Plans: It provide coverage against critical illnesses such as cancer, heart attack, stroke, organ transplants, kidney failure among others. These plans aim to cover higher ticket size medical expenses.
Travel insurance policy insures your domestic or oversees trip against losses arising from unforeseen emergencies like loss of baggage, flight delays, hospitalization, unexpected hotel accommodation or accidents. The duration of the cover can be for a Single Trip or for Multiple Trips. Many insurance companies offer a wide range of policies for individuals and family floaters in the age group of 3 months to 60 years.
Our home is a place, which provides us warmth and also is an investment for a lifetime. Therefore, protecting this investment should be our first priority. Our home can also be threatened with fire, burglary, damages caused by natural and man-made disasters. A Home Insurance Policy, provides security to the structure and/or valuable contents of home against these unforeseen events. Any owner/ tenant of a residential structure can insure his structure and/or valuables.
Some insurance companies provide commercial insurance services for companies which are listed below:
Property Insurance: Fire and Special Perils Insurance, Industrial risk insurance, Burglary insurance, Package Insurance etc
Engineering Insurance: Erection risks Insurance, Contractors risks Insurance, Plant & Machinery Insurance, Electronic Equipments Insurance, Machinery Breakdown Insurance
Liability Insurance: Public Liability Insurance, Product Liability Insurance, Employees Compensation Insurance
Marine Insurance: Normal Cargo, Project Cargo, Inco terms
Employee Benefits Insurance: Group Health, Group Personal Accident
Event Insurance: Future Events Insurance
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