Life Insurance: Types of Insurance Policies in India

Everyone’s life is uncertain, and no one can predict their future. It hardly takes time for a person's life to change drastically. The entire world felt a life-changing experience when a deadly disease named coronavirus shook the world and got it to a standstill. So many lives were lost, while some had significant health issues. Who would have thought that they would ever see such a day?An unexpected circumstance can change a person’s life completely. Life is not in our hands, but providing security to loved ones is in our hands. Buying a life insurance policy is a prevalent and significant way to provide financial security to loved ones. Life insurance is very essential for every household. The Government is sanctioning money towards the healthcare sector. Several schemes have been launched, keeping the income of its citizens in mind.Everyone can take insurance by setting aside a small portion of their income towards a secure insurance plan. By doing so, individuals can lean on their insurance to pay significant medical expenses if needed. Insurance companies take these periodic investments from individuals and invest them in high-return generating assets. Through this method, they can disburse a considerable amount to a needy individual.However, insurance companies are very specific about the kind of expenses they cover and the circumstances in which they become liable to pay. Different insurance plans will have different terms and conditions, which must be carefully scrutinized before opting for them. Let’s discuss different types of insurance plans to understand what an individual might need.

Insurance companies invest in debts and equities. Some life insurance plans pay the sum assured along with interest upon retirement. In return, an amount is paid monthly, quarterly, half-yearly, or yearly. This way, the insured can maximize their savings and get insurance coverage.There are many types of insurance plans available in the market these days. They can be classified into two broad categories, these are:

1. Life Insurance
2. General Insurance

These insurance plans have many different plans under them. Also Read: What Is Bike Insurance: Meaning, Types & Coverage

Life insurance plans can be sub-categorized into:

1. Term Life Insurance
2. Endowment plan
3. Whole life insurance
4. Child plan
5. Pension plan
6. Unit-linked insurance plan (ULIP)

General insurance plans can be sub-categorized into:

1. Health Insurance
2. Motor Insurance
3. Travel Insurance
4. Home Insurance
5. Fire Insurance

Let us understand these insurance policies in detail.

Term Life Insurance

Term life insurance is the most affordable and essential product of life insurance. As the plan's name suggests ‘term’, it covers the insured for only a specific period. This policy assures the insured that a lumpsum amount will be paid to the insured's nominee in case of any untoward incident like the insured's death. The entire amount is tax-free, so the dependents will get the sum assured without deductions. These plans also state that no benefits shall be given to the insured in case of survival at the policy's maturity. Since it has no maturity amount, its premium payable is also relatively less than other life insurance policies. Also Read : How Does A Term Life Insurance Work?

Endowment Plan

An endowment policy is a term life insurance policy that covers the insured for a particular period. Unlike term insurance, the endowment plans, the insured receives a lumpsum amount upon survival once the policy's tenure is over. The sum assured is given to the nominee/beneficiary of the policy in case of the sudden death of the insured.So, this way this plan has two benefits for the insured person. It provides a security blanket to the policyholder's family members and gives the insured maturity benefits.

Whole Life Insurance

Whole life insurance has extensive coverage and is one of the oldest forms of life insurance. It is also known as ‘traditional’ life insurance, as it covers the entire life span of the insured person, unlike other life insurance plans, which only provide coverage for a specific period.Whole life insurance provides death benefits to the insured person's loved ones. It can also be used as an instrument for savings, as it helps accumulate cash value throughout its term. The maturity of Whole Life Insurance is 100 years. This plan will be a mature endowment if the policyholder survives beyond this age.

Child Plan

Child plans are insurance plans that help a person secure their child's future. The amount deposited under this policy may be helpful to the child in achieving their goals. This amount can also be utilised for other purposes like higher studies, marriage etc., even in the absence of the person who has taken this policy. Thus, this policy provides double benefits to the policyholder. It combines insurance plans with savings by helping to plan the child’s future financially.

Pension Plan

A pension plan , commonly known as a retirement plan, helps the policyholder to build a corpus amount which can be used once retired. This plan acts as a regular source of income even after the person retires. It helps a salaried person accumulate money by allocating a small percentage of the salary to this account. It also helps develop a habit of savings in an individual, which can be used during the post-retirement days.This plan is also used as insurance cover that provides security to the family members. The nominee/beneficiary appointed by the insured is entitled to receive the entire amount upon the death of the person (insured).Also Read: Consider This Checklist Before Buying ULIP Plan Online

Unit-Linked Insurance Plans (ULIPs)

Unit-linked insurance plan is an insurance policy that provides dual benefits to the person who has taken this policy. It provides a life insurance cover and also serves as an investment plan. A portion of the amount paid as a premium is used for the coverage of the life insured through the policy term. The other portion is invested in debt funds and securities. Here the policyholder decides the investment plan as per requirement and risk appetite.

General Insurance

General insurance is a type of insurance policy that ensures a person and protects and covers the policyholder in the form of damages incurred. The insured person’s family receives the sum assured in case of the policyholder’s demise. General insurance also covers different types of insurance policies that protect against losses that have been caused due to liabilities like home, health, vehicle and travel etc.Also Read: What Is General Insurance-Types of Insurance in India These various types of general insurance policies include the following:

Health Insurance

Health insurance policies cover plans due to some medical emergency. A cashless claim facility can be availed if the treatment is done among the listed network hospitals, or a claim can be reimbursed afterwards.Most Indians go for a standard health insurance plan. This plan covers the following:

1. Pre-hospitalisation and post-hospitalisation expenses
2. Daycare procedures
3. Hospitalisation
4. Medical expenses
5. Treatment of critical illnesses
6. Maternity and newborn care

Health insurance policies also provide tax benefits:

1. The policyholder, along with parents insured (everyone below 60), the total tax deduction is Rs. 50,000.
2. The policyholder, along with parents insured (above 60), the total tax deduction is Rs. 75,000.
3. The policyholder and parents are above 60 years, and the total tax deduction is Rs1 lakh.

Health insurance exclusions:

1. Any claims during the waiting period of the policy. Usually, a policyholder can claim only after the completion of 1 year of its inception.
2. Medical hospitalisation or treatment due to war or other such activities.
3. Self-inflicted injuries.
4. Medical expenses claimed due to drugs or alcohol.
5. Diagnostic charges if the disease is confirmed and not covered in the insurance policy.

Motor insurance& Its Types

The Motor vehicle Act of 1988 has made it compulsory for every vehicle owner to have motor insurance . This type of insurance provides financial protection to the motor vehicle against any damage, theft, loss, or accident due to man-made disasters or natural calamities. There are two types of motor insurance plans available. These are the car insurance plan and two-wheeler insurance plan.

1. Loss of damage occurs when the driver does not have a valid driving licence.
2. Loss or damage occurs when the policy has lapsed and not been renewed.
3. Loss or damage occurs when the vehicle's driver is under the influence of alcohol or other intoxicants.
4. Loss or damage occurs due to manufactured situations like war, riots and nuclear activities etc.
5. Loss or damage of personal belongings in the car (it is covered only if the add-on is taken).

1. Electrical and mechanical breakdown of bike or scooter.
2. General components wear and tear of the two-wheeler.
3. Loss of damage occurs when the rider does not have a valid driving licence.
4. Loss or damage occurs when the rider of the two-wheeler is under the influence of alcohol or other intoxicants.
5. Loss or damage occurs due to manufactured situations like war, riots, nuclear activities, etc.

1. Car Insurance Plan Everyone dreams of owning a car someday. It requires a considerable amount to buy one. When people spend a lot on buying a luxurious thing, then they also ensure that its maintenance is done correctly. Every individual must insure their car to protect it from damages and incur a significant outflow of cash for repairs. The Government has made it mandatory for every car owner to insure their vehicle.In India, a car owner can buy a comprehensive or any other car insurance plan offered by the insurance companies. The insurance coverage preferred by many car owners is Third-party Car Insurance Plans. This type of insurance covers the damages and losses incurred to a third party (another person). It is preferred by many people because it is affordable. However, it has limited coverage.The other insurance which is bought by many car owners is a Comprehensive Car Insurance Plan. This type of insurance provides all the benefits of third-party insurance along with their car protection against any damages. This insurance policy is expensive as it covers most of the liabilities of the car owner in case of any theft or accident. An additional premium can be paid, and add-on covers can be taken. It will ensure all-around protection of the car along with the passengers.Some things that are excluded from a car insurance policy are:
2. Also Read : What Are Add-On Covers Of Motor Insurance?
3. Two-Wheeler Insurance Plan A Bike Insurance Policy is available in India for anyone riding a two-wheeler, whether a motorcycle or a scooter. There are two types of plans available which are the same as car insurance plans. These plans are comprehensive insurance and third-party bike insurance.The third-party bike insurance covers only third-party liabilities. Thus, the coverage provided under this plan is limited. It is always better to take a Comprehensive Bike Insurance Plan. It not only provides extensive coverage. It can also be clubbed with many add-ons covers to increase protection further. The Government has mandated that every vehicle owner has a Motor Insurance Plan. Not having an active motor insurance plan can lead to hefty fines and rejection of a claim in case of an unfortunate accident or an untoward incident.Some things that are excluded from a motor insurance policy are:
4. Comprehensive Vehicle Insurance This type of insurance covers any commercial vehicle, be it a lorry, tempo, cab or container. Any vehicle that is used for commercial purposes is covered under this policy. The number of wheels of the vehicle can be anything above a three-wheeler.

Travel Insurance

When travelling within India or abroad, travel insurance provides financial protection to policyholders and their families. Based on who is travelling, a travel insurance plan can be bought. Some of the plans are:

1. Student travel insurance plan
2. Individual travel insurance plan
3. Family travel insurance plan

The coverage of this policy includes:

1. Passport loss
2. Baggage loss
3. Hijacking
4. Medical emergencies
5. Accidental death
6. Delay or cancellation of flight

Some things that are excluded from a travel insurance policy are:

1. Delay of luggage (less than 24 hours).
2. Travelling against the doctor's advice.
3. Riots or wars in a foreign country.
4. Medical expenses due to an injury during the trip, which is self-inflicted.
5. An Injury occurs by participating in a dangerous sport like Bungee Jumping, Skydiving, Parasailing etc.

Home Insurance Plans& Its Types

Home insurance provides financial protection against any damage or loss to the property and the values present within the property. This protection covers loss due to natural calamity or a manufactured disaster like a burglary, storm, landslide, tornado, earthquake, fire and robbery etc.The different types of home insurance that can be availed are:

1. Home Structure/Building Insurance This type of insurance policy protects the homebuyer from any destruction or damage caused to the house's structure during any calamity.
2. Standard Fire and Special Perils Policy This policy provides financial protection to the policyholder towards the damages caused to the house due to the following incidents:An outbreak of fire can happen due to a short circuit, and cylinder burst etc.Any anti-social manufactured (created) activity like riots, stampedes, explosions, etc. Due to natural calamities, such as landslides, earthquakes, floods, storms, etc.
3. Burglary and theft insurance This insurance policy also covers valuables or expensive goods stolen from the house during a theft or burglary.
4. Public Liability Coverage This coverage provides insurance coverage to a third party (who may be a guest or a visitor) present in the house on the occurrence of an untoward incident which is covered under the home insurance plan.
5. Personal Accident Provides complete coverage to the policyholders and their families in case of an unfortunate demise or a permanent disability caused due to the reasons covered under the home loan plan.
6. Tenant’s Insurance Provides financial protection to the tenant living in the premises of the house property that is insured. This coverage is for any loss of property while living in a rented house.
7. Landlord’s Insurance This insurance plan provides coverage to those people who have rented their apartment/house. This policy provides coverage against any loss of property or rents when the property was rented out.
8. Content’s Insurance Provides compensation for loss of articles in the house like appliances, furniture and types of equipment etc. They are covered against loss due to natural calamities or manufactured disasters like theft, fire and floods etc.

Fire Insurance Plans& Its Types

The fire insurance plan differs from the other insurance policies concerning compensating with the sum assured. Fire insurance plans provide a sufficient amount of coverage so that the individual or the company who has incurred loss due to fire can set up their establishment. These insurance companies also cover losses incurred due to riots, turmoils and risks involved during the war.The different types of fire insurance in India are:

1. Floating policy: This policy is tailor-made for people in the export-import business. It covers the goods of an organisation which are spread in different places. For this plan, an average premium is charged. The policyholder can add their conditions and clauses also.
2. Valued policy: in this policy, the value of an item is decided when the policy is taken. The insurer agrees to pay the amount (which can be more or less than the market price) if this item is destroyed or damaged. This premium is pre-decided for those goods and items whose actual value cannot be decided. Examples that are covered under the valued policy are art, painting, jewellery and craft etc.
3. Comprehensive policy: This is a single policy that covers multiple risks. The insured is covered against fire, burglary, riot, explosion, lightning and labour disturbances etc.
4. Average Policy: This is when a policyholder takes a policy of a lesser amount than the actual value of the property. In such a case, a clause is added to the fire policy. The compensation amount is reduced.
5. Specific policy: in this policy, a specific amount of risk is insured. Here the property value is not taken into consideration. The policyholder will get only up to the sum insured in case of fire loss.
6. Replacement policy: The insurance company compensates for the property according to the market price. In this, the depreciation of the property is also taken into account. The compensation will replace the price. The new asset will have the same price as the lost property price.
7. Consequential loss policy: This policy covers the losses that a person in business will have due to a fire in their manufacturing unit or factory. The insurance company will pay for the loss by calculating the loss of sale.

Before buying any insurance policy, it is essential to understand its benefits, coverage, limitation, and features. The policy should be bought from a reliable insurance company with a good track record. Their claim settlement should also be an easy process.