Everything You Need To Know About Insurance

Everything You Need To Know About Insurance

Before we proceed to understand the basics of Insurance, let us understand some of the jargon that you will come across while going through this article.

Insurance Policy: a document containing the terms and conditions of an insurance contract

Insurer/ Insurance Company: a person or company that undertakes to compensate for the uncertain losses of the insured or policy holder.

Insured/ Policyholder: a person or company that is covered during losses by the insurance company.

Premium: an amount that is to be paid by the insured for an insurance contract.

Insurance is an assurance or indemnity that protects the insurance buyer from financial losses in future. A company that sells an insurance is called an insurer or insurance company, and a person or company that buys an insurance is said to be insured or policyholder. The agreement of an insurance involves payment of money in fragmented amounts to the insurer on a regular basis in exchange for a promise to hedge against the risk or cover the losses borne by the policyholder. In other words, the insured/policyholder makes certain losses by paying certain amount (which is technically called as premium) so as to be protected from future uncertainties by the insurer.

Anything that you have plans to buy, or already own them- be it a home, vehicle, laptop, expensive gadgets, building or even business- you can get them insured by paying certain amount of money as premium to the insurance company. Today there are several types of insurance policies available in the market. Broadly, there are five types of insurance policies that you need to be familiar with.

#1 Vehicle/Auto Insurance

Auto/ Vehicle Insurance is a popular type of insurance that protects the policyholder against financial losses in the event of accident or theft of the vehicle owned by the insured. The vehicle insurance typically covers damage or theft of the vehicle, legal responsibility towards others in case of damage to other’s property or vehicle caused by your own and medical coverage to the owner of the vehicle in case of injuries due to accidents caused by collision.

#2 Home Insurance

Home Insurance or Homeowner’s Insurance (as it is popularly known in the US) covers the financial losses, and damages to the home and its assets, thus providing liability coverage to the home. Home insurance policies are not seen as being bought as much in India, and some other Asian countries as in the western countries such as US and UK. But, Home insurance is one of the requirements when the owner requests a bank for a mortgage for his/her home.

#3 Business Insurance

Business insurance is another popular type of insurance sought by companies/startups that shields organizations from financial losses, or misfortunes because of uncertain events that may happen amid the typical course of business. There are many kinds of business insurance for organizations such as protection against property damage, risk with regard to employees and legal liabilities. Organizations assess their protection needs in light of potential dangers, which can fluctuate depending on the kind of environment in which the organization works.

#4 Health Insurance

Health is Wealth. With good health comes happiness in life, and it is only with good health that you can fulfill all your dreams and desire of your life. You may not know what would be your financial condition in future in the event of your ill-health. That’s when a health insurance policy will come to your rescue. Health Insurance is a type of insurance coverage that covers your medical or surgical bills which might occur due to illness or injury to your body. Health insurance cost is minus the premium, and is tax-free.

#5 Life Insurance

This is the most popular insurance known to us. Life Insurance protects the policyholder from financial losses in the event of his/her death. Only the beneficiaries, who names are mentioned in the policy, are entitled to receive the corpus of the policy. The beneficiary needs to provide the death certificate to the insurance company to get the financial benefits. 

The objective of Life Insurance is to give a measure of monetary security for your family after your demise. Hence, consider your financial need, and the standard of living you would like to give to your family in future. Ask yourself before deciding on purchasing a life insurance who will be responsible for my funeral, liability towards others and my medical expenses to be paid to the healthcare unit? These questions will help you choose a right policy.