Types of Insurance

In the first blog of the series, we discussed why insurance is required.
To read the first Blog (Insurance - Introduction) in this Series. Click here
Let us now understand various types of insurance.


Types of Life Insurance

1. Term Insurance: Term Life insurance plan is the most basic and economical plan which financially secures the immediate future needs of the family of the insured in case of his/her death.
a. In the case of demise of the insured during the term of the policy, the sum assured will be provided to the nominee; either in full or in installments, against the premium paid by the insured.
b. Provides coverage in case of full or partial disability, when the regular income of the insured is disrupted.
c. If the policyholder survives the term of the policy, then the insured either has to obtain extended coverage or let go of the coverage entirely.

2. Endowment Policy: Endowment plans are savings oriented life insurance plans which promise guaranteed benefits. People looking for long-term benefits that provide savings along with life coverage can opt for Endowment Policy.
a. In the case of demise of the insured during the term of the policy, the sum assured will be provided to the nominee.
b. If the insured lives post maturity of the plan, maturity benefits will be paid to the insured.
c. Availing loan against the policies in case of emergencies.

3. Unit Linked Insurance Plan (ULIP): It is an optimal combination of insurance and investment components. People looking to have higher returns over the long term period should opt for ULIP. It is considered an improvement of a traditional or endowment plan. As compared to Endowment Plans, ULIP is much more transparent process. One can clearly track the expenses being charged or the amount of return getting generated over a period of time.

For instance, ABC has financial goals of building a corpus for the down payment of home and car 10 years down the line and wanted a life cover to shield against the uncertainties of life. Among various financial instruments, he found that ULIP will be able to address his future goals in the following manner:

- Life Insurance Cover: One of the mantras for securing the future of the family is to have Life Insurance cover which the ULIP is fulfilling.

- Investment for Creating Wealth: Once the security of family is taken care of, the focus is on creating wealth for the future. ULIP primarily invests in diverse asset classes such as equity, debt or balanced fund. In this equity will offer you the high rate of return on your investment whereas balance and debt funds will prevent the scrapping of the corpus in worst conditions.
If you are a risk-averse investor and looking for guaranteed savings along with insurance cover, then one should opt for endowment plans. However, if you need inflation-adjusted returns which help you to maximize your wealth; you should opt for Unit Linked Insurance Plan (ULIP).

Types of General Insurance

1. Health Insurance: It will provide cover for you & your family and take care of all medical expenses incurred in case of any unforeseen medical emergencies. In the present era, high rising medical cost is quite a burden for everyone but having a medical cover would be very beneficial and will result in saving unwanted expenses. One can also get cover towards maternity expenses, pre-existing illness, etc. as listed under the terms of policy chosen.

2. Motor Insurance: It acts as the safety tool for the riders, as motor insurance protects you from damage or theft of the vehicle. If there is an accident happening, insurance will give you the coverage towards the financial loss occur in order repair the vehicle .

3. Travel Insurance: While traveling abroad or domestic, an important document one should carry along is your travel insurance which is to be purchased from a standardized insurance service provider. Travel insurance is worth buying as it will provide you coverage against Accidental Death, lost passport, lost checked-in baggage, trip delays etc.

There are many insurance options available in the market one can purchase policy depending upon individual situation, claim settlement ratio, lifestyle and employment benefits.



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