Insurance: Its Importance, Different Types, and Advantages
The risk of death, disability, or destruction surrounds an individual’s life and property. These dangers could lead to financial losses. Insurance is a smart approach to transfer these risks to a third party.
What is the definition of insurance?
The insurance firm (insurer) and the individual enter into a legal agreement known as insurance (insured). In this case, the insurance company guarantees to compensate the insured for any losses incurred as a result of the covered contingency occurring. The contingency is the occurrence that results in a loss. It might be the policyholder’s death or the property being damaged or destroyed. It’s referred to as a contingency because the outcome of the occurrence is unclear. In exchange for the insurer’s promise, the insured pays a premium.
What is the procedure for obtaining insurance?
The insurance policy is a legal contract between the insurer and the insured for the insurance. The insurance policy specifies the rules and situations under which the insurance company will pay the insured person or nominees the insurance sum. Insurance is a means of safeguarding yourself and your loved ones from financial ruin. In general, a large insurance policy has a lower premium in terms of money paid. Because very few insured people actually claim the insurance, the insurance firm bears the risk of offering a high level of coverage for a low cost. This is why you can get insurance for a large sum of money at a low cost. Any individual or business can seek insurance from an insurance company, but the insurance company has the final say on whether or not to give coverage. To make a decision, the insurance company will review the claim application. In most cases, insurance firms refuse to insure high-risk applicants.
What kinds of insurance are available in India?
In India, insurance can be split into three categories:
Life insurance is a type of insurance that protects
as the name implies, is insurance for your life. You purchase life insurance to provide financial security to your dependents in the case of your untimely death. If you are the sole breadwinner for your family or if your family is largely reliant on your income, life insurance is especially crucial. In the event that the policyholder dies within the policy’s term, the policyholder’s family gets financially rewarded.
Health insurance is purchased to cover the costs of pricey medical treatments. A variety of diseases and conditions are covered by various types of health insurance coverage. You can purchase both generic and disease-specific health insurance policies. A health insurance policy’s premium normally covers treatment, hospitalisation, and prescription expenditures.
Insurance for automobiles
Car insurance is a crucial item for every car owner in today’s environment. This insurance covers you in the event of an unforeseen event, such as an accident. Some insurance additionally cover damage to your car caused by natural disasters such as floods or earthquakes. It also includes third-party liability, which requires you to pay compensation to other drivers.
Insurance for Education
Child education insurance is similar to a life insurance policy that has been established specifically as a savings tool. When your child reaches the age for higher education and is accepted into college, education insurance might be a terrific option to provide a lump sum amount of money (18 years and above). This money can then be utilised to cover the costs of your child’s further education. The child is the life assured or the recipient of the funds in this insurance, whereas the parent/legal guardian is the policy owner. Using the Education Planning Calculator, you may estimate how much money will be spent on your children’s higher education.
We’ve all fantasised of having a home. Home insurance can assist cover the cost of replacing or repairing your home in the event of an accident, such as a fire, or other natural disasters or risks. Other events covered by home insurance include lightning, earthquakes, and other natural disasters.
What are the insurance tax advantages?
You can take advantage of income tax benefits in addition to the safety and security benefits of purchasing insurance.
- Up to 1.5 lakh in life insurance premiums can be claimed as a tax-saving deduction under Section 80C.
- Up to 25,000 in medical insurance premiums for you and your family, as well as 25,000 for your parents, can be claimed as a tax-saving deduction under Section 80D.
These claims must be submitted while electronically submitting income tax returns.
You can purchase an insurance policy both offline and online, whether it is for life insurance, health insurance, or general insurance. Just as there are insurance agents who may assist you in purchasing a policy, there are websites where you can purchase a policy. Before picking and investing in an insurance coverage, be sure you’ve done your homework.