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Insurance Policy – Types of Insurance Policies in India

Insurance Policy – A Quick Overview

While you cannot ensure a risk-free life for you and your loved ones, you can always choose an insurance policy to be well prepared for any unforeseen emergency in life. A right insurance cover will not only protect you against any financial setback but also offer the much-needed help in times of any unforeseen event.

Types of Insurance Policies & Plans In India

Every individual has different needs. Therefore, a one-size-fits-all approach doesn’t work when it comes to buying an insurance policy. There are different types of insurance policies that provide coverage against different kinds of risks. As a buyer, one should be aware of the factors to consider while buying an insurance policy.

In India, insurance policies can be broadly classified into general insurance and life insurance. Other than these two categories, there is another category called pocket insurance, which is slowly gaining momentum in India. Let’s review each of these policies in brief, along with the features and benefits they offer.

General Insurance

General insurance plans protect you from any financial loss caused to your assets including home, car, property, and others due to fire, burglary, theft, or accidental damage. It also provides personal insurance cover against health and travel emergencies.

General Insurance can be further divided into the following categories:

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

Health Insurance:

A health insurance helps you take care of your & your family’s health without any financial distress. A policyholder can claim the cost of their medical care until the maturity period of insurance by paying a nominal premium every year. You can choose from a wide range of health, critical illness, and accident insurance policies available in the market. A tax rebate can also be claimed against the premium paid for these insurance policies.

Travel Insurance

If you have wanderlust, then a good travel insurance policy is a must. The policy covers unforeseen expenses arising due to loss of baggage or passport, medical emergencies, trip cancelation, accidents, and more.

Motor Insurance:

Motor insurance offers a cost-effective plan for all motor cars, including the commercial ones with optimum coverage against theft, accidental damage, and more. You can insure your car or two wheeler with a third party liability motor insurance policy or a comprehensive motor insurance policy . A commercial vehicle can also be insured in the same way.

Home Insurance:

Home insurance policy safeguards you against financial losses resulting from damage caused to your house due to natural calamities, fire breakout, accidental damage, and burglary. There are different types of home insurance policies, some of which not only provide coverage for the structure of the home but also the valuables inside it. Both tenants, as well as home owners, can buy a home insurance policy.

Life Insurance:

A life insurance policy provides financial protection to the family of the insured in case of the policyholder’s demise. It offers a decent lumpsum amount that can be used to meet future expenses, in the absence of the policyholder.

There are different types of life insurance policies; depending upon the type of coverage offered:

  1. Term Insurance
  2. Whole Life Insurance
  3. Child Plan
  4. Retirement/ Pension Plan
  5. Endowment Policy
 

Term Insurance

A term insurance policy offers benefits to the family of the policyholder only if he/she dies in the specified term period as per the policy. If the insured remains to be living until the policy ceases, then there is no pay-out of any claim.

Benefits:

There are different types of life insurance policies; depending upon the type of coverage offered:

  • Life coverage and financial security at an affordable rate of premium.
  • Certain term insurance policies offer multiple flexible pay-out options.

Whole life insurance

Whole life insurance policy covers the entire living period of the policyholder. It includes a cash value component that increases exponentially over a period of time.

Benefits:

  • Whole life insurance holders can either withdraw their cash or take loan against it.
  • The insured can get coverage against death for the entire living period, unlike the term insurance.

Child Plans

A Child Insurance Policy helps you start saving and investing your money to secure your child’s future financial needs. You can withdraw the accumulated sum when your child reaches adulthood.

Benefits:

  • Child insurance policy secures the future of a child even in the absence of parents.
  • A secured loan can be taken against the policy in the intermediate period.

Retirement/Pension policy

Retirement policy ensures the policyholder a regular income even after retirement. With this plan, you can secure yourself financially in the old age.

Benefits:

  • The retirement policy covers your financial needs post your retirement until the age of 100 years.
  • The policy also offers a premium rebate.

Endowment Policy

Endowment policy ensures an amount to be paid either to the policyholder or their beneficiaries as per the maturity date. This policy serves both the purpose of insurance and savings.

Benefits:

  • A policyholder can benefit from long term savings.
  • Endowment insurance also provides terminal bonus and reversionary bonus to the policyholder.

Pocket Insurance

Also referred to as micro insurance or small insurance, Pocket Insurance is essential to safeguard yourself, your family, and your personal belongings from a variety of risks and uncertainties. It covers you in incidents such as wallet theft, road trip cancellation, electronic gadget breakdown, gym injuries, lost keys, damage to mobile screen, and more. Pocket insurance covers a host of products at an affordable price.

Pocket insurance policies can be categorized under the following segments.

Assistance: The products under Assistance category are designed to aid you with challenges in your everyday life. You can choose from a wide range of products such as Wallet Protect, Key Replacement Insurance, Purchase Protection Cover, ATM Assault & Robbery Cover, Designer Clothes Insurance, and more.

Lifestyle: The Lifestyle category under Pocket Insurance includes products such as Watch Insurance, Morning Walk Accident Insurance, Daily Commute Insurance, and more. Products under the Lifestyle category help you cover minor risks at very low premiums.

Travel: Pocket Insurance products under Travel category cover you against the vulnerabilities and risks during your journeys and trips. You can seek coverage for your road trips, treks, pilgrimage, and even your baggage. The duration of the policy ranges from 10 days to 365 days.

Health: Under the health category, you can avail a range of health insurance policies including Child PA Cover, Pregnancy Complications Cover, Hospital Cash Cover, Dengue Cover, Infection Cover, amongst others.

Why Should You Buy An Insurance Policy Early in Your Life?

An Insurance policy safeguards you against financial risks due to loss or damage to your assets or valuables. Delaying the purchase of an insurance policy exposes you to multiple risks and hazards. Most insurance companies come with an upper age limit for entry, so you may not be eligible to apply for health insurance after you cross a certain age. If you have had insurance since a young age, you can have a lifetime renewability. Some insurance policies also offer you tax benefits.

What Are The Benefits Of Buying An Insurance Policy Online?

You can buy an insurance policy offline through an insurance broker or you can buy the same online from our website. Purchasing insurance online is more convenient as the whole process hardly takes a few minutes and you get your policy document emailed to you almost immediately.

Here are some of the benefits of purchasing an insurance policy online.

  1. Convenience: You can easily purchase an insurance policy online from the comfort of your home. With just a few clicks on the screen, you can secure your valuables.
  2. Online reviews: Before you buy a policy online, you can read reviews about a policy online. This will help you make an informed decision.
  3. Easy comparison: You can compare multiple insurance policies online and choose the one that best fits your requirements.

How Should I Choose My Insurance Policy?

Most financial planners suggest purchasing an insurance policy even before one starts to save. One must secure their lives and valuables without giving a second thought to it. To the least, one should definitely invest in a life insurance policy to safeguard the lives and future needs of their near and dear ones.

Here are few factors to consider before choosing an insurance plan:

  • Select the indemnity cover that suits you: Insurance plans are tailored as per different segments like an individual health plan or a child plan. You can analyse all the existing plans and choose a plan that meets your specific requirements.
     
  • Estimate your coverage amount: There is no certainty as to which category one falls into. However, it is wise to take into account various factors like lifestyle choices, hereditary illness, city of residence, etc. to estimate the coverage amount.
     
  • Compare your pocket costs: Insurance companies do not cover you for the entire amount of loss. There is a certain percentage of the claim amount that has to be borne by the policyholder. You can always cross-check different plans and pick the one that offers you maximum coverage at a reasonable cost.
     
  • Benefits: Benefits offered by every plan is different. You are likely to narrow down your options once you come across this point. While comparing policies, a lot of people simply go by the lowest premium amount when they should actually look for the benefits that each policy offers.
     
  • Budget: A policy should not be chosen purely based on its premium. However, you must carefully analyse the benefits that a policy offers as against the premium paid. The cost of insurance must be reasonable enough. Also, if price is a major concern, you should check out the Pocket Insurance policies offered by Bajaj Finserv. These policies offer you adequate coverage at premiums starting from just Rs. 79.
     

Frequently Asked Questions

What is an Insurance policy?

An insurance policy is a contract between the insured and the insurer to reimburse the amount of incurred loss in exchange for a nominal premium amount.

How many types of insurance policies are there?

Insurance policies are generally divided into two categories -

  1. General insurance
  2. Life insurance
Further, these policies are subdivided into multiple categories targeting different individuals and different assets. Pocket Insurance too is gaining popularity, covering a host of products for individuals who are looking to buy affordable insurance policies.

Which insurance policy is the best to buy in India?

Insurance policy is designed for a specific purpose covering certain risks for an individual. This is highly subjective and differs from person to person.

Which life insurance policy is the best?

Life insurance policy is further divided into different categories like term insurance, whole life insurance, endowment policy, and more. You can analyse the available options and choose the one that caters to you in the best possible way.

Why and when buy an insurance policy?

Insurance policy gives financial security to your near and dear ones. You must not risk your family’s future if you are the only bread earner of the house. Even delaying the purchase of a insurance policy can be risky. Instead, be an early bird and buy it right away to avail its benefits.

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