Life is full of unexpected situations and we cannot stop things from occurring. What we can do is protect ourselves at our level best. But how can we protect ourselves from life situations? Yes, you’re right, we cannot. Protection here means getting a financial cover of about the total worth of risk. This is what insurance does. It protects an individual or a thing with its financial worth. Let’s see how it works and what all can be included.
Insurance is a wide term which means protection from the risk. Risk is everywhere. Right from when we leave our house for work to coming back. Also, within the house premises. Anything can happen to us as well as things that surround us.
For instance, while traveling to the office, one may meet with an accident. The second scenario, there can be a possibility of death or major vehicle breakdown in this situation. But, one can protect both of these losses with financial aid. Let’s see how.
Insurance basically has two types:
- Life insurance
- General insurance
In the above scenario, the threat of life is covered by life insurance and the threat of vehicle by general insurance.
For us to understand the whole idea of insurance, let’s understand the terms involved in the contract.
| Insurer : | The party that provides the insurance to the insured is termed as an insurer. This party may be an agency or a company that is registered as a service provider. |
| Insured : | The party that seeks for the desired protection is termed as an insured. He or she approaches an agency or company to acquire details and enter into an insurance contract. |
| Insured Amount : | The total amount of risk that is being insured by the insured is known as insured amount. This amount can vary according to the cost of the asset in case of general insurance. |
| Premium : | The amount that is agreed on by insured and insurer which will be paid at a constant interval of time. This amount includes a part principal amount plus interest. |
| Policy : | The agreement that is being entered by both the parties is termed as an insurance policy. |
Life Insurance
Life insurance is a cover against one’s life or a period, whichever occurs first. There are various advantages of life insurance as there is nothing more important than life. In the era where we are surrounded by inflation, there is a family that survives after us. A single-handed income goes nowhere. Hence, it is important and mandatory that one has a cover for his or her life.
Whatever be the case, death or maturity of the policy. The company pays off the entire amount on whatever occurs first. However, there are different types of life insurance that needs to be selected based on the need. With the world becoming a global village, there are various options available to buy life insurance online. One just needs to research about different types and there you go. You can now buy life insurance online with a single click.
The different types of life insurance are:
- Whole life insurance: cover for entire life (does not have a maturity period);
- Money back policy: periodic returns + Insurance;
- Endowment plan: savings + Insurance;
- ULIP (Unit Linked Insurance Plan): Investment options + Insurance
- Term plan: Risk cover;
- Child plan: Protects child’s financial security;
- Pension policy: Regular pension after retirement + Insurance.
Let us now look at some advantages of life insurance:
- Shares and covers risk;
- Is beneficial for tax treatments;
- They are flexible with the owner’s needs;
- It makes life easier and less stressful;
- The small chunks are always affordable.
General Insurance
What is general insurance and how is it helpful?
Any loss other than death can be covered under general insurance. General insurance covers the financial worth of the loss that has occurred. This type of insurance is helpful to protect the assets of an individual and cover the medical expenses.
There is always confusion whether health insurance policy comes under life insurance or general insurance. So, as the name says – life insurance covers only life risk. Health insurance is a type of general insurance that covers the medical expenses up to a certain limit, as per the contract.
You may have got an idea about what is general insurance. Now, let’s undergo some types of general insurance that one can have.
- Motor insurance;
- Health insurance;
- Travel insurance;
- Employee benefit policy;
- Home insurance, etc.
Some of the benefits of general insurance are:
- Risk cover;
- Protection of assets;
- Minimum loss;
- Capital being mobilized;
- Maintains financial stability.
Advantages of Insurance:
- There are numerous income tax benefits for those who come under the tax bracket;
- It helps the economy grow;
- With the formation of companies, there will be an increase in employment rates. Hence, it boosts the employment rates;
- Financial stability of the economy is maintained;
- The rotation of finances helps the economy to boost the GDP;
- Helps the individuals to minimize the losses;
- It covers the risk than an individual is afraid of;
- Helps the individual live comparatively stress-free life;
- Insurance encourages saving prospects of an individual;
- It helps in maintaining the standard of living by decreasing the financial loss;
- It helps in promoting foreign trade and boost the economy;
- It has a positive impact on inflation by maintaining it to a lower level.
Disadvantages of Insurance:
- It does not cover the entire loss that is incurred or all type of losses;
- The process to claim may get lengthy;
- It may happen that the loss incurred is way much higher than the claim received;
- Life cannot be measured in terms of money. Hence, the loss is always higher for life insurance;
- It may give rise in crimes. There may occur instances where insured are hurt to get hands on the insurance amount.
Insurance has more positive sides than the negative ones. According to the researches, it is always advisable to insure the worthy assets. Healthcare insurance is a must-have for all the individuals irrespective of their age. This helps in protecting and works as a financial aid when in need.
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