Types of insurance policies
Insurance is nothing but financial protection against any uncertain event. There are a lot of events happening in life that cannot be predicted while the occurrence of each has its own financial impact. This financial impact can certainly dent your financial goals. Hence, it is important to have adequate and appropriate insurance in place. In this article, we will have a look at different insurances that are available in the market. Broadly, the insurance products are divided into two types: Life insurance and non-life insurance.
Life Insurance
Life insurance is a policy that ensures financial assistance to one’s family members or dependents after their demise. There are two types of losses after a person dies: Emotional loss and financial loss. Definitely, the emotional loss cannot be replaced but the financial loss can be recovered with the help of life insurance. Therefore, every earning member, having dependents, must have a life insurance policy. Having said, there are seven different kinds of life insurance policies that can be broadly divided into two: Pure term plan and traditional policies. A pure term plan is a plain vanilla life insurance plan, which only concentrates on risk protection. And in the case of traditional policies, apart from risk protection, an investment component is also available. However, the premium is on the higher end for traditional policies that offer less inflation-adjusted returns along with less life cover. Policies such as money-back, endowment, Unit-Linked Insurance Plan (ULIP), child’s plan and retirement plan, etc come under traditional life insurance policies.
Non-life insurance
Non-life insurance is also popularly known as general insurance. These insurances help an individual to cover financial loss caused by any uncertain event apart from death. There are around six to seven sub-types of general insurance policies. Policies such as motor insurance, health insurance, critical illness insurance, fire insurance, property insurance, marine and hull insurance, mobile insurance, cyber insurance, etc. fall under general insurance. In the case of life insurance, the whole sum assured is given to the nominee after the death of the policyholder. However, in the case of most of the general insurance policies, only the cost of damage is received and not the whole sum assured. The whole sum assured can only be received if the cost of damage is higher than or equal to the sum assured.