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Insurance Coverage In India: Explained

About insurance policy

Insurance means protection from Financial loss

Insurance is a legal agreement between two parties i.e. the insurance company (insurer) and the individual (insured).
The company collects small amounts of money from its clients known as premiums.
The insurance premium is sometimes paid on an annual basis, half-yearly or, as most companies today allow, monthly financing of the premium.
In this, the insurance company promises to compensate for the losses of the insured on happening of the insured contingency. The contingency is the event that causes a loss.
How it works :
  • The insurer ( insurance company) and the insured ( customers ) get a legal agreement for the insurance, which is called an insurance policy.
  • The insurance policy has details about the terms and conditions under which the insurance can be claimed by the insured person.
  • The insured person has to pay the premium to the company. An insurance premium will be more or less expensive and cost can vary depending on the type of coverage you are looking for, as well as the risk.
  • The insurance company takes this risk of providing a high cover for a small premium because very few insured people actually end up claiming the insurance.
  • There are 24 insurance companies in India… Out of which 1 is Govt company ( LIC ) and remaining 23 are Private companies

There are 4 Types Of Insurance Everyone Needs

1. Life Insurance
2. Property insurance
3. Health insurance
4. Vehicle insurance

1. LIFE INSURANCE

about Life Insurance
A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured person dies.
Life insurance is of 3 types
  • Term life insurance
  • Whole life insurance
  • Universal life insurance
Term life insurance:
It generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage.

2. PROPERTY INSURANCE:

about property insurance
Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes Fire insurance, Flood insurance, Earthquake insurance, Home insurance.

3. HEALTH INSURANCE:

about health insurance

Property is insured in two main ways
1.Open perils
2. Named perils.
Open Perlis :
Open perils cover all the causes of loss not resulting from earthquakes, floods, nuclear incidents, acts of terrorism, and war.
Named Perils : 
Named perils require the actual cause of loss due to damage-causing events as fire, lightning, explosion, and theft.

4. VEHICLE INSURANCE:

There are three types of property insurance coverage:
  • Replacement cost
  • Actual cash value and
  • Extended replacement costs.
About vehicle insurance
  • Replacement  cost :
    It covers the cost of repairing or replacing property at the same or equal value. The coverage is based on replacement cost values rather than the cash value of items.
  • Actual  cash value :
    It covers the owner or renter the replacement cost minus depreciation. If the destroyed item is 10 years old, you get the value of a 10-year-old item, not a new one.
  • Extended replacement costs :
    It will pay more than the coverage limit if the costs for construction have gone up; however, this usually won’t exceed 25% of the limit. When you buy insurance, the limit is the maximum amount of benefit the insurance company will pay for a given situation or occurrence.
-Bhargav Teja, Frontlines media

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