Explain The Various Types Of Insurance Policies In India

Insurance is a risk transfer means where an individual can transfer his risk to the insurance company and receive the cover for economical casualty that he may face due to unpredictable occurrences. Simply, it is a lawful contract between two parties, one is the insurance company who is known as the insurer and the other party is the person who is known as insured, wherein the insurance company promises to compensate for financial losses due to insured contingencies in return for the premiums paid by the insured individual. 

Insurance plays a vital function to protect what is valuable to a person. 

Types of Insurance Policies in India: –

In India, there is a vast span of insurance policies. All policies aimed at protecting specific aspects of someone’s health or assets.

The types of insurance policies in India are stated below:

• Life Insurance;
• Health insurance;
• Travel insurance;
• Motor insurance;
• Property insurance;
• Cycle insurance;
• Mobile insurance; and 
• Bite-size insurance.

• Life Insurance: Life Insurance is a specific contract between an insurance policyholder and an insurance company. In this policy, the insurer guarantees to pay an amount of money in exchange for a premium upon the demise of an insured person or after a term. This policy gives risk coverage to the insured family. 

As per section 80(c) of the income tax Act, 1961 insurance premium of life insurance policies are tax-deductible.[1]

The types of life insurance are stated below:

1. Term Insurance Plan: The term insurance plan is obtained for a fixed time. As these policies do not hold any cash value, their policies do not hold any maturity advantages. Thus, the term insurance policies are inexpensive than other policies. This policy turns beneficial only on the occurrence of the incident. 

2. Endowment Plan: Endowment plans are those life insurance policies where a percentage of an individual’s premiums go toward the death benefit, while the remaining is endowed by the insurance provider. In this plan, the policyholder will obtain a lump amount of money in case if he endures until the date of maturity.

3. Unit Linked Insurance Plans (ULIPs): Unit Linked Insurance Plans is a combination of insurance and interest. The investments are created in debt and capitals by a fund executive allocated by the insurance provider.[2] However, the policyholders can decide whether he prefers to invest in debt or capital and in what amount. However there are no inevitable returns in ULIPs, a amount of money is paid to the policyholder at maturity. 

4. Money Back Plan: This plan is very much related to an endowment policy, the only distinction is that this policy gives many survival advantages which are assigned proportionally over the plan period. However, if the policyholder expires during the policy term then the entire amount ascertained is paid to the nominee, this is despite the survival benefits that the policyholder has obtained. 

5. Whole Life Insurance Policy: The whole life insurance policy provides a person with a life cover for the future. If the premium amount is paid regularly, the insurer guarantees to pay the amount insured to the nominee of the policyholder after the demise of the policyholder. 

6. Retirement Policy or Pension Policy: This policy is a combination of investment and insurance. A quantity of the premiums goes toward creating a retirement oeuvre for the policyholder. This plan is accessible as a lump-sum or monthly expenditure after the policyholder retires.

7. Child Insurance Plan: This insurance plan is an investment as well as a savings plan which is specially formulated to assist the child’s future economical necessities. It entitles a person to start investing in the child’s future. Some child insurance plans allow mediator secrecy at certain periods.

• Health Insurance: Health insurance is a contract between the policyholder and the insurance company, whereby the insurance company agrees to undertake assurance of allowance for medical expenditures in case the insured gets sick or meets with an accident that directs to the hospitalization of the insured person. 

The types of health insurance are stated below:

1. Individual Insurance Policy: This policy only covers a person. It takes care of a person’s medical expenses in case the person gets admitted into a hospital. The premium of this policy in such cases will depend on personal aspects such as the person’s age, medical record, etc.

2. Maternity Insurance Policy: This policy is a women-specific health insurance policy. This policy delivers coverage for pre-natal and post-natal expenditures along with the delivery and ambulance expense. A baby cover is also provided wherein the expenses related to the newborn baby are covered up to a specific period. 

3. Family Floater Policy: The family floater policy provides a person with sole insurance cover for his entire family so anybody in his family can contend in case of hospitalization or surgical expenditures. 

4. Senior Citizen Insurance Policy: These health insurance policies are specially formulated for senior citizens who are above 60 years old. Since old people are more inclined to make a claim, the premium to be paid is elevated in such cases. Many insurers do not tension on a pre-medical screening or omit pre-existing illnesses before granting senior citizen insurance.

• Travel Insurance: Travel Insurance is insurance that protects a person while he travels. Travel Insurance conserves the person and person’s family against travel-related accidents, immediate medical expense during travel, casualties such as luggage loss, loss of passport etc and intermission or delays in flights or impeded the arrival of baggage etc.

The travel insurance policy is perfect for a person contemplating travelling, either within the nation or international.

The types of travel insurance are given below:

1. Domestic Travel Insurance Plan: This policy is specially organized for clients planning to travel within the territory of the country. A domestic travel insurance policy protects the policyholder from expenditures that may result from treatment of a medical accident, theft, loss of baggage, delays or revocation of aviation, permanent disability, and personal liability.[3]

2. Medical Travel Insurance:  Medical travel insurance policy precisely designed to cover all the expenditures arising from medical emergencies and other healthcare-related problems during the travel. 

3. Senior Citizen Travel Insurance: This policy generally belonging to the age of 61-70 years old persons. This insurance offers additional coverage against dental treatments as well as cashless hospitalization.

4. Group Travel Insurance:  The group travel insurance policy helps an individual to save a lot on premiums, without having to arbitrate on the safety net against any accidental and hostile development that might take form through the course of the trip.

5.  Single and Multi-trip Travel Insurance:  The single-trip travel insurance policy conserves its validity through the time a person on a trip. It covers both medical as well as non-medical expenditures. The multi-trip travel insurance policy gives extensive coverage.

• Motor insurance: Motor insurance is an insurance policy that encompasses the policyholder in case of economical casualties arising from an emergency or other damages maintained by the insured vehicle. 

The types of motor insurance are stated below:

1. Private Car Insurance: Private Car Insurance is one of the most essential purchases whether it is a natural disaster or somebody intentionally or unintentionally harms or steals the car, private car Insurance takes care of all. With compulsory aspects, a person can guarantee that any harm that happened to another person’s life or possession by his vehicle will be covered in a claim. 

2. Two Wheeler Insurance: It is a mandatory prerequisite as per the Motor Vehicles Act 1988 and Motor Vehicle Amendment Act 2019.[4] It gives coverage for any economical loss to the vehicle due to accidental loss or damage, the lawful liability toward third parties in the incident of bodily injury, death or property damage. 

3. Commercial Vehicle Insurance: These policies safeguard businesses from conceivable economical loss to the vehicle ensuing out of unexpected loss or damage, the legal liability towards third parties for physical injury, death or property damage on account of any accident encompassing the vehicle.

• Property insurance: Property insurance gives coverage for people, businesses and other related elements against man-made or natural disasters on their property. It furnishes a way for protecting properties such as a house, shop, factory, business, machinery, stocks from fire, burglary, implosion, riots, floods, earthquakes, etc. 

The types of property insurance are stated below:

1. Burglary Insurance policy: This policy offered for a house or a business. This policy encompasses assets such as vital documents, cash and insurances which are protected under the property. A burglary insurance policy can also cover damages induced due to thefts, riots and attacks. 

2. Umbrella Insurance Policy: This policy is an extensive insurance policy that offers protection to businesses against different kinds of dangers. This policy is adequate for large-sized offices as well as small and medium-sized offices. 

3. Fire Insurance: This policy offers security for buildings, shops, industrial organizations, hospitals, etc. It covers quantities such as finished goods, raw materials, accompaniments, machinery against fire and allied dangers. This policy also offers cover against storms, cyclones, floods, eruptions, lightning, aircraft damage, riots, landslides, bursting and overflowing of water tanks, etc. 

4. Marine Cargo Insurance: This policy encompasses the risk of goods that are being transited through rail, road, air and water. This policy is beneficial for import and export dealers, buyers and sellers, contractors etc. 

• Cycle Insurance: The insurance policy protects if the cycle is vandalized, damaged or snatched, or if a person falls off their bicycle and hurt himself or another person. 

The types of cycle insurance are given below:

1. Comprehensive Insurance – This insurance policy covers all the damage induced to third-party as well as own damage. Own damage occurrences could be natural disasters, burglary, theft, riots or damage caused during travel. 

2. Third-party Liability Insurance – This insurance offers an essential cover against the damages inflicted to the third-party bodily damages to their vehicle.

• Mobile insurance: If someone’s mobile is lost or damaged, there is a chance of the data in the device being lost or stolen to endure such issues, companies are now giving mobile insurance. These policies give coverage against theft or unexpected damage to all types of phones.
• Bite-sized Insurance: This Policy encompasses certain wants of the policyholder for a comparatively shorter term. Such policies are available at a lower premium.

Conclusion:-

Life is planned with an unexpected situation. Any time anyone needs a huge sum of money for an unexpected situation so these insurance policies can help a person by offering a deception of support to minimize economical liability from unexpected circumstances.

By Shreeparna Goswami

3^rd year of Shyambazar Law College.

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[1] Income tax benefit on life insurance: section 80C & 10D – HDFC Life, https://www.hdfclife.com/amp/insurance-knowledge-centre/tax-saving-insurance/tax-benefits-on-life-insurance?agentcode=00399206&source=NW_KC_PlanRW_8.

[2] ULIP (Unit Link Insurance Plan ) – Benefits, Returns, Best ULIP Plans, https://cleartax.in/s/unit-link-insurance-plan-ulip.

[3] Domestic Travel Insurance: Check Plans Features, Benefits & Reviews, https://www.coverfox.com/travel-insurance/domestic-travel-insurance/.

[4] Motor Vehicles (Amendment) Act 2019 – ICICI Lombard, https://www.icicilombard.com/blog/car-insurance/car/new-motor-bill-and-its-impact-on-the-insurance-sector.

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