Firstly, what is insurance? So, insurance is a legal agreement that lies between two parties i.e the individual (who wants to be insured) and the insurance company (the insurer). In that, the insurance company promises to give insured to the losses on the happening of the insured contingency. The contingency is the event that creates a loss. It can be loss of death, money, etc. it’s called a contingency because there’s uncertainty regarding the happening of the events that cause loss. For the promise, the insurer insured pays the premium in return.
Insurance is a means of security and safety from financial loss. An entity that gives or provides insurance is known as an insurer(insurance company). And a person or an entity who buys insurance is known as a policyholder or insured. The amount of money charged by the insurance company to the insurer for the coverage set forth in the insurance policy is known as the premium.
Now, why is insurance important? So, insurance is important because the life and property of an individual are surrounded by the risk of disability, death, or destruction. These risks may result in your death or it can be a huge financial loss. Insurance is a way to transfer your risk to that company. And in this article, we cover all information about insurance just read along.
How Did insurance Work?
Here, the insurer(the insurance company) and the insured (individual) get a legal; contract for the insurance that is known as an insurance policy. The insurance policy documents have all information about your insurance for example under which terms and conditions the insurance company will pay out the insurance amount to the insured person or to the nominees. So, before getting your insurance policy you must read all the documents carefully.
Insurance is a key to protect yourself and your family from a financial loss. Usually, the premium for a big insurance cover is much lesser in terms of money paid. The insured (insurance company) takes the risk of providing a high cover for a small premium because very few insured people actually need to claim the insurance.
Any individual or the company who wants to be insured can seek insurance from an insurance company, but the decision to provide the insurance is at the discretion of the insurance company. The insurance company can evaluate the claim application to make a decision. Usually, the insurance company refused to provide the insurance to high-risk applicants.
Types of insurance?
Any kind of risk that can be quantified can potentially be insured. Specific kinds of risk that may give to claims are known as perils. An insurance policy will set out in detail which perils are covered by the insurance policy or not. Insurance can be categorized into a few types.
As the name suggests, health insurance is for health. Health insurance covers the medical costs for expensive treatments. Here, different types of health insurance policies cover an array of ailments and diseases. You should buy a generic health insurance policy as well as policies for a specific disease. The premium paid towards a health insurance policy covers hospitalization, treatment, and medication costs.
Here also as name suggesting that life insurance is for insurance of life. You should buy life insurance to make your dependents financially secured in the event of an unfair event. Life insurance is important if you are the only person in your family you get paid or if your family is almost dependent on your income. Under life insurance, the policy holder’s family has financially compensated in case the policyholder expires during the running period of the policy.
Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum payment or an annuity. Mostly, in states, a person cannot purchase a policy on another person without their knowledge. In many countries such as the UK and the United States, the tax law provides that the interest on this amount value is not taxable under certain circumstances.
It is for the insurance of education as the name suggests. Child education insurance is related to the life insurance policy which has been specially designed as a saving tool. Education insurance is a great way to provide a lump sum amount of money when your child reaches the age of higher education and is ready to join college at 18 years of age or above.
This fund can be used to pay for your child’s education expenses. Under this insurance, the child is the life assured or the recipient of the funds taken. While the guardian/parent is the legal owner of the insurance policy. You can estimate the money that will go into funding your children’s higher education using an education planning calculator.
Auto insurance for the insurance of vehicles. In today’s era, car insurance is an important policy for car owners. This auto insurance protects you against untoward incidents such as an accident. Well! Some policies also compensate for damages to your car during natural calamities such as earthquakes and floods. It also covers third-party liability where you have to pay for damages to other car owners.
Auto insurance typically covers the property coverage, for the damage or theft of the vehicle. Liability coverage covers the legal responsibility to others for bodily injury or property damage. Also, the medical coverage, for the expenses of treating the injury, rehabilitation and sometimes lost wages and the funeral expenses.
Home insurance is for the insurance of homes as the name suggests. We all dream of owning homes. Home insurance will help you with covering the loss of damages caused to your house due to accidents such as fire and other natural calamities. This insurance covers other instances like earthquakes and lightning etc.
Property insurance may include specialized forms of insurance such as earthquake insurance, flood insurance, boiler insurance, home insurance. The term property insurance is like casualty insurance. It is used as a broad category of various sub types of insurance. Some of them are aviation insurance, boiler insurance, crop insurance, etc.
Benefits of insurance?
Apart from the security and safety, there are some benefits of buying insurance, that is the income tax benefits that you can claim. The first benefit is a life insurance premium of up to rupee 1.5 lakh can be claimed as a tax-saving deduction under section 80C. And the last one is a medical insurance premium of up to rupees 25,000 thousand for yourself and your family and 25 thousand for your parents can be claimed as a tax-saving deduction under section 80D. You can claim these benefits of insurance at the time of e-filing income tax returns.
Be it life insurance, general insurance, or health insurance, you can buy these insurance policies online and as well as offline. Like there are insurance agents who will help you to buy a perfect policy you can afford. There are also websites where you can buy an insurance policy form. Just ensure that you have done your research before choosing and investing in an insurance policy.
Seeking how to choose the suitable insurance for your home. Then just read along with this article.