What is Insurance Policy?
Unexpected expenses are a harsh reality in life. Even if you believe you are financially secure, a sudden or unforeseen expense can significantly undermine that security. Depending on the severity of the emergency, such situations may also leave you in debt.
Insurance is a risk management solution. When you purchase insurance, you are purchasing protection against unanticipated financial losses.
While it is impossible to plan for contingencies arising from such incidents, insurance policies provide support to reduce financial liability from unforeseen occurrences. There are numerous insurance policies available, each aimed at protecting different aspects of your health or assets.
How does Insurance Policy help you to reduce your financial risk?
The insurer and the insured enters into a legal contract for insurance, known as the insurance policy. The insurance policy specifies all the terms and conditions under which the insurance company will payout to the insured or the nominees. Thus, insurance is
a shield for yourself and your family from financial destruction. In general, the premium for a large insurance policy is much less expensive. However, because very few insurers actually use their insurance, the insurance company risks providing a big amount at a low cost.
What are the different types of Insurance Policies available?
- Life Insurance
Life insurance is insurance for your life. You can purchase life insurance to ensure that your dependents are financially.
secure in the event of your unexpected death. Life insurance is particularly important if you are the sole earner in your family or if your family is highly dependent on your income. Then, if the insurer dies during the policy term, the policyholder’s family will be financially compensated.
- Health Insurance
Health insurance can be purchased to cover the costs of expensive medical treatments. Health insurance policies do cover a wide range of diseases and ailments. You can purchase both a Generic health insurance policy and a policy for a specific disease. The premium paid for a health insurance policy typically c
overs the costs of treatment, hospitalisation, and medication.
- Car Insurance
Car insurance is an important policy for every car owner in today’s world. This insurance covers an unanticipated event, such as an accident. Some policies also cover damage to your car caused by natural disasters such as floods or earthquakes. It also covers third-party liability, which is when you must pay damages to other vehicle owners.
- Educational Insurance
Education insurance is similar to a life insurance policy that has been designed specifically as a saving tool. For example, when a child reaches higher education and is accepted into college, education insurance can be a great way to provide a huge amount of money required. This fund can then be used to cover your child’s college expenses; the child will be the life assured or the recipient of the funds under this insurance, while the parent/legal guardian will be the policy owner.
- Home Insurance
Home insurance can assist in covering losses or damage to your home caused by accidents such as fire and other natural calamities or perils. Other occurrences covered by home insurance include lightning, earthquakes, and other natural disasters.
Benefits of Insurance Policies
- Safety and Security
- Insurance ensures the financial security of a family:- No matter how much you earn or how much you save, an unexpected event can destroy your financial situation in the blink of an eye. Insurance is the best way to become financially secure for yourself and your family.
- Insurance alleviates stress during difficult times.
- Life, Health, and Liability facility
- Financial planning
- Transfer of Risk:- The insurance contract is based on the ‘principle of financial risk transfer from the insured to the insurer.’ As an insurer, you pay premiums to receive compensation from the insured at the time of unpredictable events. As a result, having insurance relieves the financial burden for an individual.
- Some types of insurance are mandatory by law:- Motor insurance is an example of this. According to the Motor Vehicle Act of 1988, every motor vehicle on Indian roads must have third-party motor insurance. Motor insurance policies are extremely useful in the event of a claim.
How to Decide the type of Insurance Policy which you require?
You should consider these points before selecting an Insurance Policy:-
- Purpose of Insurance
- Predictable risks
- How long do you think you’ll need the insurance?
- Affordability
FAQs on Insurance Policy
✅ What is subrogation?
The process of seeking reimbursement from the responsible party for a claim they have already paid is referred to as subrogation.
✅ What is “insurance coverage”?
The term ‘insurance coverage’ refers to the fact that when an individual purchases an insurance policy, the insured is covered by the insurance company for a specific amount for themselves or the items for which he purchased the insurance policy, for which he pays a premium to the insurance company. The insurance company will compensate the insured in the event of damage or claims made by the insured in accordance with their ‘insurance coverage.’
✅ What is an insurance policy’s contestable period?
The ‘contestable period’ is for 1 or 2 years, during which the insurance company has complete authority to investigate the policy and decide whether or not to pay the insured.
