What is Insurance ?
Insurance is a legal agreement between two parties i.e. the insurance
company (insurer) and the individual (insured). In this, the insurance
company promises to make good the losses of the insured on happening of
the insured contingency. The contingency is the event which causes a loss.
It can be the death of the policyholder or damage/destruction of the
property. It’s called a contingency because there’s an uncertainty regarding
happening of the event. The insured pays a premium in return for the
promise made by the insurer.
How does insurance work ?
The insurer and the insured get a legal contract for the insurance, which is
called the insurance policy. The insurance policy has details about the
conditions and circumstances under which the insurance company will pay
out the insurance amount to either the insured person or the nominees.
Insurance is a way of protecting yourself and your family from a financial
loss. Generally, the premium for a big insurance cover is much lesser in
terms of money paid. 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. This is why you get insurance for a big
amount at a low price. Any individual or company can seek insurance from
an insurance company, but the decision to provide insurance is at the
discretion of the insurance company. The insurance company will evaluate
the claim application to make a decision. Generally, insurance companies
refuse to provide insurance to high-risk applicants.
What are the types of insurance available in india ?
Insurance in India can be broadly divided into three categories:
Life Insurance
As the name suggests, it is insurance on your life. You buy life insurance
to make sure your dependents are financially secured in the event of your
untimely demise. Life insurance is particularly important if you are the sole
breadwinner for your family or if your family is heavily reliant on your
income. Under life insurance, the policyholder’s family is financially
compensated in case the policyholder expires during the term of the
policy.
Health Insurance
is bought to cover medical costs for expensive treatments. Different types
of health insurance policies cover an array of diseases and ailments. You
can buy a generic health insurance policy as well as policies for specific
diseases. The premium paid towards a health insurance policy usually
covers treatment, hospitalization and medication costs.
Car Insurance
In today’s world, a car insurance is an important policy for every car owner.
This insurance protects you against any untoward incident like accidents.
Some policies also compensate for damages to your car during natural
calamities like floods or earthquakes. It also covers third-party liability
where you have to pay damages to other vehicle owners.
Education Insurance
The child education insurance is akin to a life insurance policy which has
been specially designed as a saving tool. An education insurance can be a
great way to provide a lump sum amount of money when your child
reaches the age for higher education and gains entry into college (18 years
and above). This fund can then be used to pay for your child’s higher
education expenses. Under this insurance, the child is the life assured or
the recipient of the funds, while the parent/legal guardian is the owner of
the policy. You can estimate the amount of money that will go into funding
your children’s higher education using calculator.
Home insurance
We all dreaming of owning our own homes. Home insurance can help
with covering loss or damage caused to your home due to accidents like
fire and other natural calamities or perils. Home insurance covers other
instances like lightning, earthquakes etc.
What are the tax benefits on insurance ?
Apart from the safety and security benefits of buying insurance, there are
also the income tax benefits that you can avail.
➢ Life insurance premium of up to ₹1.5 lakh can be claimed as a
tax-saving deduction under sec 80c
➢ Medical insurance premium of up to ₹25,000 for yourself and
your family and ₹25,000 for your parents can be claimed as a
tax-saving deduction under sec 80D
These claims have to be made at the time of return filling.
Conclusion
Be it life insurance, health insurance or general insurance, you can buy an
insurance policy offline as well as online. Just like there are insurance
agents who will help you buy a policy, there are websites as well that you
can buy a policy from. Ensure that you have done your research before
choosing and investing in an insurance policy.
Insure Now