Importance of Insurance – Types of Insurance Plans & Benefits

Author : Rahul Agnihotri | Published On : 01 Mar 2024

Whether you are a salaried individual, a business professional, man or woman, you must have insurance coverage for life and your assets. An insurance plan offers you financial protection against the uncertainties of life. It basically transfers the risk of loss to an insurance company. 


Let us know about what insurance is? Its benefits and the type of insurance plans available in India. 


What is insurance?


An insurance is a legal contract between two parties – you (insured) and the insurance company (insurer). In this, the insurer promises to compensate you or your family financially if something untoward happens to you or your assets. In return, you agree to pay a premium regularly to the insurer. 


Types of insurance policies in India


In India, broadly there are two categories of insurance plans – life insurance and general insurance and there are different subtypes of policies under these categories.  


When you do your insurance planning, you must assess your needs carefully and purchase the right kind of policy to get maximum protection and benefit from it. Now, let us look at the types of insurance plans available in India. 


Life insurance 


As the name says it all, life insurance provides coverage against your life. You must buy this policy so that your dependent family members have the financial security in the event of your untimely demise. 


Life insurance is necessary all, particularly if you are the sole breadwinner in the family. Under life insurance policy, your family gets monetary compensation from the insurance company in the event of your demise during the policy period. 


There are different types of life insurance policies in India and each of these plans have different features and offer different benefits. The types include:


  • Term insurance 

  • ULIP (unit linked insurance plan)

  • Endowment plan

  • Group life insurance

  • Whole life insurance

  • Money Back policy

  • Child insurance plan


Health Insurance


Just as it is important to have life insurance coverage, it is equally critical to have a health insurance policy. As you grow old, you become more susceptible to various illnesses and with the medical care cost increasing every year, getting quality treatment can be unaffordable for many. 


This is where health insurance policy comes into the picture. It allows you to get coverage against the treatment costs. You can either purchase a generic health insurance policy or a policy that covers specific diseases to suit your needs. Of course, the premium you pay will vary based on your health condition, the type of coverage you buy, and the sum assured you choose. 


Motor Insurance


The vehicles you own, be it a car or two-wheeler, it would be one of your prized possessions, right? And, it is important that you keep your valuable assets protected by buying motor insurance. It gives you financial coverage for repairing and/or replacing any part that is damaged. 


Motor insurance also give you financial protection against theft, and damages due to accidents and natural calamities. There are two types of motor insurance policies – third party insurance and comprehensive insurance. 


In third part insurance, you get coverage only for the damages you cause to the third party’s vehicle, personal assets or life. However, you don’t get coverage for the losses you suffer. For complete protection, you must get a comprehensive motor insurance policy; it covers third-party liabilities and self-damages. 


Home insurance


Home is one of the largest purchases you may make in your life, and it is a dream for many to buy a home. So, if you have recently purchased a new home or are planning to buy one soon, you must also purchase a home loan to get financial protection against the damages to your safe haven due to fire, and other natural calamities. 


Benefits of insurance


The importance of insurance cannot be stressed enough as it lets you get financial coverage against losses. Here are other benefits you can enjoy:


  • Insurance policies reduce the impact of losses that you have to bear in perilous situations. It gives you monetary compensation if something happens to you or your assets Also, it helps avoid the mental stress arising during emergency situations. 


  • When you have an insurance plan for your life, health, or assets, you get a feeling of assurance that you will get financial assistance if something happens to you. 

  • There are different types of insurance policies available in the market and also the insurance companies allow you to customise the coverage so that you can get the perfect plan to suit your needs. 

  • Insurance policies secure the financial future of your families. Even if something happens to you, the insurer will give the sum assured to the family members so that they can be financially independent.