Types of Insurance

Before taking insurance of any kind it is important to know certain types of insurance which is granted to a person at risk. Let us know in brief what each product means and what are the coverage it provides so that you can choose smartly from the Types of Insurance currently prevailing in the Insurance Industry. 

There are two major parts in which Insurance products can be divided. That is Life Insurance and Non-Life Insurance. 

Life Insurance Products 

Life Insurance can be granted on the basis of two types and that is the Death benefit and Survival benefit.

Technically, the Term Assurance Plan refers to death coverage benefit only where the legal heir of a person gets the Sum Assured after the death of an Insured person who has been granted Insurance cover. Whereas, in the Pure Endowment plan a person can get coverage only if he survives in the term of maturity of the policy. So, if a person dies before maturity he gets nothing. So, Insurance companies provide covers on the Endowment Assurance plan which is nothing but a combination of Term Assurance and multiple Pure Endowment plans where a person gets the benefit of both types of insurance cover. This is known as Endowment Assurance plans. 

Whole Life Policy is based on a Term Assurance plan and is granted coverage with an unspecified period. Here Sum Assured is paid on the death of the policyholder. 

Money Back Policy is based on a combination of Term Assurance and multiple Pure Endowment plans. 

There are many riders available nowadays for the Term Assurance plans where a person can get medical benefits also. And if the financial condition of a person fluctuates, a policyholder can step-up or step-down in the Sum Assured of his/her policy. 

Unit Linked Insurance Plans (ULIP) is nothing but a Life Insurance policy with the benefit of investment in various funds available in the market. A portion of the premium is invested in a proportionate manner in funds like Equity, Debt, Balanced and Money Market Fund. The policyholder can select the type of fund to invest depending on the degree of risk he is willing to take in the market. 

A person can opt for Annuity as it covers the risk of living too long. A certain amount of periodic payment is done to the Insured either immediately or after a certain deferment period (specified period of time).

An organization, the company can opt for Group Policies where a single policy covers a large no. of persons employed in a company e.g. banks take coverage for their loan account-holders. This is automatic, i.e. any person joining such an organization is entitled to the fixed coverage decided as per the policy contract. 

Nowadays you can opt Term or ULIP plans online through various Web Aggregators such as Policybazaar eliminating agents and their commission, paper works and official expenses thus making your premium lower as compared to traditional ones. 

Non-Life or General Insurance Products

There are various products offered by GI companies.

It can be subdivided into three major branches i.e. Fire Insurance, Marine Insurance, and Miscellaneous Insurance. These three branches are further categorized in their respective fields. 

Marine Insurance

Marine Cargo covers risks to goods in transit on land, air or waterways. Marine Hull as named generally specialize in coverage to loss or damage of ships through the sea while export/import operations or inland transit. 

The cargo policy covers losses while goods are on transit only. 

Fire Insurance

It provides cover for financial losses arising out of damages to the property due to fire, explosions, etc. Any Acts of God such as floods, typhoons, lightning is also covered along with damages by the impact of vehicles, riot, and strike, malicious damages, etc. 

Here the name of perils is listed in the policy contract so these policies are named perils. 

War risks are excluded peril in Fire Insurance

Add On covers can be opted for additional perils can be opted such as for Earthquake cover.

The main thing is to note that whatever is included in the policy is covered. Exclusions are mentioned in policy so that to avoid any disputes in the future. 

Consequential Loss of Profits is another part in Fire insurance where a person can get coverage for additional losses arising out of the loss of property where the work which was carried out earlier before the loss is no longer being able to be done such as business loss, production loss, data loss, etc. These losses are compensated until the normalcy is restored. 

Motor Insurance

It is a major part of the Miscellaneous category which has a huge share in the Insurance Industry. It deals with insurance of motorized vehicles on road, whether used for private or public service. It deals with coverage to damages of vehicles, injury of persons whether on-road or inside the insured vehicle, property damages in connection with motor accidents. Any person outside the vehicle excluding the Owner/driver is known as Third Party. 

Motor Insurance (Third Party Liability Insurance) is compulsory by law in India as per the MV Act.   

Personal Accident Insurance 

Personal Accident policies cover death or disablement arising out of accidents of any kind (caused by external, violent and visible means)

Occupation and age are an important factors in deciding the risk. It also covers medical costs and loss of income due to disability. 

Engineering Insurance 

Coverage for several types of risk attached to contractors in civil engineering projects, erection, testing and commissioning of plants related to engineering work are provided. DSU i.e. Delay in start-up, CAR - Contractors All Risk and EAR - Erection All Risk, Consequential Loss of Profit are certain types of Insurance products to cater to various risks. 

Health Insurance

A person is exposed to the majority of illness and certain diseases which reduces life expectancy. With the skyrocketing cost of medical treatment, it is much more beneficial and economical if someone opts for Health Insurance that is in varieties offering different types of health coverage. Health insurance is available for an Individual or Family Floater option is also available which normally covers dependents of a family. Generally, 2 adults and 2 children are provided coverage. SA (Sum Assured) is shared between the family. 

Group Policy is available for organizations or companies.  

Liability Insurance 

This policy covers professionals who are liable to the public such as Doctors, Engineers, Lawyers, etc.

Doctors are responsible for the life of the patient in medical treatment. They can be sued if there is any part of negligence on doctors. Similarly, engineers are responsible if a bridge collapses which would lead to loss of life and property. This amount can be very huge, which is beyond the capacity of an individual. Hence coverage is provided to indemnify such professionals from any loss to third parties or property. 

Any willful, noncompliance with statutory provisions, fines, and punitive levies are excluded. 

Other Miscellaneous Insurance

Fidelity Guarantee - Risk of dishonesty, fraud, and embezzlement by employees are covered. 

Workmen Compensation Insurance - Compensation paid by the employer to employee at the time of accident in premises as per WC Act 1926 are covered in this section.

Overseas Medical Insurance - Covers medical expenses incurred while traveling abroad. Loss of baggage, passport while going for a travel, study or work are related to this insurance.

Burglary Insurance - For coverage of risk based on burglary while housebreaking, theft, forcible entry and damages to property associated with it.

Home Insurance - It is a type of property insurance that covers a private residences and any electronic or valuable items in the house. 

Aviation Insurance - Loss of property or life arising due to the crash of airplanes is covered here. Since these are huge loss so it is Re-insured. 

Many Insurers are nowadays devising plans that are being shaped due to customer needs. Examples can be taken for mobile phones where nowadays various insurance products have arrived for the coverage loss or damage arising due to theft of mobile phones, screen damage, software/hardware damages etc. Credit/debit card holders can opt for insurance for the loss arising due to hackers, theft of cards. Person in hospitals can now get daily allowances while getting medical treatment. Technology, economic conditions and Consumer demands are the major factors in these aspects which are leading to different types of Insurance and more innovations in Insurance market is yet to come.