Are you Insurance Savvy? Let’s Find Out

Life is uncertain and when it throws surprises, even the most seasoned of all players can get affected.

While you cannot evade the emotional and psychological loss of a particular incident, you can surely be prepared to face the financial stress arising out of a contingency with the help of a comprehensive life insurance policy. Most people delay buying insurance despite acknowledging the importance of an insurance policy. It is primarily because of a lack of awareness, and most people do not know which insurance policy to buy and how to make the best use of it. They are not insurance savvy. Hence, they end up losing on the manifold advantages that a life cover and other types of insurance plans can provide.

If you are new to the concept of insurance, read on to come become insurance savvy and understand what kind of insurance you need and when:

What is insurance, and how many insurance companies are there in India?

Insurance is a legal agreement between you and the insurance company, where the latter promises to reimburse/compensate your financial loss on the happening of the insured contingency, which causes losses. The contingency in each insurance contract differs as per the type of insurance policy. In return for the promise made by the insurance company, you pay a premium as defined in the contract.

You can buy insurance cover for various risks, including your life, health, family, business and assets. There are 57 insurance companies in India; 24 of these companies offer life cover, while 34 offer non-life cover, such as insurance for health, motor, assets, business, property, etc.

How does insurance work?

The concept of insurance is related to ‘risk pooling’. When you buy an insurance policy from an insurance company for a specific duration, you are required to make regular payments in the form of a premium for obtaining financial protection. Similarly, the insurance company collects premiums from other people and pools the money to pay for losses in case of loss of an insured event. When you make a claim, the insurance company compensates your loss from the pooled money. However, if you do not claim during the specified policy period, no benefits are paid. Moreover, some other insurance plans also come with a savings and investment element attached to them.

What are the different types of insurance policies available in the market?

Primarily, insurance products are classified into two broad categories – life insurance products and general insurance products. Life insurance plans cover you against the risk of death. Life insurance plans come in different forms, such as term insurance, whole life insurance policy, money back plans, unit-linked investment plans, etc. Some of these life insurance plans only offer life cover, whereas other policies provide savings and investment opportunities along with life cover.

Alternatively, general insurance products comprise all types of insurance policies that cover risks other than death. These products have a wide range, including health insurance, motor insurance, home insurance, travel insurance, critical illness insurance, commercial insurance, marine insurance, etc.

At the core, insurance is a must-have risk management tool in your life. Depending on your financial position and needs, the best policy in India will vary. However, here are four types of insurance policies that you should have:

1. Comprehensive life cover: Life cover is insurance for your life. Life insurance protects your family in case of your untimely demise during the policy duration. It assures you that in case of your death, your loved ones will not struggle financially. The insurance company pays a defined death benefit to your nominee to help them stay financially secure even in your absence. This death benefit is given in return for the life insurance premium you pay.
   
   Life insurance plans come in different variants. A life insurance term plan gives you pure life cover without any savings element and comes at highly economical life insurance premiums. A whole life insurance policy guarantees¹ a minimum cash value along with an assured death benefit. The life insurance premiums for such plans remain the same throughout the policy term. Alternatively, you can consider opting for ULIPs that offer a combination of life cover and market-linked investment returns. Irrespective of the life insurance plan you choose, make sure the sum assured can adequately protect your loved ones in your absence.
   
   Check online life insurance policy details and make an informed choice. You can also add different types of insurance riders#, such as accident insurance, disability insurance, etc., to enhance your life insurance coverage.
   
   

2. Health insurance: Health insurance plans reimburse your medical costs in case of different events. A variety of benefits are offered under health insurance plans. You can buy generic health insurance that reimburses your medical costs such as hospital bills, recovery expenses, etc. or take a health plan that pays you a daily cash benefit while you recover or one that covers treatment expenses if you are diagnosed with a critical illness. 
   
   

3. Motor insurance: You can also buy an insurance policy to protect your vehicles, including your car, bike, scooter, etc., from any loss such as theft, damage or third-party loss. Some motor insurance policies also compensate you for loss incurred due to natural calamities such as floods, earthquakes, etc. Motor insurance for third-party liability is compulsory for driving any vehicle in India.
   
   

4. Home insurance: Home insurance or property insurance aims to protect your property, precious belongings, etc., from events such as theft, damage and loss, including natural disasters.
   
   

Apart from this, there are several sub-categories of insurance. However, the priority of any insurance policy depends on your needs.

That said, amongst all, it is wise if you have at least a good life insurance term plan in place. You can buy an online life insurance policy without any hassle and with minimum documentation.

Check Tata AIA life insurance plans to select a life cover policy that best aligns with your requirements.

L&C/Advt/2021/Oct/1700