Types of Insurance Coverage & Their Importance

 

Types of insurance coverage

 

Insurance coverage comes in various forms, each designed to protect individuals and businesses from different liabilities and risks. Life Insurance and General Insurance are the two major types of insurance coverage. Here is the overview of some of the common types of insurance coverage along with its benefits:

1. Life Insurance

Life insurance is designed to provide financial support and protection to the family of the policyholder in the event of their untimely demise. Different types of life insurance are available to meet the variant needs and preferences of individuals. Life insurance also serves as a tool for investment offering retirement income or cash value accumulation. Some of the benefits of life insurance coverage are as follows:

• It acts as a cushion for your family and loved ones ensuring their life goals are not compromised even in your absence.
• Life insurance provides dual benefits of life cover and wealth creation by investing the premiums in the market-linked funds enabling you to meet your long-term goals. It also offers regular income to meet short-term financial goals and facilitates in retirement planning.
• Life insurance also offers tax benefits under Section 80C if old tax regime is opted and 10(10D) of the Income Tax Act.

2. Health Insurance

Health insurance covers medical expenses and provides immediate financial help in the event of a medical emergency. It covers all kinds of medical expenses, including hospitalisation, surgeries, medical tests, and doctor visits that may be necessitated due to an accident, illness, or injury. Some of the benefits of health insurance coverage are as follows:

• One of the primary benefits of any health insurance plan is that it provides coverage for all financial expenses due to hospitalisation which could be related to an illness or injury.
• Some health insurance also covers expenses before and post-hospitalisation such as doctor’s visits, transportation costs, diagnostic tests, etc.
• Premiums paid for health insurance policies are eligible for income tax deductions under Section 80D of the Income Tax Act under old tax regime⁵.

3. Auto Insurance

Auto Insurance, also known as Motor Insurance. Third-party motor insurance is mandatory under the Motor Vehicles Act, of 19885. Auto insurance protects you against financial and legal liabilities towards a third party. There are three major types of motor insurance2: Third-party liability insurance, own-damages cover and comprehensive insurance. Some of the benefits of auto insurance coverage are as follows:

• Auto insurance provides financial protection against third-party liabilities in the event of an accident causing harm or losses to a third party.
• Auto insurance also provides personal accident cover protecting against permanent total disability or death in a road accident.
• It offers an option to either get your vehicle repaired at a network garage and get a cashless claim or reimburse the repair cost by submitting the expense receipt.

4. Property Insurance³

Property insurance provides coverage to your residence, furnishing and other assets in your home against losses and damages due to natural or man-made calamities, theft, burglaries, etc.

5. Travel Insurance⁴

Travel Insurance covers various travel-related risks, and thus provides coverage against any medical treatment that may arise due to unforeseen events or incidents during travel. Some of the benefits of travel insurance coverage are as follows:

• Travel insurance covers major travel-related losses such as checked-in baggage, loss of transport or other belongings, etc
• It provides medical evacuation services and emergency transportation from the place of your visit back to your city.
• It also pays a specified fixed sum in case you happen to lose your money while on the trip accidentally.

6. Other general insurance plans

Other plans of general insurance include personal accident insurance, fire insurance, marine insurance, etc. which cover specific events or assets and compensate if the covered perils occur.

 

What all gets covered under insurance coverage?

 

Coverage under an insurance policy depends on the type of plan selected. For instance,

1. Life insurance

Life insurance policies provide life cover and pay a death benefit if the life assured passes away during the policy tenure. Some life insurance plans also have a maturity benefit wherein a benefit is paid if the life assured survives the chosen policy tenure and the plan matures.

2. Health insurance

Health insurance plans cover the medical bills you might incur due to an illness or injury. The exact coverage depends on the type of policy that you choose.

3. Motor insurance

Motor insurance plans offer coverage against third-party liabilities arising due to damages or losses caused to them due to the insured’s vehicle. Moreover, under comprehensive motor insurance plans, coverage is also allowed for the theft of the vehicle or damages suffered by it.

4. Travel Insurance

Travel insurance plans cover the financial risks that you might face while travelling. Common coverage benefits include medical coverage, coverage against loss of baggage, trip cancellation or delay, etc.

5. Property Insurance

Property insurance plans cover the financial losses suffered if your house and/or its contents are damaged due to insured perils like fire, flood, theft, earthquake, etc.

6. Other general insurance plans

Other plans provide specific coverage depending on the policy chosen. For instance, fire insurance covers the losses suffered due to fire while marine insurance covers the losses suffered when the goods being transported are damaged.

 

Conclusion

 

Insurance is a mechanism to ensure financial protection against the risk of loss, damage, or liability. Its significance cannot be overstated in the current scenario. Different types of insurance coverage fulfil different insurance needs and situations. For example, life insurance provides financial support to the policyholder’s family in the event of their death, health insurance covers medical expenses and travel insurance covers travel-related risks. It is necessary to assess one’s risks and buy the appropriate insurance coverage to ensure that they are protected adequately from future mishaps or contingencies.

 

FAQs

 

1. Why do I need insurance coverage?

Insurance coverage ensures protection for you and your family from financial liabilities and losses due to unforeseen events, helps in ensuring peace of mind and a safety net for your financial well-being.

2. What does travel insurance cover?⁴

Travel insurance provides coverage against a host of insurable incidents, including but not limited to personal accident cover, trip cancellations or trip delays, hospitalisation expenses, loss of passport, loss or damage to baggage checked-in, etc. Read the inclusions and coverage of the policy document to know exactly what your travel insurance covers.

3. Can I customise my insurance coverage?

Many insurance companies provide the option of customisation through optional riders which can be added to the insurance policy at an additional premium cost and allows you to customise your coverage benefits to suit your specific insurance needs.

4. What are the types of life insurance policies?

The types of life insurance policies include term life insurance, whole life insurance, unit-linked life insurance, endowment life insurance, retirement plans and child insurance plans.

5. How much insurance coverage do I need?

The amount of insurance coverage that you need depends on several factors such as your lifestyle habits, age, potential liabilities, income, health needs and personal circumstances. It is necessary to assess your future goals and financial situation to determine the appropriate insurance coverage that you need.

Reference

1. https://www.businessinsider.in/personal-finance/essential-tips-for-effortlessly-renewing-your-bike-insurance-policy-in-2024/articleshow/109426352.cms

2. https://www.forbes.com/advisor/in/car-insurance/types-of-car-insurance/

3. https://policyholder.gov.in/property-insurance#:~:text=Answer%3A%20Bharat%20Griha%20Raksha%2C%20Bharat,%2C%20lightening%2C%20impact%20damage%20etc.

4. https://www.forbes.com/advisor/in/travel-insurance/what-is-travel-insurance/

5. https://morth.nic.in/sites/default/files/circulars_document/Mandating_third_party_insurance_period_of_cars.pdf

BJAZ-WEB-EC-07805/24