Types of insurance

             As we have seen Insurance plays a crucial part in our financial planning. But any novice person thinks about purchasing insurance one main question arises into his mind. That is what kind of insurance I should buy? This is a valid question because there are so many insurance products are available in the market. From all these products we should select an insurance product as per our requirement and capacity. In this article, we are going to understand different types of insurance, which could be helpful for us to select appropriate insurance products.

Above diagram shows different insurance types let understand them one by one.

1)         Non-General Insurance:-

           Non-General Insurance includes Life Insurance and Health insurance.

A)Life insurance:-

          Life insurance deals with the risk of our life. It will provide financial security to our family after our death. It is the most important step in our financial planning which provides stability to our life. We have discussed in detail about it in Previous posts. There are different plans offered by insurance companies these are.

i)Endowment plan:-

          Endowment plans are traditional insurance plans which offer Insurance with some saving part. In this plan, we pay a regular premium in the policy period and we get life cover. along with life cover, we also get Sum assured amount with bonuses after completion of policy.

          This plan is good for accomplishing long term goals like child education, marriage or retirement.  These products offer fixed return which is lower than medium risk instruments like an Index fund, large-cap fund. But these types of products provide higher tax-free return then many of fixed income instruments.

          These  Plans are suitable for risk avers persons who don’t want to take a risk and expect higher returns than other fixed income. Many persons can consider this type of instrument as low-risk debt instrument in their financial planning.

ii)Whole life plan:- this plan is the pro version of the endowment plan . in this plan we will get life cover for the whole life. For this plan we have to pay a premium up to a certain period, many insurance companies provide Fixed benefits after the premium paying term. In this plan, either our family or we get the benefit. The family will get benefits on death while we can get benefits on completion of policy. The premium for these plans is slightly higher then endowment plans.

iii) Term insurance:-

                     Term insurance is a type of insurance that contains pure life cover. There is no saving part in these plans. We will pay some premium for life cover and insure our life for a particular period. In this plan our family gets benefits on our death only. we don’t get any amount at the end of the policy. This type of insurance has the lowest premium as it contains only life cover.

         These kinds of insurance suitable for persons who don’t want to consider insurance as saving or investment products or who don’t afford above high premium plans. Many people consider this plan as protection to their home loans so if they face some mishappening then their family could pay loans easily. We can also link these plans to our mortgage so sum assured and premium reduces over period along with loan amount.

iv)  MoneyBack Plans:-

           These plans provide us returns much time during the policy period along with life cover. Normally it depends on which plan we select. if we have 20-year the money-back policy then we could get 20% at each of 5^th , 10^th and 15^th year and get the remaining amount on maturity. Plus point of these plans is that if one has mishappening at the 18^th year of the policy then one’s family will get total benefit of policy irrespective of how much return one gets before.

v) ULIP:-

                   ULIP(Unit Linked Insurance Plan) is a mixture of insurance and investment. In this plan, we get units that we can buy or sell at any time. The main benefit of this plan is that this plan provides flexibility to buy and sell. In this plan, we can choose different asset classes in which we want to invest. This plan is similar to a mutual fund. Return on this plan is based on the performance of the asset class.

B) Health insurance:-

                             As the name suggests health insurance takes care of our hospital bills. It can cover from small medical checkup to surgeries. The main motto behind having health insurance is that we can prevent the large drain from our pocket by paying a small amount of premium.

          Premium of this insurance is based on our age, lifestyle, family medical history. We can choose a different option in this type of insurance like group insurance or family floater. In group insurance, we can take insurance of a large group it may be society or employee of the company. In the family floater type of insurance, we can take health insurance of the whole family in which we can cover the medical expenses of the family up to the sum assured amount.

2)   General Insurance:-

General insurance contains all other kinds of insurance. With the help of general insurance, we can assure our any assets like home, car, home accessories etc.