Typically insurances are seen as a burden by most of the middle class peoples. But the fact is, it is a life saver in toughest times of our life. Hence it is very essential to understand the facts and hidden terms and conditions of various types of insurance policies and it’s features and benefits. One who knows and understand these things, then he can able to invest his hard earned money wisely and it will save you from the financial hurdles during the emergency times of your life.

Generally insurances are of two types. One is Indemnity policy and another one is Benefit policy. Indemnity is a kind of contract to reimburse the actual loss incurred by us with regards to the subject matter. On the other hand benefit policies comes with the rewards and as well as risk coverage benefits. We are all very well knows some of the insurance policies like Vehicle Insurance, Life Insurance and Health insurance etc., But the fact is, Insurance companies are offering various types of insurance policies to their customers. Each and every such policies are having its own and unique features.

Mostly, while making an investment, we are all are very much concerned about the security aspect of our investment. In India, The Insurance companies are monitored and regulated by the Government through its separate legal body known as Insurance Regulatory and Development Authority of India.

Types of Insurance Policies and its Benefits

Based on the nature of coverage and benefit it is classified in two major parts vis Life insurance and General Insurance.

Under Life insurance it is classified into the following based on its benefits

1. Term / Protection: Term life Insurance is traditional form of Life Insurance Product. This type of Insurance takes care of pure income replacement needs rather than Capital appreciation requirements. Term Insurance covers the risk of the policy holder for specific agreed period and pays the death benefits only if the policy holder dies during the policy period and will not gives you the maturity benefit.
2. Endowment/ Pure Endowment: Endowment policies are risk cover and maturity benefit policies. The risk is covered for a specified period and at the end of the policy the sum assured is paid back to the policyholder along with all rewards i.e. bonus accumulated during the policy term.
3. Money Back Plan: Money Back policies are one type of Endowment policy. The difference is money back policy provides periodic payments of partial benefits during the term of policy so long as the policy holder is alive. For better understanding we can assume it like a pension plan which offers monthly income during the remaining life of insured. Peculiar nature of these policies is that, in event of death at any time during policy term, the death claim would comprise of full sum assured without deduction of any survival benefit amounts. Also, bonus is calculated on sum assured.
4. Whole Life Insurance Product: It give risk coverage throughout the life time of the insured person. Unlike Endowment plans they do not carry any maturity value and sum assured is paid to the family in case of unfortunate death of the policyholder.
5. Unit Linked Insurance Plan (ULIP): Unit Linked Insurance Plans are such Insurance plans where the value of the policy changes as per the underlying Investment Assets. The underlying asset may be any kind of shares of the company or any other assets decided by the insurance company at the time of formulating the policy. It allows protection and flexibility in Investment and the possibility of earning high growth is comparably higher than other kind of policies and the risk involved also high. The Premium paid is used for the purchase of units in Investment assets.
6. Pension or Retirement Plans: A pension plan is retirement solution where policyholder decides the age retirement age and agrees to pay premium till the time of the retirement and thereafter he has option to commute the a part of his fund value and take an annuity for the balance. Pension plan provides Income protection as well as the Life Cover. The difference in money back plan is that it will starts to give money back at the end of the term of investment as per that policy and Pension plan starts giving money back only at the end of age of retirement.
7. Annuities: Annuity is a contract where Insurer in return for the payment at regular intervals till fixed date make series of agreed payments at regular intervals from fixed date.
8. Group Insurance: Group Insurance is an insurance that covers a group of people, who are the members of the societies, employees of an organization or professionals in common group. Insurance premium in this kind of insurance will lower per person but higher in totality. Which means, if we purchase a separate insurance for a single person will cost us more than purchasing the policy with same benefit and coverage for a group of persons. This kind of policy is available only to the organizations or business entities and with the minimum required number of employees (for Example at least 10 employees to be covered in the policy) for insure.

On the other hand, General insurance policies are having lot of verities meant for business and reimbursement of loss purpose. Like Fire Insurance Policy to cover the risk associated with fire accidents, Marine insurance policies for covering the risk associate in the business of transportations by sea, And other miscellaneous policies like Burglary insurance, Motor Vehicle Insurance, Aviation, Professional Liability insurance, Loss of Profit insurance, Crop insurance, Cattle insurance, Workman Compensation, Engineering, Health insurance etc. Each and every policies are formulated with different kind of benefits, terms and conditions.

The most important thing while choosing the insurance, we have to clearly read and understand the terms and conditions with regards to the Period of insurance coverage, Amount of premium, procedure for lodging the claim in case of uncertainty, and exclusions from the coverages etc. We should know one that, without receipt of premium by the insurer, even though the policy is issued to you will not cover the risk. Hence ensuring the prompt credit of premium to the insurer is still lies with us.