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What is Insurance and How does it works?

What is insurance?

Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company groups the risks of the clients so that the payments are more affordable for the insured.

Insurance policies are used to protect against the risk of financial losses, both large and small, that may result from damage to the insured or his property, or liability for damage or injury caused to a third party.

How does insurance work?

The insurer and the insured obtain a legal contract for insurance, which is called an insurance policy. The insurance policy has details about the conditions and circumstances under which the insurance company will pay the insurance amount to the insured person or the nominees.

Insurance is a way to protect you and your family from financial losses. In general, the premium for large insurance coverage is much lower in terms of money paid. The insurance company assumes the risk of providing high coverage for a small premium because very few insured people end up claiming insurance. That is why you get insurance for a large amount at a low price.

Any person or company can seek insurance from an insurance company, but the decision to provide insurance is at the discretion of the insurance company. The insurance company will evaluate the claim request to make a decision. In general, insurance companies refuse to provide insurance to high-risk applicants.

What are the types of insurance available in India?

Insurance in India can be broadly divided into three categories:

Life insurance

As the name implies, life insurance is life insurance. You buy life insurance to make sure your dependents are financially insured in case of your premature death. Life insurance is particularly important if you are the sole breadwinner of your family or if your family depends heavily on your income. With life insurance, the family of the policyholder receives financial compensation if the holder expires during the term of the policy.

Health insurance

Health insurance is purchased to cover the medical costs of expensive treatments. Different types of health insurance policies cover a variety of diseases and ailments. You can buy a generic health insurance policy, as well as policies for specific diseases. The premium paid for a health insurance policy generally covers the costs of treatment, hospitalization and medication.

Motor insurance

In today’s world, car & bike insurance is an important policy for all car owners. This insurance protects you against any adverse incident such as accidents. Some policies also compensate for damage to your car during natural disasters such as floods or earthquakes. It also covers third-party liability when you have to pay damages to other vehicle owners.

Education insurance

Childhood education insurance is similar to a life insurance policy that has been specially designed as a savings tool. Educational insurance can be an excellent way to provide a lump sum of money when your child reaches the age for higher education and gets entry to college (18 years or older). This fund can be used to pay for your child’s higher education expenses. Under this insurance, the child has the insured life or the recipient of the funds, while the parent / legal guardian is the owner of the policy.

You can calculate the amount of money that will go to finance your children’s higher education with the Educational Planning Calculator.

Home insurance

We all dream of having our own houses. Home insurance can help cover loss or damage caused to your home due to accidents such as fire and other calamities or natural hazards. Home insurance covers other cases such as lightning, earthquakes, etc.

if you are interested to learn about insurance claim procedure to can read this blog written by Devjeet.

What are the tax benefits of insurance?

In addition to the security benefits of buying insurance, there are also the income tax benefits that you can take advantage of.

The life insurance premium of up to ₹ 1.5 lakh can be claimed as a tax savings deduction under Section 80C

The health insurance premium of up to $ 25,000 for you and your family and $ 25,000 for your parents can be claimed as a tax savings deduction under Section 80D

These claims must be made at the time of electronic filing of tax returns.

conclusion

Whether life insurance, health insurance or general insurance, you can buy an insurance policy offline and online. Just as there are insurance agents that will help you buy a policy, there are also websites from which you can buy a policy. Make sure you have researched before choosing and investing in an insurance policy.

About Shandya Rajput

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