Insurance is a contractual financial arrangement between an individual or entity (insured) and an insurance company (insurer). Under this agreement, the insured pays regular premium amount as per the agreement, and in exchange, the insurer offers financial protection and compensation for specified risks or losses mentioned under the insurance policy. The Insurance policies are subdivided into two categories i.e. Life Insurance & General Insurance. Let’s understand the types of insurance policies.

Life Insurance

Life insurance is a contract agreement between an individual holding an insurance policy and an insurance company. In this arrangement, the insurance Company commits to disbursing a specified sum of money in return for a premium payment, either upon the demise of the insured person or at the conclusion of a predetermined period.


Types of Life Insurance Policies

• Term Insurance: Term insurance is a category of life insurance policy that offers coverage for a specific duration, typically ranging from a few years to several decades, such as 30 years. In the event of the insured individual’s death within the specified term, provided the policy is active, a death benefit is paid out.

• Whole Life Insurance Policy: Whole life insurance is a form of permanent life insurance, signifying that the coverage extends throughout the entire lifetime of the insured individual, Dependent on the timely payment of premiums.

• Endowment Policy:
  Endowment life insurance is a hybrid financial product that integrates life insurance with a savings or investment plan. You have the flexibility to decide the duration of the endowment life insurance coverage. In the case of your demise before the maturity date, your nominee receives the insurance death benefit. However, if you survive even after the maturity date, you are entitled to a substantial payout from the insurance company. This dual functionality provides a combination of protection as well as the savings element, making endowment life insurance a versatile option for financial planning.

• Money Back Policy: A money-back policy is a life insurance product that offers the policyholder to receive periodic returns, either in the form of regular payments or as a lump sum at specific intervals throughout the policy period. The returns provided by a money-back policy can be guaranteed, linked to investment performance, or a combination of both, offering a unique blend of life insurance coverage and periodic financial benefits.

• Key-man insurance policy:It is a life insurance policy that a company (insured) procures on the life of a crucial individual such as an owner, top executives, or another key figure in to the business. The company serves as the beneficiary of the policy and is responsible for paying the premiums. This type of life insurance is commonly referred to as “Key-man Insurance” It’s purpose is to provide financial protection to the business in case of key person’s death, offering a financial cushion to minimise the impact of such a loss on the company’s operations and stability.

General Insurance

General insurance is a contractual arrangement between a insured and an insurer, where the insurer safeguards valuable assets against risks such as fire, theft, burglary, or other unfortunate events under the policy. The general insurance also provides the financial protection to the health of the insured through Health insurance policy.

 Types of General Insurance Policies

• Health Insurance: Health insurance is a type of general insurance that provides coverage for the medical and surgical expenses incurred by an insured individual. It serves to either reimburse the policyholder for the expenses related to medical/surgical or directly pays to the hospital on behalf of the insured individual (cashless facility). The primary aim of health insurance is to minimise the financial risk associated with medical treatments and ensure that individuals can access necessary healthcare services without facing excessive burden of treatment cost.

• Accident Insurance: It is an insurance plan that protects against the financial risks associated withvehicle damage, commonly known as “auto or motor insurance”. This coverage extends to various types of vehicles, such as four-wheelers, three-wheelers and two-wheelers.

• Home Insurance/Property Insurance: It is a policy safeguarding against expenses and damages incurred by your house or any property covered under the policy.
• Fire Insurance: Fire insurance is an insurance policy which provides coverage for losses or damages resulting from accidental fires or other events typically covered by a standard fire policy. It is a type of property insurance that helps individuals & businesses to recover some or whole loss caused by fire damage.

Benefits of Insurance

• Provides Certainty: Insurance coverage provides a feeling of assurance to the policyholders. The insured pays a small portion of the income for this certainty that will help in the future. So, there is a certainty of handsome financial aid against the premium. It will protect the policy buyer when met with accidents, hazards, or any vulnerabilities.

• Provides Protection: Insurance coverage reduces the financial impact of losses in precarious situations, offering monetary reimbursement during financial crises. Beyond financial protection, it plays a crucial role in helping mental stress arising from unforeseen events.

• Shelter in Retirement:Retirement is a crucial life stage, underscoring the importance of having an insurance policy for financial security and peace of mind, particularly during this phase. This type of policy ensures that you possess the essential resources to manage any unforeseen emergencies.

• Tax Savings:Insurance policies serve as effective tax planning tools, offering policyholders tax deduction benefits under the Income Tax Act of 1961. Though there are various methods for tax savings, life insurance plans from Finance Domain are particularly advantageous for protection, long-term savings, and tax planning.

• Cultivate Saving Habit:Insured individuals commit to paying a predetermined sum for insurance according to a specified period or throughout their lifetime. This commitment serves as an incentive for them to grow a habit of saving. After realizing the advantages of saving, individuals initiate this practice through various means.