What is an insurance policy? How many Types of Insurance?

Life is uncertain. We actually don’t know what will happen in the next second. Risk is everywhere. It might be your life risk, or it might be a big loss in your business.

I will start today’s content with a short story.

Suppose, you are the only earning member in your family. You are doing a job in a reputed company where you are earning a good amount of salary. During the summer, you have decided to go on a road trip with your friends. 

Suddenly, you had an accident that takes your life or makes you disabled. How your family will survive? How your treatment will be done?

That’s why a solution has been introduced and that is the insurance policy.

All of us have heard the term insurance. Many of us are not clear about this topic.

In this context, I will discuss the insurance policy and its classification in detail.

So, let’s jump into it.

What is an Insurance Policy?

Insurance policy is basically protection from financial loss.

An insurance policy is a contract between the insurer and the insured where the insured or the policyholder will pay a certain amount of premium and in return, the insurer has to pay the compensation while the policyholder is in a financial crisis or after the validity has expired.

Types of Insurance Policy

We need security for both of our personal and professional life. If we want to survive money is an important factor. In our personal and professional life insurance policy plays an important role. It helps us to secure our business deals and also our personal lives.

Types of insurance actually vary from countries to countries. But there are two types of Insurance policy that are globally recognized.

Life Insurance

Life insurance policy is a contract where the policyholder has to pay a certain amount of premium and in return, the insurer will pay compensation upon the death of the policyholder. The insurance company will also pay compensation if the policyholder becomes disabled.

In some countries, life insurance has also included the pension scheme feature where they will support you financially after retirement.

Life insurance can be in various types. They are

Term Insurance

Term insurance is a basic insurance policy. It can be done for a specific period of time. After your death, the insurance company will provide a certain amount of compensation to your family. 

If you survive within the time period of that policy, your family won’t get any money.

Whole life insurance

It is for a lifetime. After your demise, they will provide a lump sum amount of money to your family. They will also provide bonuses in some cases.

Money-Back policy

In this process, you will receive a certain amount of money as your survival benefit. Besides, you will receive the whole balance after the maturity expires.

Endowment Policy

This policy is similar to the term insurance policy. It is also valid for a certain time. But in this case, you will get the entire money after the maturity proceeds.

Child Plan

Who does not want to secure their child’s life? Insurance companies will provide you the opportunity to secure your children’s financial issues. After your death, your children will get a certain amount of compensation. 

The interesting part is in this case, the insurer will pay the premium after your death and your child will get payment at specific periods.

Retirement Policy

Most of the companies have a pension scheme these days. Some companies may not have this feature. Insurance companies are offering you to build your retirement fund. 

If you do this policy, you will get a regular amount after your retirement. After your demise, your family can also claim the entire amount of money.

General Insurance

General Insurance Policy includes all the insurance policy except Life insurance. It includes Health Insurance, Travel Insurance, Motor Insurance, Fire Insurance, etc.

General Insurance will give you compensation for your financial loss due to liabilities. The insurance company will provide you an amount for damages of your vehicles, house, business, medical treatment, etc.

Property Insurance

If you want an insurance policy for your property, you will be definitely looking for a policy which will cover all the risks. If you go for a peril basis policy, it will cover-up limited risks. 

But if you go for all-risk policy, it will cover-up all the risks except some specific factors.

Health Insurance

Health is wealth. If we don’t take care of our health, we have to go under medical treatments. In most of the developed countries, the Government provides health insurance to its citizens. 

If this facility has not been provided by your Government, you should have health insurance for you and your family members.

Health insurance will cover your medical costs. It will pay money to the hospital for your certain illness or injuries.

Health Insurance covers

  • Hospitalization Cost
  • Medical bills for critical illnesses
  • Post-hospitalization costs
  • Maternity costs
  • Medical bills for accidental injuries

Fire Insurance

It will cover-up the risk factors regarding the fire. If you don’t have fire insurance, you might face lots of problems.

Suppose, you have a restaurant. Your business is doing well. Suddenly, A fire accident has happened in your restaurant. If you don’t have fire insurance you might face a financial loss.

On the other hand, if you have fire insurance, it will minimize your financial loss.

Fire Insurance will cover replacement, reconstruction or repair expenses of the insured property. Besides, it will also cover the expenses of the affected livelihood due to fire.

Motor Insurance

The accident is a global common scenario. According to the Association for Safe International Road Travel, almost 1.25 million people die in road accidents every year.

So, I hope you can understand the importance of Motor insurance in your life. Motor insurance will cover-up the damages of your vehicles.

Motor Insurance includes car insurance and two-wheeler or bike insurance.

There are two types of motor insurance. They are

  • Comprehensive Insurance Policy
  • Third-Party Insurance Policy

Home Insurance

Home Insurance Policy will pay you compensation for the damage to your home. It will pay you for the damages due to natural calamities, fire, theft, earthquakes, etc.

Home Insurance Policy not only give you financial protection for your home but also provide compensation for the valuables inside the property. 

There are four types of Home Insurance Policy. They are

  • Home Structure Insurance Policy
  • Standard fire and Special Peril Insurance Policy
  • Content Insurance Insurance Policy
  • Public Liability Insurance Policy

Travel Insurance

Travel Insurance will compensate for your financial loss for your medical or non-medical emergencies while you are traveling abroad.

Travel Insurance covers

  • Emergency Medical costs
  • Loss of Passport
  • Loss of Baggage
  • Hijacking or theft
  • Accidental death

There are two types of travel insurance. They are

  • Single Trip Insurance Policy
  • Annual Trip Insurance Policy

Marine Insurance

Marine Insurance will provide you marine perils protection. It ensures a ship, cargo or freight. 

There are two types of Marine Insurance. They are

  • Ocean Marine Insurance Policy
  • Inland Marine Insurance Policy

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