Protecting What Matters Most: Insurance for Every Stage of Life

What is Insurance?

The meaning of insurance would be an assurance against unforeseen and unfortunate losses. This means that you can be compensated if you encounter a less-than-normal event in your normal course of life and incur a financial loss.

Legally insurance has been defined as a contract where the insurer agrees to compensate the insured against the losses incurred due to any unforeseen contingency. The contract also involves a consideration which is called a premium. The maximum available benefit amount is called the sum assured or the sum insured.

Insurance is a way to manage your risk. When you buy insurance, you purchase protection against unexpected financial losses. The insurance company pays you or someone you choose if something bad happens to you.

You may be responsible for all related costs if you have no insurance and an accident happens. Having the right insurance for your risks can make a big difference in your life.

People get insurance not only to help with risks from unexpected events but also to help pay for routine things, such as annual medical checkups and dental visits. In addition, insurance companies negotiate discounts with healthcare providers, so their customers pay those discounted rates.

An insurance policy is a written contract between the policyholder (the person or company that gets the policy) and the insurer (the insurance company).

The policyholder is not necessarily the insured. An individual or company may get an insurance policy (making them the policyholder) that protects another person or entity (who is the insured). For example, when a company buys life insurance for an employee, the employee is the insured, and the company is the policyholder.

How does an insurance policy work?

Insurance policies are often in place for a specific period of time. This can be referred to as the policy term. At the end of that term, you need to renew the policy or buy a new one. With some types of insurance, you choose a beneficiary, the person you want to receive the policy’s benefits or payments.

When you buy an insurance policy, part of your responsibility includes paying a fee called a premium. Some premiums are paid monthly, as in health insurance. Others may be paid once or twice a year, like auto or homeowner’s insurance. The cost of your premium generally depends on how much of a risk you are to the insurance company.

In addition to the premiums, most insurance policies include a deductible. That’s the amount you have to pay first before the insurance company pays their share. For example, if you have a Rs 50,000 deductible on your homeowner’s policy and a storm causes Rs 3,00,000 in damage, you will pay Rs 50,000 and your insurance company will pay Rs 2,50,000. With some policies, you can choose your deductible. Usually, a higher deductible means a lower insurance premium.

Insurance Components

An insurance policy is made of multiple components. Some of the important parts of an insurance contract are:

1.      Premium:

This is the financial consideration which makes the insurance agreement a legally binding contract.

2.      Policy Limit:

Policy limit applies to health and general insurance policies where compensation depends on the amount of loss. The policy may limit the maximum compensation for certain types of losses.

3.      Deductible:

Deductible applies to general insurance and health insurance policies. A deductible is the maximum amount of loss you will bear out of your pocket. The insurer will start paying only when your losses (or expenses) rise above the deductible limit.

Types of Insurance Policies

Life Insurance Policy

It is insurance on your life. You buy life insurance to ensure that your loved ones are financially secured even when you are not around. If you are the only breadwinner, you would want your family members to maintain the same living standards in the event of your untimely demise. The nominee gets the sum assured in case of your death.

Health Insurance Policy

Although health insurance is usually counted as a general insurance contract, there are a few differences. Health insurance covers your medical costs for expensive treatments. You can avail two types of health insurance policies:

    1. Mediclaim Insurance, which compensates you for the medical expenses
    2. Critical Health Insurance, which offers lump-sum payments for dangerous and life-threatening health conditions

Non-life Insurance Policy

These compensate for the losses sustained arising from a specific financial event that is not related to life. Non-life insurance could be car insurance, home insurance, etc.

You can avail insurance benefits under the following two types of policies:

Because of these two variants health insurance falls perfectly between general and life insurance policies. Also, both health insurance policies are important in ensuring complete financial safety for you and your family.

Key Features of Insurance

Listed below are the key features of an insurance plan that you should consider:

  1. Insurance is a tool for risk transfer.
  2. Insurance is a community solution as several people, who are exposed to the same risk, pool their funds together to bear the loss.
  3. The contract is based on the ‘utmost good faith’ principle unlike other business contracts.
  4. Insurance cover does not affect the chance of loss or minimise the magnitude of loss.
  5. As a party to the insurance contract, you should always try to avoid, mitigate and minimize the losses.
  6. You can only insure against risks which are unpredictable in occurrence and magnitude.
  7. Speculative, financial (betting) and business risks cannot be insured.

Benefits of Insurance

There are a lot of benefits of buying insurance and listed below are some of them:

1.      Financial Safety for Family:

They provide cover against life’s uncertainties and protect you against losses arising from different unexpected events in life.

2.      Safety of Financial Status:

Certain events like medical emergencies can have a significant impact on your cash flow management. Insurance ensures you don’t have to pay out of pocket for such situations.

3.      Wealth Creation Goals:

Insurance policies like ULIPs give you investment opportunities and help you fulfil your essential financial goals.

4.      Wealth Preservation:

Life insurance policies like endowment and moneyback plans are some of the safest long-term investments possible. These plans help you preserve your wealth from inflation and taxes for long periods.

5.      Wealth Distribution:

Few investment plans offer the kind of safety offered by life insurance pension plans. After retiring at the age of 60, you can live up to 100. Only life insurance pension plans can guarantee a regular income for that period.

Tax Benefits of Insurance

Along with providing financial security, insurance also offers tax benefits. Here are some of the tax benefits offered by insurance:

  1. You can claim a life insurance premium of up to Rs 1.5 lakh under Section 80C.
  2. Under Section 80D, you can claim a medical insurance premium of up to Rs 25,000 for self and family and additional Rs 25,000 for parents. The deduction limit rises to Rs 50,000 if the insured are senior citizens.
  3. Under Section 10(10D), the life insurance benefits you or the nominee receives from the insurance company are tax-exempted. This means both maturity value and death benefit received from a life insurance policy will be tax-free.

What should you consider when buying an insurance policy?

A useful rule to live by is to do your homework before you buy insurance. Research any insurance company you’re thinking about buying from to be sure that the company is financially sound and provides good service. Also, find out what factors matter so that you can get the coverage you need at the best price.

Secure Your Dreams with Sunsoil Financial

Drop in you details and our experts will call you back

    *By submitting your details, you agree to be contacted by Sun Soil Financial for Loan, Insurance & Investment product related information through Email/SMS/Phone/Letter

    We'd love your feedback!

    Thank you for visiting our website. Let your Feedback fly to us: To help us continue provide better services, share your experience through a short survey.


      What to Cook This Week ab 1

      Peruvian roast chicken, tofu-ginger stir-fry and more recipes. 1

      What to Cook This Week

      Peruvian roast chicken, tofu-ginger stir-fry and more recipes.

      What to Cook This Week

      Peruvian roast chicken, tofu-ginger stir-fry and more recipes.

      Related Articles

      Being financially illiterate can lead to a number of pitfalls, such as being more likely to accumulate unsustainable debt burdens, either through poor spending decisions or a lack of long-term preparation. This, in turn, can lead to poor credit, bankruptcy, housing foreclosure, and other negative consequences.

      Read More

      Example 1

      Read More

      example 2

      Read More

      Share With