Insurance: A Basic Overview

Insurance is a written contract between the insurer and policyholder. It is a way in which you can protect yourself and your belongings as well. Under the contract, you are supposed to pay a regular amount of money as a premium to the insurer, and then they will pay you back the money if something wrong happens. For example, the company will give a lump sum amount to its policyholder if that individual met unfortunate incidents like an untimely death, damage to their house, or an accident. It is beneficial to economic growth since it creates a long-term reserve.

History and Definition of Insurance

Insurance has its deep-rooted history. In 1818, the life insurance business appeared with the establishment of the Oriental life insurance company in Kolkata. But the company faced failure in 1834. Some insurance companies like Oriental, Bombay Mutual and Empire of India had started their business in the Bombay residency. But back then, the British government dominated these companies with their foreign insurance companies like Royal Insurance, London Globe Insurance, Albert Life Insurance, and Liverpool. 

General Insurance was formed in 1975, a wing of the insurance association in India. General Insurance was nationalised on 1st January 1973. The General Insurance Corporation of India was established in 1971, and then it commenced its business in 1973.

In 1999, as per the recommendation of the Malhotra Committee report, IRDA (Insurance Regulatory and Development Act) was formed as an autonomous body to develop and regulate the insurance industry. Twenty-four life insurance companies and 34 general insurance companies in India, including Agriculture Insurance Corporation and ECGC.

Benefits of Insurance

It is a life-protection plan that gives you lots of benefits if you choose the right plan. It helps you secure your future goals, whether your child’s future or your family protection. After retirement, you can also receive a lump sum amount of money to secure your post-retirement life.

Life Insurance acts as a shield that ensures the protection of one’s family in their absence. Life insurance premiums generally qualify for the tax deduction under the Income Tax Act. So, Life insurance is tax-free, which is excellent.

Life insurance plans also allow you to take any loan on the existing policy to overcome any urgent requirements.

There is also an option called money-back insurance plans that provide an option to make regular income for anyone’s family member when the insurer is absent.

Another benefit to taking insurance is that it will provide money to diagnose any critical illness to those who chose the critical illness cover plan.

Types of Insurance

Two types of insurance are Life insurance and General Insurance. Furthermore, there are different types of Life and General insurance plans. 

The Life insurance plans include: 

• Whole Life Insurance
• Endowment plans
• Child plans
• Pension plans
• Term Life Insurance
• Unit-linked Insurance plans

The different types of General Insurance plans are:

• Health Insurance
• Home Insurance
• Fire Insurance
• Motor Insurance
• Travel Insurance
• Life Insurance

Life insurance offers coverage against sudden or unfortunate incidents like accidents or death. It is financial protection for a family. Insurance companies offer a considerable amount to your beloved ones if anything terrible happens to you. You can choose any plans, policy period, or coverage amount according to your convenience.

• Whole life insurance offers an individual coverage of a certain number of years.
• In the Endowment plan, companies will pay the Sum Assured to the insured person’s family.
• Child plans offer a secure future to the children of the insured person.
• Pension or retirement plans are the cushions for one’s life after retirement.
• You can secure your family’s future with a meagre premium in the Term Life Insurance plan.
• Unit-linked insurance offers both insurance benefits and investment in a single policy.
• General Insurance

General Insurance is one of the types of insurance that offers financial protections other than the death of the policyholder. It gives you financial protection against the loss of such things as a car, mobile, home and health, etc.

• In Health Insurance, companies will give you protection against the treatment of illness, daycare procedures, hospitalisation, etc.
• Few home insurance policies give you financial support when damage happens to your personal property.
• Fire Insurance is a type of insurance that provides coverage for any damage due to fire with the Sum Assured. There are many kinds of fire insurance.
• Motor insurance gives you financial support if your car or bike somehow gets involved in an accident. There are three types of Motor Insurance. These are- Car Insurance, Bike Insurance, and Commercial Vehicle Insurance.
• Travel insurance will give you financial support when you go somewhere with your loved ones at any place to secure your journey. 

Conclusion

Insurance is an agreement in which an insurer guarantees security or compensation from an insurance firm in coverage. According to the contract, you must pay a regular sum to the insurance as a premium, and the insurer will reimburse you if something catastrophic happens. Insurance has become very necessary nowadays as life is so uncertain. So, insurance is a perfect option for the protection of yourself and your loved ones. This sector is the colossal one, and it is now growing at a fast rate. This sector’s banking services have added about 7% to the country’s GDP. It is a blessing to economic development as it provides a long-term fund.