Published: Feb 16, 2023, 1:53pm
Insurance coverage is a much wider concept, which is designed to financially help the insured from any kind of losses or damages which might occur due to an unforeseen incident. It refers to all genres of insurance coverage which varies from life, health, vehicle, home etc.
Let’s have a better understanding of insurance coverage, its benefits, features and its type through this detailed read.
Insurance coverage is a legal contract between insurer and insured, where the insurer is responsible for providing financial coverage to the insured in case of any mishap or medical emergencies. To receive the compensation and benefits from the insurance company, the insured is required to pay a certain amount which is called a “premium” to them. Premium is dependent on a number of factors such as insured’s age, sum assured coverage and lifestyle habits.
For instance, you purchase an insurance policy from an insurance company of sum assured up to INR 70 lakh. So, this plan will provide you coverage from losses up to the sum of INR 70 lakh.
However, if the losses or damages incurred are more than INR 70 lakh, in such a case your financial compensation will be limited to the insurance coverage that you have opted for, which is INR 70 lakh. And if your losses are below INR 70 lakh, say INR 50 lakh, then you will be compensated up to INR 50 lakh and not INR 70 lakh.
Insurance coverage is nothing but work on the basis of “risk sharing” and “risk pooling”. When one purchases any kind of insurance policy from the insurance company, it is generally being offered for a specified period and with a specific amount of cover. To receive the benefits of your policy, the insured has to make regular payment of premiums towards the policy.
When any unfortunate event happens, the policyholder is required to notify the insurance company as soon as possible with all the required details. All the losses will be compensated by the insurer from the collected pool of policyholder’s premium as per the mentioned terms and conditions of your insurance coverage. However, in certain policies especially in life insurance policies, even if you do not make any claim, the insurance company provides you with the sum of money as a lump sum payment at the time of maturity.
Let’s have an in-depth look at these two types of insurance coverage.
Life insurance coverage is one of the most important insurance coverage, especially when you have dependents such as elderly parents, spouses and young children. In such a case, the sum assured coverage amount is paid to the policyholder’s nominee, if the policyholder dies within the policy period. However, apart from pure term plan coverage, there are many other variants of life insurance coverage which also has saving and investment component along with life coverage such as: Unit-Linked Investment Plans
The general life insurance coverage includes non-life related liabilities and risks. General insurance should be very crucial as your expensive assets carry the high possibility to get damaged due to an accident or theft. For instance:
Mr. XYZ has got a brand-new car, and suddenly while driving, their car gets collided by the other vehicle. Due to this collision, the rear-view mirror of their car was totally damaged. But, Mr. XYZ has no stress-as he has already taken a car insurance policy from ABC insurance company, which will provide full claim for the damages and thus Mr. XYZ has to shell out nothing from his pocket.
There are various types of general insurance, such as:
For any kind of insurance coverage, first it is important to understand the need for insurance. For this, below are the certain factors which can help you in deciding what type of insurance you need:
If you have answers to the above parameters, then you can easily get coverage for your health, your family, travel, mobile, motor etc.
Insurance is such a critical aspect of financial planning that its benefits cannot be ignored, especially when life is full of uncertainties. So, next time when you are planning to review your financial portfolio and realize that you are still uninsured, ensure that you set aside at least some funds for the appropriate kind of insurance coverage.
Rashi Maheshwari is a Deputy Editor for Forbes Advisor India. She has more than a decade of experience working in news, public relations and communications. In the past, she has worked with CNBC Awaaz, CryptoWire, among others and has covered beats including insurance, personal investments and cryptocurrency. She is a travel enthusiast and would like to visit every country and try as many different culinary specialities as possible.