Introduction
Insurance helps people stay financially secure in uncertain times. Each type of insurance, whether it's life, health, or motor insurance, offers a particular type of protection. In this article, we'll learn about insurance and some of the types through practical examples and stories.
What is insurance?
Financial compensation against losses caused by unforeseen events like accidents, property damage, medical emergencies, or death is provided by insurance contracts.
This contract is usually made between a policyholder and an insurance provider (insurer). The policyholder pays regular premiums for this to obtain financial protection against losses from a specified risk, and the insurer agrees to pay financial losses as claimed when an insured event occurs.
The main purpose of insurance is to provide financial management and peace of mind against unexpected events. Here we will discuss the major types of insurance.
1.Life Insurance
Life insurance provides financial support to the family or beneficiaries after the death of the policyholder. The policy proceeds can be used to cover daily household expenses, education or debt even after the death of the main earner.
Example:
Anil was 45 years old, working as a private school teacher. Anil had taken a ₹25 lakh term life insurance policy for 20 years, costing him ₹650/month. Sadly, he passed away due to a heart attack while at home.
His wife, Meena, was a homemaker with two children in school. After submitting the required documents (death certificate, policy copy, etc.), the insurer processed the claim in a few days. The payout helped Meena pay for school fees, rent, and daily expenses for the next 4–5 years while she looked for a job.
2.Health Insurance
Health insurance is taken to cover hospital expenses in case of illnesses, accidents, etc. It prevents individuals from wasting their savings during a medical emergency. Most of the payments are settled directly between the hospital and the insurer. Health insurance avoids major losses on savings during unexpected illnesses.
Example:
Ritu is a graphic designer. Ritu fell severely ill with typhoid and had to be hospitalised in a private hospital. Her total medical bill was around ₹1.2 lakh. She had a health insurance policy to help in her bad times and didn’t have to pay anything out of pocket.
3. Motor Insurance
Motor insurance is mandatory in some countries. It includes coverage for damage to your vehicle, third-party liabilities, and theft. It protects both the driver and others involved in an accident.
An insurance claim can reduce the cost of vehicle repairs.
Example:
Sunil's car collided with another vehicle while parking. The rear bumper and taillights were damaged, and the repair estimate was high. He had a comprehensive motor insurance policy. After inspection and documentation, the insurance company paid the deductible amount, and Sunil paid the remaining amount as per the policy's deductible.
Disadvantages of insurance
- The purpose of insurance is to protect against risk, but it also has some disadvantages or limitations.
- A person has to pay a premium every year, whether you have made a claim or not. Life insurance policies are for a long period of time; if you give up on them, you do not get the full benefit.
- In health insurance, immediate coverage is not available for many diseases (e.g., cosmetic surgery and dental, etc.).
- Not every hospital has a cashless facility, and sometimes the claim process gets lengthy without documents and approval.
- In motor insurance, if your vehicle is damaged in an accident, you do not get the full amount due to wear and tear.
- While third-party insurance is mandatory, it doesn’t cover damage to your own vehicle.
- Sometimes the terms and conditions in an insurance policy are so technical that it becomes difficult for a layman to understand them. Taking out a policy without reading it carefully can lead to problems in the future.
Conclusion
Insurance claim stories show how insurance works when you need it most. While each policy has its own terms and coverage conditions, understanding the basic purpose through examples makes it easier to appreciate their value. This article is intended to provide awareness not financial advice so that you can explore your options with a better understanding. Always check the terms of the policy before purchasing.
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