Types of Insurance: a short introduction

 What is an Insurance

Insurance is a type of risk management basically used to safeguard against the threat of an unexpected, dubious misfortune. Insurance is characterized as the even-handed exchange of the risk of a misfortune, starting with one thing then onto the next, in return for payment.
An Insurance provider is an organization offering the protection.
The policyholder is the individual purchasing the insurance policy.

How many types of Insurance are there?

1. Life Insurance
2. Health Insurance
3. Auto Insurance
4. Long Term Care Insurance
5. Dental Insurance
6. Disability Insurance
7. Home Insurance
8. Business Insurance
9. Travel Insurance
10. Credit card Insurance
11. Pet insurance

etc.

Human Life Insurance:

1. Term Plans:

1. Provide only life cover
2. Pay out the sum only if individual doesn’t survive the term
3. Fixed to pay an annual premium for fixed period till no events
4. Long term and premium stays the same during the period
5. Lower premiums, You can get life cover up to INR 1 Crore with a premium of 10,000 INR approx. annually.

2. Endowment Plans:

1. Pay out the sum assured under both scenarios – death, and survival, as long as premiums have been paid regularly
2. Good avenue for investment for those with low to medium risk appetite
3. For investors seeking a combination of insurance and savings
4. The downside is low and premium is higher, You get same 1 Crore life cover with a premium of 50,000 INR approx. annually.

3. ULIPs:

1. Invest in stock/debt market (you have the option to choose allocation)
2. Combination of long term savings and insurance in that order
3. If objective is life cover, then term plan better than ULIP
4. ULIPs have higher expenses
5. Pay out the sum assured on maturity
6. ULIPs give high returns on long term basis (10 years)

What are ULIPs?

A unit-connected protection design (ULIP) is a kind of life coverage where the money estimation of a policy differs as indicated by the present net resource estimation of the fundamental venture resources. It permits security and adaptability in investment, which is absent in different types of insurance, for example, entire life policies. The premium paid is utilized to buy units in assets picked by the policyholder.

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