Shahrukh
Insurance Components
Here are some of these components to help you better understand ‘what is insurance’ and how it works:
Insurance Premium Policy
The premium of an insurance policy is the amount that you need to pay to purchase a specific amount of insurance cover. It is typically expressed as a regular cost, be it monthly, quarterly, half-yearly, or annually, that you incur during the premium payment term.
There are various factors based on which an insurance company calculates the premium of an insurance policy. The idea behind is to check the eligibility of an insured individual for the specific type of insurance policy that he/she wants to buy.
For example, if you are healthy and do not have a medical history of getting treatment for severe bodily diseases, you will likely to pay less for health insurance or life insurance policy than someone suffering from multiple ailments.
You should also know that different insurance companies may ask for different premiums for similar types of policies. So, selecting the right one at a price you can afford does require some effort.
Policy Limit
It is defined as the maximum amount that an insurance company is liable to pay for the losses covered under the insurance policy. It is determined based on the period (policy term), loss or injury, and similar other factors.
Typically, higher the policy limit, higher will be the premium payable. For a life insurance policy, the maximum amount that an insurer pays to the nominee is known as the sum assured.
Deductible
Deductible related to an insurance policy is the amount or percentage that the policyholder agrees to pay out of pocket before the insurer sets in to settle a claim. You can also think of it as a deterrent to small, insignificant claims that many people file under their insurance policies.
Deductibles are applicable per policy or per claim as defined by the terms of a specific type of policy. Generally, insurance policies bought with high deductibles are less expensive as the higher out-of-pocket expense results in fewer claims.
How Does Insurance Work?
As defined above, an insurance policy is a legal contract that binds both policyholder and the insurance company towards each other. It has all the details of the conditions or circumstances under which either the insured individual or policy nominee receives insurance benefits from the insurer.
Insurance is a method by which you can protect yourself and your loved ones from facing a financial crisis. You buy an insurance policy for the same, while the insurance company takes the risk involved and offer insurance cover at a specific premium.
In case of any eventuality, the insured or nominee can file a claim with the insurer. Based on the evaluation criteria for claims, the insurer reviews the claim application and settles the claim.
Types of Insurance in India
- The four most common types of Insurances that people buy are :
- Life Insurance
- Health Insurance
- Motor Insurance
- Home Insurance
Benefits of Insurance
Insurance policies benefit people as well as society as a whole in various ways. Along with the obvious benefits of insurance, others are not much discussed or talked about.
1. Cover against Uncertainties
It is one of the most prominent and crucial benefits of insurance. The insured individual or organizations are indemnified under the insurance policies against losses. Buying the right type of insurance policy is indeed, a way to get protection against losses arising from different uncertainties in life.
2. Cash Flow Management
3. Investment Opportunities
Also Read: What is Investment & its objectives?
Tax Benefits of Insurance
Other than the protection benefits of insurance policies, you can also avail income tax benefits.
Section 80C
Section 80D
Section 10(10D)
The life insurance tax benefits and tax benefits of ULIPs in India include tax exemption under Section 10 (10D) on the maturity proceeds or payouts from these insurance plans. This is subject to applicable terms and conditions specified by tax authorities that may be updated periodically.
You can claim these tax benefits of insurance at the time filing your income tax returns..
Get an Insurance to Stay Protected
Staying secured with insurance is a necessity in our times. While many invest in different types of insurances, not everyone knows about the many advantages it offers. Insurance, like Life Insurance, secures not only yours but also your family's financial future safely and affordably. Moreover, investing in Life insurance encourages a regular habit of saving money. Thus, it empowers you to build a significant corpus.
Insurance plans such as term plans and health insurance plans from Max Life Insurance helps you safeguard yourself and your family's financial standing and lets you earn multiple other benefits. So, now that you know 'what is insurance?', how it works, you should consider taking the one that suits you and stay secured!
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