Insurance Products
Insurance
Insurance products are financial instruments that provide individuals and businesses with protection against potential financial losses or risks. These products are offered by insurance companies, which collect premiums from policyholders in exchange for assuming the risk of potential future lossesInsurance coverage can be defined as a contract in the form of a financial protection policy. This policy covers the monetary risks of an individual due to unpredictable contingencies.The policyholder pays a certain amount called ‘premium’ to the insurance company against which the latter provides insurance cover. The insurer assures that it shall cover the policyholder’s losses subject to certain terms and conditions. Premium payment decides the assured sum for insurance coverage or ‘policy limit’.
Features of Insurance Coverage
Insurance coverage has the below mentioned salient features:
- It is a kind of risk management plan to use an insurance policy as a hedge against an uncertain loss
- Insurance coverage does not mitigate the magnitude of loss one may face. It only assures that the loss is shared and distributed among multiple people
- Various clients of an insurance company pool in their risks. Hence, they pay the premiums together. So when one or a few incur a financial loss, the claimed money is given out of this accumulated fund. This makes each client bear a nominal fee
- Insurance coverage can be provided for medical expenses, vehicle damage, property loss/damage, etc. depending on the type of insurance
- Premium, policy limit, and deductible are the main components of an insurance coverage policy. The policy buyer should check them thoroughly while buying an insurance policy
Benefits of Insurance Coverage
Provides Protection
Insurance coverage does reduce the impact of loss that one bears in perilous situations. It provides monetary reimbursement during financial crises. It not only protects the insured from financial woes but also helps in checking mental stress arising out of it.
Provides Certainty
Insurance coverage provides a feeling of assurance to the policyholders. The insured pays a small portion of the income for this certainty that will help in the future. So, there is a certainty of handsome financial aid against the premium.
Risk Sharing
The very manner in which insurance policy functions makes it a cooperative scheme. An insurer would be unable to pay from one’s capital. An insurance company pools in collective risks and premiums because it covers a large number of risk-exposed people.
Value of Risk
Insurance policy assesses the volume of risk and also anticipates the various causes of it. It evaluates the amount for insurance coverage and the premium payment amounts on a risk value basis. It safeguards against unforeseen events and consequential loss.
Types of Insurance Coverage
Life Insurance
One can avail the life insurance in order to protect the family due to premature death or death during the tenure of the policy. It provides the family with a lump sum when the insured person meets with an untimely death. This helps the grieving family to battle with financial struggles that may occur in absence of a breadwinner.
Life insurance provides a payout or death benefit to beneficiaries upon the insured person’s death. It helps protect the financial well-being of dependents by providing funds to cover expenses such as mortgage payments, education costs, or daily living expenses.
General Insurance
General insurance, also known as non-life insurance, is a type of insurance that provides coverage for various risks and liabilities other than life-related risks. It offers protection against financial losses resulting from unforeseen events such as accidents, property damage, theft, liability claims, or natural disasters. Here are some common types of general insurance:
- Property Insurance: Property insurance covers losses or damages to property caused by events such as fire, theft, vandalism, or natural disasters like earthquakes, floods, or storms.
- Auto Insurance: Auto insurance provides coverage for vehicles against damages resulting from accidents, theft, or other incidents.
- Liability Insurance: Liability insurance protects individuals or businesses from legal claims arising from bodily injury or property damage caused by their actions or negligence. It covers legal expenses, settlements, or judgments resulting from lawsuits.
- Health Insurance: Health insurance covers medical expenses, including hospitalization, doctor visits, prescription medications, and preventive care.
