Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
Risk is everywhere: When you drive your car to work, when you visit a new country, when you ride your bike to a nearby shop, when there’s a new bug going around in town.
Bottomline: You need the security of insurance.
There are two broad types of insurance:
And you need both in life.
What is Life Insurance
Life insurance is a contract that offers financial compensation in case of death or disability. Some life insurance policies even offer financial compensation after retirement or a certain period of time. Life insurance, thus, helps you secure your family’s financial security even in your absence. You either make a lump-sum payment while purchasing a life insurance policy or make periodic payments to the insurer. These are known as premiums. In exchange, your insurer promises to pay an assured sum to your family in the event of death, disability or at a set time.
Life insurance can help you support your family even after retirement. Depending on what it covers, Life insurance can be classified into various types:
Life insurance not only ensures the well-being of your family, it also brings tax benefits.
The amount you pay as premium can be deducted from your total taxable income.
However, this is subject to a maximum of Rs 1.5 lakh, under Section 80C of the Income Tax Act.
The premium amount used for tax deduction should not exceed 10% of the sum assured.
What is General Insurance?
A general insurance is a contract that offers financial compensation on any loss other than death. It insures everything apart from life. A general insurance compensates you for financial loss due to liabilities related to your house, car, bike, health, travel, etc. The insurance company promises to pay you a sum assured to cover damages to your vehicle, medical treatments to cure health problems, losses due to theft or fire, or even financial problems during travel.
Simply put, a general insurance offers financial protection for all your assets against loss, damage, theft, and other liabilities. It is different from life insurance.
Let us help you understand better:Health Insurance
This type of general insurance covers the cost of medical care. It pays for or reimburses the amount you pay towards the treatment of any injury or illness.
It usually covers:
The treatment of critical illnesses
Medical bills prior to or post hospitalisation
Day care procedures like Cataract operations
You can also opt for add-on benefits like:
Maternity cover: Your health insurance covers you for the costs related to childbirth. This includes pre-delivery check-ups, hospitalisation during delivery, and post-natal care.
Pre-existing diseases cover: Your health insurance takes care of the treatment of diseases you may have before buying the health insurance policy.
Accident cover: Your health insurance can pay for the medical treatment of injuries caused due to accidents and mishaps.
Your health insurance can also help you save tax. Your premium payment can reduce your taxable income.