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February 3, 2023
Insurance

1. What is insurance?

  • March 11, 2022
  • 4 min read

Insurance is a legal agreement between two parties i.e. the insurance company (insurer) and the individual (insured). In this, the insurance company promises to reduce the insured’s losses in case of the insured contingency.

The contingency is an event that causes harm. This could be the death of the policyholder or loss/destruction of property. This is called a contingency because there is uncertainty regarding the event. The insured pays the premium in return for the promise made by the insurer.

Life insurance

As the name suggests, life insurance is your life insurance. You purchase life insurance to ensure that your dependents are financially protected in the event of your untimely demise. Life insurance is especially important if you are the sole breadwinner for your family or if your family is very much dependent on your income. Under life insurance, the policyholder’s family is financially compensated in the event of the termination of the policyholder during the term of the policy.

health insurance

Health insurance is purchased to cover medical costs for the expensive treatment. A variety of health insurance policies cover a range of illnesses and illnesses. You can buy general health insurance policies as well as policies for specific diseases. The premium paid for a health insurance policy usually covers the cost of treatment, hospitalization, and medication.

Car insurance

In today’s world, car insurance is an important policy for every car owner. This insurance protects you from any untoward incident like accidents. Some policies also compensate for damage to your car during natural disasters such as floods or earthquakes. It also includes third party liability where you have to pay damages to other vehicle owners.

Education insurance

Child education insurance is a life insurance policy specifically designed as a savings tool. Education insurance can be a great way to provide a lump sum when your child reaches the age of higher education and gets admission to college (18 years and over). This fund can be used to pay for your child’s higher education expenses. Under this insurance, the child is the life insurer or recipient of the funds, while the foster / legal guardian is the owner of the policy.

You can estimate the amount of money for the higher education of your children using the education plan calculator.

2. How does insurance work?

The insurer and the insured receive a legal contract for insurance, called an insurance policy. The insurance policy contains details about the conditions and circumstances under which the insurance company will pay the sum assured to the insured person or nominee.

Insurance is a way to protect yourself and your family from financial loss. Generally, the premium is very low in terms of money paid for a large insurance cover. The insurance company risks providing a higher cover for smaller premiums because very few insured people actually claim insurance. This is why you get insurance for a large amount at a low cost.

Any person or company can take insurance from the insurance company, but the decision to provide insurance is at the discretion of the insurance company. The insurance company will evaluate the claim application to make a decision. Typically, insurance companies refuse to provide insurance to high-risk applicants.

3. What type of insurance is available in India?

Insurance in India can be broadly divided into three categories:

Home insurance

We all dream of owning our own homes. Home insurance can help cover damage or damage to your home due to accidents such as fires and other natural disasters or hazards. Home insurance includes other examples such as lightning, earthquake, etc.

4. What are the tax benefits on insurance?

Apart from the safety and security benefits of buying insurance, there are income tax benefits that you can take advantage of. Life insurance premiums up to Rs 1.5 lakh can be claimed as tax-saving deduction under Section 80C

Medical insurance

Medical Insurance up to 25,000 for yourself and your family and up to ₹ 25,000 for your parents can be claimed as a tax-saving deduction under Section 80D These claims are to be made at the time of e-filing income tax return.

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