Insuranceis a necessity in our lives today so as to protect ourselves as well as our families and other dependants from any sudden financial crunches. But to invest in good insurances, you must first know about the different kinds. Insurance is a vast area which covers a large
number of aspects. It is a typical risk management process that helps both the insured as well as the insurer. There are two kinds of insurances, life insurance and health insurance. And three major types of products issued and sold by life and health insurers are the life insurance policy, annuity contract, and health insurance policy. Let us see different types of Insurance products one by one:
- Life insurance policy: a policy under which the insurance provider would pay a benefit upon the death of the named person. Life insurance can be further divided into three parts:
- Term life insurance provides a policy benefit if the insured dies within a certain period of time.
- Cash value life insurance (also called permanent life insurance) offers life insurance coverage throughout the insured’s lifetime along with a savings part. As there are premiums to be paid for these policies by the insured, an accumulated savings amount also known as the policy’s cash value, gradually builds.
Endowment insurance provides a policy benefit that is paid either when the insured dies or after a certain period of time, if the insured lives till then.
Annuity contract: a contract under which an insurer makes a series of periodic payments to a named individual in exchange for a premium or a series of premiums that were paid by the insured beforehand. This particular insurance can be used as a retirement plan too where you can receive the periodic payments from your insurer as a kind of pension after retirement.
Health insurance policy: a policy that provides a cushion against financial loss resulting from the insured’s illness, accidental injury, or disability. Two major forms of health insurance are:
- Medical expense coverage: provides benefits to pay for the treatment of an insured’s illnesses or injuries.
- Disability income coverage: provides income replacement benefits to an insured person who has become unable to work because of illness or injury.
Now that you have an overview of the different kinds of insurances, you can plan your personal finances accordingly so as to include certain kinds of insurances as per your needs. Getting an insurance policy might seem like a head ache at first since you need to work your finances around the premiums that you need to pay but in the long run you as well as your family and dependants are the ones who will actually benefit.