Life And Health Insurance

Life And Health Insurance

“We live in an unpredictable world these days. Thus, there are many legitimate reasons to prepare yourself for those unannounced curveballs.”

I was just doing some time pass on my mobile, that’s when I read these lines. Later that evening I got to know that one of my friend’s younger brother died of cardiac failure.

‘CARDIAC FAIL’, he was only 35, and an athlete too. He left behind a wife and a 2-year-old daughter. He doesn’t deserve to die so young. But then I could relate to the lines which I read earlier, “Life is unpredictable”.

To deal with this unpredictability we all should have a contingency plan. We certainly live in stressful times. We do need to plan ahead in life.

Bertolt Brecht says – “You don’t need to pray to god anymore when there are storms in the sky, but you do have to be insured.”

What Is Insurance?

Insurance is a thing providing protection against a possible eventuality. It is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness or death in return for payment of a specified premium. In other words, insurance is a legal agreement between two parties i.e., the insurance company (insurer) and the individual (Insured).

How Does Insurance Work?

The legal agreement between the insurer and insured is called an Insurance Policy. It is a document detailing the terms and conditions of a contract of insurance.

An insurer is a company or person who promises to reimburse. The insured is the one who receives the payment, except in the case of life insurance, where the payment goes to the beneficiary named in the life insurance contract. The premium is the consideration paid by the insured – usually annually or quarterly – for the insurer’s promise to reimburse. This contract between an insurer and insured is called “Insurance Policy”. The events insured are known as risks or perils.

Types Of Insurance

Broadly there are 8 types of insurance.

  • Life Insurance
  • Motor Insurance
  • Health Insurance
  • Travel Insurance
  • Property Insurance
  • Mobile Insurance
  • Cycle Insurance
  • Bite-Size Insurance

But here we will mainly discuss 2 types of insurance, which everyone should think about, life insurance and medical insurance

Life Insurance

It is an agreement between the insurance company which guarantees compensation for the loss of life in return for the payment of a specified premium. In life insurance, the beneficiary whose name has been mentioned in the contract receives the specified sum, in case of loss of life.

Types Of Life Insurance Policies

  • Term Insurance Plan
  • Endowment Plan
  • Unit Linked Insurance Plan (ULIP)
  • Money Back Policy
  • Whole Life Policy
  • Annuity Pension Plan
  • Child’s Plan

1. Term Insurance Plan – The death benefit from a term plan is only available for a specified period. For instance, 40 years from the date of policy purchase.

2. Endowment Plan – in this a portion of your premium go towards the death benefit while the remaining is invested by the insurance provider. Maturity benefits, death benefits and periodic bonus are some types of assistance from such policies.

3. Unit Linked Insurance Plan (ULIP) – This is similar to an endowment plan. A part of its premium goes to mutual fund investment while the remaining goes to the death benefit.

 4. Money Back Policy – Such policies pay a certain percentage of the plan’s sum assured after regular intervals. These are known as survival benefits.

5. Whole Life Policy – Such policies offer life cover for the entire life, instead of the specified term. Some tenure may restrict the whole life insurance tenure to 100 years.

6. Annuity Pension Plan – These plans are a fusion of investment and insurance. A portion of the premium goes towards creating a retirement corpus for the policyholder. This is available as lump-sum or monthly payment after the policyholder retires.

7. Child’s Plan – This is an investment cum insurance policy. This provides financial aid for your children throughout their lives. The death benefit is available as a lump-sum payment after the death of parents.

Advantages Of Life Insurance

  • Tax benefit
  • Encourages saving habits
  • Secures family’s financial future
  • Helps plan your retirement

Health Insurance

Health insurance is a type of insurance wherein an insured can claim payment for his medical and surgical expenses. In health insurance, the company agrees to undertake a guarantee of compensation for medical expenses in case the insured falls ill or meets with an accident that leads to hospitalization. The insurance companies have tie-ups with hospitals so as to provide cashless treatment to the insured.

In case the insurance company have no tie-ups with hospitals then they reimburse the cost of expenses incurred by the insurer.

Types Of Health Insurance

1. Individual Health Insurance – As the name suggests, the policy covers the expenses of an individual’s hospitalization expenses. The premium is determined as per the age of the insurer.

2. Family Health Insurance Plan – An individual can include all the family members against multiple diseases under a single cover. This plan offers a fixed sum assured for the family members. This sum assured can be availed by whole family or individual.

3. Senior Citizen Health Insurance Policy – This policy is designed for senior citizens over 60 years of age, for protection from health issues.

4. Surgical or Critical Illness Insurance Plan – This plan is suitable for the insured that requires treatment against critical illness such as kidney failure, paralysis, cancer, heart attack etc. As the medical expenses of these treatments are high, the premium paid by the insured is also high.

5. Maternity Health Insurance Plan – This policy covers pre-and post-natal care, child delivery expenses of newborn babies.

6. Personal Accident – As the name suggests, it covers the hospitalization expenses in an accident. The premium amount depends upon the amount of cover taken.

7. Unit Linked Health Plan – This is a unique plan. It provides insurance and saving both at the same time. This policy helps in building a corpus that can be used to meet those expenditures which are not covered by an insurance policy.

Advantages Of Health Insurance Policy

  • Cashless treatment
  • NCB (No Claim Bonus, this is a bonus which is paid to the insured if the insured dies not to file a claim for any treatment in the previous year)
  • Medical Check-ups
  • Tax benefit

Whether it is life insurance or health insurance, it is always better to plan ahead. Being prepared does not make the crisis disappear! Even if you are prepared, it's still there, only in more manageable proportions.

“The time to repair the roof is when the sun is shining.” – John F Kennedy