The term insurance refers to a policy that ensures the financial stability and security of the family in the future. Before understanding how insurance works in India, let us understand its importance in today’s life. Insurance helps to free people from future expenses and liabilities. You may face unexpected and sudden expenses that require a large amount of money. At that time, savings can be a huge help to bear all the expenses.

For e.g. Sheena has set up health insurance for her family. At the age of 60, her father needs urgent heart surgery. These types of expenses are unpredictable, but Sheena needn’t worry much about finances because all of her expenses like surgery, medicines, tests, doctor’s fees, etc., will be covered by insurance. This shows us how one can secure their future through small investments in the present.

Now let us understand how insurance works in India[1]

Insurance companies provide different types of insurance plans to match your needs. For instance, Future Generali offers term insurance, ULIPs, health insurance, child plans, retirement plans and savings plans. Depending on your lifestyle and life situation you might choose one or a few of them. Before deciding on an insurance plan it is important to know how insurance works in India and what are its important components. There are three components that determine insurance in India. They are as follows:

  • Premium - It is the cost that has to be paid yearly, half-yearly, quarterly and monthly to the insurer for a fixed period. This is crucial because most people first check the premium of the insurance to know how much they have to spend at fixed intervals. Premiums initially may add to your expenses but their long term benefits outweigh the initial burden.
  • Policy Coverage - It is the amount that an insurer will have to pay to the person getting insurance under a policy. The premium of the policy also depends on the coverage amount. The higher the coverage, higher the premium. Therefore it is very important to check and compare the cover amount offered by different policies and then choose the one that suits you.
  • Deductible – This is applicable in case of Mediclaim policies or Health insurance policies offered by Health or Generali Insurers. This is the amount that the policyholder has to pay before the insurer pays the final amount. Generally, policies with higher deductibles have low premiums because the claims will be less once the policy matures. This varies from policy to policy and company to company.

Types of Insurance Plans :

There are several types of insurance plans in India, and you must choose one that meets your requirements. Here are some popular ones below:

  1. Term plans – As the name suggests you can choose the plan for a particular term or period. A term plan keeps your family secure from financial challenges if an unfortunate event occurs and provides a life cover of your choice at affordable premiums. The life cover provides your loved ones with an assured sum in case you suffer an unwanted incident during the policy period.
  2. Health plans - Health insurance is a type of insurance that offers lump sum to cover medical expenses that arise due to illness. These expenses could be related to hospitalisation costs, the cost of medicines or doctor consultation fees. Some plans focus only on critical illnesses while others offer a more comprehensive support that covers major and minor illnesses and their costs.
  3. Traditional saving plans – An insurance savings plan provides an opportunity of saving and accumulating funds for the future, while offering a life cover for the policyholder, thus securing the financial future of the family.
  4. Child plans - Child plans help you create a corpus for your children's future, over a period of time. On maturity, these plans pay a lump sum amount which can be used to pay your child's college fees or marriage expenses.
  5. Retirement plans- These plans are designed to make your life free of stress and tension after retirement. They are a popular plan to ensure a financially strong and secure future.
  6. Unit Linked Insurance Plans (ULIPs) - A ULIP is an insurance plan that offers the dual benefit of investment to fulfil your long-term goals, and a life cover` to financially protect your family in case of an unfortunate event. The premium paid towards a ULIP is divided into two parts. A part of it is contributed to your life cover`, and the remaining is invested in the fund of your choice. You can choose to invest in equity, debt, or a combination of both funds as per your risk appetite and goals.
  7. Group plans - It is mainly for a group of people that want every member of that group (be it employees or clients or social group) to be secured under insurance. These plans are popular among companies for their employees and it is not limited to the employee only as it may provide coverage to the employee's dependents such as spouses, kids and parents.

Conclusion

Now you have an idea about how insurance works in India. Remember that it is best to begin your insurance journey as soon as possible to reap maximum benefits. So, try to cultivate the discipline and knowledge to make the right investments to secure your future. There are several experts in the industry that can make the journey smoother.

Future Generali India Life Insurance Co. Ltd. offers several plans and policies for a secure future. To understand which policy works best for your particular needs & how, you can visit our website or talk to our trusted and experienced advisors.