The document defines various types of insurance including life insurance, term insurance, money back policies, unit-linked insurance plans, health insurance, motor insurance, travel insurance, home insurance, and fire insurance. It provides examples to illustrate how different insurance policies such as term life insurance and money back policies work. The key purpose of insurance is to transfer risk from individuals to an insurance company in exchange for regular premium payments.

1. G. Ramya Sri

2. What is an Insurance ?
Insurance is a legal contract between two parties- the
insurance company (insurer) and the individual (insured),
wherein the insurance company promises to compensate
for financial losses due to insured contingencies in return
for the premiums paid by the insured individual. In simple
words, insurance is a risk transfer mechanism, where you
transfer your risk to the insurance company and get the
cover for financial loss that you may face due to
unforeseen events. And the amount that you pay for this
arrangement is called premium.

3. Howdoesinsurancework?
The concept of insurance works on the basis of ‘risk
pooling’. When you buy any type of insurance policy
from the insurance company for a specified period
with specific cover, you will make regular payments
(referred to as premiums) towards the policy.
Similarly, Insurance Company collects premium from
all of its clients (referred to as insured) and pools the
money collected to pay for losses arising out of an
insured event.

4. Types of Insurance
Life Insurance
Term Insurance
Money-Back Policy
Unit-Linked
Insurance Plan
Pension Plan
General Insurance
Motor Insurance
Health Insurance
Travel Insurance
Home Insurance
Fire Insurance

5. Life Insurance: Life Insurance is defined as a contract
between the policy holder and the insurance company,
where the life insurance company pays a specific sum to
the insured individual's family upon his death. The life
insurance sum is paid in exchange for a specific amount
of premium.
Term Insurance
Term policies are considered largely risk-free, low cost
and usually with the highest coverage. These plans are
purchased for a fixed period of time (such as 10 years or
20 years). They provide a fixed payout in case of death of
the insured person or at the end of the term.

6. Example: Mr. Mehta, with an income of Rs.10
lacs per annum, is the sole earning member in his
family of four. He and his wife had two school-
going children.
He buys term plan with Rs.1 Crore with policy
term of 30 years and monthly premium of
Rs.750
He passed away due to Lung cancer and his
family approached the insurance provider
regarding the claim.
The family received lump-sum amount of 1
Crore.

7. Money Back Policy: In a money back policy, the
customer gets a certain percentage of the sum assured
as guaranteed payouts at fixed intervals. In short, money
back plans are endowment plans with liquidity.
(Endowment or Guaranteed Returns Plan
Endowment Plans provide financial protection through life
cover along with guaranteed returns. The policyholder will
receive a lump sum amount if he or she survives until the
date of maturity of the policy. With these plans the life
cover amount is much lower and people generally buy
these plans for the maturity benefit. These plans are great
if you are saving for a big purchase.)

8. Market Linked Plans or ULIPs:
ULIPs (Unit Linked Insurance Plans) provide both
protection and savings combined with flexibility to the
covered person. As these products are linked to capital
markets, they may have the potential to deliver better
returns than traditional plans. However, with high
returns there is a risk of low returns as well, which will
depend on the market’s performance.

9. Premium Plan : Premium paying term is often
mistaken for policy term. Although policy term usually is
equal to the premium paying term, both are different.
For instance, policy term for a life insurance plan can be
40 years, yet premium paying term can be 20 years. Which
means, one needs to pay for 20 years, but the policy will
cover for 40 years.
Many insurance companies give the life assured the
autonomy to pick the premium paying term lower than the
policy term. Moreover, insurers allow individuals to get
the life insurance benefits even if they stop the term
insurance premium payments after a stipulated period;
only if all the premiums are previously paid.

10. General Insurance:
Insurance contracts that do not come under the ambit of
life insurance are called general insurance. The
different forms of general insurance are fire, marine,
motor, accident and other miscellaneous non-life
insurance.
Fire Insurance:
Fire insurance covers a policyholder against fire loss or
damage from a number of sources. These include fires
brought about by electricity, such as faulty wiring and
gas explosions, as well as those caused by lightning and
natural disasters.

11. Motor Insurance:
MI refers to policies that offer financial assistance in the
event of accidents involving your car or bike. Motor
insurance can be availed for three categories of motorised
vehicles, including:
•Car Insurance - Personally owned four-wheeler vehicles
are covered under such a policy.
•Two-wheeler Insurance - Personally owned two-wheeler
vehicles, including bikes and scooters, are covered under
these plans.
•Commercial Vehicle Insurance - If you own a vehicle that
is used commercially, you need to avail insurance for the
same. These policies ensure that your business automobiles
stay in the best of shapes, reducing losses significantly.

12. Health Insurance:
Refers to a type of general insurance, which provides
financial assistance to policyholders when they are admitted
to hospitals for treatment. Additionally, some plans also
cover the cost of treatment undertaken at home, prior to a
hospitalisation or after discharge from the same.
Types of Health Insurance policies
• Individual Health Insurance
• Critical Illness Cover
• Senior Citizen Health Insurance
• Maternity Health Insurance
• Group Health Insurance
• Personal Accident Insurance
• Preventive Healthcare Plan

13. Travel Insurance:
Such policies ensure the financial safety of a traveller
during a trip. Therefore, when compared to other
insurance policies, travel insurance is a short-term
cover.
Depending on the provider you choose, travel
insurance may offer financial aid at various times,
such as during loss of baggage, trip cancellation and
much more. Here is a look at some of the different
types of travel insurance plans available in the
country: Domestic Travel Insurance; International
Travel Insurance; Home Holiday Insurance

14. Home Insurance:
Home insurance is a property insurance policy to help you
cover your own home or rented apartment, and your personal
belongings within, from unforeseen circumstances such as
burglaries, fires, floods, storms and explosions. Buying a
house is one of the most vital investments people spend all
their life working towards. Yet, there are so many people who
forget to secure and protect for this very important investment
in their life. From your cutting-edge gadgets and beautiful
interiors to your jewelry and other valuable belongings; your
home is more than just its mere physical property and is a lot
more valuable than you imagine it to be.