Securing your future and your finances with insurance is an essential part of financial planning. But to ensure that you get the right kind of coverage, you need to first understand how many types of insurance there are and what the different types of insurance available in India are.
In India, insurance can be broadly classified into two types — life insurance and non-life insurance, also known as general insurance. These two types of insurance can be further sub-classified into multiple different categories. Let’s first take a closer look at life insurance and its different types, before moving onto general insurance.
Like all types of insurance, life insurance is a financial contract between you and an insurance company. Here, the insurer agrees to pay out a lump sum to your beneficiaries in the event of your death. This lump sum is referred to as the death benefit sum assured. Your beneficiaries can use these funds to take care of their daily expenses and pay for their life goals.
And in return for receiving this life cover, you need to pay a fee, known as the premium, to the insurance company. This premium can be charged as a one-time lump sum amount or as periodic payments. As long as you pay the premiums on time, you will continue to enjoy life insurance coverage.
Find out about India's best life insurance schemes: What are the Best Life Insurance Schemes in India?
Life insurance can be further categorised into different types, according to the nature of the benefit offered. Here’s a quick look at the different types of life insurance.
Term insurance is one of the most popular types of life insurance. Since it is a pure life cover, it is also the most affordable kind of life cover. Here, your beneficiary will receive the death benefit sum assured in the event of your demise during the policy term.
However, if you survive till the end of the policy term, you will not be entitled to any benefits whatsoever. Unless you opt for the Return of Premium (ROP) rider at the time of purchase, in which case you will be entitled to get back all of the premiums paid upon the plan’s maturity.
In addition to providing you with a death benefit, endowment life insurance plans offer guaranteed maturity benefits as well. If you outlive the policy term, you will receive the guaranteed maturity payouts at the end of the policy tenure. These maturity payouts can be in the form of a lump sum amount, regular periodic payments, or a combination of the two.
Whole life insurance is very similar to an endowment insurance plan. However, the only difference between the two is with the tenure of the policy. Endowment plans usually provide coverage only for a limited period of time, typically up to the age of 6o or 65. Whole life insurance, on the other hand, is designed to offer life insurance coverage till you attain 99 or 100 years of age.
ULIPs are fast becoming one of the most preferred types of life insurance. A ULIP essentially combines the elements of insurance and investment. In addition to providing you with a life cover, a part of the premium that you pay towards a ULIP is invested in a mutual fund of your choice. Upon maturity, the accumulated fund value, along with profits, if any, is paid out to you as a lump sum amount.
Designed to help you safeguard your child’s future, a child insurance plan provides you with a life cover as well as a guaranteed lump sum payout on maturity. This way, you can ensure that your child gets the necessary financial assistance to meet their major life goals, like their higher education and their wedding expenses.
Also known as annuity plans, retirement focused life insurance plans are designed to offer regular payouts after a certain period. You can use these payouts to take care of your monthly expenses after you retire.
There are two types of annuity plans available in India — immediate annuity and deferred annuity. In an immediate annuity plan, you start to get the regular payouts immediately after you’ve purchased the policy. In a deferred annuity plan, on the other hand, you only start to receive the regular payouts after the expiry of a certain period of time.
Any kind of an insurance policy that does not insure life is categorised as general insurance or non-life insurance. These types of insurance policies are designed to provide a specified amount of money to the policyholder in the case of certain contingent events or incidents.
So, if the said contingent event that’s covered by a general insurance policy occurs, the policyholder will be entitled to receive the sum assured under the policy. If not, the policyholder will not be eligible for any of the benefits listed under the policy.
General insurance in India can be broadly categorised into the following 4 types. Here’s a closer look at each of them.
A health insurance plan is designed to cover the cost of healthcare and medical treatments. So, if you’re ever diagnosed with an illness that’s covered by the plan or if you require an emergency surgery, the payout from a health insurance plan can help significantly reduce the financial impact of these medical bills.
There are two different types of health insurance plans that you can opt for -
Learn how to choose the right health insurance plan based on your salary here.
With a motor insurance plan, you basically insure your motor vehicle, like your car or your two-wheeler. In case of an accident or a mishap, the payout from the motor insurance policy can be used to repair the damages to your vehicle and take care of any third party liabilities that may arise.
As with health insurance, there are two different types of motor insurance plans available in India -
Among the different types of general insurance, home insurance is by far the most overlooked kind of cover. As the name suggests, home insurance policies insure your house.
And in the event of any damage to your house or its structure due to natural disasters, explosions, fire, burglary, or riots, you can use the payout that you receive from the policy to rectify the damages.
Travel insurance is designed to cover the risks involved in travelling. This includes flight or baggage delays, loss of passport or baggage, emergency medical expenses while travelling, and flight cancellations, among other things.
In case any of the above events occur, you will be eligible to receive monetary compensation for the same from the insurance company. There are three main types of travel insurance policies that you can opt for -
With this, you must now be aware of insurance and its types in India. Insurance is easily one of the most useful investment options available. By purchasing an insurance policy, you can effectively protect your assets, including your life and your health.
In the event of an untoward incident, all or part of your expenses will be covered by insurance. This leaves your personal finances largely untouched, allowing you to save for your future without having to worry about expensive bills.
There are more than just 3 types of insurance in India. At the highest level, insurance can be classified as life insurance and general insurance. Then, we have different types of life insurance, such as term insurance, endowment plans, ULIPs, child insurance plans and more.
There are also different types of general insurance, like health insurance, travel insurance, home insurance and motor insurance. Even within these categories, there are various types of insurance based on the scope of coverage.
PPO insurance or Preferred Provider Organisation insurance is a kind of health insurance plan. Here, the health insurance provider negotiates a contract with a network of private healthcare providers. And if a policyholder seeks medical care from any of the network chains, they will enjoy the benefit of reduced rates.
Currently there are 57 insurance providers in India, out of which 24 are life insurance providers.
Here are the top 5 insurance plans in India as of March 2023 -
a. Aditya Birla Sun Life Insurance
b. HDFC Life Click 2 Protect Plus
c. SBI Life eShield
d. Future Generali Care Plus
e. Aviva i-Life
