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A Cheat Sheet on Insurance and Its Types

By Bhavesh Mehta - Jan 16,2020
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A Cheat Sheet on Insurance and its Types

An individual is prone to many risks like death, financial loss due to disability, accidental damage to assets resulting in the loss of production, etc. Such things may result in a financial loss and thus need to be protected by transferring it to someone who can make good the loss. For instance, people opt for health insurance to protect themselves against the enormous hospitalization costs due to diseases. You can conveniently buy health insurance on Finserv MARKETS.

Insurance is a form of a legal contract between two parties, i.e. the Insurer (insurance company) and the insured (customer). In this contract, the insurance company indemnifies the insured in the event of any accidental loss or damage to the insured’s assets, as covered under the insurance contract. The contract is executed through a payment (premium) paid by the insured to the insurance company. Let us take an example. Your car is an asset and motor insurance is designed to protect the asset against accidental loss or damage. Bajaj Allianz Motor Insurance, available on Finserv MARKETS, provides comprehensive coverage against damage to the vehicle. The motor policy, besides other financial products, can also be purchased through the Finserv MARKETS App. It provides a user utmost convenience, besides easy claim settlement, quick disbursal and transparent pricing.

The legal document in insurance parlance is termed as, “Insurance policy”. It is a legal document and consists of terms, conditions, warranties, exclusions, etc. agreed to by the Insured during the issuance of the contract. All such terms and conditions form the boundary under which the insurance company will pay out the insurance amount in case of a financial loss or a loss of life. Along with the terms and conditions, understanding the broader and more specific classifications of insurance is crucial in deciding which type of insurance is necessary for you and your family.

Insurance is primarily of two types:

  • Life insurance
  • Non-life insurance.

Life insurance

This has more to do with an individual’s life, i.e. any risk or loss due to a human loss can be covered under this type of insurance. That’s one of the reasons why the amount the policy pays out in life insurance is termed as, “Sum Assured” compared to “Sum Insured” in non-life insurance. Life insurance indemnifies the insured in the form of a lump-sum amount that is paid to the insured, in case of maturity of the policy while the insured is still alive. However, in the case where the insured dies within the policy time period, the sum assured in the policy schedule is paid to the nominee(s) selected by the insured.

So, life insurance involves insuring the life of an individual, instead of an asset. Thus, life insurance becomes important for a person who is the sole breadwinner of the family, as the family heavily relies on his/her income. An untimely demise may result in heavy financial burden on the family and continuing the same lifestyle and expenditure may become difficult. Bajaj Allianz Group Term Life Insurance, available on Finserv MARKETS, is an example of life insurance which provides substantial cover to the insured.

Life insurance creates a financial buffer around your family in case one meets with an unforeseen accident. But is having life insurance enough? The damage to health or material possessions like a vehicle can also be financially damaging. Things like minor accidents, hospitalisation or the protection of material possessions are beyond the scope of life insurance, which brings us to the second type of insurance–non-life insurance.

Non-life insurance

Non-life insurance, as the name indicates, has more to do with non-living things, however, the versatility of the products in this category allows both human as well as non-human risks to be insured against any loss or damage. For e.g., non-life insurance covers the financial loss caused due to an individual’s involvement in an accident.

Key categories of non-life insurance include health insurance, motor insurance (two-wheeler, private car, commercial vehicles), factory insurance, godown/warehouse insurance, accident insurance for humans, goods in transit insurance, natural catastrophe (earthquake, flood, etc.) insurance, home insurance, jewellery insurance, theft insurance, money insurance, liability insurance, fidelity insurance, cyber risk insurance, etc.

The types of insurance you can opt for are plentiful. Insurance provides you with a concrete contingency plan and mitigates huge amounts of financial risks. You can take your pick from the range of insurance options at your disposal and rest assured that no financial burden will come your way.

You can buy both life and non-life insurance policies on Finserv MARKETS with utmost transparency. In the life insurance category, one can buy term insurance on Finserv MARKETS, while in the non-life insurance segment, you can purchase health insurance, motor insurance, personal accident insurance, travel insurance, etc on the platform. You can also opt for any of the insurance products through the Finserv MARKETS App. The intuitive app is a must-have as it offers exclusive offers, quick approvals and fast claim settlement. You can also pay your premiums easily through the app.

However, the will to get an insurance plan is not sufficient, it has to fit into your budget. The pricing of life or non-life insurance plans depends on various factors.

Insurance Pricing

The insurance premium price is decided by the appointed actuary of an insurance company. Experience and trends help insurers take decisions on the pricing as per the asset or occupancy or risk classification of a customer. Insurance works on the principle of, ‘law of large numbers’ and that is what enables an insurance company to cover the risk of a high amount at a very low price (e.g. one can buy motor insurance for his/her four-wheeler through Finserv MARKETS just by paying Rs. 3221 per year for a coverage that could amount into lakhs)

Anyone can ask for insurance from any insurer, however, it is the sole discretion of the insurance company to accept the risk or decline the insured’s application as well as the terms and conditions. As a market practice, the insurance company rejects applications from a high-risk individual. Acceptance of an insurance proposal primarily depends on past claims history and losses an individual or entity is prone to. A high-risk cover comes at a high premium compared to a low-risk cover, which is available at a cheaper price. The ambiguous rules around rejection can be worrying. However, you can get the insurance of your choice, including health insurance and motor insurance through Finserv MARKETS in an extremely transparent manner.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor-made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no-cost EMIs to 4 hours of product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522