If you’re new to the world of insurance, then it is likely that you’re unaware of several key concepts and terms that are generally used in this industry. However, it is crucial for you to be aware of the different terminologies that are commonly used in insurance. This way, you will not only be able to understand the concept better, but also be able to make more informed purchase decisions. In this article, we’re going to take a look at one term that’s often used in insurance - insurance coverage. Read on to find out more about this.
To better understand the meaning of insurance coverage , let’s quickly run through the aspect of insurance. Insurance, as a concept, is basically designed to protect you from any losses that might occur due to an unforeseen incident.
Insurance coverage is the extent to which you’re protected from any losses that you might have to undergo. To put it simply, insurance coverage is the total amount of loss, liability, or risk that you’re protected from, by an insurance plan. The higher the insurance coverage amount, the better your ability to withstand losses or liabilities.
We’ll have to delve a little deeper and get into the finer details to fully understand the concept of insurance coverage. Here’s an example that could help you.
Say that you purchase an insurance plan from an insurance service provider. And this insurance plan of yours covers you from losses of up to Rs. 50 lakhs. Now, the sum of Rs. 50 lakhs is your insurance coverage. What this essentially means is that the insurance service provider will compensate you financially for specified losses that you suffer from or expenses that you incur, to the tune of Rs. 50 lakhs.
That said, what if the losses or expenses exceed Rs. 50 lakhs? In that case, your financial compensation will be restricted to the insurance coverage that you opted for, which is Rs. 50 lakhs. So then, what if your losses are below Rs. 50 lakhs, say Rs. 25 lakhs? In this case, your financial compensation would be restricted to Rs. 25 lakhs.
In return for providing you with insurance coverage, the insurance provider will require you to make periodic payments in the form of premiums. The frequency of these premium payments are usually monthly. However, it can also be quarterly, semi-annual, or annual as well. In some cases, you can also pay the entire premium as a lump sum, one-time payment.
Now that you’ve gotten a good understanding of what the term ‘insurance coverage’ means,let’s take a look at the different types of insurance coverage. Insurance coverage is primarily categorised into two types:
Life insurance coverage
General liability insurance coverage
Here’s an in-depth look at these types of insurance coverage.
This type of insurance is designed to offer financial compensation to an individual’s family in the event of the said individual’s demise. The compensation that the deceased individual’s family receives can be used by them as they see fit, to meet different life goals, pay off debts, or take care of everyday expenses.
When opting for such an insurance, an individual will have to specify the following details:
The amount of insurance coverage needed
The tenure of coverage
The details of the beneficiaries or nominees to whom they want the financial compensation to be paid out to, in case of their demise
When it comes to life insurance coverage, there are many different categories like the following:
Term insurance plans
Unit Linked Insurance Plans (ULIPs)
Whole life insurance plans
This type of insurance covers non-life related liabilities, losses, and risks. It includes different kinds of covers like health insurance coverage, motor insurance coverage, fire insurance coverage, insurance coverage for home loan, travel insurance and more.
Here’s a more detailed look at the top different types of general liability insurance coverage.
What is health insurance coverage? In the simplest terms, health insurance is basically designed to compensate you financially for any expenses that you might incur towards treating health-related ailments, illnesses, and diseases.
Some health insurance plans also offer maternity insurance coverage as well. Health insurance with maternity coverage basically helps you pay for the hospital expenses that you might incur in connection with your pregnancy. In addition to this, there are also other forms like insurance with dental coverage and cancer coverage insurance as well.
If you own a vehicle, be it a two-wheeler or a four-wheeler, you’d probably be aware of motor insurance coverage. This type of insurance protects you from liabilities and losses arising due to an accident involving your vehicle. Motor insurance includes both car insurance coverage and bike insurance coverage. There are two primary types of motor insurance coverage that you can opt for, as explained below.
This type of motor insurance protects you from any third-party claims that may arise due to your vehicle getting into an accident. For instance, if your vehicle causes any bodily injury or property damages due to an accident, third party insurance can help pay for rectifying the damage caused. However, it doesn’t cover any damages to your vehicle, which will have to be borne by you out of your own pocket.
Also known as full coverage insurance, this motor insurance plan protects you from third-party liabilities and repair expenses for your own vehicle as well.
Home insurance is designed to offer you financial compensation in the event of any damages to your home and its contents, which you can then use to restore your property. It covers damages arising due to natural calamities and disasters, accidents, and theft, among others. That’s not all! Home insurance also offers fire insurance coverage, which compensates you in the case of any fire damages to your home.
Although relatively new in India, cyber insurance has long been offered in other parts of the world. It is designed to cover any damages, losses, and liabilities that you might have to contend with, as a result of cyber attacks. It also covers data breaches, computer and network equipment damages, and even losses due to business interruptions.
As the name itself signifies, travel insurance covers any losses that you might incur while traveling. In addition to covering financial losses due to damage or loss of your luggage, this type of insurance also covers flight cancellations, loss of your passport, and medical expenses while travelling as well.
Insurance is so crucial that its importance cannot be emphasised enough; especially when life is full of different kinds of risks and uncertainties. When it comes to insurance coverage in India, the insurance penetration is only about 4.2%. However, that might change soon as Indians become aware of its importance.
So, here’s a quick look at why every individual should opt for insurance.
It prevents you from dipping into your savings to pay for damages and other expenses.
It provides some much needed financial assistance to the families of the deceased.
It reduces the stress, both financial and emotional, that you have to go through in the event of unpleasant incidents.
It helps you plan for any emergency financial requirements in a much better manner.
This sums up the fundamental details that you need to know about insurance coverage, its importance, and the types of coverage available. If you are still uninsured, remember to invest in a sufficient life cover right away. And if you are interested in buying a new car, taking a vacation, or purchasing a new house, ensure that you set aside some funds for the appropriate kind of insurance coverage.