New 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. There is insurance available for various risks, starting from your life to mobile phones that you use. In the end, it’s essential to protect what is ‘important’ to you.

How Does Insurance Work?

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. In case the insured event takes place, and you make a claim, losses will be compensated by the insurance company from the pool of policyholder’s premiums. In case you don’t make a claim during the specified policy period, no benefits will be paid to you. However, there are various types of products offered by insurance companies today which also involve savings element attached to it.

Types Of Insurance Available

There are various types of insurance products available in India. Mainly, insurance products are classified as:

Life insurance covers you against the risk of death. Life insurance policies come in many variants such as term plans, endowment plans, whole life insurance plans, money back plans and unit-linked investment plans etc. Many life insurance products can be a great tool for long-term savings also as it comes as a combination of protection and savings. General insurance products cover financial losses caused by various risks other than death. General insurance products come in various types covering a wide range of risks such as health insurance, motor insurance, marine insurance, liability insurance, travel insurance and commercial insurance etc.

Benefits And Importance of Insurance

Insurance is a risk management tool not only benefits the individual and businesses but also benefits the society and economy in numerous ways. Following are some of the important benefits of insurance: