To clearly understand the relation between the two parties, let us first define insurance and its types. An insurance policy is a legally bound contract between the insurance company, i.e., the insurer and a person/business/entity, i.e., the insured.
It is clear that life insurance is insurance covering life makes a promise to compensate for the losses incurred by the insured on the happening of a contingency. Contingency refers to the event that causes the loss, which often includes the policyholder's death or the destruction of a property. In return, the insured has to pay a premium amount for maintaining the promise made by the insurer.
Some of the different types of insurance policies available include health, life, car, education, and home insurance policy. But before we discuss all about insurance types, let us first know about insurance premium.
What do you mean by insurance premium?
The definition of premium is the specific amount of money the insured has to pay to the insurer to maintain the insurance coverage. The premium amount is generally set by the insurance company keeping in mind various factors involved.
For life insurance, some of these factors include- the type of coverage opted, health condition, policy lifestyle and the likelihood to pay the claim. It is essential to know the insurance premium definition as it clearly states the connection between the insurer and the insured. However, to dig deep, let's also look into their definition.
Who is an insurer and insured?
There is often confusion between the meaning and responsibility of the insurer and insured. So, it is essential to understand what is insurer first. The insurer is defined as the company that issues insurance policies, handles claims, and sells policies. Moreover, the insurer is responsible in providing financial coverage to their customer in the form of sum assured in case of occurrence of the event (stated in the policy). Insured, on the other hand, is the person or business covered by the policy.
Maximize Tax Efficiency: Learn how to optimize your finances by exploring the income tax slab for ay 2023-24 and making informed financial decisions.
Different types of Insurance
Insurance companies take the risk of covering the insured against many cases of loss. The insurer and insured can be bound in any of the following policies which the insured finds fit:
By the name, it is clear that life insurance plan is insurance covering life. People opt for this insurance policy to secure the life of their dependents in case of their untimely demise. Moreover, it is especially vital for those who are the family's sole breadwinner and have a family dependent on them.
This insurance type covers the expensive medical cost against an array of ailments and diseases as specified in the policy. The claim generally covers hospitalization, treatment, and medication costs.
Get BMI Smart: Understand your body better by calculating your BMI with our body mass index calculator. Your health matters, take the first step!
Car insurance is another vital policy people take towards insuring losses due to motor accidents. In addition, you can also use it to cover the damage to your car and even third-party liability. Some insurance companies even insure cars against natural calamities such as earthquakes or floods.
Education insurance offers people a great way of providing lump-sum money to their kids after they reach a certain age and enter college. This policy covers the higher education expense of the policy holder's child.
With the home insurance option, people can cover the loss or damage caused to their house due to fire. Some companies even cover the loss against natural calamities, hazards and other instances like lightning.
By reading the above points, you must now be clear about the relation between the insured and insurer, how they are bound with a contract (insurance policy), and what are their roles. Insured is the person who is covered against risk. On the other hand, the insurer is the company that is providing coverage. It is a service that an insurer provides under a particular insurance policy against a premium paid by the policyholder.
Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.
#For 30 Year Old Male, Endowment Plan Option, online purchase of policy excluding underwriting extra premium & GST.
^As lumpsum payout at the end of 20th year.