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This article provides key information on types of insurance policies. It also lists out few tips for buying insurance policies in India.

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Insurance Policies in India

Indian insurance industry is flourishing with global players. Strong regularity norms by Insurance Regulatory and Development Authority (IRDA) have actually helped the industry to flourish. Sector reforms by government gave real boost to insurance sector which has become a center of attraction. Investment guru Mr. Warren buffet visited India last week. He wants to enter into the untapped Indian insurance market. He is planning to enter with general insurance.

Insurance has become a big industry in India now; more than 20 life insurance companies are offering different products in India. In order to choose the suitable policy, it is very important to know different product offerings by all insurance companies.

Type of Insurance Policies
Insurance can be broadly classified into two categories life and general insurance.

General Insurance
General insurance is basically non life insurance, which is meant for short period of time, ideally twelve month or less. Now a day, some companies make contracts for more than twelve month but not more than 5 years.

Vehicle insurance, fire insurance, marine insurance etc. falls under general insurance category.
In India, ICICI Lombard, National Insurance, Oriental Insurance, Reliance, Cholamandalam MS, Tata AIG, HDFC Ergo etc provide general insurance.

Life Insurance
Life insurance is the most discussed stuff in the industry. Most of the people know about the insurance but they do not the difference of the same. The good thing about insurance is that the awareness has been increasing over a period of time. A decade back, people used to buy insurance because somebody forms their family or friends force him/her to buy it. But now people buy insurance to mitigate the risk. People have started understanding the need of an hour.

Life insurance can be classified as whole life plan, endowment, term plan, money back plan and Unit Linked Insurance Plan (ULIP).

Whole-Life Plan – insurance company collects premium from the insured till the retirement or the term of the policy and pays the claims to the nominees only after the death of the insured person. This helps the family to survive better after the death of insured.

Endowment – Insurance company collect premium form the insured for the certain period of time like 15, 20, 25, 30 years. Company pays sum assured to the nominees in case of death of the insured during the policy period or pay the premium paid by the insured with fix returns (as per policy document) to the insured.

Money back – the policy is useful for that investor who needs periodical payouts. The insurance company collect premium certain period of time which is called premium payment term, and pays percentage of sum assured to the insured on regular interval. If insured dies during the policy term, insurance company pays sum assured and accrued bonus to the nominees.

Term plan – in case of term insurance, insures pay premium to cover the death risk. Insured does not get anything from the insurance company, if he survives till the end of policy term. The premium paid for term cover goes to the company. The good part of this plan is, insured gets maximum death cover with minimum premium.  Now a days, companies have come up with insurance with return of premium, if nothing happens to insured during the term of the policy, the company pays part of the premium back to the insured.

ULIP – it is a new flavor of insurance which is a mix of investment as well as insurance. Insurance companies collects premium form client and invest the same into equity and debt markets. The returns generated by this investment are passing on to the inventors at the maturity. The insured person gets the benefit of risk cover as well as the investment gains. The product also offers the flexibility of partial withdrawal after certain period of premium payments. In case of death of Insured, the nominee gets the sum assured or fund value, which ever is higher.  

Insurance Providers in India
LIC is a leading Insurance company in India followed by ICICI Pru and HDFC Standard Life. The other companies like Birla Sun life, Bharti Axa, Bajaj Allianz, Tata – AIG, Kotak, Max Newyork, SBI Life, Reliance Life etc also provides insurance solutions to the clients.

Tips for Buying Insurance
  • Decide the objective/Goal and time frame for risk cover. The product should match your goal and the time horizon as well.
  • Decide the life risk (sum assured) which needs to be covered. You should not be over insured or under insured.
  • Compare all the available option in the selected category from all the insurance company. You can compare it online. Now days, many website provide comparison of selected product.
  • Do your own research about the product; try to understand the working of the selected product.
  • When you are investing into Unit linked Insurance plan, do not forget to choose the fund option. One should choose the fund option based on his/her risk appetite.
Last but not the least, life is unpredictable and uncertain with unknown future, so be wise and insure yourself and secure tomorrow for you and your family.

  • ameresh:
    Respected Sir,
    I am a teacher, aged 39, my earning is 20 thousand/months approx, i have a kid aged 6 years, and a wife. i have an ancestral house, retired parents.
    09-Jan-2013 10:23 AM
  • Sailee:
    Wow, this will help me :)
    05-Dec-2012 10:41 AM
  • prajakta:
    so nice but can be don more nice
    28-Nov-2012 03:25 PM
  • ganesh:
    very very valuable and useful tips . thank you very much mam.
    11-Aug-2012 10:29 PM