Accounting Equation

What is Insurance?

It’s a protection from financial loss, so as by purchasing it you are protecting yourselves from unexpected financial losses. What can give more peace of mind, knowing that you and your loved ones will be financially secure from various unforeseen events. As we all know ‘tomorrow is uncertain’, and we all face many challenges as these are part of our life. It can be an unfortunate death or a medical emergency, an accident or damage to your vehicle, assets/ property etc. Is It Important?  

WHAT IS INSURANCE: Beginners Guide and 2 Main types? Is It Important?  
General Insurance

Having to deal with the financial effects of these circumstances might drain your finances. You may need to use some of your or your family’s own savings to meet the situation. This clearly speaks of the relevance of insurance for proper protection and financial support against all threats to your life, health and property. Insurance plans are a beneficial part while planning out your future. 

As said, it’s beneficial, but how is it beneficial? Insurance plans can help you in paying for future medical care, hospitalization, or contraction of any illness or treatment. Then it can help to offset the family’s financial loss caused by the untimely death of the family’s sole earner. The insured

A person’s family can also pay off any debts that were accused during his/her lifetime, such as home loans or other debts.  It will help a family in running the household even after the death of the breadwinner and will help in protecting the future of your child in terms of his/her education. Then in the event of any unforeseeable disaster or catastrophe, insurance can assist secure your house.

Your home insurance policy will assist you in obtaining coverage for home damages and pay for the price of repairs or rebuilding, as necessary. Along with basic coverage, many insurance policies also include savings and investment options. These aid in saving money and accumulating wealth through frequent investments.


An insurance policy is a contract you engage in with an insurer to protect yourself and your family against any specific risks under agreed terms. So usually we tend to take advice or guidance from people engaged in this field or with the company which provides it, as it takes some effort to understand how insurance works. But it’s essential to understand the fundamentals of coverage in order to obtain what you need.

Understanding what is available and how it functions can have a significant impact on the cost of your insurance. With this knowledge, you’ll be able to make the best decisions on the insurance coverage for your assets, property and lifestyle. The concept of insurance is very basic, you pay insurance when you have something to lose and are unable to cover a loss on your own. So paying money every month gives you relief that if something goes wrong, the insurance company will assist you financially and make everything as it was before your loss. 

What is an insurance premium? Payments are made to the insurance provider when you buy insurance. The term “premiums” refers to these payments and in exchange, you are covered from certain risks. You are protected from specific hazards in exchange for paying your premiums. The insurance company promises to pay when such situations occur. Numerous insurance policies are available for purchase, including those for your vehicle, house, life, health, and disability.

How does Insurance works

How is an insurance premium paid? You might pay the premium monthly or semi-annually depending on the insurance policy. In some circumstances, you might have to pay the entire sum in advance before the coverage begins. The insurance policy-holder is the person who owns the insurance policy. You purchased the policy and have the authority to modify it as the policyholder. And policy-holders are in charge of selecting that their premiums are paid. 

What does master policy signify?  A master policy is an insurance contract provided to a policyholder that combines numerous individual policies into a single one. A master policy unifies all of the policies into one document rather than releasing individual documents for each location or business activity. A master policy can be for a group insurance policy, such as group health or group life insurance. Another scenario that calls for the usage of a master policy is the consolidation of coverage for properties or locations that are insured under one policy. Instead of setting up separate insurance for each location, firms with several locations frequently obtain a master policy that covers all of their locations.

Although it is not mandatory for everyone to get insurance, doing so is a smart move if your investments or finances are at stake. However, obtaining insurance is often necessary as a requirement for approving the loan when third parties have a financial interest in the property, as is the case when a bank holds a mortgage. Some insurance is extra, while other insurance, like auto, may have minimum requirements set out by law. 


There are many different insurance policies available, each of which protects a different aspect of your assets or health. Property and Casualty insurance provides protection to businesses and individuals related to their assets or properties both physical and financial. While Life and Health, insurance protects people from financial loss due to premature death, or other medical issues. Coverage types include Life insurance, Health Insurance, Automobile insurance, House insurance, property insurance, Industrial insurance, Travel insurance, Fire insurance etc. 

Life Insurance
Life Insurance


A life insurance policy is a legal agreement between an insurer and a policyholder. In exchange for the premiums paid by the policyholder during their lifetime, a life insurance policy guarantees that the insurer will pay a sum of money to named beneficiaries when the insured dies.

 To enforce the contract, the life insurance application must accurately disclose the insured’s past and current health conditions, as well as high-risk activities. In the event of your untimely death, the insurer will make the large sum available to your family and dependents.

How does life insurance work? Typically, life insurance is only available for a limited time. Thus, if you die within this time frame, the life insurer is supposed to pay a death benefit, also known as the sum assured. However, if you survive the term, depending on the type of life insurance, you may be eligible for a maturity benefit. Whole life insurance plans, on the other hand, are more likely to pay the death benefit rather than the maturity benefit.

A premium of life insurance is the amount that the insured individual must pay on a regular basis in order to maintain their insurance coverage, as determined by the insurance company. An insurance company considers the type of coverage chosen, the policyholder’s lifestyle and health conditions, and the likelihood of a claim being made, among other things, when determining the premium amount.

How long does it take life insurance to pay out? According to the Insurance Regulatory and Development Authority (IRDA) of India, insurers must settle death claims within 30 days. This condition applies to all claims in which the insurer does not believe an investigation into the cause of death is necessary.

Health Insurance
Health Insurance


First Health Insurance as it protects your savings from being drained by medical treatments. Medical emergencies are unpredictable, and quality management can become prohibitively expensive as healthcare costs rise. A medical insurance policy, also known as health insurance, pays for medical expenses incurred as a result of illness or injury. It pays your medical bills or reimburses you directly.

A comprehensive medical insurance policy will pay for hospitalization, daycare procedures, medical care at home (domiciliary hospitalization), and ambulance fees, among other things. A health insurance policy keeps you protected against a variety of diseases. It also contributes to increased tax savings. You can deduct your health insurance premiums from your taxable income under section 80D of the Income Tax Act of 196I.

There are many benefits that taking insurance for your life, health or property can bring on. The world around us keeps on facing challenges and as a part of it, we’re subjected to them. So it is essential to seek insurance coverage for you and your family while planning out your future. How to choose which types of insurance suits your needs? This question carries a clear objective as it is pointing to its relevance of it. Firstly assess your needs carefully, you should give adequate thought to this by taking into consideration your current situation and possibilities. 

Types of insurance
Types of Insurance

There are types of insurance that the financial experts recommend to be claimed by everyone which are Life insurance, Health insurance, Auto insurance and long-term liability insurance.

Aside from protecting individuals and businesses from various types of potential risks, the insurance sector contributes significantly to the nation’s overall economic growth by providing stability to business operations and generating long-term financial resources for industrial projects. Among other things, the insurance industry promotes the virtue of saving among individuals and creates jobs for millions, particularly in a country like India, where both savings and employment are important.

We only covered the two main types of insurance in this article; in the next article, we will go over insurance in greater detail. See you next time!!

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