Insurance and Types of Insurance

We earn, we save and we live our livelihood vis a vis we support our family including our parents, siblings, spouse and children. As we all know, life is very uncertain, and being one or may the only earning member of the family, it becomes utmost important that we save guard our family’s interest and its future spending, even when we are not around. 

Insurance is a product offered by banks, Insurance companies and other financial institutions in tie-ups which help us save guard our family interest and future spending. In other words we can also classify it as a risk hedging process for us not being around our family.

Not only our lives but we can also take insurance against our business, property, vehicles and others. Anything that has a material impact in our life can be insured. This can be explained by the types of insurance available in the market. This list is appended below;

Under Life Insurance two types of products are available. A Policy which would give you only protection against life but no maturity benefit and a policy which would give you protection as well as maturity benefit if you live through the policy term. Whole life insurance and couple insurance (Joint Life plan by LIC) are the best examples of protection + Investment policy.

Health Insurance on the other hand covers your illness which may occur in due course of anyone’s life. Pre-existing as well other illness can be covered under the same.

Lastly comes General Insurance, which covers home, business, property, motors (four wheeler, two wheeler and others) insurance etc. This is an inclusive list and many more policies can be included under the same. Travel insurance is common for health insurance and general insurance, as you can cover your health also while travelling under the policy.

Tax implication: Life insurance premium is tax exempted under sec 80C with a maximum limit of Rs.1.00 lac. A point to look here is if, the policy is not continued for two years after any of the premium payment against which tax benefit has been taken, the same would be added to your taxable income.

Claim received from insurance co. against life insurance policy in the event of death is full exempt under the Income tax Act 1961 under sec 10(10).

Health insurance premium is also tax exempt under sec 80(D).

Rest all other policy premium are taxable under the Income tax Act 1961.

Grace period: A grace period of not more than 30 days is given to the policy holder in case of default of premium payment. No. of days mainly depends upon the frequency of you payment, like monthly, quarterly, annually etc.