Different Types of Insurance in India – Explained in Detail

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What is insurance and why do you need insurance? You need insurance to secure yourself against risks. But how do you define risk? Risks are all around you – while driving your vehicle on the road, while traveling abroad for work or for pleasure, while going around town, etc.  Even a small mundane task may turn risky if it is not done properly. So, the fact is you can’t escape risk. Thus, better stay protected under the coverage of insurance.

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What are the types of insurance?

Insurance can be categorized into two broad categories:

  • Life insurance
  • General insurance

Let us take some instances here to understand the need of insurance including life and general insurance.

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Why do you need insurance – Life and General insurance?

Here are some situations which explains the importance of insurance in life:

Case 1 Case 2 Case 3
Rajiv is the only son of Mr. and Mrs. Verma. He is a dutiful son who is carrying on his responsibilities towards his old parents well. But an unfortunate incident of a road accident led to his ill-fated demise leaving his parents alone and destitute You were experiencing pelvic pain on and off for some time, which you ignored thinking it will be fine soon.

An ultrasound later revealed that you had fibroids in the uterus. Doctor suggests that you should opt for a uterus removal. Now, you are thinking about the huge costs involved.    

You were traveling to a nearby city with your family to attend a function. Being in a hurry to reach the venue on time, you drove at greater speed than required.

You lost control of your steering and bumped into a nearby tree. Thankfully, there were no casualties. However, the damage done to your car was too much to make a hole in your pocket.

Now, Rajiv’s parents don’t have any means of livelihood. If only Rajiv had bought a life insurance policy, his parents would have received enough to survive comfortably during their old age. If you had had a health insurance plan earlier, you would have got the surgery done with zero cost from your pocket. Now, you realise that you should have opted for a comprehensive car insurance plan to cover the damages done to your car and to avoid paying money from your pocket.   

So, as you can see in the above cases, you never know when you would require the support of insurance – be it health, life or any other.

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Various Types of Insurance

Life Insurance 

Life insurance offers financial security to the family of the insured in the event of his/her death/disability. Hence, it supports the financial security of the family after your demise. The premium for such plans can be paid as a lump sum amount or as regular payment for a particular period. Depending on the type of cover chosen. Life insurance can be categorized into the below types:

Types of life insurance

Here’s the classification of insurance under life:

Term insurance  It is the basic type of insurance that covers the insured for a specific time period where the nominee of the insured gets a lump-sum amount in case of death of the insured. However, if the insured survives the term plan duration, no money is paid to the family
Endowment plan An endowment plan is like a term plan, which is valid for a certain time duration. Under this plan, a lump-sum amount is paid to the nominee of the policy in the event of the death of the insured. However, unlike a term plan, an endowment plan allows the insured to receive a maturity amount after the completion of the term period
Money-back policy Under this plan, a certain percentage of the sum assured is paid to the insured as survival benefit throughout the policy term. Once the term expires, the insured receives the balance amount as maturity benefit. In case of death of the insured during the policy period, the nominee/family receives the total sum assured. This is regardless of the survival benefit payments made.
Whole-life insurance This plan covers the insured for his/her entire lifetime. The nominee/family receives the death benefit after the insured is no more. They will also receive a bonus accrued on the amount.
ULIPs Under ULIPs, a part of the premium paid by the insured is used as insurance cover, while the rest is invested in funds like Equity and Debt. In the event of death of the insured, a lump-sum money is paid to the family.
Child Plan  Child plans are there to secure the financial future of the child. Here, if the insured dies, the child is offered a lump-sum money. It also comes with a premium waiver option in case of sudden death of the insured to secure the future of the child.
Pension plan  Pension plans are there to support a person in building their retirement fund. Here, the plan offers a regular pension amount to the insured after retirement. Once the insured dies, the family receives the death benefit.

What is General insurance?

These plans offer financial security against any loss. However, it doesn’t cover death as it insures all other aspects other than life. So, here you get compensation against any financial losses incurred because of liabilities regarding health, vehicle, house, travel, etc. The insurer pays the compensation depending on the terms and conditions of the policy to cover the damages or to cover healthcare costs. Overall, general insurance allows monetary protection for assets against various liabilities.

Types of general insurance

  • Motor Insurance
  • Home insurance
  • Health insurance
  • Travel insurance
  • Fire insurance etc.

Health Insurance

Health insurance is covered under general insurance policies. Health plans cover the healthcare expenses of the insured and his/her family members. There are two ways to receive compensation – through cashless payment or through reimbursement payment. You can claim for any illness or injury depending on the terms of the policy. These plans generally cover the below and much more depending on the policy type and the terms of the plan, such as:

  • Hospitalization expenses
  • Critical illnesses
  • Day care procedures
  • Maternity expenses
  • Pre-existing diseases
  • Pre and post hospitalization etc.

Motor Insurance 

Similar to health insurance, which covers your deteriorating health, motor insurance covers your deteriorating vehicle. This is another type of general insurance that allows monetary protection against your vehicle from damages caused by accidents, fire, theft, calamities etc.

Motor insurance is available for both private and commercial vehicles. Driving a vehicle without a third-party motor insurance is not allowed in India.

Motor Insurances are available for four-wheeler as well as two-wheeler vehicles.

Types of insurance policies include:

Third-party vehicle insurance

Comprehensive vehicle insurance

Travel Insurance 

When you travel abroad or within the country, you get the assistance of a travel insurance that pays for any kind of monetary liability arising out of emergencies such as medical and non-medical liabilities like baggage loss, passport loss, delayed flights, accidental deaths etc.

Types of Travel Insurance

  • Single trip policy
  • Annual multi trip policy

Home Insurance 

As the name suggests, a home insurance compensates the insured against damages caused to your home because of calamities, including man-made and natural calamities, theft, fire, threats etc. Such a plan protects the insured financially in taking care of the valuables inside your home.

Types of home insurance include:

  • Standard fire and special perils policy
  • Home structure insurance
  • Public liability coverage
  • Content Insurance

Fire Insurance 

Fire insurance is a policy that compensates against the damages caused by fire to your property, business, goods etc. It covers a broad category of expenses against reconstruction and repair of property and surrounding buildings. Hence, it covers any third-party damage caused by fire. Further, it also covers expenses of people whose livelihood gets affected because of the fire.

Types of fire insurance

  • Valued policy
  • Floating policy
  • Comprehensive policy
  • Specific policy

Top General Insurance Companies

To Sum Up

So, from the above discussion, you can conclude the importance of insurance in life. However, when you plan to buy insurance, you must take a good look at the plan, its inclusions and exclusions, the premiums to be paid and so on. Only after research and comparison of plans you must buy a policy.

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FAQs on Different Types of Insurance

How many types of insurance are there in India?

Life insurance and general insurance are two categories of insurance in India, which are further segregated.

What is general insurance meaning?

General insurance plans protect individuals against expenses caused due to emergency situations in terms of health, vehicle, home, travel and so on.

What are the different types of life insurance?

Term Insurance Plans
ULIPs 
Endowment Insurance Plans
Money Back Insurance Plans
Whole Life Insurance Plans
Child Insurance Plans
Retirement Insurance Plans

What are the different types of health insurance policies?

Individual Health Insurance Plan
Family Floater Health Insurance Plan
Senior Citizen Health Insurance Plan
Critical Illness Insurance Plan
Group Health Insurance Plan
Top-up Health Insurance Plan
Personal Accident Insurance Policy

What are the different types of General Insurance?

Health Insurance 
Motor Insurance
Travel Insurance
Property Insurance 
Commercial Insurance 
Asset Insurance 

Other Term Insurance Products

Apr 07, 2023
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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