Three Main Types Of Insurance And Reasons Why You May Need Them

Unplanned events and emergencies are a normal occurrence in life.

No matter how financially stable you are, unplanned expenses can negatively impact your finances.

Depending on the type and extent of the emergency, it can not only drain your bank account but can extensively sink you into debt.

It is impossible to save for such emergencies as it has no exact value of the damage it can cause.

This is where insurance policies come into your aid.

These policies guarantee and offer support in times of such crises to reduce your financial liability.

There are a variety of insurance policies, each intended for protecting a particular aspect of life.

You should know how the different policy types work to gain the most from the particular policy.

This article will feature the three major kinds of insurance policies.

  1. Motor insurance
  2. Health insurance
  3. Life insurance policy
  1. Life Insurance

This is where the policyholder secures their beneficiaries financially in the event of premature death.

This policy is prevalent to the sole breadwinners in a family so that the dependents maintain their original financial status quo even with the passing on of their breadwinner.

Kinds of Life Policies

There are several kinds of these policies that are inclusive of:

  • Term Plan; this policy applies for a specified duration as per your insurance provider’s terms.
  • Whole Life Insurance; the policy provides a lifetime cover to an individual.
  • Universal life insurance; in this plan, the premiums are distributed into the cash value and death benefits. This policy is favorable due to its flexibility as you can alter the death policy amounts and also pay the premiums with the cash value policy.
  • Endowment Plan; in this plan, a part of your premiums go to the death benefits and the rest invested by the insurer. This plan’s benefits include a death benefit, maturity benefit, and periodic bonuses.
  • Child’s Plan; this plan provides financial support to your child throughout their life.
  • Retirement Plan; also referred to as pension plans. They are an integration of investments and insurance. A part of the payment goes to the policyholder after retirement in the place of the monthly salary.

Reasons why you need a life insurance

  1. Protect your loved ones in case of an unexpected death.
  2. To cater to the funeral expenses; this can be costly and financially draining to your loved ones.
  3. Your loved ones will be in a better place to pay off your debts.
  4. Life insurance can chip in in case of a terminal illness to lay off your loved ones the medical bills burden.
  5. Supplement your retirement.
  6. Peace of mind.
  7. It is a form of inheritance.
  8. Payment of your estate taxes in your absence.
  9. Encourages saving habits.
  10. Takes care of your business operations
  1. Health Insurance

Health insurance is a type of policy that provides financial assistance to the policyholder when admitted to hospitals for treatment, during any hospital visit or home treatment.

Types of these policies

There are several kinds of these policies;

  • Individual Health Insurance – This plan provides cover to just one person, the policyholder.
  • Family Floater Insurance – With one policy, you can secure your whole family.
  • Critical Illness Cover – The insurance plan is specific to the policyholder in case of a terminal illness. The policy gives out a large lump sum compared to other health insurance policies.
  • Senior Citizen Health Insurance – Senior citizens of society are prone to many illnesses due to their weak immunity. This policy intends to protect such members of the society in case of any illness.
  • Group Health Insurance – This particular policy applies to a company’s employees during their term serving in the organization.
  • Maternity Health Insurance – These plans cover medical expenses at the prenatal, postnatal, and delivery stages for both the mother and the newborn.
  • Personal Accident Insurance – This covers financial liability from injuries arising from accidents, disabilities, or accident-related deaths.

Why do you need a health insurance policy?

  • To protect your family in case of a medical emergency
  • To fight against lifestyle/ chronic diseases
  • To protect your savings in case of emergencies
  • To deal with medical inflation
  • To counter inadequate insurance cover
  1. Motor Insurance

Motor insurance is an agreement between the insurer and the vehicle owner.

It will protect you against financial loss in an accident or theft.

In most states, it is necessary that every car and bike owner get insurance. You can get an insurance cover based on the type of vehicle you own.

The three types of motor insurance include;

  • Car Insurance; as the name suggests, the insurance covers an ordinary four-wheeler vehicle.
  • Two-wheeler Insurance; covers two-wheeler bikes or scooters.
  • Commercial Vehicle Insurance; provides cover for commercial or business vehicles.

There are three main types of motor insurance covers;

  • Third-Party Liability – This policy pays financial liability to third parties affected. It will help to protect you from legal implications on the damages or injury caused. They, however, do not offer financial coverage to the policyholders after accidents.
  • Comprehensive Cover – unlike third party liability, comprehensive covers offer better security and protection. They cover not only the third parties’ liability but also the policyholders’ vehicles. Furthermore, it offers protection from damages caused by natural calamities
  • Own Damage Cover – this cover is basically similar to a comprehensive policy without the third party liability option. The cover applies to the policyholder only.

Reasons why you need a motor insurance

Cars and bikes have become increasingly expensive with each passing day. Accidents and damages are also inevitable on the roads. It is better to be safe and protect yourself from emergency expenditures.

  • Protects you from compensatory legal battles.
  • Covers the expenses involved in third party liability.
  • Covers the cost of damages caused in your car.
  • In case of theft, you can recover a part of the cost you ought to bear. Also, it covers traffic fines and other small legal costs arising from your vehicle usage.
  • It is a state requirement in most states.
  • Covers damages caused by natural calamities.