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Insurance coverage: types, inclusions, and exclusions

Insurance has become a much-needed financial asset today. It doesn’t matter if we have colossal wealth or not; in the face of adversities, it can quickly become insufficient.

In other words, no one can predict what the future holds for us, but the least we can do is be prepared for it financially. That’s where insurance coverage comes in. 

What is the insurance coverage?

Insurance coverage is your financial safety net. It is the sum that provides financial protection to the insured or their family in case of adversities, such as death, accident, illness, or disability. That said, insurance coverage sets the limit of the financial cover one can avail. One cannot make claims that exceed insurance coverage.

Unlike any asset, insurance doesn’t have a lump-sum cost that an individual must pay to buy insurance. Instead, the policyholder has to pay the regular premiums to get insurance in the exchange.

In a nutshell, insurance shifts the risk from the individual to the insurer. The insured doesn’t have to worry about the rock-heavy hospital bills and asset damage. When one is insured, the insurer takes care of the financial burdens.

Types of insurance coverage

The most common types of insurance coverage include:

1. Life insurance coverage

As the name suggests, life insurance aims to provide your family with a safety net to help them meet their expenses and lead a comfortable lifestyle in your absence. The distinguishing feature of life insurance is that it provides survival benefits.

Survival benefits combine sum assured, accrued bonuses, and investment returns. If the policyholder survives the policy term, they can get the survival benefit.

This type of insurance has its subtypes as well. These are primarily:
  • Child plan
  • Term plan
  • Endowment plan
  • Unit-linked insurance plans or ULIP
  • Retirement plan
  • Money-back plan
  • Whole life insurance
2. Health insurance coverage

The cost protects you from medical and hospitalisation expenses in unforeseen accidents and illnesses. With hospital bills growing unaffordable every day, health insurance is a must-have to ensure the best medical treatment for yourself or your family and protect yourself from financial catastrophes.

Health insurance works similarly to life insurance. The policyholder must pay premiums regularly in the form of health insurance costs. In this regard, insurance coverage is the limit you can claim if the treatment costs exceed the health insurance coverage.
Typically, health insurance lasts 12 months (if it’s short-term), beyond which it needs to be renewed to retain the benefits.
3. Motor insurance coverage
While all other types of insurance are a choice, motor insurance is mandatory. Motor insurance provides monetary coverage against theft and damage caused to vehicles (own or third-party) due to accidents and fire, depending on the chosen policy.

There are three types of motor insurance policies:

  • Third-Party Liability Motor Insurance
  • Comprehensive Motor Insurance Cover
  • Personal Vehicle Damage Cover

4. Property insurance coverage

The fourth type of insurance coverage is property insurance, which provides a financial net for immovable items, i.e., properties such as homes, shops, buildings, and offices. This type of insurance protects against damage caused by fire, theft, and natural catastrophes.
This type of insurance has its subtypes as well. These are primarily:

Picking the right coverage is imperative. You wouldn’t want to settle for an inadequate amount that would fail to offer you the required financial net.

At the same time, you wouldn’t want to pick an insurance policy that provides adequate coverage but comes with unaffordable premiums.

The right approach here would be to find a balance. Here’s how you can find the right coverage for yourself:

Identify your requirements
It doesn’t matter what type of insurance you choose; the coverage should be according to your requirements. So, predict your future expenses and identify your needs accordingly.
Calculate your expenses
This step is of utmost importance, especially if you are buying life insurance. The amount you choose should be adequate to match your family’s needs when you’re gone. After analysing your annual expenses, project a figure, and purchasing habits can help you calculate a rough one.
Take inflation and medical emergencies into account
The funds you have will lose value in the future. The object you buy for INR 100 would cost INR 1000 in the future. So, it is highly advisable to consider inflation and medical emergencies while computing your required coverage.
Compare quotes
While almost all insurance companies offer similar insurance coverage but different benefits, go for an insurance company that provides maximum benefits.