An insurance plan or policy can be defined as a contract in the form of a policy. The policy covers the monetary risks of an individual (insured) due to unpredictable circumstances. The insured is called the policyholder. The insurer is also known as an insurance-providing company or the insurance carrier or the underwriter. They provide coverage or reimbursement to the policyholder in case of the specified loss in the policy.
To avail of this indemnity, the policyholder pays a certain amount called ‘premium’ to the insurance company against the insurance cover. The insurer assures the policyholder that it shall cover the losses incurred to the insured subject to certain terms and conditions. The amount of Premium payment depends upon the assured sum for insurance coverage or ‘policy limit’. Insurance plans or contracts are designed in such a way that they meet the specific needs of the insured.
Features of Insurance Coverage Plans
Here are some of the common features of Insurance coverage mentioned below :
- An insurance plan is basically a risk management plan to use an insurance policy to act as a shield against uncertain losses.
- The Insurance coverage/plan does not reduce the magnitude of loss one may face due to some unavoidable circumstances. It only assures the policyholder that the loss is shared and distributed among multiple policyholders.
- The insurance works on the principle of a common pool system, which means that many policyholders or clients of an insurance company pool in their risks. Hence, they pay the premiums together. So when one or a few incur a financial loss, the claimed money is given out of this common pool fund.
- Insurance coverage plans can be availed for the services like medical expenses, vehicle damage, property loss/damage.
- Premium, policy limit and frequency (annual, installment) of policies are the main components of an insurance coverage plan of a policy. The customer should check them thoroughly before buying an insurance policy.
Why one should take an insurance plan?
As we go through life, get married, raise a family, and start some business, the importance of insurance increases. That’s because insurance is all about providing financial safety and security in case of any loss to the business, life, vehicle, or entity.
Reasons for taking insurance plans
- Security for you and your family: Our family depends on financial support for living, which is why once we start a family, insurance is very important. So that those who matter most in our life may be protected from financial hardship in case any unexpected loss happens.
- As a cover for the difficult times: Nobody knows what lies around the corner. Unforeseen loss or tragedies such as illness, injury or permanent disability, even death – can leave you and your family facing tremendous emotional stress and financial burden. Insurance helps in reducing the financial stress in case of loss of dear ones, therefore we can focus on recovery and rebuilding our lives.
- For financial security: No matter how sound your financial position is today, an unexpected event or circumstance can destroy everything in a short span of time. In those situations, the Insurance offers a payout so that if there is an unforeseen event for you and your family. This way we can hopefully continue to move forward.
- Peace of mind: We all know that money cannot replace your health and wellbeing. But you can at least have peace of mind knowing that if anything happens to you, your family’s financial security is covered by insurance.
- Financial protection and securing the future of the family: Insurance protects and helps in case of the untimely death of an earning family member. A lump-sum death benefit can secure the financial future for our children and protect their standard of living.
So all these factors and guidelines should be considered while choosing a suitable plan that fulfills our requirements.
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