Insurance is a legal agreement between two parties – the insurer and the insured, also known as insurance coverage or insurance policy.
Insurance is a contract of reimbursement. For example, it reimburses for losses from specified perils, such as fire, hurricane, and earthquake.
How Does Insurance Work
Insurance is a way of protecting yourself and your family from a financial loss. Generally, the premium for a big insurance cover is much lesser in terms of money paid. The insurance company takes this risk of providing a high cover for a small premium because very few insured people actually end up claiming the insurance.
The insurer and the insured get a legal contract for the insurance, which is called the insurance policy. The insurance policy has details about the conditions and circumstances under which the insurance company will pay out the insurance amount to either the insured person or the nominees.
Importance Of Insurance
Apart from protecting individuals and businesses from many kinds of potential risks, the Insurance sector contributes significantly to the general economic growth of the nation by providing stability to the functioning of businesses and generating long-term financial resources for the industrial projects. Among other things, Insurance sector also encourages the virtue of savings among individuals and generates employments for millions.
1. Provides Safety and Security to Individuals and Businesses
2. Generates Long-term Financial Resources
3. Promotes Economic Growth
4. Provides Support to Families during Medical Emergencies
5. Spreads Risk
Some Important Sections Of Insurance
- Section 80C: You can claim deduction of life insurance premium paid from your taxable income as per the provisions of Section 80C.
- Section 80CCC: You can get deduction from your taxable income towards premium paid for Pension policies up to a limit of `1,50,000/-.
- Section 80CCE: Under this Section, the overall limit for deduction under Sections 80C, 80CCC and 80CCD(1) is `1,50,000/-.
- Section 80D: You can get deduction of premium paid towards health insurance policies taken for self, spouse, dependent children and parents.
- Section 10(10D): Proceeds from Life Insurance policies are exempt, subject to conditions of Section 10(10D).
- Section 10(10A): Payment received on commutation of a Pension policy is exempt from tax.
Types Of Insurance In Worldwide
There are many types of insurance in all over the worlds. In life, unplanned expenses are a bitter truth. Even when you think that you are financially secure, a sudden or unforeseen expenditure can significantly hamper this security. Depending on the extent of the emergency, such instances may also leave you debt-ridden. There are different types of insurance some are explained here-
- Life Insurance
- Motor insurance
- Health insurance
- Travel insurance
- Property insurance
- Mobile insurance