Insurance is a contract between a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in turn for payment of a specified amount called a premium. In simple words insurance is the mitigation or diversification of risk amongst a lot of people. Typically, a person who has a risk that is an uncertain event which might lead to loss approaches an insurance company. The insurance company agrees to pay for the economic loss caused to the person if the uncertainty even causes him a loss, for this service the insurance company charges a premium.

The insurance company makes money by collecting premiums from a lot of people and investing the same in various asset categories. Their main expenditure is the claims made by the people if they suffer any losses. The insurance industry has rapidly grown and in the past century and now there are several types of insurance policies like:

Life Insurance Policy: Life insurance is a legal contract that is done between the insurance company and the policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries when the insured dies. The insurance firm promises a benefit in exchange for premiums paid by the policyholder.

There are further types of life insurance policies as well:

Term Life Insurance: Term insurance is the simplest way of getting life insurance plans. Easy to understand and affordable to buy. A insurance provides death risk protect a specified period. In case the life assured passes away during the policy period, the life assurance company pays the benefit to the nominee. It is a pure risk cover plan that gives high coverage at low premiums.

Unit Linked Plans (ULIPs): A unit-linked plan may be a comprehensive combination of insurance and investment. The premium paid towards ULIP is partly used as a risk cover (insurance) and partly is invested in funds. One can invest in several funds offered by the insurance firm counting on his risk appetite. The insurance company then invests the premiums they collect in the stock market and other related investment tools i.e. in bonds, equities, debts, market funds, or a hybrid funds.

Endowment Plans: Endowment plan is another sort of life assurance plan, which may be a combination of insurance and saving. A certain amount is kept for all times cover – insurance, while the remainder is invested by the life assurance company. In an endowment plan, if the life assured outlives the policy term, the insurance firm offers him the maturity benefit. Moreover, Endowment Plans may offer bonuses periodically, which are paid either on maturity or on the death of the policyholder. On death, the death benefit is payable to the nominee.

Money-Back Life Insurance: Money-back plan may be a unique sort of life assurance policy, wherein a percentage of the sum assured is paid back to the insured on periodic intervals as survival benefit. Money-back plans also are eligible to receive the bonuses declared by the corporate from time to time. This way, the policyholder can manage their short-term financial goals.

Whole Life Insurance: A whole life assurance policy covers the life assured for whole life, or in some cases, up to the age of 100 years. Unlike, term plans, which are for a specified term. The sum assured or the coverage is decided at the time of policy purchase and will be paid only at the time of death of the policyholder. Or of the life assured along with bonuses if any. However, if the life assured outlives the age of 100 years, the insurance firm pays the matured endowment coverage to the life insured.

Motor Insurance: It is a type of policy that covers all types of risk factors that are associated with your vehicle, driver, passengers, third-party vehicle, third-party driver, third-party vehicle passengers, and third-party property. The insurance policy will also cover the following risk factors: Weather damage. Floods.

Health Insurance: Health insurance is an insurance product which looks a taking care of all medical-related expenditure like surgeries of an insured individual. It reimburses the expenses incurred thanks to illness or injury or pays the care provider of the insured individual directly.

Travel Insurance: Travel insurance plans cover medical emergencies, cancellation of trips, trip interruption, delays, medical evacuation, and lost, damaged, or stolen luggage. This helps in creating certainty while traveling and reduces the economic effect of emergencies abroad.

Property Insurance: It is the type of Insurance that looks at safeguarding the property and equipment of a business against loss from theft, fire, or other perils; all-risk coverage covers against all risks; named-peril coverage covers only against specific perils named within the policy.

Mobile Insurance: It is a type of insurance which specializes in all the cost incident to replacing or repairing your phone if it is lost, damaged, or stolen. Mobile phone policies usually have a lower excess than most other contents insurance policies, typically around £50. They also include extra cover like Accidental damage.

Bite-size Insurance: Small-ticket insurance cover, also known as a sachet or bite-size insurance, is a non-comprehensive plan, focusing on reducing the premium which leads to reduce the cover of the policy.

Fire Insurance: Fire insurance is a type of property insurance that specializes in fire-related damages cost to people and their property. The purchase of fireside insurance additionally to homeowners or property insurance helps to hide the value of replacement, repair, or reconstruction of property, above the limit set by the property insurance policy.

Marine Insurance: Marine insurance looks to mitigate the damages which will be caused to ships, cargo, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination. When goods are transported by mail or courier, shipping insurance is employed instead.

Reinsurance: Reinsurance is simply insurance policies that are being purchased by another insurance company in order to mitigate risk. Essentially, reinsurance can limit the amount of loss an insurer can potentially suffer. In other words, it protects insurance companies from financial ruin, thereby protecting the company’s customers from uncovered losses.