So if you are a novice and feel a little lost in the world of finance and investments, then you should first know about the different kinds of insurance policies available. Then, you have to understand which policies you need. Insurance needs are very personal and unique. Therefore you cannot buy the same policy that your friend bought. Always keep this in mind.
The common types of insurance policies
Insurance is categorized in two broad divisions - life insurance and general insurance. A policy that covers your life is known as a life insurance policy and any other form of insurance including health insurance, motor insurance, travel insurance, etc are categorized as general insurance. Life insurance covers your life and if you die within the policy period, your nominee gets a sum of money. All other forms of insurance protect you against unfortunate incidents such as illnesses, accidents, theft, etc. So as an investor you need to know what kind of policy you need.
Life insurance is a must. No matter how old you are or what your responsibilities are, you cannot survive without a life plan. However, there are many different kinds of life insurance plans that cater to different needs. For example, a term plan, which is less expensive, covers you for a limited number of years. It doesn't have any return on investment and is a pure cover. An endowment policy acts both as insurance as well as investment as you get the money back if you outlive the policy. ULIPs carry more risk, but give you higher returns. They combine the components of insurance and investment in the money market. So make sure you speak to your insurance agent or financial advisor and then select the life insurance policy that suits you the most.
Just like life insurance, health insurance is also a must. Nowadays healthcare is one of the most expensive sectors and you cannot afford to stay unprotected. Whether you are at the risk of contracting a hereditary illness or coming across a road accident, health insurance needs to be purchased. Depending on your financial capabilities buy a health insurance plan that will provide maximum coverage at minimum costs.
If you have a vehicle of your own, you will automatically get a motor insurance policy. However, this kind of insurance is only for vehicle owners and obviously if you do not own one, you do not need this policy!
Travel insurance is not compulsory, but it is wise to get a plan before you travel. At an inexpensive rate, a travel insurance policy will cover mishaps such as sickness, baggage loss, flight rebooking, etc when you travel on business or pleasure.
Other forms of general insurance
There are many other forms of general insurance such as home insurance, lifestyle insurance, mortgage insurance, etc. These are not as common as life and health insurance and are only purchased by a handful. Buy these policies only if you feel they will help you specifically.
Insurance is one of the greatest boons available to us. However, a faulty insurance portfolio can cause more harm than good and so you must be careful and choose the right kinds of insurance policies. Make sure you have a life insurance policy and a health insurance policy without fail in your insurance portfolio. As for the other kinds of insurance, assess your requirements, speak to a trustworthy insurance advisor and then decide which policy to buy.
Written By: Deepak Yohannan
The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal
For more articles by Deepak Yohannan, please visit MyInsuranceClub.com
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