Private insurance is classified into life insurance and non life insurance. Life insurance aims at providing financial security to the individuals and their dependents. The risk covered here is death in case of life insurance, sickness and disability in case of health insurance. Annuity, on the other hand provides financial assistance to old persons with no earnings to meet their daily requirements. So, the risk covered here is survival. Non- life insurance refers to the property, liability and miscellaneous insurance, Life insurance deals with the insurance of individuals, groups, and pension plans. Since 1st September, 1956, transacting life insurance business in India was the exclusive privilege of the nationalised insurance company viz., LIC. However, with the passing of the IRDA Act, 1999, the life insurance sector has been thrown open to private players
Types of life insurance plans offered in our country:
- Term assurance plans
- Whole life plans
- Endowment assurance plans
- Assurances for children
- Family income policy
- Joint life assurance
- Health insurance benefits (Asha Deep II and Jeevan Asha II)
- For handicapped dependents (Jeevan Adhar)
- Pension plans
- Unit linked plan (Bima Plus of LIC)
A life insurance policy that provides coverage for the whole of the insured’s life is called Whole Life insurance. A policy that covers a set time period, such as five or ten years, is called Term life insurance. Endowment policies are also term policies but the difference is it pays benefits when the insured dies during the policy term and pays benefits if the insured survives the policy term. And Annuity contracts promise to pay the insured a periodic payment.
Health insurance is a contingent claim contract on the insured incurring additional expenses or losing income because of incapacity or loss of good health. Payment becomes necessary because physical or mental incapacity prevents the insured from being able to work is called Disability Income Insurance. If the incapacity prohibits the insured’s activities of daily living, it is called Long term care insurance. If the insured incurs hospital, physician, or other health care expenses it is called medical expense insurance. In India, only medical expense insurance is available.
A few differences between life insurance and general Insurance
The risk namely ‘death’ is certain in life insurance. The only uncertainty is as to when it will take place, whereas in general insurance, the insured event may or may not take place. A life insurance contract is a long-term contract, while general insurance contract is a one-year renewable contract. It is difficult to determine the economic or the financial value of life, whereas the financial value of any asset to be insured under a general insurance policy can be determined.
The life insurance contract is not a contract of indemnity. The general insurance contract is a contract of ‘indemnity’ where the exact value of loss is reimbursed. (Personal accident insurance being an exception) The Premium charged under a life insurance policy is based on a mortality table, but the premium for a general insurance policy is calculated on the basis of past loss experience, probable risk factors and fixed Tariff plan.
Group insurance is a means through which a group of persons, who usually have a business or professional relationship to the contract owner, are provided insurance coverage under a single contract. Generally it is provided by employers for the benefit of their employees. Creditor – debtor groups like the loanees of a housing finance company and miscellaneous groups like professional associations, religious groups, and customers of large retail chains, and savings account depositors, poorer sections of the society, landless agricultural workers also can avail the benefits of group insurance.