One should purchase a life insurance in case they are in dire need of financial support.

When buying an insurance, wouldn't it be the best if one knew more about life insurance than the average life insurance agent? You'd know what products are good, what are not, what to buy, and what not, no matter what the agent tries to "sell" to you.

Insurance is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for a specific loss, damage, illness or death in return for the payment of a specific premium. For example, if one has availed a life insurance policy and goes through a life-threatening accident or injury, the insurance company provides them compensation.

Insurance works on the Following Principles:


Proximate cause is concerned with how the actual loss happened and whether it is a result of an insured peril or not



Stating that the person getting insured must have Insurable Interest in the object of insurance, meaning, one cannot get an insurance for their neighbour's car or something that is not important to the insurer himself.


According to this principle, an insurance contract is signed only for getting protection against unpredicted losses arising in future.


Meaning, the contract needs to be signed by both parties (insurer and insured) in an absolute faith.


The insured must try his level best to minimize the loss of his insured property in case of uncertainty.


Applies to all principles of indemnity and says that if the insurer has taken more than one policy for the same object, they can claim compensation only to the extent of actual loss.


When the insured is compensated for the losses due to damage to his property, the ownership rights of such property shifts to the insurer.


Importance of Insurance:

One should purchase a life insurance in case they are in dire need of financial support.

For example, if one has an estate without an insurance, a family to support, debts and mortgages, and yet, life has its own plans: the breadwinner of the family has an untimely death. The estate will be distributed in this case, and all the property gone.

However, if the person has a life insurance policy, his commitment to an insurance company of a premium and some amount of money is secure with the company. In this case, the lump sum of money he has deposited is given to his family as a “death benefit”. Therefore, the family of the insured is protected from loans, creditors and mortgages while they also have their future intact.

Different Types of Insurance:



A protection against financial loss that could result from the premature death of an insured individual

A contract that covers any other risk other than the risk of life


It is a kind of an investment as much as it ensures one’s life risk.

It is a contract of indemnity and only promises to make up for one’s losses incurred.


It is a long-term contract, some policies run up till the time one is alive.

It is a short term contract, generally for one year and needs to be renewed on expiry.


Premium has to be paid over the year.

Premium has to be paid together as a lump sum.

Insurance Claim

The assured sum along with benefits is paid either on the event of death of the policy holder or on maturity of the policy.

On the contrary, the sum is paid at the time of the accident in order to reimburse the loss.

Insurance Interest

The individual who is taking the policy must be present and available at the time of contract.

The insurable interest must be present both at the time of contract and at the time of loss.

Policy Value

It can be done for any value depending upon the premium policy.

However, the general insurance amount payable is restricted to the amount of loss incurred.


Types of Life Insurance:

  1. TERM INSURANCE: Has a low premium and pays the nominee the assured sum at the time of demise within the term of the policy.
  2. ENDOWMENT PLANS: It is an insurance plus an investment plan. Some amount out of it is paid to the insured after their death and the rest is invested in a low-risk debt instrument, as predefined by the policy.
  3. UNIT LINKED INSURANCE PLANS: ULIPs offer life insurance along with opportunity of capital appreciation by investing in various funds having various degrees of risk.  These are generally invested in equity with no guarantee of return.

Types of General Insurance:

Today, every object can be insured by companies. Also, companies have different policies in order to decide for the customer as to how much compensation will be given by the company for the loss of the insured. 

There are different types of general insurance and different types of policies for each type of insurance:

  1. HEALTH INSURANCE: A certain amount of money is deposited with the insurer, in order to ensure that if the insured gets a serious illness, the entire cost of that is covered by the insurance company.
  2. AUTOMOBILE INSURANCE: Everyone today owns a vehicle and this policy is meant to insure that in case of an accident of the vehicle insured, the company will provide compensation for the loss.
  3. HOME INSURANCE:  Policies are built upon the building of the insured's house and the objects inside the house. In case of fire, accident or theft of any kind, the insurance company pays for the loss. 
  4. TRAVEL INSURANCE: It is useful in case one faces an accident while travelling, the loss is compensated for by the insurer. 
  5. THE CROP INSURANCE: It is specially designed for farmers and ideally the farmers should get this insurance on every crop they sow. The crops can get damaged due to unpredictable weather conditions or any other problem that the crop can face. If the crops get destroyed due to rain or any other reason, the insurer pays for the loss. 
  6. PET INSURANCE: It is meant for domesticated animals that are availed by the customer. 

There are other types of insurance policies like those of Political Risk or Marriage, etc.

Benefits of an Insurance:

The obvious and most agreeable advantage of having an insurance would be the compensation of losses, be it a general insurance or a life insurance.

It renders protection to the customer’s family and property. Despite losses or untimely death, the standard of living initially attained  by the insured’s family is maintained with the benefits of an insurance. 

It reduces stress during difficult times. At the time of a crisis, especially one that is not foreseen, the insured is less stressed, not a borrower of loans and at peace as compared to someone who has lost their savings.

It acts as an investment in many cases which can enable the insured to get returns and even leave a legacy behind. 

The insured is in a financially secure position and as events unravel, the remuneration is paid by the insurance company.

Edited by Shraddha Jha

Want to get your business journey featured on CLIQTAX ? Send an email to us at