What are Insurance Policies?

Learn about Insurance Policies with Akshaye Khanna

Case breakdown: Movie Race

The scene that you just saw shows Rajiv Singh (played by Akshaye Khanna) is making a plan with Sonia (played by Bipasha Basu). He tells her that he and his brother has $ 50 million insurance policy each. He is making a plan to kill his brother so that he can receive double the amount under the indemnity clause.

In this blog, Learning Perspectives will explore the meaning of insurance policies.

What are Insurance Policies?

Insurance contracts are those contracts that enable individuals or entities to receive financial protection against insurance losses. This contract is between the policy holder (individual/entity who buys the policy) and the insurance company that provides the contract. In case of death/disaster or eventuality, the insurance company provides the money to the policyholder or the nominee.

Components of Insurance Policy:

Insurance Premiums:

Premiums are paid by the policyholder. It is the amount that allows an individual to buy the insurance cover. This is generally paid by the policy holder either monthly, quarterly, semi-annually or annually. Different insurance policy providers ask for different premiums. A policy holder should research about the policy and pay premiums accordingly.

Insurance policies can be for:

  1. Life
  2. Health
  3. Motor
  4. Home
Policy Limit:

It is the maximum amount that the insurance company pays for the losses under the insurance policy. This amount is calculated based on the following:

  • Duration
  • Injury
  • Indemnity Clause, if any

As Rajiv mentions about the indemnity clause. Indemnity clause policy protects individuals and business owners in case an event. In this case, death of Rajiv’s brother. Indemnity is a contractual agreement between two parties. In this agreement, one party decides to pay for any losses that would be caused by another party. Risks are managed between the parties through indemnity clauses.

If death of an individual occurs and the nominee is suspected to be involved, then a police case is registered. Generally when there is death by murder, following documents are required:

  1. Death Certificate
  2. FIR
  3. Postmortem report

Claim amount is paid to the legal heir. In case there is no legal heir, the amount is kept in the court till a successor is found.

Deductible:

It is the amount paid by the policy holder before the insurance company pays the claim. This could be in the form of percentage or out of pocket expenses for the policy holder.

In India, people can avail tax benefits by purchasing an insurance policy:

80C:

Premium paid towards a life insurance policy is eligible for deduction under section 80C. Premium should be paid for a life insurance policy either for self or dependents.

80D:

This deduction is applicable on medical or health insurance. It is allowed when premium is paid on self’s health policy or for health care of family members including parents.

10D(D):

This benefit is provided towards the premium paid for life insurance policy.

Written by: Ms. Gitika Chandra

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