What are the different types of insurance policies a person should have?

A couple of years ago, my cousin Pooja was busy planning her wedding. Flowers, outfits, photographers — her calendar was packed. But just a month before the big day, her father had a sudden heart attack. Between ICU charges, tests, and medicines, the bills crossed ₹4 lakh in a week. The family wasn’t ready for it financially, and the wedding budget took a big hit.

That’s when it hit me — in India, we often think insurance is for “later.” But life doesn’t wait for later.

Insurance isn’t about being pessimistic. It’s about being prepared. It’s that safety net that catches you when you’re falling. So let’s talk — in plain, no-nonsense words — about the types of insurance you actually need.

What is Insurance?

Think of insurance as a deal you make with a company: you pay them a small regular amount (premium), and they promise to help you with money when life throws you a curveball.

It’s like paying a dhobi in advance for the whole month. You may not send clothes every day, but when there’s a pile, you don’t have to worry about paying more — it’s already covered.

What Are the Types of Insurance?

Broadly, there are two main types:

1. Life Insurance – Covers your life. If something happens to you, your family gets financial support.
   
2. General Insurance – Covers pretty much everything else — health, vehicle, home, travel.

Types of Life Insurance (With Real-Life Triggers)

Life insurance is about the people who depend on you — spouse, kids, parents.

1. Term Life Insurance – Cheap and straightforward. If you pass away during the term, your family gets a big payout.
    Trigger: You’re the only earning member and paying off a home loan. If you’re gone, the loan shouldn’t become your family’s nightmare.
   
2. Whole Life Insurance – Covers you for your entire life, not just a fixed period.
    Trigger: You want to leave a guaranteed financial legacy for your kids, no matter when you pass away.
   
3. Endowment Policy – Insurance plus savings. If you survive the term, you get your money back with some bonus.
    Trigger: You want protection but also want to save for a future event like your child’s wedding.
   
4. Money-Back Policy – Instead of one lump sum at the end, you get small payouts during the policy term.
    Trigger: You want periodic cash for things like school fees or festival expenses.
   
5. ULIPs (Unit Linked Insurance Plans) – Insurance plus market investment.
    Trigger: You’re okay with some risk and want your money to grow while still having life cover.
   
6. Child Plans – Secures your child’s education and future dreams.
    Trigger: You want to be sure your child can study abroad even if you’re not around.
   
7. Retirement Plans – Creates income for your post-retirement life.
   Trigger: You don’t want to depend on your children after retirement.

Types of General Insurance (With Real-Life Triggers)

General insurance is about protecting your health, belongings, and travel plans.

1. Health Insurance – Pays for hospital bills.
    Trigger: You’re fit now, but one surgery can cost ₹3–5 lakh. Health insurance keeps your savings intact.
   
2. Motor Insurance – Mandatory if you own a vehicle. Covers damage to your vehicle and third-party liabilities.
    Trigger: That careless driver at the traffic signal dents your car — you don’t want the repair bill from your pocket.
   
3. Home Insurance – Covers your house and valuables from fire, theft, or natural disasters.
    Trigger: You’ve spent years building your home. A short circuit shouldn’t wipe out everything you own.
   
4. Travel Insurance – Helps with lost baggage, trip cancellations, or medical emergencies abroad.
   Trigger: Your luggage gets lost on your Europe trip, and you need clothes, toiletries, and essentials immediately — without ruining your holiday budget.

Tax Advantages of Different Insurance Types in India

Yes, apart from protection, insurance can also help you save tax under the Income Tax Act, 1961.

Life Insurance Tax Benefits

• Under Section 80C, you can claim deductions of up to ₹1.5 lakh per year on premiums.
  
• The payout your family gets (death benefit) is generally tax-free under Section 10(10D).

Health Insurance Tax Benefits (Section 80D)

• Up to ₹25,000 deduction for premiums for yourself, spouse, and children.
  
• Additional ₹25,000 for parents (₹50,000 if they’re senior citizens).

Factors Determining Your Insurance Coverage

• Age – Younger = lower premium.
  
• Income – Higher earnings may need higher coverage.
  
• Family Size – More dependents = more protection needed.
  
• Lifestyle & Health – Health history and habits affect coverage.

Conclusion

Insurance is like the seatbelt in your car — you hope you never need it, but the day something happens, you’ll thank yourself for wearing it.

If you do nothing else, at least have:

• A term life plan to protect your family.
  
• A health insurance policy so hospital bills don’t crush your savings.
  
• Motor insurance if you own a vehicle (mandatory anyway).

Everything beyond that — home, travel, ULIPs — is like adding extra layers of safety.

FAQ

Q1. What are the 4 types of insurance?

 Life insurance, health insurance, motor insurance, and home insurance.

Q2. What are the 7 types of life insurance in India?

Term life, whole life, endowment, money-back, ULIPs, child plans, and retirement plans.

Q3. What are the five insurance policies?

 Term life, health, motor, home, and travel insurance.

Q4. How many types of insurance are there for humans?

 Two — life insurance and general insurance — with multiple sub-types in each.

Disclaimer : Investments in debt securities/ municipal debt securities/ securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully.