Insurance Coverage: A Complete Guide to Insurance Coverage

Insurance is a means to get compensation for a financial loss that you suffer. The policy covers specific contingencies and if you suffer from such contingencies, the economic loss that you suffer is paid by the insurance plan. Different insurance policies cover different types of contingencies and so to know the exact coverage available under insurance, you need to look at the different types of insurance plans independently. 

So, let’s assess the most common 3 types of insurance coverage offered under some of the most popular types of insurance policies in India.

1. Life Insurance Plans:

Life insurance policies are those which cover a human life against the risk of dying too young and also against the risk of living too long. Different types of life insurance plans are available in the market covering the different types of financial needs that you have. These plans include the following –

1. Term insurance plans which cover the risk of premature death during a specified tenure
2. Whole life plans which cover the risk of death over your entire life
3. Endowment plans which cover the risk of death during the policy tenure and also pay a benefit on maturity
4. Money-back plans which pay a specified amount of money back benefit at regular intervals over the policy duration. These plans also cover the risk of death during the term of the policy
5. Children plans which ensure a financial corpus for your children whether you are around or not
6. Unit linked plans which create an investment corpus and also provide coverage against premature death
7. Pension plans which create a retirement corpus and allow annuity pay-outs to create a source of regular income for the retiree

Insurance Coverage Under Life Insurance Policies:

1. All life insurance plans provide insurance coverage against the risk of premature death. If the insured dies during the term of the policy, the plans pay a death benefit which is, usually, the sum assured
2. Under many life insurance plans, there is also a maturity benefit which is paid when the term of the plan comes to an end
3. Pension plans cover the risk of living too long. They pay a series of annuity payments for as long as you live so that you can meet the financial cost of living your life even after retirement

2. Health Insurance Plans

Another popular category of insurance is health insurance. Health insurance plans are designed to cover the medical costs that you incur if you are sick or wounded and you need hospitalisation. These plans, therefore, provide financial support against expensive medical costs.

Insurance Coverage Under Health Insurance Policies:

Health insurance plans also come in many different variants. These variants and their coverage benefits are described below –

1. Indemnity Health Insurance Plans

   These health insurance plans cover the actual medical costs that you incur when you are hospitalised. The coverage benefits under different plans differ but some of the common coverage benefits which are found in health insurance plans are as follows –

   Insurance coverage benefits	What is covered
   Hospitalisation expenses	Expenses incurred when you are hospitalised for 24 hours or more. These expenses include – Room rent ICU room rent Doctor’s fee Surgeon’s fee Anaesthetist’s fee Treatment costs Cost of medicine, blood, oxygen, etc.
   Pre hospitalisation expenses	Expenses incurred before you are hospitalised
   Post hospitalisation expenses	Expenses incurred after you are discharged from the hospital
   Day care treatments	Treatments which result in hospitalisation but the hospitalisation is not for 24 hours because of advanced medical treatments
   Organ donor expenses	Expenses incurred in harvesting an organ from a donor for transplanting it in your body
   Domiciliary treatments	Treatments taken at home because of non-availability of hospital beds or because you cannot be moved to a hospital
   Maternity expenses	Expenses incurred in childbirth, both normal and Caesarean as well as pre and post-natal expenses
   Ambulance expenses	Expenses incurred in transporting you to the hospital in an ambulance
   AYUSH treatments	Expenses incurred on non-allopathic treatments like Ayurveda, Homeopathy, etc.

2. Critical Illness Health Insurance Plans

   Critical illness plans are fixed benefit health insurance plans. These plans cover a specific list of critical illnesses and treatments. If you are diagnosed with any of the covered illness or if you undergo any covered treatment, the policy pays the sum insured in lump sum irrespective of the actual medical costs that you incur.

   Some common critical illnesses which are covered by critical illness health insurance plans are as follows-

   1. Cancer
   2. First heart attack
   3. Coma
   4. Paralysis of limbs
   5. Kidney failure wherein regular dialysis is required
   6. Major organ transplant
   7. Bone marrow transplant
   8. Open chest CABG (Coronary Artery Bypass Graft)
   9. Heart valve replacement
   10. Blindness
   11. Third degree burns
   12. Multiple Sclerosis
   13. Motor neuron disease, etc.
3. Hospital Cash Health Insurance Plans

   Like critical illness plans, hospital cash plans are also fixed benefit health insurance plans. These plans pay you a fixed amount of benefit on a daily basis if you are hospitalised. These plans do not have a specific coverage feature. They cover hospitalisation for 24 hours or more and pay a benefit each day of hospitalisation.

2. Motor insurance plans

Motor insurance plans include car or bike insurance plans. These plans are mandatory as per the Motor Vehicles Act, 1988. Motor insurance plans come in two variants and the insurance coverage under each variant is different. 

Insurance Coverage Under Motor Insurance Policies:

Let’s, therefore, check the variants and the insurance coverage provided by each –

1. Third-Party Liability Motor Insurance Plans:

   Third-party liability plans are a legal necessity and they provide the basic insurance coverage which is required by law. Coverage under third party liability plans are allowed for financial liabilities which you, the vehicle owner, would face if your vehicle causes any of the following contingencies –

   • Death of an individual
   • Physical injury to an individual
   • Damage of an individual’s property

   Under the first two instances, insurance coverage is allowed for an unlimited amount. However, for property damage cases, insurance coverage is limited to INR 7.5 lakhs under both car and bike insurance plans.

2. Comprehensive Package Motor Insurance Policies:

   Comprehensive package policies, as the name suggests, provide a comprehensive scope of insurance coverage to vehicle owners. The policy covers third party liabilities as well as the damages suffered by the vehicle itself. Insurance coverage under comprehensive plans are, therefore, offered for the following contingencies –

   • Death of an individual due to your vehicle
   • Physical injury caused to an individual due to the vehicle
   • Damage to an individual’s property due to your vehicle
   • Natural calamities like floods, earthquakes, cyclones, etc. which cause damage to the vehicle
   • Man-made causes which cause damage to the vehicle like fire, explosion or implosion, riots, malicious acts, etc.
   • Theft of the vehicle
   • Damage to the vehicle in the course of its transportation

   So, the motor insurance policy that you choose will determine the insurance coverage which you can avail.

Key Takeaways:

1. Insurance coverage is the extent of risk that is taken by the insurance company in exchange of premium for the life of an individual or any asset by ensuring services in case the unforeseen event occurs during the policy duration
2. The most common three types of retail insurance coverage in India are life insurance, health insurance and motor insurance
3. Insurance coverage protects the financial loss that is done by events like car accidents, fire, etc. 

Conclusion:

The insurance coverage, therefore, is specific to the type of insurance policy that you buy. A life insurance policy covers the risk of premature death while a health insurance policy provides coverage against medical expenses. A motor insurance policy, on the other hand, covers any legal liability that you face in an accident and also covers the damages that your vehicle suffers. So, when buying a policy, understand the scope of insurance coverage offered by the policy. Choose a policy whose insurance coverage is comprehensive and suitable for your requirements.