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Insurance Coverage: Types, Inclusions, And Exclusions

A comprehensive guide to understand what is insurance coverage and how you should get it.

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Insurance has become a much-needed financial asset today. Doesn’t matter if we have colossal wealth or not; in the face of adversities, it can quickly become insufficient. In other words, no one can predict what the future holds for us, but the least we can do is be prepared for it financially. That’s where insurance coverage comes in. if you have ever wondered, what is insurance coverage, you’re at the right place. 

What is Insurance Coverage? 

The answer to, “What is insurance coverage?’ is simple. Insurance coverage is your financial safety net. It is the sum that provides financial protection to the insured, or their family in case of adversities, such as death, accident, illness or disability. That said, insurance coverage sets the limit of the financial cover one can avail. One cannot make claims that exceed insurance coverage.

Unlike any asset, insurance doesn’t have a lump-sum cost that an individual has to pay to buy insurance. It is instead the regular premiums that the policyholder has to pay to get insurance in exchange.

In a nutshell, insurance shifts the risk from the individual to the insurer. The insured doesn’t have to worry about the rock-heavy hospital bills and asset-damage. When one is insured, it is the insurer that takes care of the financial burdens. 

Types of Insurance Coverage 

Now that you know the answer to, “What is Insurance Coverage?”, let’s discuss the types of insurance coverage. To begin with, even when the one goal of insurance is to provide financial protection against unforeseen events, there are types of insurance aimed at offering you the highest protection in different areas.

That said, here are the most common types of insurance coverage:

1. Life Insurance Coverage 

As the name suggests, life insurance aims to provide your family with a safety net to help them meet their expenses and lead a comfortable lifestyle in your absence. The distinguishing feature of life insurance is that it provides survival benefits. Survival benefits are a combination of sum assured, accrued bonuses, and investment returns. In case, the policyholder survives the policy term, they can get the survival benefit. 

This type of insurance has its sub-types as well. These are primarily:

  • Child Plan
  • Term Plan
  • Endowment Plan
  • Unit Linked Insurance Plans or ULIP
  • Retirement Plan
  • Money-Back Plan
  • Whole life insurance 

2. Health Insurance Coverage 

The answer to “What is insurance coverage in health insurance”, is this, it is the cost that protects you from medical and hospitalization costs in the event of unforeseen accidents and illnesses. With hospital bills growing unaffordable every day, health insurance is a must-have to ensure the best medical treatment for yourself or your family and protect yourself from financial catastrophes.  

2. Health Insurance Coverage

The answer to “What is insurance coverage in health insurance”, is this, it is the cost that protects you from medical and hospitalization costs in the event of unforeseen accidents and illnesses. With hospital bills growing unaffordable every day, health insurance is a must-have to ensure the best medical treatment for yourself or your family and protect yourself from financial catastrophes.  

Health insurance works similarly to life insurance. The policyholder must pay premiums regularly in form of health insurance costs. The insurance coverage in this regard is the limit up to which you can make claim. If the treatment costs exceed the health insurance coverage, the policyholder has to pay the remaining amount.

Typically, health insurance lasts 12 months (if it’s short-term health insurance); beyond which it needs to be renewed to retain the benefits.

Health insurance is often topped up with riders. Riders are extra benefits you can get by paying extra premiums. The additional riders range from critical illness rider, accidental rider, maternity cover, ICU room rent, etc. that provide you extra financial protection.

3. Motor Insurance Coverage 

While all other types of insurance are a choice, motor insurance is mandatory. Motor insurance provides monetary coverage against theft and damage caused to vehicles (own or third-party) due to accidents and fire, depending on the chosen policy.

That said, there are three types of motor insurance policies:

  • Third-Party Liability Motor Insurance
  • Comprehensive Motor Insurance Cover
  • Personal Vehicle Damage Cover

4. Property Insurance Coverage

The fourth type of insurance coverage is property insurance that provides a financial net for immovable items, i.e., properties such as homes, shops, buildings, and offices. This type of insurance protects against damage caused by fire, theft and natural catastrophes. 

How to Find the Right Coverage for you? 

Now that we know what insurance coverage is, and the types of insurance coverage, we might as well understand how to pick the right coverage. Picking the right coverage is imperative. You wouldn’t want to settle for an inadequate amount that would fail to offer you the required financial net. At the same time, you wouldn’t want to pick an insurance policy that provides adequate coverage but comes with unaffordable premiums.  

The right approach here would be to find a balance. Here’s how you can find the right coverage for yourself:

Identify your Requirements 

Now that we know what insurance coverage is, and the types of insurance coverage, we might as well understand how to pick the right coverage. Picking the right coverage is imperative. You wouldn’t want to settle for an inadequate amount that would fail to offer you the required financial net. At the same time, you wouldn’t want to pick an insurance policy that provides adequate coverage but comes with unaffordable premiums.  

The right approach here would be to find a balance. Here’s how you can find the right coverage for yourself:

Identify your Requirements 

Doesn’t matter what type of insurance you choose; the insurance coverage should be according to your requirements. So, predict your future expenses and identify your requirements accordingly. 

Calculate your Expenses 

This step is of utmost importance especially if you are buying life insurance. The amount you choose should be adequate to match the needs of your family when you’re gone. Projecting a figure after analyzing your annual expenses, purchasing habits can help you calculate a rough figure.

Take inflation and medical emergencies into account

The funds you have will lose value in the future. The object you buy for INR 100 would cost INR 1000 in future. So, it is highly advisable to take inflation and medical emergencies into account while computing your required coverage.

Compare Quotes

While almost all insurance companies would offer you similar insurance coverage, they would offer you different benefits. So, go for an insurance company that provides you insurance coverage with maximum benefits. That said, make a decision only after comparing quotes online to find the right coverage and benefits for you.  

What is Included in Insurance Coverage? 

Every type of insurance coverage comes with limitations and terms condition. Everything that one might think is included, may not be. So, here’s a mini guide that can brief you about the inclusions in each type of insurance coverage:

Life Insurance Coverage - Natural deaths caused due to natural illnesses and accidents are covered in life insurance policies.[1]

Health Insurance Coverage: The following are covered under a health insurance policy: [2]

  • Hospitalization costs (24+ hours)
  • Pre and Post Hospitalization expenses (30 days prior, and 60 days post)
  • Treatment Cost
  • Emergency Services
  • Laboratory Expenses
  • Prescription Drugs
  • Ambulance Charges
  • Day-care procedures

Apart from that, there may be co-payment and sub-limit clauses in your health insurance policy. These clauses impose a limit on the amount the insurer pays while settling claims.

Motor Insurance: The type of motor insurance policy you have opted for determines what’s included in your policy. For instance: if you choose Third Party Liability Motor Insurance, motor insurance would cover the third-party vehicle, but it won’t cover your vehicle.

Apart from that, motor insurance covers the following: [3]

  • Man-made calamities, such as Explosion, Burglary, Theft, Riots, Terrorism, etc.
  • Natural calamities
  • Transit by rail/road, air or waterway damages
  • Third-party legal liability
  • Cover for the driver in case of death

Property Insurance: Property Insurance covers against damage caused by fire, theft and natural catastrophes to immovable properties. [4]

What is Not Included in Insurance Coverage?

1. Life Insurance 

Even though all natural deaths are covered in a life insurance policy. But deaths caused due to suicide, HIV Aids, intoxication and drugs, are not covered in life insurance. [5]

2. Health Insurance 

A health insurance policy doesn’t cover the treatment costs of any pre-existing diseases. Currently, pre-existing diseases (PEDs) are defined as conditions with signs or symptoms for which medical advice or treatment has been received. Diseases that are not defined in a health insurance policy are also not covered by health insurance companies.  [6]

3. Motor Insurance 

The following is not covered in a motor insurance policy:[3] 

  • Damage caused during the influence of alcohol and drugs
  • Intentional Damage
  • Damage caused due to over-speeding and racing
  • Damage to tires and car accessories
  • Wear and Tears to the Vehicle that happen over time.
  • Damages caused by natural catastrophes

4. Property Insurance

  • Willful destruction of property.
  • Damage caused by wars
  • Theft claims if the insured house is left unoccupied for more than 45 days
  • Wear and Tear that happen over time. [4]

Frequently Asked Questions (FAQs)

Q1. What if I am not satisfied with my health insurance coverage? 

As health insurance renews every year (if it’s short-term insurance), you have the option to increase your health insurance coverage upon renewal without losing your benefits. However, note that your premiums would increase accordingly.

Q2. Is it essential for me to purchase riders with my health insurance policy? 

No, it is not mandatory to buy riders along with health insurance. However, it is highly suggested that you do. Buying riders can give you extra benefits that would help save money.

Q3. What happens if my claim is denied?  

One of the pivotal reasons why claims can get denied is when the policyholder doesn’t maintain transparency. In other words, if there was any relevant information that was hidden from the insurer, the insurer can deny the claims. However, if you think you have made full disclosure the claim hasn’t been processed, you can file a complaint with IRDAI.

Q4. Which is the most affordable insurance policy? 

Third-Party Liability Motor Insurance is the most affordable motor insurance policy, given that it only covers the damage to third party vehicles, not the damage to your own vehicle.

Q5. What is a No Claim Bonus?

Some health insurance and motor insurance policies provide a no-claim bonus. No claim bonus is the bonus that the insured gets if they do not file a claim in a financial year.

Q6. What is insurance coverage? Is it the only factor that must be considered? 

The answer to “what is insurance coverage” is simple, it is the amount up to which you will be covered or insured. Although, a high insurance coverage is an important factor, but other factors such as affordability of premiums and benefits are equally important.

 

Sources:

https://www.policyholder.gov.in/Report.aspx#

[1] https://www.policyholder.gov.in/uploads/CEDocuments/Life%20Insurance%20Handbook.pdf

[2] https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/Guidelines%20on%20Standardization%20in%20Health%20Insurance%202016.pdf

[3] https://economictimes.indiatimes.com/wealth/insure/what-are-the-inclusions-and-exclusions-in-a-car-insurance-policy/articleshow/67194567.cms?from=mdr

[4] https://www.policyholder.gov.in/what_property_insurance_to_buy.aspx

[5] https://economictimes.indiatimes.com/wealth/insure/life-insurance/8-major-death-cases-which-are-not-covered-in-term-life-insurance/articleshow/70444745.cms?from=mdr

[6] https://www.irdai.gov.in/admincms/cms/whatsNew_Layout.aspx?page=PageNo3916&flag=1

ARN No :- Mar22/Bg/25

1 cr cover @ Rs.604/ month