What Is Insurance: Understanding it's Meaning and Benefits

01 January, 2024

From unforeseen health issues to sudden accidents, life throws may curveballs our way, especially when we least expect them. These unwelcome surprises can be in the form of unexpected damages endured by our high-value assets, medical emergencies, life-threating conditions, or worse, the untimely demise of loved ones. But by investing in insurance plans, we can face these situations and the mental and financial duress they cause. To ensure we are always covered, we need to pay our insurance premiums on time. Let us delve deeper into the meaning of insurance, explore its numerous benefits and learn about HDFC Bank’s PayZapp – a secure and convenient online platform for instant insurance premium payments.

What is Insurance?

Insurance is a financial agreement or contract between two parties – the insured and the insurer, wherein the former pays a pay a regular amount of money, called a ‘premium,’ to the latter. In return, the insurer covers the financial costs associated with an insured event which could be a medical condition, a vehicle, a real-estate asset, or life itself. The extent of coverage you can get depends upon the policy terms and the sum insured or total compensation amount applicable against your policy.

Let us understand this with an illustration. Let’s say you are primary breadwinner of your family. One day, you find yourself in an accident that causes you to be permanently disabled, which, in turn, impacts your employability. However, you have an accidental insurance or a life insurance policy worth ₹2 Crore. You raise a claim, and the insurer compensates the applicable amount, which helps ensure that you and your family are financially looked after despite you losing your employment.

Types Of Insurance

Some of the most common insurance products you can invest in include:

Health Insurance:

Health insurance is a type of insurance plan that covers your medical expenses. So, when you are diagnosed of an illness, and need medical treatment, your health insurance provider covers the cost of the treatment up to the sum insured amount. Health Insurance gives you access to quality healthcare without you having to worry about draining your savings.

Life Insurance:

Life Insurance provides financial support to your family in the unfortunate event of your sudden death. By investing in Life Insurance, you can ensure that your loved ones are financially taken care of even in your absence. Compensation from life insurance plans can help your loved ones pay off your debts, cover their educational expenses and provide livelihood.

Auto Insurance:

Auto Insurance plans provide protection to your vehicle in case of damages or losses caused by a myriad of natural calamities and human-made incidents. Such an insurance plan also protects your legal and financial liabilities in case a vehicle owned by you causes accidental losses and damages to third-party individuals, their vehicles, or property.

Home or property Insurance:

Home insurance plans safeguards your home and the belongings within from sudden losses or damaged attributed to fire, theft, or natural disasters. During any unfortunate event, such an insurance plan offers financial assistance to repair or rebuild your home. You can find customised home insurance policies depending on your specific needs.

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What are the Benefits Of Insurance?

Now let us explore some major benefits of Insurance:

Financial security:

Insurance provides financial security during events like illnesses, accidents, and vehicle/property damage. It ensures that you do not have to endure financial losses by depleting your savings.

Peace of mind:

Insurance provides peace of mind, enabling you to live your life without constantly worrying about losing your assets suddenly. Your insurer steps up and compensates you for your loses.

Access to quality healthcare:

When you fall ill, you typically want access to the best medical care. With health insurance, you can get the best treatment without burning a hole in your pockets or compromising on costs.

Family and dependent protection:

A life Insurance policy ensures that your loved are financially secure in your absence. The compensation amount is typically high, which ensures your family is not left financially devastated.

No Claims Bonus Benefits

Did you know that not filing an insurance claim converts to monetary rewards? With the no-claims bonus benefit you can get discounts on your insurance premiums or an enhanced sum insured.

Tax Benefits Of Insurance

With insurance investments, you can enjoy tax benefits under various sections of Income Tax Act including:

Section 80 C:

Under this section of the IT Act, you can claim deductions on the premiums paid against life insurance policies. The maximum deduction allowed is ₹1.5 lakh per year, which reduces your tax liability while helping you make investments to secure your and your family’s financial future.

Section 80D:

Section 80D provides tax benefits against Health Insurance premiums. You can enjoy tax deductions ranging from ₹25,000 to ₹100,000 per annum for purchasing health insurance policies for yourself, spouse, children and parents. Your age, as the policy buyer, impacts the tax deduction you can claim.

Section 10(10D):

Section 10 (10D) offers tax exemptions on the maturity proceeds of Life Insurance policies. This means that the funds received by the beneficiaries in case of unforeseen circumstances or after the maturity of Life Insurance policies, including the sum assured and bonuses, is exempt from tax.

PayZapp – For Seamless Payments of Insurance Premiums

With HDFC Bank's PayZapp UPI app, you can pay your insurance premiums conveniently. PayZapp facilitates quick and secure digital payments at your fingertips. You can add your insurance provider as a biller in your PayZapp account and set up automatic payments, reminders, and track your premiums payments effortlessly, while ensuring that you never miss a premium due date.

With PayZapp, you can pay your insurance premiums on-the-go through your smartphone. Plus, you can choose from a range of online payment options including Credit/Debit Cards with Swipe to pay feature, Net Banking, UPI (Unified Payment Interface) and PayZapp mobile wallet within the app. Additionally, you can enjoy a wide range of discount deals, cashpoints and other rewards for choosing PayZapp as your mode of premium payment. Know more about PayZapp.

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.