Types of Insurance

Insurance in India is broadly classified into two categories, each covering a different kind of risk:

1. Life Insurance. Covers the risk to human life — payable either on the death of the insured within the policy term, or on the insured surviving to the end of the policy term (maturity), depending on the type of policy (term insurance, whole-life, endowment, etc.). Since a human life cannot be given a precise money value, life insurance is not a strict contract of indemnity — the sum assured is paid in full regardless of the insured's actual financial dependants' loss. The Life Insurance Corporation of India (LIC), a Statutory Corporation studied in this unit's chapter on Government Organisation, is India's largest life insurer, alongside several private life insurance companies operating under IRDAI regulation.

2. General Insurance. Covers risks other than life, and (unlike life insurance) is governed by the principle of indemnity throughout. General insurance includes several major sub-categories:

• Fire Insurance — covers loss/damage to property (buildings, stock, machinery) caused by fire and certain allied perils (like lightning, explosion, as specified in the policy).
• Marine Insurance — covers loss/damage to a ship (hull insurance) and/or its cargo (cargo insurance) during a sea voyage, historically one of the oldest forms of insurance given the high risks of sea trade.
• Motor Insurance — covers loss/damage to a vehicle and third-party liability arising from its use; in India, third-party motor insurance is compulsory by law for every vehicle used on a public road.
• Health/Medical Insurance — covers the cost of medical treatment/hospitalisation of the insured (and often dependent family members) up to the policy's sum insured.
• Miscellaneous Insurance — a residual category covering a wide range of other risks (burglary, fidelity, personal accident, crop insurance, and more), each with its own specific terms. …