Insurance is a great risk investment tool that provides financial protection in various situations. But the major benefit always remains the disbursing of funds when the policyholder raises a claim. Raising such claims is subject to whether the insurance provides protection or, in insurance lingo, coverage. Read on to know more about what is coverage in insurance, its functioning and its various types.
What Is Coverage In Insurance?
Insurance coverage, coverage amount or just coverage is a term used in insurance policies that refers to the amount the policyholder gets against any specific incident. So they can get financial protection from the causes of that particular incident. In life insurance, the coverage depends on the policyholder’s life, and in health insurance, the coverage depends on the policyholder’s health.
Usually, the coverage is a fixed amount that the insurer provides against the premium payments. So, if you wish to increase the coverage, the premium will also increase. The coverage also depends on other factors of the insurance policy, such as the premium frequency, term duration, moneyback policy, and age of the life or object insured. Currently, there are 24 life insurers and 33 non-life insurers in India who can legally provide insurance with insurance coverages abiding by the IRDAI rules and regulations.
Difference Between Coverage and Cover
While coverage only means the direct monetary benefit you get from the insurance upon raising a claim on a particular cover. Sometimes insurers keep different coverages for different covers.
For example, there can be different covers in health insurance, such as health cover and critical illness cover. Health cover is the general cover, and critical illness cover covers some over-expensive diseases with prolonged treatments. So the coverage amount when you claim on critical illness cover will be much higher than the coverage amount for the general health cover. Above this, some insurers also provide cover restoration, which allows raising claims several times during the term, increasing the coverage to a much higher amount. This varying coverage helps the policyholder substantially increase the returns from an insurance plan.
Working Of Coverage
To further understand what is coverage in insurance you must learn how it works. This will be easy to understand via an example. Suppose a potential policyholder wishes to purchase insurance. They have a family or dependents whose main source of income is the income that this person brings in. So, the potential customer will have to purchase insurance which will give them protection if anything happens to them, resulting in their sad demise. For this, they purchase insurance with life coverage. So, in case of the policyholder’s demise, the insurance coverage will provide funds to the nominee. These funds will be enough for the family or dependents to continue living their lives without any financial troubles.
You can set the coverage for your insurance as per your requirement. But a major reason for the popularity of insurance coverage is that you can add several covers in a single plan. So instead of purchasing two different insurance policies like health insurance and life insurance, you can purchase life insurance with added health coverage. So you can get both coverages under the same plan resulting in a reduced expense than owning two different plans.
Major Types of Insurance Coverages
After knowing what is coverage in insurance and their working, you might want to know the best coverage amount for different insurance policies. Now there are three different types of coverages:
- Coverage for life insurance
- Coverage for health insurance
- Coverage for general insurance
It would be best to opt for coverage as per the value of the insured object or person. The coverage should be enough to take care of the dependents for at least a few years in life insurance. For health insurance, it should be to meet the expenses of major medical treatments, even for critical illnesses. And in general insurance, it should be as per the value of replacement or repair of the object.
Now that you went through this guide which helps understand what is coverage in insurance, you won’t have trouble with your insurance policies. The best method to create insurance with extensive coverage and thus a more secured financial protection is through plan customisation. You can apply this plan customisation to your life insurance and add the most helpful covers to increase the coverage when particular situations arise. And in the case of your vehicles also, you can use plan customisation to add as many as necessary covers in your car insurance renewal and increase the coverage. So make use of these optimum coverages to extend the benefits from insurance without much extra expense and financially secure your life and property.