FINANCIAL LITERACY

• Insurance


  A financial arrangement that provides protection against the risk of uncertain losses
• Insurance


  A financial mechanism designed to mitigate the risk of uncertain losses by transferring them from individuals or entities to an insurance company
• Insurance


  A contractual agreement where the insured pays a premium to the insurer in exchange for coverage against specific perils or risks
• Insurance


  A contract that transfers the financial burden of potential future losses from the insured to the insurer
• Key elements of insurance

  • Risk transfer
  • Premium
  • Policy
  • Purpose
• Risk transfer


  Individuals or entities transfer the risk of potential loss to an insurer
• Premium


  Insured parties pay a periodic premium to the insurer in exchange for coverage
• Policy


  A legal contract outlining the terms and conditions of coverage
• Purpose of insurance


  To mitigate financial losses resulting from unexpected events, such as accidents, illness, or damage to property
• Parties involved in insurance

  • Insurer/Insurance company
  • Policyholder/Insured
  • Beneficiary
• Insurer/Insurance company


  The entity that provides the insurance coverage, accepts premiums from policyholders, and agrees to compensate them for covered losses or events
• Policyholder/Insured


  The individual or entity that purchases the insurance policy from the insurer, pays premiums in exchange for coverage against specified risks
• Beneficiary


  The person or entity designated to receive the proceeds of the insurance policy in the event of the insured's death or other covered event
• Types of insurance


  • Life insurance
  • Non-life insurance
• Life insurance


  A financial product that provides a payout to designated beneficiaries upon the death of the insured person
• Types of life insurance

  • Term life insurance
  • Permanent life insurance
• Term life insurance


  Provides coverage for a specific period, typically 10, 20, or 30 years. If the insured dies during the term, the beneficiaries receive the death benefit. If the insured survives the term, the coverage expires.
• Permanent life insurance


  Provides coverage for the entire lifetime of the insured, as long as premiums are paid. This category includes whole life insurance, universal life insurance, and variable life insurance.
• Death benefit


  The amount of money paid out to the beneficiaries upon the insured's death. The beneficiaries can use this money to cover funeral expenses, pay off debts, replace lost income, or meet other financial needs.
• Premiums


  Policyholders pay regular premiums to keep the life insurance policy in force. Premiums can typically be paid monthly, quarterly, or annually.
• Underwriting


  When applying for life insurance, the insurance company assesses the risk of insuring the applicant based on factors such as age, health, lifestyle, occupation, and hobbies. This process determines the premium rate.
• Beneficiaries


  Policyholders designate one or more beneficiaries who will receive the death benefit when the insured passes away. Beneficiaries can be individuals, such as family members or friends, or entities like trusts or charities.
• Cash value (Permanent life insurance)


  Some types of permanent life insurance policies accumulate cash value over time. This cash value grows tax-deferred and can be accessed by the policyholder through loans or withdrawals while the insured is alive.
• Tax implications (Life insurance)


  In many cases, life insurance death benefits are not subject to income tax. However, there are exceptions, such as when the policyholder transfers ownership of the policy for valuable consideration.
• Non-life insurance


  Also known as property and casualty insurance, encompasses a wide range of insurance products designed to protect individuals, businesses, and organizations from financial loss due to unexpected events other than death.
• Major non-life insurance products

  • Auto insurance
  • Health insurance
• Auto insurance


  Provides coverage for damage to or caused by automobiles, including liability for bodily injury and property damage, as well as coverage for theft, vandalism, and other perils.
• Auto insurance coverage


  • Third-party liability insurance coverage
  • Comprehensive car insurance coverage
  • Personal accident cover
  • Zero depreciation insurance
  • Engine protection cover
• Individual health insurance


  Purchased by individuals or families directly from an insurance company, provides coverage for medical expenses. Individuals can choose from a range of plans with different premiums, deductibles, and coverage options.
• Group health insurance


  Typically offered by employers to their employees, provides coverage to a group of people. Employers often negotiate group rates with insurance companies, making coverage more affordable for employees. Group plans may also offer more comprehensive coverage than individual plans.
• TPA (Third-Party Administrator)


  Independent organizations that manage various aspects of insurance claims processing and other administrative functions on behalf of insurance companies or self-insured entities. They serve as intermediaries between insurance providers, policyholders, and healthcare service providers.
• Pradhan Mantri Jan Arogya Yojana (PM-JAY)


  Also known as Ayushman Bharat, is one of the world's largest government-funded healthcare insurance schemes. It provides coverage of up to ₹5 lakh (per family per year) to over 10 crore poor and vulnerable families for secondary and tertiary care hospitalization.
• Rashtriya Swasthya Bima Yojana (RSBY)


  Launched to provide health insurance coverage to below-poverty-line families. It has been subsumed under PM-JAY.
• Pradhan Mantri Suraksha Bima Yojana