Microinsurance
Microinsurance – Necessity and its model
Microinsurance is a sort of insurance created to lower the cost of necessary insurance goods. It reduces typical insurance into something considerably more granular. Those who cannot afford regular insurance are offered specific insurance products by Microinsurance.
You can pay to insure only what you need thanks to the idea of microinsurance. For instance, it can cover modest expenses like a one-day travel, a one-time event, or even particular medical need.
Microinsurance can be provided in a variety of methods or types such as through authorized insurance brokers, community organizations, micro lenders, and other non-governmental organizations.
It aims to help people with lesser incomes. In developing countries such as India, this type of insurance has had some effectiveness in helping low-income households purchase insurance, particularly health insurance.
Microinsurance follows the concept of risk pooling, despite its tiny unit size and its activities at the level of specific communities. With the help of networks of risk pools created by microinsurance, which merges several tiny units into bigger structures, insurance functions and supporting structures are improved.
An estimated 1.5 to 3 billion policies are sold in the microinsurance market in underdeveloped nations. For health, agriculture, property, and disaster insurance, these plans are necessary and are in high demand.
Micro insurance in India
Micro insurance in India – What are its features
Micro insurance in India refers to insurance programs developed specifically to meet the needs of people living in rural areas. According to the financial experts of FIA Global – a leading business correspondent service provider, The IRDAI Microinsurance Regulations, 2005 control microinsurance. Both the Life Insurance and General Insurance categories may include such coverage.
However, what distinguishes them is the fact that the sum assured by such
insurance is equal to or less than Rs. 50,000. The economically vulnerable group may be able to receive some form of insurance protection thanks to
microinsurance. Such programs can give low-income individuals who cannot afford the popular type of insurance a sense of security.
Types of Microinsurance Plans – An overview
The types of Microinsurance in India are divided into the following two broad
categories such as-
- GENERAL MICROINSURANCE
A general or regular microinsurance plan covers health insurance, personal
accidents, and assets like animals, cottages, etc. Both individuals and groups have access to this type of insurance.
- LIFE MICROINSURANCE
Endowment or term plans are both acceptable types of life microinsurance. An
individual or a group may purchase it, and it comes with or without an accident
benefit. Health insurance may also be involved in such arrangements.
The functioning of microinsurance policy – The process
Here are some details outlining how a microinsurance policy functions in India –
- Non-governmental organizations (NGOs), self-help organizations, and microfinance institutions all distribute microinsurance policies.
- In order to increase the reach and guarantee widespread involvement, the price for these programs is minimal.
- Insurance companies are free to offer bundled products or composite policies that fall under the General Insurance or Life Insurance categories.
- When a policy’s sum insured is within the range set by the government, insurers also issue a few microinsurance policies.
Conclusion
The main benefit of microinsurance is that it provides a low-cost way for those in the community who are economically disadvantaged to get insurance. They can get financial support during hard times by purchasing microinsurance policies.
