What is Rural Insurance in India? Features, Claim, Types and Coverage

In this article you will know in detail what is Rural Insurance in India, Types, Features, Importance, Objectives, Advantages. Rural insurance refers to insurance products and services specifically designed to meet the needs of individuals and businesses in rural areas.

These policies typically cover risks associated with farming, ranching, and other rural occupations, such as crop and livestock loss, damage to buildings and equipment.

Rural insurance may also include coverage for natural disasters such as floods, droughts, and wildfires, which can be more common in rural areas. Some rural insurance policies are also tailored to specific industries, such as farming or ranching.

Overall, rural insurance is designed to protect the assets and livelihoods of those who live and work in rural communities.

What is Rural Insurance?

Rural Insurance” is an insurance that provides protection to farmers, cultivators and people located in rural areas against losses related to sea, flood, hailstorm and other changes.

This helps the farmers to increase their income due to crop loss. It was started by the Government of India in 1938, and was later merged with the General Insurance Corporation in 1972.

Rural insurance in India has a long history, dating back to the early 20th century. The Indian government established the Agricultural Insurance Company of India (AIC) in 1938, which was later merged with the General Insurance Corporation of India (GIC) in 1972.

The primary aim of the AIC was to provide insurance coverage for crops and livestock in rural areas. In the years that followed, the government introduced several schemes to provide insurance coverage to farmers and rural communities.

Some of these schemes included the National Agriculture Insurance Scheme (NAIS) and the Modified National Agriculture Insurance Scheme (MNAIS). These schemes provided coverage for crop losses due to natural calamities such as drought, flood, and hailstorms.

In recent years, the government has also introduced new initiatives to promote rural insurance, such as the Pradhan Mantri Fasal Bima Yojana (PMFBY) and the Pradhan Mantri Suraksha Bima Yojana (PMSBY), which provide insurance coverage for crops and accidental death, respectively.

Despite these efforts, the penetration of insurance in rural India remains low due to various challenges, including lack of awareness, poor infrastructure, and lack of access to financial services.

Importance of rural insurance

Rural insurance is important for several reasons:

  • Financial protection: Rural insurance provides financial protection to farmers and rural communities against losses due to natural calamities such as drought, flood, and hailstorms, which are common in rural areas. This helps to mitigate the impact of these events on the livelihoods of farmers and their families.
  • Promotes agricultural development: Insuring crops and livestock helps to reduce the risks associated with farming, which in turn encourages farmers to invest more in their farms and increase productivity.
  • Improves access to credit: Having insurance coverage can help farmers access credit from banks and other financial institutions, as it provides them with a form of collateral.
  • Reduces poverty: Rural insurance can play an important role in reducing poverty in rural areas by helping farmers to maintain their livelihoods and income in the face of natural disasters and other risks.
  • Encourage Adoption of new technology: Insurance coverage encourages farmers to adopt new technologies and agricultural practices as they feel secure in case of loss.
  • Increase in Agriculture GDP: Insurance coverage will lead to an increase in agricultural GDP, which will have a positive impact on the economy as a whole.

Types of rural insurance

There are several types of rural insurance available in India, some of the most common include:

  1. Crop insurance: This type of insurance covers losses due to natural calamities such as drought, flood, and hailstorms, as well as other risks such as pests and diseases. The Pradhan Mantri Fasal Bima Yojana (PMFBY) is a government-supported crop insurance scheme that provides coverage for major crops.
  2. Livestock insurance: This type of insurance covers losses of livestock due to natural causes such as disease and accidents, as well as losses due to theft. The Livestock Insurance Scheme (LIS) is a government-supported scheme that provides coverage for cattle, buffalo, sheep, and goats.
  3. Weather-based crop insurance: This type of insurance covers losses due to weather-related events such as excessive rainfall, drought, or frost. The scheme is based on the weather data and farmers get the insurance claim based on the loss occurred due to weather-related events.
  4. Health insurance: This type of insurance covers the medical expenses of farmers and their families. The Pradhan Mantri Suraksha Bima Yojana (PMSBY) is a government-supported scheme that provides accidental death and disability coverage for a nominal premium.
  5. Micro-insurance: This is a type of insurance designed specifically for low-income individuals and families in rural areas. Micro-insurance policies usually have lower premium rates and provide coverage for specific risks such as accidental death, disability, and illness.
  6. Farmer-Groups insurance: This type of insurance is specially designed for small farmer groups, under this scheme the group is responsible for the premium payment and the claims are settled on the group basis.

How Rural Insurance Functions?

Rural insurance functions in several ways, including:

  • Risk assessment: The first step in providing rural insurance is to assess the risks that farmers and rural communities face. This includes identifying the types of crops and livestock that are grown in the area, as well as the potential hazards such as natural disasters and pests.
  • Premium calculation: Based on the risks assessed, insurance companies calculate the premium that farmers and rural communities need to pay for coverage.
  • Policy issuance: Once the premium has been calculated, the insurance company issues a policy to the farmer or rural community. The policy outlines the coverage provided, the premium to be paid, and the terms and conditions of the insurance.
  • Claim settlement: In case of any loss due to the insured event, farmers or rural communities can file a claim with the insurance company.
  • Premium collection: Insurance companies collect the premium from the farmers or rural communities either through direct payment or through the government agencies or banks.
  • Support and education: Insurance companies often provide support and education to farmers and rural communities to help them understand the benefits of insurance and how to file claims.

Features of rural insurance

Rural insurance typically has several key features, including:

  • Coverage for specific risks: Rural insurance policies typically provide coverage for specific risks such as crop losses due to natural disasters, losses of livestock due to disease or accidents, and medical expenses.
  • Tailored to the needs of farmers and rural communities: Rural insurance policies are designed to meet the latest new unique needs of farmers and rural communities. They take into account the types of crops and livestock that are grown in the area, as well as the potential hazards such as natural disasters and pests.
  • Affordable premiums: Rural insurance policies typically have lower premium rates than other types of insurance, making them more affordable for farmers and rural communities.
  • Easy access: Rural insurance policies are typically available through government schemes or through insurance companies’ tie-ups with banks and other financial institutions, making them easily accessible to farmers and rural communities.
  • Claim settlement: Rural insurance policies usually have a streamlined claim settlement process, that allows for fast and efficient settlement of claims in case of an insured event.
  • Weather index-based insurance: Some rural insurance policies are based on weather-based index, which eliminates the need for farmers to prove the loss occurred due to insured events, this process is based on the weather data of the area.

Advantages of rural insurance

  • Protection against natural disasters
  • Coverage for specific rural risks
  • Access to financial services
  • Support for small farmers and businesses
  • Encourage investment in rural areas

Rural Insurance Companies in India

  • Aviva India
  • TATA AIG
  • IFFCO Tokio
  • Cholamandalam
  • Oriental Insurance
  • Bharati AXA General Insurance
  • Bajaj Allianz General Insurance
  • ICICI Lombard General Insurance
  • HDFC ERGO General Insurance
  • TATA AIG General Insurance
  • SBI General Insurance
  • Reliance General Insurance
  • United India Insurance
  • National Insurance Company
  • Oriental Insurance Company

What Rural Insurance Covers?

Rural insurance policies can cover a wide range of risks and losses that are specific to rural areas. Some of the most common types of coverage offered by rural insurance policies include:

Natural disaster insurance: Many rural insurance policies cover losses caused by natural disasters such as floods, storms, and earthquakes.

Farm machinery insurance: Some rural insurance policies cover losses caused by damage or theft of farm machinery, such as tractors or plows.

Rural Insurance in india 2023: FAQs

The objectives of rural insurance are to provide financial protection to farmers and other rural residents against risks associated with their livelihoods, to reduce the financial burden of losses due to natural disasters, and to promote economic development in rural areas.

Yes, some rural insurance plans offer maturity benefits, which are payments made to policyholders upon the completion of the policy term. These benefits can be used to cover expenses related to the policyholder's livelihood, such as purchasing new equipment or expanding their business.

Types of insurance included under rural insurance include Farm insurance, crop insurance, Ranch insurance, Equipment insurance, livestock insurance, and property insurance.

The four types of insurance are life insurance, health insurance, auto insurance, and property insurance.

Yes, rural insurance can be tax saving depending on the type of policy and the country in which it is purchased.

Types of rural insurance include Property Insurance, Covers home, shops, retail outlets, schools and agricultural equipment.

The features of rural insurance include coverage for risks such as crop failure, livestock death, and natural disasters.

Several companies provide rural insurance in India, including Bajaj Allianz, ICICI Lombard, HDFC ERGO, and Reliance General Insurance.

There is a great opportunity for insurance companies in India to provide coverage to the large rural population that is currently underserved. Insurance companies can also leverage technology to make insurance more accessible and affordable to rural customers. Additionally, there is a need for innovative products that are tailored to the specific needs of rural customers.

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