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Social Insurance
Here, the government takes care of those who are subjected to

losses due to some risk event. Examples are, providing a pension

when one grows old or providing free medical treatment,

meeting the cost of hospitalization, meeting the cost of tertiary

care medical procedure etc.

The Employees’ State Insurance scheme (ESI) that provides

medical care and other benefits to employees and Employees’

Provident Fund Organization (EPFO) that provides pensions and

survivors’ benefits in the event of an employee’s death are the

popular schemes under this head.

Voluntary Private Insurance
Here, individuals and groups can buy insurance from an

insurance company by entering into a contract of insurance with

the company.

An insurance contract promises to make good the losses to the

insured by paying a certain sum in consideration for the

premium received from the insured.

The insurance company enters into a contract (an insurance

policy) whereby it (insurer) undertakes, in exchange for a small

amount of money (premium), to provide financial protection by

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