Insurance is a contract between two parties, the insurer, and the insured, in which the insurer agrees to provide financial compensation or coverage for specified losses or damages in exchange for the payment of a premium by the insured. It is a tool that helps individuals and organizations protect themselves against potential financial losses.
The insurer is the company or entity that offers Insurance policies and assumes financial risk in the event of a loss. They collect premiums from the insured and provide coverage as stated in the policy. The insured is the person or entity that purchases the Insurance policy. They pay the premium to the insurer and are entitled to receive financial compensation or coverage for specified losses or damages as outlined in the policy.
The premium is the amount of money paid by the insured to the insurer in exchange for Insurance coverage. It is usually paid regularly, such as monthly or annually.
Benefits of Insurance include:
Financial protection: Insurance provides financial protection against unexpected events or losses. It helps individuals and organizations mitigate the financial impact of accidents, disasters, or other unforeseen circumstances.
Risk management: Insurance allows individuals and businesses to transfer the risk of potential losses to the insurer, reducing their exposure to financial risk.
Peace of mind: Insurance coverage gives peace of mind, knowing that one is financially protected in emergencies or unforeseen events.
Legal requirements: In some cases, Insurance is mandatory by law. For example, motor Insurance is mandatory in many countries to protect against potential accident liabilities.
What is General Insurance?
General Insurance refers to non-life Insurance policies that cover a wide range of risks other than life. It covers various aspects of life, such as health, motor vehicles, travel, property, and commercial entities.
Types of General Insurance include:
Health Insurance: Provides coverage for medical expenses and hospitalization costs in case of illness, accidents, or other health-related issues.
Motor Insurance: Offers vehicle coverage against damages, theft, or third-party liabilities. It includes car, motorcycle, and other motor vehicle Insurance policies.
Travel Insurance: Provides coverage for unexpected events, such as trip cancellation, medical emergencies, lost baggage, or flight delays.
Property Insurance: Covers property against damages or losses caused by fire, natural disasters, theft, or other risks. It includes home Insurance, fire Insurance, and other property-related policies.
Commercial Insurance: Offers business coverage against various risks, including property damage, liability claims, business interruption, and professional liability.
What is life Insurance?
Life Insurance provides financial protection to the insured person’s beneficiaries in the event of their death. It is primarily designed to provide the nominated beneficiaries with a death benefit or money.
Types of Life Insurance include:
1. Term Insurance Plans:
Provides coverage for a specific term or period. If the insured person passes away during the term, the beneficiaries receive the death benefit. It does not accumulate cash value.
Unit Linked Insurance Plans: Combines Life Insurance with investment. Part of the premium is allocated to Life Insurance coverage, and the remaining amount is invested in market-linked instruments like stocks and bonds.
3. Endowment Insurance Plans:
Offers a combination of Life Insurance coverage and savings. If the insured survives the policy term, they receive the maturity benefit, including the sum assured and accrued bonuses.
4. Money Back Insurance Plans:
Provides periodic payments, known as survival benefits, during the policy term. If the insured survives the policy term, they also receive the maturity benefit.
5. Whole Life Insurance Plans:
Offers coverage for the entire lifetime of the insured person. It includes a death benefit and may also have a cash value component that accumulates over time.
6. Child Insurance Plans:
Specifically designed to secure the future of a child. It provides financial protection and savings for the child’s education or other needs.
7. Retirement Insurance Plans:
Also known as pension plans or annuities, these plans provide a regular income stream after retirement, ensuring financial stability during old age.
Here are some important glossary terms related to Insurance:
The amount the insured must pay out of pocket before the Insurance coverage kicks in. For example, if you have a 50 thousand deductible on your Health Insurance policy and file a claim for 2 lakhs, you will pay the first 50 thousand and the Insurance company will cover the remaining amount.
The person or entity that owns the policy and is entitled to the benefits and coverage provided by the policy.
A formal request by the insured to the Insurance company for compensation or coverage for a loss or damages covered under the policy.
The amount of money the insured pays the Insurance company in exchange for the Insurance coverage. It is typically paid regularly, such as monthly, quarterly, or annually.
Evaluating and assessing the risk of insuring a person, property, or entity. Underwriters analyze various factors to determine the applicant’s premium amount and insurability.
6. Policy Limit:
The Insurance policy’s maximum coverage for a particular loss or event. If the loss exceeds the policy limit, the insured would be responsible for the remaining amount.
Specific conditions, circumstances, or events listed in the Insurance policy for which coverage is not provided. It’s important to review the policy exclusions to understand the coverage limitations.
An endorsement is an additional provision or attachment to the Insurance policy that modifies or expands the coverage provided. Riders allow policyholders to customize their insurance policies to suit their specific needs.
These are just a few key terms related to Insurance. The Industry has an extensive vocabulary, and specific terms can vary depending on the type of Insurance and regional practices. It’s important to note that Insurance policies and their terms can vary across countries and Insurance providers. It’s advisable to consult with an insurance professional or refer to specific policy documents for detailed information.