The Insurance & Its Various aspects

How does insurance work?
The insurer collects premiums on a number of policies and pools these funds, which it then invests to increase the amount of money held and that is how the insurer can afford to make claims payment. There is one more point to understand that every policy holder pays the premium to the insurance company and that collected premium makes pool of funds, but every policy holder does not submit claim that is how the viability of insurance companies are maintained.

Types of insurance policies:
Individual or person specific policies like life insurance policy, health insurance policy, auto-insurance policy and house owner’s policy etc.
Group or business policies like group life insurance, group health insurance, Workmen compensation policy and Medical Malpractice Insurance policy etc.
There are many types of insurance policies i.e. life insurance, health insurance, Accident insurance, disability insurance, critical illness policy, travel insurance, Fire Insurance, fleet insurance , marine
insurance, building insurance, & home insurance etc.
Before moving forward we have to understand some of the terms are used in insurance i.e. the
insurer, Insurance policy, the insured, premium, policy coverage & Claims.

What is Insurance policy?
An insurance policy is a legal contract between the insurance company (the insurer) and the insured that can be a person or a group. The insured has to make sure that the policy is being given, meets all requirements of the policy holder and that you understand your liabilities and the liabilities of the insurer in case if any loss occurs.

Who is the insured?
Insured is a person or legal entity whose financial losses are covered by the insurance policy. Under general and health insurance policies the insured is entitled to receive the benefit amount from the insurer for the covered financial loss as specified in the insurance policy. However, in the case of life insurance plans insured is only covered under the plan and the life cover benefit goes directly to the nominees.

What is the premium?
An insurance premium is the amount of money an individual or a business pays for an insurance
company against its policy. Insurance premiums are paid on policies that cover a variety of personal
and commercial risks. If the policy-owner (insured) fails to pay the premium, the insurance company
may cancel the policy. The size of insurance business also can be estimated with total amount of
premium collected by an insurer. According to a study the total premium collected by the entire
insurance industry world over is estimated to $ 8.89 trillion for the year 2023.

What is insurance coverage?
Insurance coverage is your financial safety net. You should make sure the insurance policy you
choose offers the coverage that you need by taking into account the kind of coverage you require. It
is the sum that provides financial protection to the insured, or their family in case of adversities,
such as death, accident, illness, disability or collision and liability coverage may be important when purchasing car insurance, whereas coverage for fire, theft, and natural disasters may be necessary
when purchasing home insurance. The insurance coverage sets the limit of the financial cover one
can avail. One cannot make claims that exceed insurance coverage

What is deductible?
The sum of money one must pay out-of-pocket before your insurance coverage begins is known as a
deductible. Choose insurance with a deductible that is fair for you based on how much you can
afford to pay in deductibles.

What are exclusions?
Exclusions in an insurance policy are list non-covered services or items. The exclusions limit the
insurance coverage, make sure that you are aware of these limitations and that they will not have an
impact on the type of coverage you require.

What are limits of an insurance policy?
A limit is one of the most important concepts to understand when you’re considering an insurance
policy. An insurance coverage limit determines the maximum amount of money an insurance
company will pay for a covered claim. Often, the amount of coverage that insurance policies offer is
limited. Understand your policy’s limits and make sure that they’re sufficient to cover any possible
losses.

What is a claim in insurance?
An insurance claim is a formal request by a policyholder to an insurance company for coverage or
compensation for a covered loss or policy event. The insurance company validates the claim and
once approved issues payment to the insured or an approved interested party on behalf of the
insured. There are standard norms for documentation of any kind of insurance claims, the insured
should find out details from their insurers that what all documents are required for submitting with
the claim i.e. Death certificate for the life claim, traffic police report for an auto-claim likewise
medical report , discharge summary, payment receipt & other documents for health insurance
claims.

What is claim processing in insurance?
Once the insured submits the claim to the insurer, the expert of the insurance company do scrutiny
of claims’ documents with due diligence technically & financially and eventually takes a decision on
the admissibility of the claims and payable amount is approved and eventually the payable amount
is payed to the insured or beneficiary. If in case the claim is not admissible then the claim will be
denied.

To be continued…