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Insurance is one of the most critical services of our time. There are risks all around us, be it the risk of fire, accidents, illnesses, liabilities, and more. Having an insurance policy during tough times can mean the difference between smooth sailing and a rough ride.
This article will discuss the following important topics on insurance:
An insurance policy is a contract of indemnity between the insured (policyholder) and the insurance company. The insurance company indemnifies the insured in exchange for a fee. This fee is called an insurance premium. In simple words, the insurance company will protect the insured against a specified set of risks and uncertainties, as mentioned under the policy bond.
There are various types of insurance policies offered in the market. Every insurance contract is designed to cover a specific set of risks. Let us look at some popular types of insurance:
Health insurance is one of the most important types of insurance services available in the Indian market. A health insurance policy protects against unexpected accidents and illnesses.
There are a variety of different health plans available in India, they are:
There are a host of other lesser-known insurance services also available in the Indian market. They are:
Let us understand how the concept of insurance works in simple steps:
Step 1: A Person finalizes an insurance policy based on his needs.
Step 2: The person purchases the policy by paying his first insurance premium.
Step 3: The insurance contract gets initiated and is now active.
Step 4: The policyholder can decide to make a claim if need be.
Step 5: Upon claim, the insurance company will reimburse the policyholder for the damages that have occurred.
Let us solidify the concept of insurance with 3 simple examples.
Let us assume that Mr. Mohan bought a Rs 50 Lakh worth life insurance policy from HDFC Life. He, unfortunately, passed away five years after purchasing the policy. As per the policy terms, HDFC Life will now pay Rs 50 Lakhs to Mr. Mohan’s nominee.
Let us assume that Mrs. Devika bought a Rs 30 Lakh worth health insurance policy from HDFC ERGO. She, unfortunately, met with an accident soon after she bought the policy, and is now admitted to the hospital. As she was insured, the insurance company will bear the total expenses of her treatment.
Let us assume that Mrs. Sridevi bought a motor insurance policy from ICICI Lombard. Soon after, she met with a minor road accident and damaged her car’s windscreen. She now makes a claim with the insurance company for her damages. As she was insured, the company will bear the repair expenses of her automobile.
The concept of insurance is governed by 7 principles. These principles govern the functioning of insurance. They are:
It is very important for parties to an insurance contract to abide by these principles. If either the insurer or the insured violates any of the above 7 principles, the contract of insurance can be terminated.