What is Insurance?
A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.
Why is Insurance important?
Insurance is important because it protects a person or entity from extreme financial loss or responsibility due to an unfortunate emergency, accident or negative unforeseen event. There are many different kinds of insurance, some of which cover a person and some of which cover businesses and other entities.
What are the different types of Insurance available?
There are various types of general insurance policies to cater for individuals, industries, trade and commerce. To name the few are Household Insurance, Fire and Allied Perils Insurance, Personal Accident Insurance, Burglary and Housebreaking Insurance, Marine Cargo/Transit Insurance, Cash in Safe Insurance, Cash in transit Insurance, Fidelity Guarantee Insurance, Travel Medical Insurance, Medical Insurance, Public Liability Insurance, Aviation Insurance and so on.
What is Re- Insurance?
It is the practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. The intent of reinsurance is for an insurance company to reduce the risks associated with underwritten policies by spreading risks across alternative institutions.
Difference between Insurance and Re-Insurance?
Insurance is basically covering of risk against adversity. Insurance is where Insurance companies cover the risk of the general public through different lines of business and types of products for which they charge a premium amount from the customer for the coverage period.
Re-Insurance is a company that provides insurance for another Insurance company or in other words shares the risk with the Insurance Company and also shares the premium amount received. So for example customer A has bought a policy with Insurer X who has been Re-Insured by Y. Now when A pays X the premium, X will give a % of the premium to Y. Similarly tom if A were to file a claim with X, X would pay A the sum assured post which Y would pay a % of the sum assured to X.
When does coverage become effective?
As per the insurance Act without the payment of premium the insurance policy will not be valid Therefore after paying premium against the Risk and it can be effected policy thereafter. The liability of insurance company does not commence until the proposal has been accepted by the company and premium is paid.