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General
Insurance |
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What
is General Insurance?
Insurance other than ‘Life Insurance’
falls under the category of General Insurance.
General Insurance comprises of insurance of property
against fire, burglary etc, personal insurance
such as Accident and Health Insurance, and liability
insurance which covers legal liabilities. There
are also other covers such as Errors and Omissions
insurance for professionals, credit insurance
etc.
Non-life insurance companies have products that
cover property against Fire and allied perils,
flood storm and inundation, earthquake and so
on. There are products that cover property against
burglary, theft etc. The non-life companies also
offer policies covering machinery against breakdown,there
are policies that cover the hull of ships and
so on. A Marine Cargo policy covers goods in transit
including by sea, air and road. Further, insurance
of motor vehicles against damages and theft forms
a major chunk of non-life insurance business.
In respect of insurance of property, it is important
that the cover is taken for the actual value of
the property to avoid being imposed a penalty
should there be a claim. Where a property is undervalued
for the purposes of insurance, the insured will
have to bear a rateable proportion of the loss.
For instance if the value of a property is Rs.100
and it is insured for Rs.50/-, in the event of
a loss to the extent of say Rs.50/-, the maximum
claim amount payable would be Rs.25/- ( 50% of
the loss being borne by the insured for underinsuring
the property by 50% ). This concept is quite often
not understood by most insureds.
Personal insurance covers include policies for
Accident, Health etc. Products offering Personal
Accident cover are benefit policies. Health insurance
covers offered by non-life insurers are mainly
hospitalization covers either on reimbursement
or cashless basis. The cashless service is offered
through Third Party Administrators who have arrangements
with various service providers, i.e., hospitals.
The Third Party Administrators also provide service
for reimbursement claims. Sometimes the insurers
themselves process reimbursement claims.
Accident and health insurance policies are available
for individuals as well as groups. A group could
be a group of employees of an organization or
holders of credit cards or deposit holders in
a bank etc. Normally when a group is covered,
insurers offer group discounts.
Liability insurance covers such as Motor Third
Party Liability Insurance, Workmen’s Compensation
Policy etc offer cover against legal liabilities
that may arise under the respective statutes—
Motor Vehicles Act, The Workmen’s Compensation
Act etc. Some of the covers such as the foregoing
(Motor Third Party and Workmen’s Compensation
policy ) are compulsory by statute. Liability
Insurance not compulsory by statute is also gaining
popularity these days. Many industries insure
against Public liability. There are liability
covers available for Products as well.
There are general insurance products that are
in the nature of package policies offering a combination
of the covers mentioned above. For instance, there
are package policies available for householders,
shop keepers and also for professionals such as
doctors, chartered accountants etc. Apart from
offering standard covers, insurers also offer
customized or tailor-made ones.
Suitable general Insurance covers are necessary
for every family. It is important to protect one’s
property, which one might have acquired from one’s
hard earned income. A loss or damage to one’s
property can leave one shattered. Losses created
by catastrophes such as the tsunami, earthquakes,
cyclones etc have left many homeless and penniless.
Such losses can be devastating but insurance could
help mitigate them. Property can be covered, so
also the people against Personal Accident. A Health
Insurance policy can provide financial relief
to a person undergoing medical treatment whether
due to a disease or an injury.
Industries also need to protect themselves by
obtaining insurance covers to protect their building,
machinery, stocks etc. They need to cover their
liabilities as well. Financiers insist on insurance.
So, most industries or businesses that are financed
by banks and other institutions do obtain covers.
But are they obtaining the right covers? And are
they insuring adequately are questions that need
to be given some thought. Also organizations or
industries that are self-financed should ensure
that they are protected by insurance.
Most general insurance covers are annual contracts.
However, there are few products that are long-term.
It is important for proposers to read and understand
the terms and conditions of a policy before they
enter into an insurance contract. The proposal
form needs to be filled in completely and correctly
by a proposer to ensure that the cover is adequate
and the right one.
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General
insurance : QUESTIONS and ANSWERS |
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What
is insurance?
We face a lot of risks in our daily lives. Some
of these lead to financial losses. Insurance is
a way of protecting against these financial losses.
For a payment (premium), an insurance company
will take the responsibility of compensating your
financial losses.
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What
is general insurance?
Insuring anything other than human life is called
general insurance. Examples are insuring property
like house and belongings against fire and theft
or vehicles against accidental damage or theft.
Injury due to accident or hospitalisation for
illness and surgery can also be insured. Your
liabilities to others arising out of the law can
also be insured and is compulsory in some cases
like motor third party insurance. |
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Why
should one insure ?
One of the main reasons one should insure is to
protect one’s belongings and assets against
financial loss. When one has earned and accumulated
property, protecting it is prudent. The law also
requires us to be insured against some liabilities.
That is, in case we should cause a loss to another
person, that person is entitled to compensation.
To ensure that we can afford to pay that compensation,
the law requires us to buy liability insurance
so that the responsibility of paying the compensation
is transferred to an insurance company.
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Who
should buy general insurance?
Anyone who owns an asset can buy insurance to
protect it against losses due to fire or theft
and so on. Each one of us can insure our and our
dependents’ health and well being through
hospitalisation and personal accident policies.
To buy a policy the person should be the one who
will bear financial losses if they occur. This
is called insurable interest.
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What
kinds of policies are there?
Most general insurance policies are annual –
that is, they last for one year. Some policies
are given for longer periods – like fire
insurance for residences – and some for
shorter periods – like insurance for goods
transportation or for emergency medical treatment
during foreign travel.
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How
much should I insure for?
The amount you insure for is called the sum assured.
Normally a policy should cover the value of the
asset – either the market value while insuring,
or the cost of replacing the asset should it be
lost or destroyed. The premium will depend on
the sum assured.
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Can
I take two policies and get claims under both
of them?
In case of an indemnity cover (one that seeks
to compensate the actual loss )--for instance,
a policy that covers property, if there are two
policies in vogue, the loss shall be shared by
both the policies. In no case can an insured get
more than the actual pecuniary loss he or she
has incurred. On the other hand, in respect of
benefit policies like the Personal Accident policy,
where a fixed compensation is paid, no matter
what the actual loss is , one may obtain more
than one policy.
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On
what basis is claim paid?
In indemnity policies, the upper limit of a claim
is the sum assured and this usually applies for
the period of the policy. Certain policies, however,
allow for reinstatement of the Sum Insured by
payment of proportionate premium for the remaining
period of the policy. The actual claim will be
the actual extent of financial loss as validated
by documents like bills. If the property is underinsured,
the insured shall bear a rateable proportion of
the loss. There can be more than one claim in
the policy period but the sum assured is usually
the limit for the policy period unless reinstated.
Nowadays health insurance policies – which
cover hospitalisation costs – have also
a cashless settlement of claims. That is, you
don’t have to pay for the treatment at the
hospital and then make a claim for reimbursement
of the expenses. The insurance company has a service
provider called the third party administrator
(TPA) health services, who liaises with the hospitals
and directly makes the payment for your treatment
as per the terms of your policy and coverage. |
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What
is the periodicity of premium payments?
Most general insurance policies are annual and
the premium payment is in advance. No risk commences
unless you have paid the premium. In some long
term policies companies have the facility of collecting
premiums periodically. |
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Why
do different people have different premiums ?
The premium is calculated on the extent and nature
of the cover you want. A higher sum insured means
a higher rate of premium. Similarly a higher risk
will be charged a higher premium. An example of
this is that an older person will have to pay
a higher premium for health insurance for the
same sum insured. Sometimes the risk is higher
depending on the location of risks – for
example in motor insurance in areas where accidents
are higher. So the premium will vary according
to the nature and severity of the risk. |
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If
I buy a policy and don’t make a claim, it
is a loss. So, why should I buy insurance?
General insurance is not meant to be for savings
or investment returns. It is meant for protection.
What you pay for is the protection against a risk.
To approach it as something from which returns
should be obtained is not the correct approach
as there is a price to pay for protecting a property
worth lakhs for a few hundred rupees. |
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If
there are problems with claims what can I do?
First you should write to the company and give
them sufficient time to respond suitably. If they
don’t respond, or it is not a response satisfactory
to you, then you can approach the appropriate
judicial channel. For complaints relating to personal
insurance covers upto a value of Rs.20 lakh, you
may approach the Insurance Ombudsman in your area.
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(
HERE ANNOUNCE THE CONTACT INFORMATION OF THE OMBUDSMAN
).
The Ombudsman has a technical
team that will go into the merits of your case
and give an award. If you are unhappy with the
outcome with the Ombudsman you still have recourse
to consumer courts.
The IRDA also has a Grievance
Cell. You may contact…………………….
(
HERE ANNOUNCE THE CONTACT INFORMATION OF IRDA)
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