Kathmandu. Life insurance or non-life insurance, both are contracts. This is because the minimum prerequisites for the contract are fulfilled between the insured and the insurer, and sometimes with the involvement of a third party, when buying and selling insurance policies.
First of all, the insured proposes to insure subject to the terms and conditions predetermined by the insurer, in the second stage the insurer decides to accept the proposal along with the proposal evaluation and in the third stage the insured pays the premium as per the terms of the insured and in the fourth and final stage, the insurer issues the policy and hands it over to the insured or proposer.
However, some of the terms included in the policy are technical and cannot be understood by the general public. In such a situation, the insured has to inquire about the technical terms. For the information of the general public, here are five technical terms used in non-life insurance in simple terms:
1. Premium: The fee to be paid by the insured for insurance. After receiving such a fee, the insurer agrees to bear the risk of the insured.
2. Deductible or Excess: In the event of any loss to the insured property or content, the insured himself will bear some of the amount of the loss. In such a situation, the risk of the insured property is not included in the insurance policy and in return, the insured gets some concession in the amount of premium. For example, if you insure a motor vehicle, you will bear a maximum of Rs 5,000 or Rs 10,000. In such a situation, the insured has to bear the loss of up to Rs 10,000 due to a motor accident or any other reason. If the loss is more than that, then the insurer has to deduct Rs 10,000 from the amount and pay the remaining amount.
3. Sum Assured: This is the maximum limit of the amount that the insurer has committed to pay in the event of damage to the insured property. In case of loss or damage to the insured property, the insurer has to pay the amount as mentioned in the policy on the basis of damage assessment.
4. Exclusions: It does not cover any part of the insured property under the risk of the policy. In such a situation, the insured himself has to bear the entire loss. For example, health insurance does not cover the expenses of most of the dental treatments, except eye surgery, but the insured has to bear the cost of most of the treatments.
5. Claims: A claim is a claim for compensation from the insurer on behalf of the insured in case of property damage.
The more you understand these basics, the more confident you will be when choosing insurance.
