HC101 - M1

WHAT IS INSURANCE? Insurance - is an agreement between two parties, the insured and the insurer. The insured can be individuals, businesses, and other entities. The insurer is an insurance company. The insured transfers the risk of a significant loss to an insurance company. In return, the insurance company protects the insured against everyday risks. Entities in Insurance. Insurer - Insured - Beneficiary/Dependent Insurer - An entity that provides insurance is known as an insurer/insurance company. Insured - is an individual who avails insurance by buying an insurance policy to protect himself/herself and family Beneficiary/Dependent - is an individual who gets the benefits of insurance. The benefits could be in the form of money or in the form of coverage in the case of healthcare. Benefits of Insurance -Covers the costs of repairs and damages to an asset making it easy for an insured person to own a vehicle. -Promotes a healthy lifestyle as an insured person is required to get periodic medical check-ups done. -Helps in the running of small businesses or family firms by managing the risks of ownership. -Helps an insured person in getting a mortgage or a home loan as lenders recognize a house or real estate property only if it is insured. -Supports the family of the insured if the person falls sick, gets injured or dies. TYPES OF INSURANCE Life Insurance -provides financial support to the family of an insured member if he/she has critical illness or he/she dies. -Most policies also include provisions for financial expenses such as burial and funeral. -Life insurance policies provide lump sum cash payment or annual payment. Auto Insurance. -In some accidents, the vehicles involved get badly damaged. Auto insurance protects the insured against financial loss in the event of a vehicular accident or damage. Pet Insurance -Insures pets against accidents and illnesses; some companies cover the costs of routine care/wellness and burial also. Property Insurance -Property insurance protects against risks to property caused due to fire, theft, or any damage that occurred due to natural calamities such as earthquakes, cyclones or floods. -It protects the insured person's house or property. Malpractice Insurance -Malpractice is a medical error, which results in harm/injury to a patient and is proven to have been caused by the negligence of a hospital or a doctor, or by a deviation from he defined standard of care. -Malpractice insurance protects physicians and other medical providers whenever they are legally challenged for medical malpractice. Theft Insurance -covers the insured against losses arising from the criminal acts of thid parties. For example, an individual can obtain theft insurance to cover the loss due to theft of laptop, mobile, etc. Liability Insurance -protects a person against financial loss in a situation where his actions or negligence if found to cause injury or death of another person or damage to his property. -Accidents at construction sites can be caused by defective equipment or dangerous materials. The injuries caused or death of people in such events can be covered under liability insurance. Health Insurance -reduces an individual's risk of incurring high medical expenses resulting from medical, surgical or dental procedures in the future that he/she may be unable to pay. -It is a protection against the financial risk associated with an illness or injury. -Typically, this insurance plan is valid for one year, and a premium is paid monthly or quarterly. -The policy can be renewed after the completion of one year. HOW DO INSURANCE COMPANIES WORKS? When you buy an insurance policy, you pay a fee to the insurance company. This fee is known as PREMIUM. It is a fixed amount paid by the individual/group to the insurance company periodically as per the insurance policy. Insurance companies invest the premiums collected in secure assets and compensate for the loss. Risk Pooling Process -A strategy of pooling money from all he insured individuals of groups for paying the losses of a few insured people.