Understanding general insurance can be a little tricky. This is mostly due to the fact that there is so much jargon involved. Without prior knowledge of all this jargon, almost everything related to general insurance may seem beyond your comprehension. Keeping this in mind, the following article will explain some of the most commonly used terminologies in general insurance. This will help you understand how a plan works & make informed purchase decisions.
- Premium: If you have never purchased a general insurance plan before, then this one of the first terms that could leave you a little confused. In normal parlance, premium means something that’s of a higher quality. However, in insurance lingo, premium is the cost of the policy. It is the amount you have to pay to get coverage from the insurance provider.
- Claim: A claim is when you request the insurance company to compensate for financial losses caused by an unfortunate event covered by your policy. For example, you can claim compensation against car insurance in case you meet with an accident. Or you can claim health insurance in case you are hospitalized due to a medical condition covered by your policy.
- Sum insured:The maximum amount you are eligible to receive when you make a claim is known as the sum insured of a policy. For example, if you have a health insurance policy with a sum insured of Rs. 5 lakhs, then you can get compensation for treatments up to a limit of Rs. 5 lakhs online. All medical expenses that exceed this Rs. 5 lakhs limit will have to be covered out of your own pocket.
- No claim bonus (NCB):This is one of the most common terms in general insurance and is actually quite self-explanatory. NCB is like a reward given to you by the insurance company for not making a claim against your policy. For instance, if you do not make a claim against your motor insurance plan, then you will be provided with an NCB discount when you renew the policy.
- Deductible:General insurance is all about risk-sharing. When you buy a plan, you transfer a majority of the risk associated with unfortunate events to the insurance company. However, you still bear a small fraction of the risks involved. Therefore, in case of a claim, you have to pay a small amount of the repair costs/hospital bills before the insurance company can cover the rest of your expenses. The amount that comes out of your pocket is known as deductible. Almost all general insurance plans, including home, health, travel & motor insurance, have deductibles.
- Free-look period:Every general insurance company will offer something known as a free-look period. This is usually a 15-day window wherein you can evaluate the policy and decide on whether it is suitable for you or not. If not, you can cancel the pan and get your money back. Therefore, a free-look period is a sort of trial period.
Remember, only buy an insurance policy once you have a complete understanding of how it works and the terms & conditions. We hope this article has been helpful, good luck and all the best!