FAQ - General Insurance

A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest.

What is General Insurance?

“Every asset has a value and the business of general insurance is related to the protection of economic value of assets.”

General Insurance or Non-life insurance means insurance other than life insurance such as fire, marine, accident, medical, motor vehicle and household insurance. Assets would have been created through the efforts of owner, which can be in the form of building, vehicles, machinery and other tangible properties. Since tangible property has a physical shape and consistency, it is subject to many risks ranging from fire, allied perils to theft and robbery.

Few of the General Insurance policies are:

Property Insurance: The home is most valued possession. The policy is designed to cover the various risks under a single policy. It provides protection for property and interest of the insured and family.

Health Insurance: It provides cover, which takes care of medical expenses following hospitalization from sudden illness or accident. Personal Accident Insurance: This insurance policy provides compensation for loss of life or injury (partial or permanent) caused by an accident. This includes reimbursement of cost of treatment and the use of hospital facilities for the treatment.

Travel Insurance: The policy covers the insured against various eventualities while traveling abroad. It covers the insured against personal accident, medical expenses and repatriation, loss of checked baggage, passport etc.

Liability Insurance: This policy indemnifies the Insured against the compensation that he has to pay for his legal liability arising out of loss or damage to third party property or life/injury.

Motor Insurance: Motor Vehicles Act states that every motor vehicle plying on the road has to be insured, with at least Liability only policy. There are two types of policy one covering the act of liability, while other covers insurers all liability and damage caused to one's vehicles.

What is underwriting ?

Underwriting of a risk involves consideration of material facts on the basis of which a decision will be taken whether to accept the risk and if so at what rate of premium.

What is Reinsurance ?

The very fundamental principle of spreading of the risk is actually practised by the insurance companies by reinsuring the risks that they have insured. Simply speaking, it is insurance of insurers.

What is a Proposal Form? Why should I fill up a Proposal Form ?

Insurance is a contract between the insured and the insurer. The proposal form acts like offer from insured side. Besides, it contains all the required information for the preparation of the policy which is a contract document.

What is an Insurance Policy ?

A contract of insurance, describing the term, coverage, premiums and deductibles is also called policy.

What is the definition of Premium ?

The Payment or consideration made for the Insurance Policy is called Premium.

What is a Deductible ?

It is that amount of loss which is deducted from each and every loss payable under the insurance policy. In other words deductible is that percentage of the loss that is shared by the Insured.

What is Cash before Cover (CBC) ?

As per the Indian Insurance Act, 1938
Section 64-VB means defines Cash before Cover (CBC) as follows:

“No risk to be assumed unless premium is received in advance: (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner”.<