Before investing in an insurance policy, it’s vital to understand some key parameters related to insurance. It’ll enable you to analyze various types of insurance companies, and narrow down on an insurer that suits your financial aspects and your needs.
The list of Insurance Key Parameters are:
Insurance Policy: It refers to the contract between the insurer and the insured that lays down the terms and conditions related to the insurance, including the amount of premium, policy limit, etc.
Insured/Policyholder: The party which seeks protection from financial loss by buying the insurance policy is known as the insured.
Insurer/Underwriter/Insurance Company: The party which provides insurance is known as the insurer.
Premium: It is essentially the price of buying the insurance policy which the insured has to pay to the insurer so that he can undertake to make good the loss if any. Premium's policies are crafted based on the risk that the insurer would have to bear.
Policy limit: It is the maximum amount of money that the insurer shall receive in case of a financial loss arising due to any event covered by the policy.
Deductible: It is the amount that the insured has to pay himself, before the insurer starts paying him to compensate for the financial loss, up to the policy limit.
Insurance Claim: It refers to the formal request made by the insured to the insurer, to compensate him for the financial loss arising due to any event covered by the policy.
Contingency: In the context of insurance, it refers to an uncertain event, which may lead to financial losses against which the insured seeks protection.