What-You-Should-Know-About-Insurance-Policy_LMR

What You Should Know About Insurance Policy

Have you ever felt like you are looking at gibberish when going through an insurance contract? Don’t worry, you’re not the only one… In this segment we will be bringing you up to speed with some insurance vocabulary.

The Insurance Contract

It is an agreement between an insurance company and a policyholder (physical or moral person), fixing in advance, for a given period, financial charges according to a well-defined set of random events (risks). The insurer undertakes to provide a specific benefit if the insured risk occurs.

It is also the set of documents that formalizes the commitment between the insurer and the insured. The insurance contract is made up of various legal documents given to the subscriber: the special conditions, the general conditions and any appendices.

Special Conditions

They are specific to each policyholder and include the information declared by the policyholder. It indicates; the characteristics of the insured property, the policyholders, the amount of the premium, the life span and the guarantees chosen.

Contruary to the general terms and conditions, they are specific to the customer since they summarize the guarantees he has chosen.

General Terms and Conditions

They take the form of a guide explaining each benefit in detail, including exclusions and how the policy works.  They must be provided when the policy is taken out. They also describe all the rights and obligations during the term of the policy.

Coverage / Waranty

It is the commitment made by an insurance company to cover the insured in the event of a specific risk under the terms of the insurance contract.

The Risk 

This is the hazard on which the insurance contract is based. Risk refers to an event that is potentially uncertain or that may occur at an uncertain date, against which one wishes to insure oneself.

It may be an event with negative financial consequences (such as illnesses or flood…etc), or happy event (such as pregnancy or retirement).

The Insurer

It refers to the insurance company or legal entity with which the insurance contract is taken out and which undertakes to provide the benefits provided for in the event of the risk materialising.

The Insured

The insured means the person or persons whose life, actions or property are covered by the guarantee of an insurance contract. The insured is very often confused with the underwriter, the one who pays the premiums, but can be distinct.

Thus, he may be either the owner of the property insured in a property insurance policy, the person whose liability is insured in a liability insurance policy, or the person whose future fate gives rise to the risk.

A distinction must be made between the insured and the beneficiary. It is the latter who will receive the benefit promised by the insurer in the event of a claim.

The Claim

The claim is the realization of a risk that falls within the scope of the insurance contract. In other words, the event (fire, theft, water damage, death, etc.) which gives rise to the obligation for an insurance company to execute the guarantee provided for in the contract: indemnity, capital or annuity.

Generally, a claim must be reported within five working days (two in the case of theft). From the date of the loss or from the day the insured became aware of it.

The Subscriber

It is the party who signs the contract and undertakes to pay the premiums. The subscriber, also known as the contracting party, is the true owner of the policy.

The subscriber and the insured are not necessarily the same person. Sometimes they are different from the insured or the beneficiary. This is the case, for example, when a company takes out insurance on behalf of its employees. Thus the company is the policyholder and the employees are the insured.

The Premium

It is the amount paid to the insurer in return for guaranteeing (or covering) a risk. It technically represents the cost of guaranteeing the risk; legally, it is the equivalent of the security sold by the insurer. The premium can be paid in several instalments over the year.

The Editorial Team

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