How General Insurance Works: A Simple Explanation

Securing one’s future against the uncertainties of life is vital. ACKO provides general insurance designed to ease worries and provide financial support when the unexpected happens. From car and term insurance to health and travel insurance, general insurance has become an indispensable part of our lives. But how exactly does general insurance work? Let’s find out.

The Purpose of Insurance

General insurance covers short-term and unexpected losses incurred during a defined policy period, usually of one year. It safeguards the insured against financial losses arising due to:

• Damage or destruction of property (cars, bikes, etc.)
• Legal liabilities towards third parties
• Injury or illness
• Costs associated with travel mishaps

Some common examples of general insurance policies are:

• Motor insurance: Covers damage to own and third-party vehicles
• Health insurance: Provides coverage against medical expenses
• Travel insurance: Covers losses occurring during travel
• Personal accident insurance: Provides financial aid in case of accidental injury or death

ACKO offers specially crafted insurance plans to ease life’s troubles for Indian families.

How Does General Insurance Work?

General insurance works on the concept of risk-sharing. Let’s understand this with an example of motor insurance.

When you purchase a car insurance policy, you pay a small premium amount. This premium collected from you and other customers is pooled together by the insurance company in a common fund.

If and when an insured car meets with an accident, the insurance provider dips into the same pooled fund and makes a payment for damages as per policy terms. Essentially, the losses of the unfortunate few are shared amongst a larger group to provide financial security.

The General Insurance Process

• Step 1 – Assess your risks: Evaluate your exposures and purchase appropriate covers
• Step 2 – Fill out the form: Provide details about yourself, assets, etc.
• Step 3 – Insurer assesses risk: Insurer evaluates the level of risk to determine premiums
• Step 4 – Accept the form and pay a premium: The insurer accepts the form, and you pay a premium
• Step 5 – Policy issuance: Insurer issues policy document mentioning terms and coverage
• Step 6 – Make a claim: Inform the insurer in case a covered loss occurs during the policy term
• Step 7 – Survey and investigation: The insurer surveys damages and investigates the claim
• Step 8 – Settle claim: If found valid, the insurer settles the claim as per policy terms
• Step 9 – Renew policy: Renew the insurance policy to continue enjoying risk coverage

How to Buy General Insurance?

• Assess your risks and insurance needs
• Research policies from different providers for optimal coverage and pricing
• Fill up the form accurately, providing all the details
• Read policy documents carefully to understand exclusions, waiting periods, etc.
• Make premium payments on time for continuous coverage
• Intimate claims at the earliest by providing the necessary documents
• At renewal, re-evaluate your risks and modify covers if required

Key Things To Note

• Read policy documents carefully to know exclusions, waiting periods, etc, before buying.
• Pay premiums on time for coverage continuity. Alerts from ACKO make it easy.
• Inform insurers about changes that can impact risk, such as changes in vehicle, address, etc.
• Make incremental enhancements to covers to keep pace with growing assets.
• ACKO advisors suggest innovative ways to stay insured in line with life’s progression.

Conclusion

General insurance is designed to provide you with peace of mind and financial security against life’s uncertainties. While insurance companies assess risks and provide coverage, you can do your due diligence to get the best value from your policy. While insurance does transfer financial risk, taking the time to understand your policy and insurance company practices is essential. Paying attention to a few key aspects allows you to extract the best value from insurance and offers you greater peace of mind.