Different insurance companies in the world are in constant competition with one another. They are always in a lifelong battle to outdo one another. For that purpose, they are coming up with new facilities and offers every time. Such insurance policies are important for several businesses in the world, as they continuously face different issues like losses due to fire or other natural calamities, theft, robbery, etc. Most insurance companies provide insurance in the form of written documents, although there are options for receiving notifications in the form of schemes, premiums, and policies. All these forms of notifications are called insurance correspondence.
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Before getting into the different types of insurance correspondence, it is essential to know about insurance. Insurance is considered as a form of protection against any loss or risk. Mostly the financial aspect of the government is considered in insurances. The insurance is a form of risk coverage contract between an insurer and an applicant. The applicant has to pay a premium at a rate determined by him from the different schemes made available to them by the insurer. In return, the insurer pays compensation according to the insurance scheme. Any written information related to the insurance is called the insurance correspondence.
Insurance- The Seven Principles
There are seven principles related to insurance. They are:
1. Indemnity Principle
According to this principle, the insurance is not related to any profit. The insurer has to pay the entire amount, as mentioned in the insurance plan to the applicant.
Both the insurer and the insured must have complete faith in each other. Both the parties must disclose correct, clear, and complete information as required for the insurance process.
3. Insurable Interest Principle
The insurance process must have a clear and complete statement with respect to the object being insured.
4. Contribution Principle
This principle says that in the case of any losses, the insured is eligible for claiming compensation equal to the loss amount.
5. Loss Minimization Principle
The main motto of this principle is that the insured must take all responsibility to prevent the risk from occurring.
6. Subrogation Principle
According to the subrogation principle, once the insured is compensated for the loss, the ownership rights related to the lost property is transferred to the insurer.
7. Causa Proxima Principle
The main theme of this principle is that if there is more than one underlying principle for the loss, then the one most relevant to the case is considered.
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On a broader aspect, insurance is of two types- life insurance and general insurance. The different types of life insurance schemes are as follows.
Money-back policies provide financial returns during cases of death or critical illness. Such a policy provides a return after a certain number of years from the start of the policy. This process continues until the end of the policy. It is different from the general insurance policies because the general ones provide financial returns upon completion of the policy.
Term Life is the life insurance policy that is provided to the insured upon his or her death during the term of the policy. The financial return in a ‘term life’ insurance policy depends on the premiums paid by the insured during the policy term. Such insurance policies are directed not only towards the financial security of the family but also in securing the child’s future like education, marriage, etc.
Pension plans are those insurance policies whose premium is being paid during the working years of an insured, but the financial returns are being provided after his or her retirement. Such a plan was policy to support any individual after retirement. The pension returns are generally enough to support the individual for the rest of life.
Unit-linked Insurance Plan
The unit-linked insurance plan had the provisions for the investor to perform both insurance and investment in an integrated manner. The amount paid as premium by the policyholder is divided into two parts- one part is used to cover the insurance policy while the rest part is being used as investments for debt or equity securities. Such investments made in the equity and debt policies are being made in a similar way to mutual funds.
The Different Types of General Insurance Policies are as Follows.
The health insurance policies cover any medical assistance required for the treatment of specific diseases. It covers hospital expenses, doctor’s support, medical bills, and any cost incurred during any surgeries.
The travel insurance policies cover flight insurances in the case of an emergency, accidental death, or dismemberment during any travel, loss of luggage, emergency medical evacuation during an unnatural scenario, etc. The insurance money is paid to the nominee in the case of the death of the insured.
The motor insurance policy is applicable to cover the cost incurred due to damage to any motor vehicle.
Home insurance policies provide financial coverages to any damage cost to home property.
Fire insurance policies provide financial coverage to any damage caused due to fire.
The following are the types of insurance correspondences.
Renewal of Policy
Renewal of policy refers to the continuation of any policy beyond its term, and it might include changes in the existing scheme.
Null and Void
If the insured fails to pay a few premia, then the policy becomes null and void. The insured will not get the benefits at the time of any mishap.
In the case of any losses, a detailed report is required during the insurance application process. It must mention in detail about the loss, reasons behind it, the amount estimated for compensation, etc.
For any insurance correspondence, the application letter must be concise, clear, and mention all the important points. The insured must maintain a polite tone in the letter without using abbreviations or slangs.
Q.1. In the Basic Insurance Protocol, What are the Names of the Two Parties Involved in the Contract?
A. For any insurance policy to be undertaken, there must be two parties- the insurer and the insured. The job of the insurer is to provide and explain the different schemes of the insurance company to the insured. They must also recommend certain plans after carefully assessing the condition of their clients. The insured is the client who is going to undertake the insurance policies. The details of the insurance plan are being discussed by the insurer to them. After careful evaluation of each of the insurance schemes and their conditions, the insured decides which insurance scheme is the best for him or her. Moreover, the insured also has the responsibility to pay all the premiums related to the insurance policy.
Q.2. What are the Different Types of Insurance Correspondence?
A. Insurance correspondence policies are generally of three types. The first type refers to the renewal of insurance policies. The insured can decide to renew the duration of the insurance policies that they had chosen once. They also have the provision to make changes in the existing scheme. However, when the insured fails to pay a few premiums, the policies become null and void. The insured will not be able to extract any benefit for the previously paid premiums. Such conditions prove to be worse in case of any mishap. In general, whenever the mishap occurs, a detailed report of the loss must be submitted to the insurance company.