I started this series of posts related to the terminologies used in insurance. In this second installment, let us know few of them which is discussed below.
- Premium: It is the consideration that one pays in monetary value for buying the insurance policy. The money paid by you to purchase the insurance policy is known as the premium. As per Section 64VB of Indian Insurance Act 1938, premium should be paid in advance before the risk coverage starts. Hence, no coverage will be provided before paying the premium.
- Indemnity: Indemnity means bringing back to the same financial condition as if the loss didn’t occurred. This is one of the basic principles of insurance which states that there should be no benefit out of the coverage. Meaning that if the person suffers a loss of INR 10000 due to the peril covered in the policy, the insurance company will pay only the amount of loss i.e INR 10000 and not more than that even though the policy cover is of greater value say INR 100000. The amount paid by the insurance company is subject to the total amount covered in the policy. This principle is applicable in general insurance while in life insurance, principle of indemnity is not applicable.
- Endorsement: This means any alterations or modifications in the insurance policy. Endorsement can be financial or non financial. Financial endorsement includes change in the sum insured, change in premium etc. Non-financial endorsement endorsement includes change in address, change of contact details, email id etc. A written application by the policyholder has to be given to the insurance company for any endorsement.
– Ashish Kumar