Understanding the complexities of Insurance - Deductible, Copayment, and Coinsurance
You must have often heard these words - Insurance, Claim, Premium. But do you know, an insurance policy is not as simple as just paying the premium and making a claim! There are many complex aspects of the policy, which is very important for you to understand. Some of them are - Deductible, Copayment and Coinsurance. In today's chapter, we will try to understand these complexities in simple language.
Deductible - a little from your pocket too!
Deductible is the amount that you have to pay yourself after filing an insurance claim. For example, suppose your car is insured and it has suffered a loss of Rs 50,000 in an accident. If your policy has a deductible of Rs 10,000, the insurance company will give you only Rs 40,000. You will have to spend the remaining Rs 10,000 yourself.
Why is there a deductible?
Insurance companies use deductibles to reduce small claims. This reduces the possibility of fake claims and insurance abuse. Also, the premium amount is also low. The higher the deductible, the lower your premium and the opposite is also true.
What to keep in mind while choosing a deductible?
Your financial condition - If your financial condition is strong, then you can choose a policy with a higher deductible.
Possibility of claim - If you are insuring less risky things, then taking a higher deductible can be beneficial.
Savings in premium - Choosing a higher deductible reduces the premium amount.
Copayment - A little from you, a little from the company!
Co-payment is a fixed amount that you have to pay yourself when you avail a medical service. For example, your health insurance policy may have a co-payment of Rs 200 for doctor consultation. This means that you have to pay Rs 200 yourself to see the doctor, the rest of the amount will be paid by your insurance company.
Why is there co-payment?
Insurance companies try to reduce small medical expenses through co-payment. This reduces the chances of fake bills and unnecessary medical consultation. Also, insurance companies' expenses are also reduced.
What to keep in mind while choosing co-payment?
Your medical needs - If you need to visit the doctor frequently, then you should choose a policy with a low co-payment.
Amount of coverage - The lower the co-payment, the higher your premium and the opposite is also true.
Co-insurance - The Partnership Game
Co-insurance is a rule under which the insurance company and the insured share the cost of a claim in a fixed ratio. For example, suppose your health insurance policy has 80/20 co-insurance. This means that if you get an illness and the cost is Rs 100,000, the insurance company will pay Rs 80,000 and you will have to pay the remaining Rs 20,000 yourself.
Why does co-insurance happen?
Insurance companies try to reduce large claims by using co-insurance. This reduces the cost of insurance companies and also keeps the premium amount low.
What to keep in mind while choosing co-insurance?
Your financial condition - If your financial condition is not strong, then choosing a policy with high co-insurance may be difficult for you. Chances of Claim - If you are insuring low risk items, then opting for higher co-insurance may be beneficial.
Premium Savings - Opting for higher co-insurance reduces the premium amount.
What is the difference between deductible, co-payment and co-insurance?
Deductible
A fixed amount that the insured has to pay before making a claim.
A car accident causes damage of Rs 50,000. If the deductible is Rs 10,000, the insurance company will pay only Rs 40,000.
Co-payment
A fixed amount that the insured person has to pay himself while availing a medical service.
A co-payment of Rs 200 can be made on consultation with the doctor.
Co-insurance
A rule under which the insurance company and the insured share the cost of a claim in a fixed ratio.
Co-insurance is 80/20. If the cost is Rs 100,000, the insurance company will pay Rs 80,000 and the insured will have to pay Rs 20,000 himself.
Types of Insurance Policies
So far we have learned about some basic aspects of insurance policy. Now let's talk about different types of insurance policies.
Life Insurance
The main objective of a life insurance policy is to provide financial security to the family of the insured person in case of his death. There are many types of life insurance policies, such as:
Term Life Insurance: In this type of policy, the insured person is given cover for a fixed period. If the insured person dies within this period, then a fixed amount is paid to his family.
Whole Life Insurance: In this type of policy, the insured person is given cover for life. On the death of the insured person, a fixed amount is paid to his family.
ULIP (Unit Linked Insurance Plans): In this type of policy, the insured person has to invest a fixed amount. This investment is invested in the stock market. On the death of the insured person, a fixed amount is paid to his family. Also, when the policy expires, the insured person also gets the return on investment.
Property Insurance
The main purpose of a property insurance policy is to provide financial security in case of loss or damage to the insured person's property. There are many types of property insurance policies, such as:
Homeowners Insurance: This type of policy covers the insured person's home and the things kept in it.
Car Insurance: This type of policy covers the insured person's car in case of an accident or theft.
Commercial Insurance: This type of policy covers the property related to the insured person's business.
Health Insurance
The main purpose of a health insurance policy is to cover the medical expenses of the insured person in case of illness or injury. There are many types of health insurance policies, such as:
Individual Health Insurance: In this type of policy, the insured person is covered individually. Family Health Insurance: In this type of policy, the family members of the insured person are also covered.
Critical Illness Insurance: In this type of policy, the expenses incurred by the insured person due to some serious diseases are covered.
Other Types of Insurance
Travel Insurance: In this type of policy, the loss or injury caused to the insured person during travel is covered.
Accident Insurance: In this type of policy, the expenses incurred due to injury or death of the insured person in an accident are covered.
Liability Insurance: In this type of policy, the insured person is given financial protection for any damage or loss caused to a third person.
Tips for Buying an Insurance Policy
Some important things to keep in mind before buying an insurance policy are:
Assess Your Needs
How much cover do you need? Decide how much insurance cover you need.
What type of insurance? What type of insurance do you need, like life insurance, property insurance, health insurance etc.
For what period? For what period do you need insurance, like one year, five years or lifetime.
Compare Different Companies
Compare Premiums: Compare the premiums offered by different insurance companies.
Compare Coverage: Compare the coverage offered by different insurance companies.
Compare Claim Settlement: Compare the claim settlement process by different insurance companies.
Understand Policy Details
Read the policy document: Read the policy document carefully.
Understand the terms: Understand the terms of the policy.
Ask for ambiguities: If you don't understand something, ask the insurance company.
Know the Claim Settlement Process
Ask about the claim process: Ask the insurance company about the claim process.
Know the required documents: Know what documents will be required at the time of claim.
Know the deadline: Know the deadline for filing a claim.
Talk to an Insurance Agent
Choose a reliable agent: Choose a reliable and experienced insurance agent.
Seek advice: Seek advice from an insurance agent to choose the right policy as per your needs.
Frequently Asked Questions about Insurance
Here are some frequently asked questions and their answers related to insurance:
1. Is it necessary to buy an insurance policy?
Buying an insurance policy is not mandatory, but it can provide financial security for you. Buying an insurance policy can protect you from financial losses caused by unforeseen events such as illness, accident, or property damage.
2. Can the premium of an insurance policy increase?
Yes, the premium of an insurance policy can increase. The premium depends on many factors, such as the age of the insured person, health condition, lifestyle, and the policies of the insurance company.
3. Can an insurance policy be cancelled?
Yes, an insurance policy can be cancelled. However, certain conditions may have to be followed to cancel the policy.
4. Are there certain conditions to make an insurance claim?
Yes, there are certain conditions to make an insurance claim. These conditions may include adhering to the terms of the policy, adhering to the deadlines for filing claims, and providing the required documentation.
5. Is there a minimum period to be followed to avail the benefits of an insurance policy?
Yes, some insurance policies have a minimum period to be followed before the policy can be availed. This period is called the waiting period.
6. Can the insurance policy be transferred?
Yes, some insurance policies can be transferred. However, the terms of transfer depend on the policies of the insurance company.
7. Is there a minimum period to be followed before the policy can be availed?
Yes, some insurance policies have a minimum period to be followed before the policy can be availed. This period is called the waiting period.
8. Is there a minimum period to be followed before the policy can be availed?
Yes, for some insurance policies, a minimum period has to be followed, only after which the benefit of the policy can be availed. This period is called the waiting period.
9. Is there a minimum period to be followed to avail the benefit of the insurance policy?
Yes, for some insurance policies, a minimum period has to be followed, only after which the benefit of the policy can be availed. This period is called the waiting period.
10. Is there a minimum period to be followed to avail the benefit of the insurance policy?
Yes, for some insurance policies, a minimum period has to be followed, only after which the benefit of the policy can be availed. This period is called the waiting period
