Insurance

What is Insurance?

Insurance is defined as any certain amount paid monthly to the insurance company, over any specific entity for a certain period of agreed time to take up the responsibility of risk associated with that specific entity.

The amount, period and risk factor will vary from entity to entity.

How does insurance company work?

Insurance company never works with one client, and you are not the only one who is paying for the insurance company, multiple clients pay different set of amounts for different period on different entity, and hence the input money will vary and the risk associated with different clients on different entities will be distributed across different months.

Say for an simple example, 10 clients are in total, each pay 1000 rupees for a year, which in total makes 12000 rupees for each client, but not everyone is going to claim the insurance amount, so say example out of 10, three clients are going to claim, although here the amount claimed by each client was 15000, which is actually more by 3000 on their total pay, although it was together 45000 rupees for the insurance company, rest 75000 rupees (120000-45000) was pure profit for the insurance company.

How does insurance companies generate their revenue?

Each insurance company has their own complex scheme and complex model to evaluate the risk factor associated with asset of each client. And hence, the more client, the more sophisticated model, the more perfect probability calculation, the more robust process to verify the accident caused to client’s asset, and hence the more profit to the Insurance company.

Where is the scope of benefit for an individual client?

As an individual/client, the actual profit comes over transferring the responsibility of taking up the ownership/risk associated with the entity. They will pay the constant amount steadily for each month, and regardless of time, if any accident/risk happened to the associated entity, the insurance company should pay the amount required for restoration.

How the re-claim process works?

The re-claim process can’t never be assumed as easy one, unless and until the accident made was purely an accidental one. If individual client caught up in a case of false accident proof/ falsifying claim for his/her own personal profit, will lead to imprisonment. So, always the insurance company have robust process of verifying the claim made by the client and they too might have separate third party service for the same.

How does the Insurance company handle the worst scenario cases?

Re-insurance was the insurance paid by the insurance company to the another insurance/financial company for the risk responsibility it took for the overall client. It was made to ensure that over which any sort of disaster/unfortunate cases, the insurance company should be solvent enough to pay for all associated risks of client and should be resilient enough to handle the worst risk scenarios too.

Types of Insurance?

Home insurance 

Life insurance 

Senior citizenship insurance 

Family insurance 

Bike insurance 

Car insurance and so on..

Whether we should go for insurance or not?

As an individual client, might feel the amount paid for each month was lost, if at any form it couldn’t be claimed, exactly here the other side of perspective opens. As here if the individual feels the risk is quiet less enough, he/she could able to manage though, and even he/she would have ended up in a good lump-sum amount if he/she would have saved those monthly pays. As conclusion, the willingness to take insurance varies from the perspective on ownership of risk, if an individual can’t bare the risk factor, for which he takes up the insurance and pay the steady amount and claims the amount on occasion of heavy risk caused to the entity.