Insurance is a contract in which the insurance company helps you to manage your financial losses through a policy. If you signed a policy with an insurance company then the company is responsible to compensate for all the unwanted/unexpected financial losses that happen to you as per their rules and regulations. In case you don't have an insurance policy, you are solely responsible for all kinds of losses that happen to you either by accident or by any other means.
There are many questions like " how does the whole system of insurance works" , " how insurance companies manage to pay all the losses that happen to their customers" etc.
Let's get the answers to all such questions.
When you buy an insurance policy from an insurance company, you need to pay a certain sum of money regularly to the company. These payments are termed as "premiums". In order to continue the insurance policy and use it when required, the premiums had to be paid on time. So here we have the solution to our question of where do insurance companies arrange money to compensate our losses.
Insurance companies have a lot of customers and each and every customer has the responsibility to pay a certain sum of money called premiums. So the insurance company collects the money from these premiums. Whenever any of their customers suffers any financial loss which is insured, then the companies compensate that customer.
It is quite unnatural that all the customers of the insurance company had an accident at the same time. Therefore these companies always maintain a certain amount of money to use whenever needed.
It is very important to know your insurance policy type. It is life insurance, health insurance, home insurance, business insurance, auto insurance or any other. Always read all the terms and conditions thoroughly before signing an insurance policy.
Auto insurance is for your vehicle. If you met an unwanted accident then the damage of your vehicle would be compensated under auto insurance policy. If you get physical damage, it comes under health insurance. Business insurance protects your business, it cannot be used for vehicle damage or any health damage. So, always take an insurance policy according to your needs and wants.
The Insurance Industry of India
The Indian insurance industry is separated into two types: life insurance and non-life insurance. Non-life insurance, often known as general insurance, is non-life insurance. The Insurance Regulatory and Development Authority of India (IRDAI) regulates both life and non-life insurance (Insurance Regulatory and Development Authority of India).