Insurance Simplified!

Alifiya Aun Ali
September 22, 2020

Summary

This article highlights the importance of understanding the insurance and the terminologies associated with it. Many people in Pakistan are unable to take advantage of their acquired policy or even acquire the right policy. The important reason is the lack of education and even the avenues to get your educated.

Every business has its own terms and jargon that are used within it to make understanding easy within the environment. for example the word CIRCULATION in a medical field means, circulation of blood in a human body. While CIRCULATION in a media world means, the number of newspapers being sold by a media organization.

The same happens in insurance there are many terminologies that used in the insurance world to facilitate smooth and easy communication and swift understanding of things. We can even put it in a way that one terminology for instance “CLAIM SURVEYOR” means a person that is sent by the insurance provider to check the car’s condition, damages incurred and other physical attributes of the car after an incident or crash has happened.

This article “INSURANCE SIMPLIFIED is a one stop handbook for understanding insurance rightly and thoroghly.

 

Insurance is something that one of the lowest penetrations in Pakistan, the actual understanding of the insurance products is very low. There are no proper financial literacy platforms available for the masses to educate them and make themselves and be aware of the importance, prominence, and significance of all the insurance products.

To create an understanding of how these insurance policies take away the burden from an individual and transfer the risks to the insurance provider.
Since the digital networks and internet access have been increasing, there are more and more people inclined towards shopping online, exploring options online, and at the same time, many are also pursuing education online, through virtual classrooms and increasing their knowledge base.
Smartchoice.pk has created a glossary of terms for you to understand the policies in a way that you are able to understand what is being offered to you and what is being excluded from your policy.

Each policy has its own terminologies that help you understand by that what we mean when we say a certain term for instance: survey, so by survey in car insurance means when an inspector comes from an insurance provider to check the condition of your, during that survey pictures of your car are clicked and submitted to the insurance provider. The sole reason for this is to take into record the condition of your car and if any situation arises where you need to make a claim against your policy, the damages post-survey would be definitely covered by the provider.

These small terms may seem very common and not so special, but understanding them and using them to your advantage at the time of claim is an art that you must learn.

Let’s start with some basic yet pertinent car insurance terms

Deductible

The deductible is a predetermined means a pre-decided amount, your insurer subtracts on claims. This amount is decided by the insurance provider and communicates in your policy at the time of policy procurement. Example: If your car repairs cost PKR 5,000 and your deductible amount is PKR 500, you will get a claim of 4,500 from the insurance provider.

Policy Period or Term

This terminology represents the time period for which the insurance policy stays in effect. The complete time period for which your vehicle shall be covered by the insurance provider Example: If the policy start date is 15th July 2020 it would end on 14th July 2021. You can have a continued coverage if you renew your car insurance policy before it expires.

Comprehensive Coverage

The comprehensive coverage is also known as “full coverage,” It covers your vehicle from damages that occur not just from collisions, but also from hail, wind, flood, fire, vandalism, and theft, etc. it covers the car from bumper to bumper and provides full coverage regarding anything that might happen to your car. The comprehensive coverage does not cover any damage that arises due to negligence and lack of maintenances. You need to also read the policy when you purchase your car insurance policy.

Depreciation

The term depreciation is the percentage of car value which decreases over time, when the value of the car decreases each year the depreciation being directly proportional increases each it. It affects the overall claim value, which you receive from the insurer when the situation arises. Example: If your car depreciation is 50% in a specific year (depending upon the model of your car) and you face damage of Rs.20, 000 you will only receive compensation from the insurance provider of Rs.10, 000 for your car parts that need replacement.

Note: you should know that no depreciation is applicable to the repair work that you may need to undertake if you face any undesirable situation e.g. Accident or collision or even vandalism. All the repairs would be 100% paid by the insurance provider.

IDV-Insured Declared Value/Market Value

The insured declared value or the market value is actually the value that you set before you finalize your car insurance policy. The insured declared value or the market value of the car is the highest amount of loss that you can claim from your insurance provider when your car gets stolen or gets damaged beyond repair. For example: if you insured your car on the value of 600,000 and God forbid your car gets stolen or is damaged to an extent in an accident that is beyond repair, you would be made the market value of the car at that instant or you would be paid the sum insured at the purchase of the policy, whichever is lower.

Exclusions

Exclusions in the car insurance policy mean that something your policy provider won’t pay for. If there is anything that happens to your car even while being covered and that your policy states that aren’t covered it would be counted as exclusions. Example: If you ignore and overlook your day to day mechanical repairs/maintenance and that leads to something that is greater in cost. That cost would not be covered in your car insurance policy.

Personal Accident Cover

Personal accident cover applies to a car when the car meets an accident. The personal accident cover does not only cover when the car is damaged but covers the individual as well. The personal coverage depends and varies from provider to provider. Example: when a car gets into an accident or collision it is covered in the procured policy but also the person’s first aid and initial treatment of the individual involved in the accident.

Just as we discussed car insurance terms, some of them are pretty important to you when you get into the business of getting your car insured. Same when you start exploring the ocean of health insurance you should know the basic terms as they would help you understand the coverage, the exclusions, and also what is covered under what.

Out of Pocket Medical Expenses

Out of pocket medical expenses means that the amount one must pay out of their own pocket for any medical care that is not included in the provided in the procured health insurance policy. Example: The out of pocket expenses means if your OPD is not covered in health policy and if you have a policy that excludes OPD service than the doctor fee is on you.

Cashless hospitalization

Cashless hospitalization is usually embedded in your health insurance procured and it allows you the benefit of utilizing the health insurance coverage at the hospital without paying cash at the time of admission and discharge.
Example: if You get admitted into the hospital due to any medical emergency procedure or due to an accident and the bill amounts up to 50,000 you can avail cashless treatment (means access to treatment without paying even a rupee), at that time, free by showing your health-card provided by the insurer at the hospital.

Pre-existing condition

A pre-existing condition is a medical condition that exists in an individual prior to acquiring the health insurance coverage, which means any disease or medical issue you have and anything that arises out of it that is usually not covered in retail health insurance plans. Example: if you have heart disease prior to the start of your health coverage, and at one point in time it leads to a related medical emergency, during that condition than that condition would not be covered by your retail insurance plan.

Network

The insurance provider has predetermined healthcare service providers for example multiple hospitals are on the insurance provider’s network, when a person goes to them they can avail medical services without paying anything just by using the card.
Another network benefit can be availed through network providers is amazing discounts on lab services, the discount on the labs varies from provider to provider and it would help you save money.
Example: The network means the list of all the hospitals for instance Aga khan hospital, Liaquat National hospital, and other labs and hospitals which are on the panel. The stronger the insurance company rating the more extensive is the list of hospitals on the panel.

Waiting Period

The waiting period is the actual period that the insured waits before the beginning of the date a policy’s effective date. During the waiting period, the procured retail health plan may not pay benefits for certain conditions that are overall covered in the purchased health insurance plan. During the waiting period of the insurance policy only cover accidental coverage.
Example: if you buy a policy on the 1st of August 2020, all coverage would become effective after one month that is 2nd September 2020, completely before that only accidental coverage is covered.

Pre-hospitalization

Pre-hospitalization is coverage of expenses incurred by the policyholder prior to hospitalization within 30 days before the hospitalization occurs. This is covered under a retail health insurance plan. Example for instance you have been diagnosed with a kidney stone issue, and the doctor asks for x-rays or ultrasounds, which leads to hospitalization for the surgery in that scenario that expenses along with the doctor fee and other test costs would be covered under your plan as pre-hospitalization coverage and will be paid by the insurance provider.

Post-Hospitalization Coverage

Post Hospitalization coverage is the protection that includes follow-up medical expenses of the policyholder, for example, doctor checkup, lab tests, x-rays. Etc. These costs that are sustained by the policyholder within a period of 30 days after and within the hospitalization or the undertaken medical procedure. Example: You have had a liver surgery, post-surgery you are required to have follow-up check-ups or lab tests. In that case, this would be covered in your post-hospitalization period and will be paid (reimbursed) by the insurer.

After some important and most used terms in health insurance, there are certainly some very prominent terms that we need to understand to know that while being away from home and our known surroundings. Knowing these terms would help you cope up with the unknown and make the most of your procured travel insurance in times of need.

Understanding the insurance policy would be like a ray of sunshine and would make you able to save the money and make the claim. Some terms of travel insurance are mentioned below

Emergency Evacuation

Emergency evacuation is the coverage that provides medical evacuation or emigration of a policyholder (insured) to a medical facility in the country they are traveling in. It depends on the condition or the situation of the policyholder. If the situation worsens or requires attention in their own country than they are taken to that country and the cost incurred while traveling is covered by the travel` insurance company. Example: If you are traveling to Turkey and you get into an accident (God Forbid) due to any medical emergency while you are traveling, if you need to shift to a medical facility od travel back to a home country that expense will be paid out by your travel insurer.

Trip Interruption Insurance

The trip interruption insurance provides coverage for policyholders who due to inevitable situations and scenarios have to interrupt or cancel their trips even if they have all booked, hotels decided and luggage packed. Etc. the reason can be because of injury, illness, death of a relative, flight problems, etc. any problem that has some genuine reason and is covered and mentioned in the clauses of the travel insurance policy are covered for such interruptions. Example: If you face a situation in which you need to interrupt your travel for instance you are going to the US and you have already and booked but at the very last moment your paternal uncle passes away and you are unable to go on the trip as planned, then, in that case, the travel insurance provider would provide your coverage as mentioned by the provider in the policy to go back to your home country. The entire expense made during such an incident would be paid by the insurance company.

Baggage & Personal Effects Coverage

Baggage & Personal Effects Coverage in a given travel insurance policy covers a policy holder’s baggage, passport, credit cards, and personal effects, one thing that needs to be remembered is that at the time of buying the policy one should be vigilant to buy the policy that has coverage for these important financial assets. You also need to check the cap that is being offered by the provider, for example, if the cap $300 how much would be paid by the airline and how much would take up by the insurance provider. For example, If your baggage is lost while traveling to Indonesia, the baggage claim for the lost or delayed baggage can be made to the insurance provider. Terms and conditions apply. (it means that if the policy mentions a $500 baggage loss claim, in case of a claim, the airlines also pay some of the cost while some of the cost is paid by the airline and the rest is paid by the insurance provider, ensuring with evidence that what was lost in the lost baggage.

Annual Multi-Trip Plan

Annual Multi-Trip Plan/coverage makes life as easy as it takes away the hassle of getting again n again. It also makes you relaxed as travel insurance now being made mandatory due to the recent pandemic and the way it is sitting in the roots, it’s a blessing for a regular journey. The annual multi-trip Provides coverage for all trips made within one year from the date of policy purchased to next year. For example: if you travel to Turkey, London, Newyork, Bangladesh etc. all in one year than you can avail of the annual multi-trip plan.

Beneficiary

A beneficiary is a person who is nominated by the policyholder in the policy as the next of kin. This beneficiary is a blood relative e it mother, wife, son, daughter, father and these people are eligible and can receive the benefit payment from your insurance policy in the event of the death of the policyholder due to any unforeseen and unexpected situation.
Example: when you are buying the travel policy, there is a mandatory column in the policy that needs to be filled which indicates to fill the name of the person you want to receive money in case of the event of death. Since life is unpredictable and you never know what might happen next, this clause actually provides financial security to the policy holder’s loved ones.

Underwriter

The underwriter is the insurer based on your multiple features as an individual, for instance, age, number of days of travel, family, or alone. Etc. the underwriter provides the written paper of the travel insurance policy based on multiple factors that are aforementioned evaluates risk and insures an individual. Example: if you are 45 years and traveling with your family and want all the possible coverage in your acquired travel insurance policy. The underwriter evaluates risk as per your age, family, medical history, and calculates your premium that needs to be paid.

Quote

A quote is a travel insurance premium quote which is the initial summary of how much a policy will cost you and it also states what would be covered in the given policy. For instance would the policy cover loss of baggage? Will it cover the loss of the passport? Does the policy have a trip cancellation benefit? Will it cover if a person has to face a delay in flight? How much medical expenses coverage is being offered? If there is an emergency would your policy pay for evacuation purposes? A that an individual receives is based on all such factors.

Why insurance is important – real benefits for you and your family

While reading this section of the article you can discover the importance and significance of insurance and why and how it plays a central role in your financial wellbeing, how the insurance helps to provide financial security for you and your family when and if it’s needed most.

Insure your greatest asset – you!

Let’s talk about first thing first…
You usually insure your car and your home. But one thing that needs to be very much understood is that nothing is more important than your life, health, and your ability to make a living. So it makes good sense and gives you all the reason in the world to insure your greatest asset – you!
As we all know and understand that as we move through life, find a partner/spouse, raise a family, and maybe start a business or a new venture, the importance of insurance in a long term plan increases. The reason and logic about getting insured also become firmer and has a greater standing. That’s because insurance is all about providing a financial safety net that helps you to take care of yourself and those you love when you need it the most.

5 reasons why insurance matters

Why is insurance important? Let’s look at five key reasons and also how to buy insurance without paying extra and with proper education.

1. Protection for you and your family

Most of us have responsibilities and we have our family depending on us for financial support to enjoy a decent and adequate standard of living, which is why insurance is especially important and very much significant once you start a family and have a spouse and kids that you need to provide for. It means and indicates that the people who matter most in your life not maybe but must be protected from financial hardship if the unexpected happens.

2. Reduce stress during difficult times

None of us know what lies around the corner. We have seen things happening in our life that we least expect to happen and Unforeseen tragedies such as illness, injury, or permanent disability, even death can leave you and your family facing tremendous and remarkable emotional stress, and even grief. With the right insurance in place, you or your family’s financial stress will be reduced and you would be rewarded. Obviously we do realize that no money can fulfill the gap and the vacuum that is created on the departure of your loved ones, but some immediate monetary benefit can make you comfortable and you can focus on recovery and rebuilding your lives. Starting to learn to live it from scratch.

3. To enjoy financial security

We all want to have a cushion keeping in mind when we have to take a fall, as no matter what your financial position is today, an unexpected event can see it all unravel very quickly. At that time the downward spiral can be so quick and fast that it might be difficult to hold up the frontier properly. We suggest not only suggest but strongly recommend you to get insurance for that scenario….want to know why? It is because insurance offers a payout so that if there is an unforeseen event you and your family can hopefully continue to move forward.

4. Peace of mind

We believe that one thing that is most expensive and precious in this world which you cannot actually buy with any amount of money is mental peace. Nothing in this world can replace your health and wellbeing or undermine its importance as you have a key role to play in your family. But you can at least have peace of mind knowing that if no matter what happens to you at any point in life, your family’s financial security is assisted by insurance. Family security is not only done through money but it’s the care and concern that you have for your loved ones and for their peace of mind it is important to make such decisions.

5. A legacy to leave behind

There are many insurance plans that offer reliable monetary compensation in an event of death or an accident that cause permanent damage to you a lump sum death benefit can secure the financial future for your children and protect their standard of living. Leaving this world with the contentment and satisfaction that your loved ones are safe and secure is a blessing like no other, so while you leave them with financial security it gives them a chance to start their life.

Case Study
Ahil and Rehana – shakir Family

The following scenario is descriptive only to demonstrate the importance of insurance and prominence of insurance in their life and is not based on an actual event.
Ahil (34) and Rehana (33) recently upgraded to a new home to allow their twin boys Imran and Asad (aged 4) and needed more room to play in the house. This also meant taking on a bigger bank loan on one income, as Rehana is a homemaker and spends time with her children and lives. To protect the family, Ahil decided to take out health insurance and life insurance. Understanding that life is unpredictable and anything can happen anytime in life.
During a simple Saturday afternoon game of backyard cricket with the twins, Ahil tripped and broke his leg. What appeared to be a simple break was more complicated than initially realized and Ahil required several reconstructive operations followed by physiotherapy. During this period his health insurance played a vital role in paying off medical expenses and other costs related to that accident which happened on fate Saturday afternoon.
It meant Ahil was out of the workforce for over six months, and while his employer was sympathetic, Ahil only had two weeks of sick leave owing to him.

Thankfully, Ahil had some savings in his bank account, which meant he used a stream of payments equal to 80% of his regular wage but because of having health insurance there main unexpected medical expenses were covered. This was a big relief for Ahil as he did not have a regular income flowing to his account. The couple needed to tighten their belts a little until Ahil was back on his feet but they were able to keep up with their other expenses and home loan repayments, because of the insurance policy which they had in place, it took care of their medical expenses and gave them mental peace which would not otherwise have been possible without their health Protection cover.
We have spoken about multiple terminologies related to health, car, and travel insurance. These terms are also used interchangeably with multiple other insurances and their meanings. For instance, an exclusion also means the same in the car or health policy. The term quote also means the same.

So there are many ways one can educate themselves and this education leads to financial awareness and financial literacy. Smartchoice.pk has an aim to create awareness and enlightenment in the masses. You can through smartchoice.pk, procure insurance at the best rates with best coverage and plans.
Smartchoice.pk insures its customers a full guided ride and a complete walk-through during the whole process of insurance procurement. To help the customers make an educated decision which would be the right fit for their need. We here at smartchoice.pk offers the best possible deal to protect you, your loved ones, your assets, and even yourself when on the go.
These terms would help you engage yourself with insurance in a more meaningful and effective manner. We hope that all these would open your mind to embrace these self-protection policies which means transferring the burden of financial risk and gaining financial security via procuring insurance through smartchoice.pk.

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