Quite often you have seen some advertisement for different insurance companies. They promise to be different and better from another. They guarantee different risk covers. In the business world also, we need some kind of protection. There are many risks in the business world. The risk of theft, loss due to fire, natural calamities are the most common. Sometimes the risks covering company gives you this information in written form. Also, you get notification regarding the policy, premiums, and schemes. All these are the insurance correspondence. In this section, we will discuss this correspondence.
Insurance is a mean of protection from risk or loss. The basic risk covered is financial. It is a contract between an insurer and an insured. In it, the insurer agrees to pay or compensate for the loss.
In return to which the insured pay premium for a fixed period of time. Any written information regarding it is insurance correspondence.
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Seven Principles of Insurance
Utmost Good Faith
In it, both the parties should have a good faith towards each other. For that, the insured must provide complete, clear, and correct information.
Principle of Indemnity
In it, the insurer agrees to pay off the insured for the actual loss suffered. It also means that insurance is not meant for profit.
The Principle of Insurable Interest
A clear statement regarding the insured object must be made.
Principle of Contribution
According to this principle, the insured can claim the compensation only to the extent of the actual loss.
Principle of subrogation
As per this principle, the ownership right of the property shifts to the insurer. It only happens when the insured is paid off for the losses.
A principle of Loss Minimization
It is the duty of the insured to take all possible steps to minimize the happening of the risk. This is the main idea of this principle.
A principle of Causa Proxima
If the loss is caused by more than one reasons, the nearest or the closest cause is taken into consideration. This is the main idea of this principle.
There are basically two types of insurance.
- Life Insurance.
- General Insurance.
Types of Insurance Correspondence
As the name suggests, it is the renewal or the continuation of the policy. In it, some changes can be made in the existing scheme also.
Null and Void Policies
The policies which are no longer active due to the non-payment of premiums are the null and void policies. If the insured doesn’t pay the premium rates for a certain amount of time, the legally existing policy becomes void. It is very important for a policy to be active at the time of the mishap.
It is a written report of the occurred loss. In it, the insured asks for the compensation under the taken protection scheme. One must clearly state the happening, the reason for it (if possible), estimated amount to be compensated, etc.
Characteristics of Insurance Correspondence
- The content of the letter must be clear and concise.
- The tone of the letter must not be rude.
- One should not use slang, abbreviation, or abusive words.
- One should clearly state the details. The details are the policy number, date of issue, amount of payment etc.
Solved Example for You
Problem: What are the two parties in the insurance contract.
Solution: The two parties are the insurer, i.e., the company issuing the protection and the insured. Insured is the person or the organization seeking the cover of risks.