Insurance Policy

An insurance policy is a legal contract between the insurer and the insurance company. You can easily read out your policy to check either it meets your needs and you understand your insurance policy. There are many people who still don’t know that what is insurance policy and how it works?

The basic concept of insurance is that the insurer will get guarantee payment for an uncertain event. On the other hand policy holder pays small amount of premium to the insurance company in exchange for that protection on certain future occurrence.

In insurance policy you pay a monthly or annual fee to the insurance company. It is specified to what type of insurance you are buying either life insurance, health or vehicle etc. So, basically for a small fee you are transferring the risk of financial loss to an insurance company.

Six Basic Principles of Insurance Policy

The six basic principles of insurance policy includes:

Insurable interest

The right between the insured and insurance company provider to be legally recognized.

Utmost good faith

All actions of insurance policy to be disclosed properly. The insurer must honestly explain everything and clear about all terms and conditions of the insurer.

Proximate cause

It is an active cause, that chain of events lead to a result without the interruption of the start and working actively.


The principle in which the insurer provides financial compensation to the insured person that is prior to the loss.


It is a right transfer request from the insured to the insurer after the claim cleared.


Insurer have the right to invite any other person to equally bear all expenses, but do not put liability to the insured to participate legally.

Four types of insurances that are very common and many people owned it are:

·         Motor insurance

·         Health insurance

·         Travel insurance

·         Home insurance

Insurance policies contain all clauses. The clauses define all responsibilities to the policyholder and also to the insurance company. It is advised to the insurer to double check all insurance policy clauses.

Important pages about Insurance policy

Many people are not aware of insurance policy. It is better to learn thoroughly important pages of insurance policy. Because no policy is perfect. Every policy have some flaws. Four pages that need to be learnt properly are as below:

Declaration pages

It is very necessary to understand your insurance policy. If you know about your policies in detail you will be able to negotiate about it and come to know its pros and cons. Every insurance policy have the declarations pages that are only for you. It includes all coverage options that are only specify to you.


The other paper that is important to read is policy forms. Make sure to read it thoroughly. It comes with legal language that defines every little details about your policy.

Endorsement Papers

You will also get endorsements that are actually the add-ons to your policy. It includes extra coverage options that are not on the basic policy.

Exclusion Papers

Exclusion papers include all the stuff that is specifically not covered. In every insurance policy there are many things and stuff that are not covered. So make sure to read exclusions carefully. Not any policy covers everything.

There are also some basic forms governed by federal regulators. Some companies stick with these forms exactly and some customize it with some more coverage even before the endorsements start to be added. Most insurance policies stated that they are providing you more than you pay their premium but it’s not true. As most of the time, you get what you pay for.

There are many type of insurance policy that one could have but here I am discussing about Life Insurance Policy.

Before moving towards the life insurance policy pros and cons. Let me share that why it is important and why I am recommending every person to have this policy. It is basically protecting people that are financially dependent on you. This policy will serve them after your death. Now we all know there is no specific day of death, so it is better to secure the future of your children, spouse etc.

Three main types of life insurance are whole, Universal and Variable. Many people must be thinking of the actual cost of buying life insurance. It is truly based on data provided to the insurance company. Make sure before buying life insurance, it should be understood that major five things that are not covered by life insurance companies are:

·         Family health history

·         Medical conditions

·         Alcohol and drug use

·         Risky activities

·         Travel plans

Most insurance policies contain declarations, insuring agreements, conditions and also exclusions. It is observed that many people don’t read all papers of insurance policy. It is advised to thoroughly read insurance policy papers.

Advantages of Insurance Policy

Insurance policy provides financial support to ensure that people maintain their stability in living standards even after bearing any kind of loss. Some other advantages of insurance policy are listed below:

·         Financial protection

·         Distribution of risk/spreading of risk

·         Stability of living standard

·         Encouragement to savings

·         Job opportunities

·         Promote foreign trades

·         Loan facilities

·         Business stability

·         Specialization

·         Increase in investment

·         Society and country welfare

·         Short term coverage

·         Tax free money

·         Easy to apply

·         Long term coverage

Disadvantages of Insurance Policy

Nothing is perfect and also insurance policies have many disadvantages:

·         Terms and conditions

·         Long legal formalities

·         Not for all people

·         Fraud agencies

·         Temporary and termination

·         Potential crime incidents

·         Rise in premium

·         Expensive

·         Annoying

·         Not easy to manage


Insurance policy required homework before getting it for yourself. It is not for everyone. One should check each and every aspect before getting the policy. There are many companies offering different insurance policies to you, but make sure to go through all papers and read it carefully before taking any decision.

I personally recommend to have health and life insurance policy. It is mandatory to have. Other policies like vehicle insurance etc. is as per your choice. Insurance policies don’t cover all damages, it is specific so make sure to read it clearly.