Get to know Conventional Insurance — Insurance is a contract between two parties in which one party agrees to compensate the other party in the event of a loss. There are various types of insurance policies available, and one of the most popular types is conventional insurance. In this article, we’ll explore the definition, principles, advantages and disadvantages of conventional insurance, along with some examples.
Definition of Conventional Insurance
Conventional insurance is a type of insurance that is offered by traditional insurance companies. It is a contract between the insurer and the policyholder, where the insurer agrees to compensate the policyholder in the event of a loss or damage. The policyholder pays a premium for the insurance coverage, and the insurer agrees to pay out a sum of money in the event of a covered loss.
What are the Principles of Conventional Insurance?
The principles of conventional insurance are based on the principle of indemnity, which means that the insurer agrees to compensate the policyholder for the actual loss suffered. The policyholder cannot profit from the insurance policy, and the compensation paid by the insurer cannot be more than the actual loss suffered by the policyholder.
Another principle of conventional insurance is the principle of utmost good faith, which means that both parties to the contract must act in good faith towards each other. The policyholder must disclose all relevant information to the insurer, and the insurer must provide accurate information to the policyholder.
Advantages and Disadvantages of Conventional Insurance
Advantages:
- Peace of Mind: Conventional insurance provides peace of mind to the policyholder by protecting them from financial losses in the event of an unexpected event.
- Financial Protection: Conventional insurance provides financial protection to the policyholder in case of any loss or damage.
- Customization: Conventional insurance policies can be customized to meet the specific needs of the policyholder.
- Regulation: Conventional insurance is regulated by the government to ensure that insurance companies operate in a fair and transparent manner.
Disadvantages:
- Cost: Conventional insurance premiums can be expensive, especially for high-risk activities.
- Limited Coverage: Conventional insurance policies may have limitations and exclusions, which may limit the coverage available to the policyholder.
- Delayed Claims Processing: Conventional insurance claims processing can take time, and policyholders may have to wait for a long time to receive compensation.
Examples of Conventional Insurance
- Health Insurance: Health insurance is a type of conventional insurance that provides coverage for medical expenses incurred by the policyholder.
- Home Insurance: Home insurance is a type of conventional insurance that provides coverage for the policyholder’s home and its contents.
- Car Insurance: Car insurance is a type of conventional insurance that provides coverage for the policyholder’s car and any damage caused to others.
- Life Insurance: Life insurance is a type of conventional insurance that provides coverage for the policyholder’s life and pays out a sum of money to the beneficiaries in the event of the policyholder’s death.
In conclusion, Get to know Conventional Insurance is a popular type of insurance that provides financial protection to policyholders in the event of a loss. While it has advantages such as peace of mind and customization, it also has disadvantages such as cost and limited coverage. It is important for policyholders to understand the principles of conventional insurance and carefully consider their insurance needs before purchasing a policy.