Cheap insurance products are purchased by consumers for protection. Consumers want their interests to be protected by the policy. In the event of a loss, the insurance will provide compensation. Therefore, buying insurance is like buying peace of mind in the future with the expectation of full coverage.
Is it true that all cheap insurance coverage claims will be paid in full? Paid 100%? As it turns out, no. There are claims that are indeed paid in full according to the claimed value, and some that are not for various reasons. For this reason, it is important to understand the concept of cheap insurance with full coverage.
Thus, the impression is that the insurance company has many reasons. Insurance companies with cheap products seem to be looking for ways to reject claims or minimize compensation. Is that really the case? Not true.
Understanding Cheap Insurance Full Coverage
|Ilustration : Understanding Cheap Insurance Full Coverage|
Understanding Cheap Insurance Products
As proof that a consumer has purchased an insurance product either cheap or other with full coverage, the consumer gets an insurance policy. A policy is an insurance contract. This written agreement contract contains many things.
The front of the policy contains a summary of the policy. The summary lists the name and address of the insured. In addition, it is about the guarantee and the price of such cheap insurance. Furthermore, the policy records the period or term of the insurance. Another part of the policy regarding the terms and conditions of insurance. This section is often referred to as 'wording'.
Back to the original question. Why doesn't cheap insurance pay the coverage in full as much as the value of the loss? In general insurance (whether cheap or with the addition of other products), there are three main reasons why the coverage claim is not paid in full. Here we learn together:
1. There is a Limit of Liability
The limit of liability is a matter of limiting indemnity in other words, the price of the coverage itself. The insurance agreement is made with an agreement on what the limit on the payment of indemnity is. That limit is the Total Sum Insured (TSI) or the price of coverage.
This limitation is commonly used for objects or interests of coverage that can be calculated in value. For example, in fire insurance and cheap car vehicle insurance. The policy lists the price of coverage for the building, the contents of the building and other assets.
This object of coverage can be valued at its price by the insurance company. Often the services of an appraiser are used to make calculations on the value of physical assets. Meanwhile, the limit of liability is applied to interests that are not easy to measure. For example, how much an accountant will be prosecuted.
The usual limit of liability is found in cheap insurance about liability and insurance products that guarantee financial interests (financial lines). For insurance with TSI, as an illustration is vehicle insurance, both car and bicycle.
If given an example of the coverage price in the insurance policy, the cheapest is USD 200,000. In the event of a claim whose damage is thorough (total loss), then the reimbursement of coverage from insurance is a maximum of USD. 200.000.
The definition of "total loss" consists of two categories. The first category is cars lost due to theft. In the second, the cost of repairing damage reaches 75% or more of the fair price of the car. Compensation equal to the value of the policy causes the insurance contract to expire. All insurance promises have been fulfilled. The term is mission accomplished.
2. There is Coverage Below The Price
The next understanding is that the indemnity of coverage on cheap insurance is not paid in full because of the coverage below the price. The term commonly used is under insurance.
This happens if the value of the coverage price is less than the actual price (sound market value). As a result of under insurance, reimbursement of coverage is not full or given on a pro-rata basis.
Following the example above, let's just say that the fair price of an insured car is USD 250,000. Consumers insure their cars at a coverage price of USD. 200,000. Thus there is a difference of USD. 50,000.
This difference is called self-insured, retained or sometimes called coinsured. In the event of a claim, the reimbursement of coverage from cheap insurance is not full. Consumers also bear losses.
What is borne by consumers is the difference between the coverage price and the fair price. This provision only applies to partial loss. In total loss, consumers will receive compensation equal to the maximum coverage price (TSI or Total Sum Insured).
3. There is a Claim Deduction
The next thing that makes the claim of coverage on cheap insurance is not paid in full because there is a claim deduction (excess or deductible). Why is there a claim deduction? The purpose is for the insured to be careful.
Usually the claim agreement will mention that a claim of little value is not reimbursed by the insurance company. Only claims that exceed the amount of excess/deductible are paid. The amount of payment is of course deducted from excess / deductible.
This claim deduction will reduce the workload of cheap insurance companies. Only claims that exceed excess/deductibles will be processed.
Ensuring Cheap Insurance Full Coverage
Is There a Way to Make a Cheap Insurance Coverage Claim Fully Replaced?
The above question seems to be not easy to answer but of course there is a solution. Consumers can request that the deductible value be nil. In other words, the policy on cheap insurance does not have a claim deduction. Any claims incurred will be fully replaced according to the value of the claim. All insurance reimbursements are limited to the price of coverage.
Another way is to buy deductible buy back insurance. This is an insurance product that will pay a deduction of claims from a previous cheap insurance policy. In order to get a full reimbursement, make sure the coverage price is equal to the value at risk or the actual price. Then on the policy with a limit of liability, if possible, the value of the coverage is made 'unlimited'. This avoids under-price coverage penalties.
The key word, always ask, understand, and ensure cheap insurance coverage full coverage purchased. Always chatty at insurance sales who offer you cheap insurance products, ask about what you still have doubts about, unclear or don't know.