Whenever you applied for any kind of insurance, you will surely feel a bit overwhelmed by the terminology which is being use in Insurance contract. Therefore it is very important that you understand what you are getting yourself into. Insured doesn’t always take efforts to know about terms which are used in the policy. But at the time of claim it can hit you very badly.

Insurance Term That You Should Know

1) Excess.

2) Franchise.

3) Co-Pay.

• 1) Excess

Excess is the term that applies to the insurance contract and comes into the effect at the time of claim. Excess is the amount which insured has to borne by himself in case of claim. Insurance company will consider your claim if claim amount is exceeds excess. If your claim does not exceed excess then insurance company is not liable for any payment. Example: In Fire Insurance Policy, Sum Insured is 2, 00,000 and Excess of Rs 30,000. Insured suffers a loss of Rs 80,000. Insurance company will pay him only Rs 50,000 which is difference between Claim amount and Excess. Rs 30,000 which insured have to borne by himself. Reason why insurance company keeps the excess in the policy is just because insured has insurance cover he should not become careless towards insured property. By applying excess insured becomes careful towards insured property. Excess which is usually applies to Motor Insurance, Fire and Marine Insurance.

• 2) Franchise
  

Franchise is the limit below which nothing is payable and beyond which entire amount of the sum insured is payable. Franchise is similar to the concept of excess but there is slight difference between. In the case of a ‘Franchise’ if the loss is in exceeds the amount of the ‘Franchise’ the claimant is entitled to claim the full value. In the case of an ‘Excess’ if the loss is in exceed the amount of the ‘Excess’ then claimant is entitled to claim only the amount of the loss less the amount of the ‘Excess’. Insurance company puts the condition of Franchise in the cases where they believe there will be a surety of loss. In Marine Cargo insurance, a cargo which is insured for Rs 1crore. While loading and unloading cargo some percentage of cargo is bound get damage, say 5%. Therefore insurance company puts the condition of Franchise with the help of it insurance company avoids the payment for the loss which is certain. Franchise which generally used in Marine Insurance.

• 3) Co-Pay

Co-payment or Co-Pay is the amount which has to paid by insured. Insurance companies use co-payments to share health care costs. Many health insurance companies today are choosing to introduce a co-payment clause in their policies in an attempt to keep a tight lid on their claims outgo. It is the portion of the claim that policyholder agrees to bear in the event of claim. For example if approved claim is Rs 1 lac and you agree to co-pay of 10%, then you will have to bear 10,000, while insurer will pay rest of the amount.

Co-pay which generally associated with Health Insurance. Co-Pay which is used by insurance companies in cases where the losses are big or where losses are pretty much certain. E.g. in case of treatment from non-network hospitals, Senior Citizens policy, Critical Illness etc.

To understand the nuances of different types of policies and its price, feel free to seek the help of InsuranceMall to select the right products based on your need. Or you can directly call them on +91-22-30503050

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