Salvage, Insurance Policy, Sum Assured, Under Insurance, Average Clause, Claim

Salvage

There is difference between salvage value and scrap value. Suppose your car damaged from front. Damage occur to Bonnet, radiator and bumper. your insurer will pay for replacement of these items with new. Now these damage items have some value in market. Say a damaged radiator will fetch 400 in market and can be used for resale. So, this is salvage value of Radiator. But If Radiator is fully damaged by crushing it, it will lose its usability and fetch value of say 100. This is scrap value.

Same occur with fully damage cars. When cars damage occurs beyond repair. Settlement is done on net of salvage basis. These cars sold to salvage buyers with good value as they sell saved parts of car at value. But when these cars crushed so make it unusable then sold on scrap basis. Then value is as per old metal prices in market.

This is concept in India, where old things are recirculated and not might fit for insurance industry in developed countries.

Abandonment and salvage is a term that can surface fairly frequently in insurance contracts. When such a clause is present, it indicates that the insurer has the ability to rightfully claim an insured asset or piece of property that has been destroyed and subsequently abandoned by its owners.

For the insurer to salvage the item, the owner must first express an intent of abandonment in writing. Once that process is complete, the insurance company could choose to take full possession of the damaged property after paying out its insured value to the policyholder.

The selling value of the property can surpass the amount paid out on the claim, so salvage rights are sometimes legally contested by several parties.

Insurance Policy

In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.

Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they feature boilerplate language which is similar across a wide variety of different types of insurance policies

Sum Assured

The sum assured is the guaranteed amount that the beneficiary of your life insurance policy will receive in case of your death. The sum assured is also known as the coverage or the cover of your insurance policy.

There are many different ways to calculate the sum assured for your life insurance policy. One of the most popular methods is Human Life Value or HLV. This method calculates sum assured based on your current and future expenses, present and future earnings, and age.

It helps you calculate your capitalized value based on current inflation. You can now find Human Life Value calculators online to know your HLV and select the right sum assured.

Sum insured, on the other hand, refers to the payable amount in case of an unforeseen event such as a medical emergency. It is a monetary benefit, unlike sum assured which is a maturity benefit.

Non-life insurance policies like motor insurance or health insurance provide protection as the sum insured. In short, it is the compensation payable to the policyholder in case of an injury/hospitalization or damage based on the concept of indemnity.

Under Insurance

Condition of average (also called underinsurance in the U.S., or principle of average, subject to average, or pro rata condition of average in Commonwealth countries) is the insurance term used when calculating a payout against a claim where the policy undervalues the sum insured. In the event of partial loss, the amount paid against a claim will be in the same proportion as the value of the underinsurance.

Payout = Claim *(Sum Insured / Current Value)

Average Clause

This means that in case of loss the insured has to bear a part of the loss. The insurer will only bear rateable proportion of the loss. In other words, for the difference between the actual value of subject matter and the amount for which it is insured, the insured has to be his own insurer.

Ex.

Suppose a property worth Rs. 2,00,000 is insured for Rs. 1,50,000 and the fire policy contains the average clause. Now, if half the property is destroyed by fire, the insurer will pay only Rs. 75,000 which is calculated as per the following formula.

Insured amount (Rs.1,50,000) x Actual loss (Rs. 1,00,000) / Actual value of the property (Rs.2,00,000)

If three-fourths of the property is destroyed by fire, the insurer will pay Rs. 1,12,500. The entire amount of policy will become payable only when entire property is destroyed by fire.

Claim

An insurance claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event. The insurance company validates the claim (or denies the claim). If it is approved, the insurance company will issue payment to the insured or an approved interested party on behalf of the insured.

Insurance claims cover everything from death benefits on life insurance policies to routine and comprehensive medical exams. In some cases, a third-party is able to file claims on behalf of the insured person. However, in the majority of cases, only the persons listed on the policy is entitled to claim payments.

A paid insurance claim serves to indemnify a policyholder against financial loss. An individual or group pays premiums as consideration for the completion of an insurance contract between the insured party and an insurance carrier. The most common insurance claims involve costs for medical goods and services, physical damage, loss of life, and liability for the ownership of dwellings (homeowners, landlords, and renters) and liability resulting from the operation of automobiles.

For property and causality insurance policies, regardless of the scope of an accident or who was at fault, the number of insurance claims you file has a direct impact on the rate you pay to gain coverage (typically through installment payments called insurance premiums). The greater the number of claims that are filed by a policyholder, the greater the likelihood of a rate hike. In some cases, it’s possible if you file too many claims that the insurance company may decide to deny you coverage.

Types of Insurance Claims

Health Insurance Claims

Costs for surgical procedures or inpatient hospital stays remain prohibitively expensive. Individual or group health policies indemnify patients against financial burdens that may otherwise cause crippling financial damage. Health insurance claims filed with carriers by providers on behalf of policyholders require little effort from patients; the majority of medical are adjudicated electronically.

Policyholders must file paper claims when medical providers do not participate in electronic transmittals but charges result from rendered covered services. Ultimately, an insurance claim protects an individual from the prospect of large financial burdens resulting from an accident or illness.

Property and Casualty Claims

A house is typically one of the largest assets an individual will purchase in their lifetime. A claim filed for damage from covered perils is initially routed via the Internet to a representative of an insurer, commonly referred to as an agent or claims adjuster.

Unlike health insurance claims, the onus is on the policyholder to report damage of a deeded property they own. An adjuster, depending on the type of claim, inspects and assesses damage to property for payment to the insured. Upon verification of the damage, the adjuster initiates the process of compensating or reimbursing the insured.

Life Insurance Claims

Life insurance claims require the submission of a claim form, a death certificate, and oftentimes the original policy. The process, especially for large face value policies, may require in-depth examination by the carrier to ensure that the death of the insured did not fall under a contract exclusion, such as suicide (usually excluded for the first few years after policy inception) or death resulting from a criminal act.