Skip to content Skip to sidebar Skip to footer
Home / Insurance

Important Things in insurance policy, functions, and definition

Important Things in insurance policy, functions, and definition - Just bought insurance? Well done. This means that you already understand the function of insurance and the importance of insurance benefits for yourself or your family members. After you register and buy insurance, you will get a document called an insurance policy.

What is an insurance policy?

The definition of an insurance policy is a legal document that becomes a written contract between the Policyholder (in this case you or anyone who pays the premium) and the Insurer (the insurance company). All matters regarding the terms and conditions of the relationship between the Policyholder and the Insurer are written therein, including the rights and obligations of each party.

In general, the insurance policy ensures that:

The Policyholder is required to provide accurate and correct personal data information, as well as pay premiums as written on the insurance policy.

The insurer is obliged to provide insurance benefits when the covered risk occurs, following the provisions agreed in the insurance policy.

Maybe we like to be lazy to read the whole of this document because the language is "really legal language", but the insurance policy is very important for you as a customer and insurance company.

What is the Function of an Insurance Policy?

As we have discussed, an insurance policy is a legal document that contains insurance terms and conditions. Here are the functions of an insurance policy for you and the insurance company.

The Function of an Insurance Policy for You

An insurance policy can be a valid written proof of a statement that:

  • You will get coverage for certain risks that occur in the form of cash compensation and/or compensation if risks occur.
  • You pay premiums regularly.
  • Evidence of filing a lawsuit if the insurance company does not fulfill its obligations.
  • Functions of Insurance Policy for Insurers
  • As for insurance companies, an insurance policy is a valid written proof of the statement that:
  • The company has received insurance premiums that you pay regularly.
  • The company will provide coverage according to the provisions of the policy.
  • Proof of refusal of insurance claims if the risks that occur do not meet the terms and conditions stated in the policy.
  • Types of Insurance Policies
  • There are various types of insurance policies that exist. The difference is often due to the type of insurance product chosen.

Here are 12 different types of insurance policies:

1. Life Insurance Policy

This policy protects a person's soul through cash compensation. This means that if the customer experiences the risk of death, the heirs will receive cash compensation from the insurance company.

Life insurance policies also have various forms, for example:

  • Term Life
  • Whole Life
  • Unit Link
  • Children's Life Insurance
  • Pension Insurance

2. Health Insurance Policy

This policy is used to regulate the terms of health insurance. Usually, the coverage listed includes medical costs for your health care. The guarantee can also be in the form of inpatient, or outpatient.

In addition, health insurance policies have further categories, including:

  • Personal health;
  • Family health;
  • Critical Illness Insurance, such as Super Strong;
  • Elderly health, which is devoted to people over the age of 60 years;
  • Office health;
  • Maternity insurance;
  • Personal Accident Insurance, such as Super Safe.

3. Property Policy

Property policies usually contain provisions for compensation if the house we buy is damaged. The types of benefits also vary, ranging from fires, natural disasters, break-ins, and other risks that may be written in the property policy.

4. Private Vehicle Policy

Similar to a property policy, a vehicle policy provides compensation for damage to your car or motorcycle. The risks borne can be in the form of break-ins, theft, damage from accidents, and others.

5. Travel Insurance Policy

This insurance policy is usually a one-time purchase, which is only active when you travel. You can also buy it from a traveling company or buy it directly from an insurance company.

6. Micro Insurance Policy

A micro-insurance policy is a type of insurance policy that is "small in size". Usually, the protection period is also shorter, it can be several days, one month, up to one year only. The risks covered also vary, depending on the type of microinsurance.

One of the most popular is micro-life insurance where the benefits are much lower than life insurance in general. However, of course, the amount of coverage is also smaller. There is many other microinsurance that focuses on specific risks, for example, sports, certain diseases that are currently spreading (such as COVID-19), and others.

7. Polis Veem

This type of policy bears the risk of loss or damage to an asset or item stored in a warehouse or other storage area.

8. Policy Estimated 

Also called a valued policy, this type of polis provides a definite cash value as a form of compensation. Usually, this nominal has been pre-estimated based on the price value of the protected goods.

9. Open Policy

Also called an open policy or unvalued policy, an open policy does not actually set a definite cash nominal for an item. Indemnification is usually carried out according to the bill, with a certain maximum limit of coverage.

10. Floating Policy

Commonly referred to as a floating policy, this type of policy is usually used for insurance for the stock of goods stored in various locations. Because the risk is different for each location, the premium value is floating or can change over time.

11. Consequential Loss Policy

This type of insurance policy pays compensation costs for declining income or increasing the outcome of a business caused by certain risks. Usually, this one policy is useful for fire insurance products.

12. War Risk Policy

Finally, this type of war risk policy provides life protection for those of you who live or travel to areas affected by the war.

Health Insurance Policy Structure

There are usually three important points in an insurance policy, namely the Policy Summary, General and Special Provisions, and an Insurance Request Letter (SPA).

Policy Summary

The Policy Summary shows your personal identity as the PolicyHolder and/or The Insured, as well as all matters related to the details of the insurance product.

Here are the points listed in the policy summary

  • Details of the insurance benefits you purchased;
  • Risk exclusions, namely special risks that cannot be covered by insurance products;
  • How to file a claim;
  • Policy number;
  • Identity of the Insured, including name and age;
  • The value of premiums to be paid per month/year;
  • The value of the Sum Insured (compensation provided) if any;
  • Identity of the Heir, including name and date of birth, if any.

General and Special Provisions

The General and Special Provisions describe the definition of the benefits and risks borne by the Policy. Arguably, this section constitutes the Terms and Conditions of 

In other respects, some general provisions and specific provisions should be listed including:

Definition of covered risks, for example:

  • What is meant by "Injury" on Personal Accident Insurance; or
  • What conditions are included in the "Stroke" for Critical Illness Insurance;
  • Procedures for paying and deadlines for Premiums;
  • Procedures for submitting insurance claims, including:
  • What documents are required;
  • When is the deadline for filing a claim;
  • Terms of investment management if the insurance is a unit link;
  • Conditions that may lead to termination of coverage.