Why Should You Understand Insurance Claims Before Purchasing a Policy?

Understand your rights and the limitations of coverage before buying insurance.

An insurance claim is the compensation paid by an insurance company when a financial loss occurs due to an insured event. The insurer will pay based on the actual damage incurred, but not exceeding the coverage limit specified in the policy. The compensation recipient may be the policyholder or a designated beneficiary, such as a spouse, heir, or assigned individual. In the event of unforeseen incidents like accidents, car collisions, or property damage, the insurance company will compensate according to the policy terms.

Differences Between Claims for "Tort" and "Non-Life Insurance"

• Tort Cases: Compensation may include monetary damages, such as repair costs, and non-monetary damages, such as moral damages or punitive damages.
• Non-Life Insurance Claims: Compensation is strictly for financial losses that can be calculated. The insurer will reimburse either in cash or with a replacement item of equivalent value, covering only the actual loss incurred.

Simply put, tort claims may include compensation for non-monetary damages, such as emotional distress, whereas non-life insurance claims only cover direct financial losses.

Ways an Insurance Claim Can Be Paid

When a covered loss occurs, an insurer may compensate using one of these four methods:

1. Repair (Restoration): The insurance company arranges for the damaged property to be repaired.
2. Replacement: A new item is provided to replace the damaged one.
3. Cash Compensation: A payout based on the actual damage, including associated expenses.
4. Restoration to Original Condition: The insurer restores the damaged property to its previous state.

The chosen method depends on the policy terms and the nature of the damage.

Claim Compensation as per Civil Law (Section 877)

Under Section 877 of Civil Law, insurance companies must pay compensation in three main cases:

1. Actual Losses: The insurer reimburses the financial loss covered by the policy.
2. Loss Prevention Expenses: If additional measures were taken to prevent further damage (e.g., moving assets), the insurer covers the related costs.
3. Asset Protection Costs: Necessary expenses to protect assets from further damage must be reimbursed.

The damage assessment is based on the location and time of the incident, but compensation will not exceed the insured amount stated in the policy.

Steps to File an Insurance Claim

To claim compensation, the policyholder or beneficiary must notify the insurer and complete the appropriate claim form. Examples include:

• Accident Claim: For injuries caused by an accident.
• Outpatient Medical Expenses: For medical costs without hospitalization.
• Inpatient Medical Expenses: For hospital stays.
• Daily Hospital Allowance: For daily hospitalization compensation.
• Death Claim: For compensation in case of the policyholder’s passing.
• Disability Claim: For temporary or permanent disability benefits.
• Critical Illness Claim: For severe illnesses like cancer or terminal conditions.

Preparing accurate and complete documents ensures a faster claim process.

Submitting Documents and Claim Processing Time

Once the claim form is completed, supporting documents must be attached, such as:

• Medical receipts (for health claims)
• Accident report (for car accidents)
• Identification documents (e.g., ID card, policy copy)

If unsure about the required documents, it’s best to check with the insurance company to facilitate smooth processing.

Claim Processing Timelines (if documents are complete):

• Basic compensation under the Motor Insurance Act: Within 7 business days
• Medical expenses: Within 7 business days
• Car accident damages (if paid upfront): Within 15 business days

Submitting documents promptly ensures a quicker claim settlement.

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