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¿What is
insurance and how does it work?
Insurance
is contracts whereby, in exchange for collecting a premium (insurance price),
the insurance Company undertakes, in the event of an accident covered by the
contract, to indemnify the damage produced or to satisfy a capital, income or
other Agreed allowance.
Terminology
A special
terminology is used in the insurance world. To understand the characteristics
and functioning of these products, first understand the meaning given to the
following words:
People
involved
• The
insurer: is the insurance company. In exchange for collecting a premium, it
assumes the obligation to indemnify the insured or beneficiary a certain amount
of money, in the event of a certain event occurring (contingency).
• The
policyholder: is the person or company that contracts the insurance and pays the
premium.
• The
insured: is the person exposed to the risk covered by the insurance contract.
The risk may fall on the person of the insured, on the property that it
possesses an economic interest or on its globally considered patrimony
• The
beneficiary: is the person or company that is entitled to receive the
consideration agreed upon in the contract.
The
policyholder, insured and beneficiary could be the same person, or different
people.
Other terms
• Policy:
This is the document in which the insurance contract is embodied. It contains
the regulation of the same and is composed of general, particular and special
conditions.
• Premium: The price of insurance
• Insured
sum: The amount fixed in each of the agreed coverages and constitutes the
maximum limit of compensation payable by the insurer, in case of contingency or
loss.
Contingency/Casualty:
The event foreseen in the policy and that gives rise to the fulfillment of the
obligations of the insurer. The production of the contingency or loss gives
rise to the agreed indemnification. (Examples of contingencies: death,
sickness, fire, accident, etc.)
