Everybody desires the best health care, but such care doesn’t come free. A health insurance policy comes handy during emergencies demanding immediate hospitalisation. A Mediclaim policy can take care of most of the expenses depending upon the terms and conditions of the policy. Most insurers have tie-ups with hospitals and in such a situation the patient is not required to pay any amount except for a small amount as security deposit.
Life insurance offers coverage for the risk of loss of life. In other words, life insurance pays out a specified sum of money if an insured individual passes away. The amount of money paid goes to the beneficiary indicated in the policy. To be insured, an individual pays an insurance premium, which can be a lump sum amount, or an amount paid in instalments. On the maturity of life insurance, the money invested is typically recovered.
Health insurance offers coverage up to a certain amount for medical expenses arising from illness or injuries. To be insured, an individual pays a lump sum insurance premium or makes monthly premium payments.
How Does Life and Health Insurance Work?
Life and health insurers both offer life and health insurance to the customers for the risk of loss of life and medical expenses arising from health issues, up to a certain coverage amount, in exchange for insurance premiums. Insurance premiums are cash outflows made by the customer in exchange for insurance.
Similarly, to other insurers, when life and health insurers offer coverage to a customer, they must determine an insurance premium for the customer to pay. They decide according to the risk level of the customer – specifically, the possibility of the customer making a claim and paying out the amount of the claim. A diagram is provided below that outlines the process: