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16 Rajab 1440     23 March 2019

Skip Navigation LinksAbout Insurance Policy FAQ

About the Insurance Policy FAQ

  • Who are the parties to an insurance contract?

    • The First Party is the one that applies for insurance and is called the insured after conclusion of an insurance contract. It is the natural or legal person (corporate) that obtains an insurance policy from the insurer.
    • The Second Party is the insurance company and is called the insurer after conclusion of an insurance contract. It is a public joint stock company licensed to carry out insurance and/or reinsurance activities.

  • What kind of information a person should be aware of before applying for insurance?

    •  They should know the type, limit and amount of insurance coverage. In case of property insurance, for example, an applicant decides whether they want to receive insurance against fire risks only or comprehensive insurance against all property risks including fire, theft and associated risks, in addition to civil liability arising from damage inflicted on buildings adjacent to the damaged insured property, in accordance with the insurance policy. Knowing such information when applying for insurance will help the insurance company decide the appropriate coverage for an applicant.

  • What is the method for applying for insurance coverage?

    • Insurance coverage can be applied for by personally visiting the given insurance company or its website if it provides online application. In addition, an applicant can rely on an insurance broker in finding the appropriate coverage and finalizing insurance procedures on their behalf.

  • What is the difference between “insurance broker” and “insurance agent”?

    • An insurance broker is a legal person that negotiates, for a charge, with an insurance company to obtain insurance for the insured. An insurance agent is a legal person representing an insurance company, marketing and selling insurance policies and conducting all works that are normally carried out for the company or on its behalf, for a charge.

  • Does the insurance company examine the applicant’s property before agreeing to provide insurance coverage?

    • The insurance company may examine the property to be insured before agreeing to provide insurance coverage. The decision for examination is based on the information provided in the insurance application, and it is carried out in order to ensure that the applicant receives a proper policy with the best competitive benefits. The insurance company may suggest making some general enhancements to the property to be insured; e.g. putting in place security and safety equipment such as CCTV cameras, night watch, etc., particularly for property insurance.

  • What is the applicant’s duty of disclosure when entering into an insurance contract?

    • ​Insurance companies, after deciding the insurance policy's coverage and limits, typically ask the beneficiary to disclose material information related to the subject matter of the insurance such as number of accidents incurred in connection with motor insurance, medical history for medical insurance, and an accurate description of the property's contents to be insured against in property insurance. Therefore, the applicant usually fulfills the duty of disclosure by filling out a disclosure form or an insurance application form with explicit answers to the questions provided. The applicant may also be obliged to disclose any information related to the subject matter of the insurance, which is called the principle of "Utmost Good Faith". If they fail to fulfill such duty, the insurer may cancel the policy or refuse to compensate for damage arising from such non-disclosure despite the insured's knowledge of this duty at the time of signing the contract.

  • What should an applicant do prior to signing and obtaining an insurance policy?

    • ​It is important to review the terms and conditions of the insurance policy (except for compulsory policies, such as the unified compulsory motor insurance and the unified cooperative health insurance policy) before signing the contract. An applicant should read the terms and exclusions set out in the proposed policy and not only depend on explanations given by the insurance agent. They should read and understand all additional terms or annexes attached to the policy and inquire about unclear terms or concepts. This is to avoid disputes that could arise in the future due to the insured's misunderstanding of the policy's content.

  • What are the insured’s obligations after singing an insurance contract and obtaining insurance coverage?

    • The insured should comply with the terms and obligations of the insurance policy and take precautionary measures to maintain the subject matter of insurance so as to be indemnified in the case of risks. For instance, an insured has to comply with the policy if it requires putting in place fire extinguishers, good accounting systems, an effective internal monitoring system, surveillance cameras or security guards around the clock seven days a week, or if it requires providing safety equipment, keeping them in a good condition and carrying out periodic maintenance on them. Similarly, an insured should not violate the policy's terms or any other terms provided for in other policies.
    • The insured should disclose any material changes in the subject matter of insurance or factors causing the risks insured against in order to avoid the insurer's rejection of a claim or indemnity due to non-disclosure of such information.

  • What is the difference between “insurance schedule” and “certificate of insurance”?

    • An insurance schedule is a document provided by an insurer for all types of insurance setting out an insured's information and insurance policy details in addition to the terms, limitations and exclusions of each policy. On the other hand, a certificate of insurance is a document issued by an insurer in compulsory motor insurance stating an insured's information, insurance policy details, and it serves as a bail bond given by the insured to the damaged party.

  • What does “beneficiary” mean in an insurance policy?

    • A beneficiary is a natural or legal person (companies) to whom benefits under an insurance policy are given when losses or damages occur. A beneficiary may be identified by name (as in protection and savings policies) or may not be identified by name (such as a damaged party in a motor accident in compulsory motor insurance policies).

  • What is a deductible (copayment)?

    • It is an amount borne by the insured and deducted from their indemnity against risks, within the insurance policy limits, as agreed upon by the two parties and set forth in the policy schedule. The insured receives a discount from the insurer on their premiums for bearing a proportion of the loss.

  • What is depreciation?

    • ​A ratio determined and agreed upon in the insurance policy is deducted from the indemnity as a result of use of the insured object during the time prior to the loss (e.g. Comprehensive Motor Insurance).

  • What are coverage limits?

    • ​They are the maximum limits of coverage provided by an insurance company as specified in the policy schedule before applying any deductibles (for copayment and depreciation).

  • What is the Average Clause?

    • ​In some insurance policies, an insured does not disclose the real value of property insured in an attempt to reduce the insurance premium. For that reason, insurance companies have adopted a condition called "the Average Clause". It is applied when the property insured at the time of the loss is of greater value than the sum insured. In this case, the insured acts as an insurer who bears the value difference proportionately. The criterion for whether to apply this condition or not depends on the loss assessor's judgement on the value of the property insured at the time of the loss; if the property insured is of greater value than the sum insured, the insurer does not assume the whole payment of the claim and the Average Clause is applied. Settlement is then calculated as follows:

    (Sum Insured under the policy ÷ Real Value of the Property Insured × Amount of loss = Amount Recoverable)

  • Can one person have more than one insurance policy from different insurance companies to insure the same property?

    • Yes, but if the insured suffers a loss, the insurer that receives the claim first can submit a claim to other insurers to participate in the payment of indemnity. Then, the payment is divided among them in accordance with the sum insured with each insurer.

  • Are the insured and insurer entitled to cancel an insurance policy?

    • The insurer is entitled to cancel an insurance policy, provided that such right is set forth in the policy and that the insured is given a grace period of at least (30) days before cancellation comes into effect.
    • However, the insurance company in its capacity as "the insurer" is not entitled to cancel the following compulsory insurance policies: (the unified compulsory motor insurance and the unified cooperative health insurance policy).

    - The Unified Compulsory Insurance Policy: Neither the insurer nor the insured has the right to cancel this policy except in the following cases: (cancellation of the insured's vehicle registration - Transfer of ownership of the insured's vehicle - submission of a new insurance policy from a different insurance company).

    - The Unified Cooperative Health Insurance Policy: The insured (an employer in group health insurance) may cancel the policy, provided that a new insurance policy from another insurance company is submitted.