At present, in addition to social insurance, many organizations and individuals also participate in commercial insurance. So, what is commercial insurance and what are the advantages that attract many people to participate? Let’s explore the characteristics of commercial insurance in the following article.
1. What is Commercial Insurance?
When you begin to explore insurance, understanding related terms such as commercial insurance is crucial. Commercial insurance, also known as Commercial Insurance in English, operates on the principle of spreading the risk among a large number of participants to compensate for the few. When signing a contract, the insurer commits to compensate or pay the insurance amount to the insured party when an insured event occurs, provided that the insured party has paid the full premium.
Commercial insurance is also understood as a form of insurance primarily aimed at generating profit. Participants must pay fixed premiums regularly to enjoy full benefits and maintain the contract. Commercial insurance redistributes income among participants to the insured party when they face risks or unexpected accidents. Income distribution in commercial insurance is usually non-indemnity-based.
Even if you contribute to commercial insurance, if you do not meet the conditions for compensation or payment, distribution will not occur, and there will be no reimbursement for the premiums paid.
2. Benefits of Commercial Insurance
Commercial insurance offers significant benefits, attracting many individuals, organizations, and businesses to participate. So, what are the benefits of commercial insurance for each insured party?
2.1 For Individuals
When individuals participating in commercial insurance face incidents such as illness, accidents, etc., they receive financial support to address financial issues such as treatment costs, hospital fees, etc.
2.2 For Businesses
During their operations, businesses may encounter difficulties and risks. In such cases, participating in commercial insurance helps businesses reduce financial burdens when dealing with these risks. This option is considered the safest and most practical for businesses, even when sudden, unexpected incidents occur.
2.3 For Commercial Banks
Commercial banks also receive certain benefits when participating in this type of insurance. Commercial insurance helps banks proactively address credit issues when working with customers.
Choosing to participate in commercial insurance is an optimal method for banks to ensure capital repayment to businesses when they face unforeseen problems in their operations.
3. Current Types of Commercial Insurance
Commercial insurance in the market is categorized based on various perspectives, methods, and according to the needs of customers. Currently, to distinguish commercial insurance more clearly, it is divided into property insurance, life insurance, and civil liability insurance.
3.1 Property Insurance
Property insurance aims to compensate for the losses to the insured party’s property when facing incidents or risks such as theft, traffic accidents, fire, explosion, etc.
Specific regulations of property insurance in commercial insurance include:
- The insured object is property (cars, motorcycles, houses, machinery and equipment, factories, goods, etc.).
- The insurance period usually lasts for one year, and customers can renew the contract annually to continue enjoying insurance benefits.
- Customers only need to pay a one-time premium.
- Property insurance contracts have no expiration date.
Property insurance is further divided into various types, including:
- Property insurance and property damage insurance.
- Insurance for goods transported by road, sea, inland waterway, rail, and air.
- Aviation insurance.
- Motor insurance: two-way insurance, civil liability insurance, etc.
- Fire and explosion insurance.
- Hull insurance.
- Liability insurance.
- Credit and financial risk insurance.
- Insurance for business interruption losses.
- Agricultural insurance.
3.2 Life Insurance
Although this is a common term, have you ever wondered what life insurance is? In commercial insurance, life insurance includes both life insurance and health insurance. The objects of this type of insurance are the health, body, and life of individuals.
Specific regulations of life insurance in commercial insurance include:
- The insured object includes cases where the insured party is sick, in pain, disabled, in poverty, injured, requiring health care, etc.
- Health insurance aims to provide health care and financial support for the insured party. On the other hand, life insurance reserves financial resources for unforeseen risks related to health care, accumulation, and future investments.
- The term of health insurance is usually one year, and customers can renew it annually. Life insurance is more flexible, with terms lasting 10 years, 20 years, or a lifetime.
- Health insurance contracts have no expiration date, while participants in life insurance receive maturity when the contract expires or when there is a risk ending the contract, stopping the contract midway.
These two types of life insurance are also divided into various subtypes, such as:
- Health insurance, including accident insurance, health insurance, and health care insurance.
- Life insurance, including whole life insurance, term life insurance, endowment insurance, mixed insurance, investment-linked insurance, and retirement insurance.
3.3 Civil Liability Insurance
The target of civil liability insurance is responsibility and compensation obligations. Typically, civil liability insurance needs to be implemented in a mandatory form.
Specific regulations of civil liability insurance in commercial insurance include:
- Insurance usually has a one-year term, and customers can choose to renew it annually if they wish to continue participating.
- Customers can pay the premium once when purchasing or in installments.
- Contracts have no expiration date.
Currently, products in civil liability insurance include:
- Mandatory motorcycle civil liability insurance.
- Civil liability insurance of vehicle owners for third parties.
- Civil liability insurance of vehicle owners for passengers.
- Civil liability insurance of air carriers for passengers.
- Liability insurance of shipowners.
- Liability insurance for goods transported by road.
- Liability insurance for products and employers’ liability for employees.
The above provides answers to the question of what commercial insurance is and synthesizes information you need to know about commercial insurance. We hope you now have a clear understanding of this type of insurance with its diverse range of products, allowing you to choose the most suitable product for yourself.
Cre: Baloo/thehartford.com
