Discover a clear glossary of insurance terms, including cash value, pre-existing condition, premium holiday, and more.
Insurance policy refers to a written agreement or contract between an insurance company (as the insurer) and the insurance customer (as the insured). The insurance policy is one of many insurance terms you need to understand if you're planning to purchase an insurance product.
Many people often confuse a policy with an insurance premium. However, the two have very different meanings. To avoid confusion, let’s go through what an insurance policy really is, its functions, and how to read it.
An insurance policy is a written agreement that serves as proof of the transfer of risk from the insured (customer) to the insurer (insurance company). This agreement outlines the rights and obligations of both parties.
Within the contract, there are several important elements that insurance customers, as the insured and premium payers, need to understand.
These include: policyholder and insured information, insurance terminology, scope of coverage provided, policy renewal, premium payment procedures, insurance grace period, expiration of coverage, claim exclusions, and premium-related terms and conditions.
An insurance policy is a legally binding document, supported by Article 35 (1) to (5) of Insurance Law No. 40 of 2014 and Chapter 9, Article 246 of the Indonesian Commercial Code (KUHD).
Therefore, it’s essential to store it in an easily accessible place in case you need it. But what happens if your insurance policy is lost? Don’t worry—you can easily take care of it.
Simply contact the insurance company’s call center or visit their office directly with a police loss report.
You now know that the insurance policy is a vital document for the insured. It's also a required document for submitting an insurance claim.
When you buy any insurance product, you'll be given a policy number, which serves as your unique identity during the claim process and data verification. The insurance policy number is a legal code confirming your participation as an insured individual.
The functions of this document can be viewed from two perspectives: the insurer and the insured.
For the insurer, the policy serves the following functions:
Proof of receipt when the insured pays the insurance premium.
Written evidence of the guarantee to compensate the insured for losses.
Official documentation to reject claims if the cause of loss doesn’t meet the terms outlined in the policy.
For the insured customer, the policy serves as:
Written evidence of risk coverage, including potential compensation.
Proof of premium payments made to the insurer.
Official documentation to hold the insurer accountable if it fails to meet its obligations.
Aside from the policy itself, you should also learn about insurance principles, which form the foundation of the insurance contract between companies and customers.
Now that you understand what an insurance policy is and its function, it’s also important to know the types. Each insurance product offers a unique contract with different goals and benefits.
Prospective policyholders can decide which policy best suits their financial planning needs. Here are some common types of insurance policies:
Ideal for those who frequently travel by motorbike. This policy offers protection against risks involving your registered motorbike.
2. Car Insurance Policy
In this agreement, the car insurance company acts as the insurer and covers damages to your vehicle—provided the cause is listed in the policy.
The car insurance policy includes details such as premium costs, coverage benefits, and extended coverage for risks not included in the base protection.
Insurers assign a monetary value to the insured’s life. This amount is given to the beneficiary if the insured passes away. Examples include unit-linked, term, and endowment life insurance policies.
4. Health Insurance Policy
Health-related issues are often unpredictable. This policy ensures that the insured receives medical treatment and covers related expenses.
Provides compensation during travel, from departure to return, such as for Hajj or Umrah trips.
Covers damages to assets such as homes, cars, or shops caused by natural disasters or fires.
Rare but available, this covers loss or damage to high-value goods stored in warehouses.
Also known as a “valued policy,” this pre-determines the payout amount the insured will receive.
This type doesn’t state an exact value but sets a maximum limit for determining the claim amount.
Provides coverage in conflict-prone areas, offering protection to the insured's life.
Based on Islamic principles, this policy emphasizes mutual help among customers through contributions to a Tabarru' Fund.
Before buying an insurance product, always read and understand the policy content. This helps ensure the agreement aligns with your needs.
Reading an insurance policy may seem overwhelming due to the many clauses, but you only need to focus on these key parts:
Review the Declaration Page Carefully
Check for correct personal details like name, address, beneficiary name, coverage amount, scope of protection, riders, clauses, insurance period, premium, policy issuance date, and insurer's signature.
Check the Insurance Limit
The limit refers to the maximum benefits you receive in exchange for premiums paid. For health policies, check limits for doctor consultations, hospitalization, outpatient care, medication, and admin fees.
Review Premium Terms
Pay attention to the premium amount, what happens if you're late in paying, and the process to reinstate a lapsed policy.
An insurance policy isn’t just a legal document—it’s your safeguard against future uncertainty. Be sure to read and understand every clause before signing. That way, you can maximize the benefits.
Roojai Insurtech is one of the best car insurance providers in Indonesia. With an all-risk car insurance policy, you get full protection for your vehicle—from minor scratches to major damage and even loss.
Roojai also partners with over 800 trusted repair shops across Indonesia. With affordable premiums tailored to your needs, Roojai is the perfect insurance choice for you!