> For the complete documentation index, see [llms.txt](https://bonkcover.gitbook.io/bonkcover/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://bonkcover.gitbook.io/bonkcover/how-it-works.md).

# How It Works

#### 1. Policy Creation

Insurance policies are created as smart contracts on the blockchain. These smart contracts contain all terms and conditions, including coverage details, premium amounts, and claim conditions.

#### 2. Premium Collection

Policyholders pay premiums in cryptocurrency or fiat currency, which are securely recorded on the blockchain. These funds are held in a decentralized escrow until needed.

#### 3. Claim Filing and Processing

When an insured event occurs, the policyholder files a claim through the BonkCover platform. The smart contract verifies the claim conditions automatically. For example, in the case of a flight delay, the smart contract verifies the delay through trusted oracles and triggers the claim payout.

#### 4. Claim Payout

Once the claim is verified, the smart contract automatically releases the payout to the policyholder's wallet, ensuring fast and efficient claims handling.