How do you access to your document ? Is it via the other application, via Share, windows explorer ...?
How do you link the document between Alfresco and the application ? Do you keep the alfresco-id in your application ? Such links imply transactionnal problematics to keep in mind.
Do you search the documents in Alfresco ? If yes, you should define a custom content model to find them by metadata.
How do you define your user access on the documents ? Is it handled by Alfresco or the Application ?
What actions do you need to do on the documents ? (searches, audit, edit, workflow, save metadata ...) ?
Some answers to your questions : 1) When I am designing a content storage in Alfresco , can I use the same file structure as mentioned above or is there better way of defining the document folders in alfresco with different approach ? Yes you can use the same file structure. But you have to keep in mind how do you plan to use your documents and Alfresco. For example, a technical structure by date can be good performance wise (you can keep your document/folder ratio < 1000). However it wouldn't be good if your users had to navigate to the document or define access.
3) I work in Insurance industry , is there better way to do define this by making use of any insurance specific Alfrescos feature ? You can use custom content model to keep insurance information on your document (see bellow)
4) What’s custom content model ? Should I consider this for the above implementation ? Custom model allows you to keep additionnal information on the document. It can be usefull from a technical and a functional point of view. Example :
you can keep the application/process that pushes the document in Alfresco
if your application generates contracts, you can save the amount, contractorName ... directly on the document
Such information are very usefull for searches, processes, audit ...
If you just keep documents in Alfresco without using some capabilities from the product (metadata, searches, access, collaboration, ...), well, a filesystem is just as good I hope these answers will help you to define your requirements and your architecture.