The Common Insurance Points
26 May 2010 | |
oraisoopoopo
Most people are familiar with the insurance in one form or another. We all took home insurance, car insurance or credit insurance, among others. Insurance contracts are long and complex documents with lots of fine print. Sometimes even a lawyer to get lost in the complexity of them. However, there are some features that all contracts of insurance have in common.
Insurance
be an unforeseen event that may or may not cover. That is the risk you are protected against. The event is a fire in your house, a car accident, medical expenses, or almost any other event to be. The only exception is that insurance covers the life of your death. It is an event that is bound to come, the moment of death is uncertain here.
measurable economic loss. Insurers will take risks, but they should be able to quantify and predict the loss in question. The insurance company should be able to know on what kind of loss associated with the event will be held. The loss must be measurable in monetary terms. For example, you may be able to provide for medical expenses or a new car, but not for the sadness you are experiencing as a result of an accident.
loss must be determined. Again, insurers know what kind of financial risks they take, besides they will not be able to get the price of the premium.
loss must be significant. The financial cost of the insured risk must justify the administrative costs of the insurance contract. Suppose you want to insure a horse race. Someone will come from the insurance company to assess the value of the horse, draft a contract specifying what is covered and under what conditions you must complete, calculate the premium and the contract award. Worth a valuable horse. But if you want your goldfish to ensure it would be difficult for the effort involved the establishment of the contract to justify.
loss will not be catastrophic. What is catastrophic depend on the size of the insurer and the assets they have. But insurance will not apply if the loss exceeds the insurer can afford. For example, hedge against an earthquake is often impossible to offset losses if the event occurs, it would be impossible for the insurance company still pay
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