Insurance is a contract between an individual (the policyholder) and an
insurance company. This contract provides that the insurance company
will cover some portion of a policyholder’s loss as long as the
policyholder meets certain conditions stipulated in the insurance
contract. The policyholder pays a premium
to obtain insurance coverage.
Premium is the amount of money that an individual or business must pay for an insurance policy. The insurance premium is considered income by the insurance company once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy. If the policyholder experiences a loss, such as a car accident or a house fire, the policyholder files a claim for reimbursement with the insurance company. The policyholder will pay a deductible to cover part of the loss, and the insurance company will pay the rest.
When you buy an insurance policy, you’re pooling your loss risk with the loss risk of everyone else who has purchased insurance from the same company. An average homeowner only files a claim once every 9 or 10 years. Insurance companies are therefore able to use the premiums from homeowners who don’t file a claim in a given year to pay for the losses of homeowners who do file a claim, which is called risk pooling.
We'll be talking about some additional insurance basics: the different types of risk and why it makes sense to eliminate or minimize them even if you have insurance, who can buy insurance and how to get it, and the importance of reviewing your insurance contract, but in this article, we will concentrate on the types of risk and reasons why it makes sense to minimize it even though you are insured.
Minimizable risks: are bad things that you can greatly reduce the chances of. You can greatly reduce the chances of someone stealing your car by not parking it on the street with the keys on the front seat and the doors unlocked. You can greatly reduce your chances of getting lung cancer by not smoking cigarettes.
Avoidable risks: are dangers you can stay away from. Your house can’t fall off a cliff in a mudslide if you don’t buy a house on a cliff.
Unforeseeable risks: are ones you have no power to minimize or prevent. A sinkhole could open up in your backyard and severely damage your house. If you don’t live in an area that is predisposed to sinkholes (such as Florida), you would have no reason to think you were at risk of one.
Taking risks costs you money, and limiting risks can save you money. Here’s an example of how this works.
Type of risk: garage fire
The effect: You have to file a homeowners insurance claim.
The costs: When you file an insurance claim, you have to pay your deductible, and your premiums are likely to go up the next time you renew your policy.
Mitigating risk: Don’t store the gas can you use to fill your lawn mower next to the your water heater, whose pilot light could ignite the gasoline vapors and start a fire or cause an explosion. Buy a gas container with a flame arrestor and a lid that prevents spills.
Premium is the amount of money that an individual or business must pay for an insurance policy. The insurance premium is considered income by the insurance company once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy. If the policyholder experiences a loss, such as a car accident or a house fire, the policyholder files a claim for reimbursement with the insurance company. The policyholder will pay a deductible to cover part of the loss, and the insurance company will pay the rest.
When you buy an insurance policy, you’re pooling your loss risk with the loss risk of everyone else who has purchased insurance from the same company. An average homeowner only files a claim once every 9 or 10 years. Insurance companies are therefore able to use the premiums from homeowners who don’t file a claim in a given year to pay for the losses of homeowners who do file a claim, which is called risk pooling.
We'll be talking about some additional insurance basics: the different types of risk and why it makes sense to eliminate or minimize them even if you have insurance, who can buy insurance and how to get it, and the importance of reviewing your insurance contract, but in this article, we will concentrate on the types of risk and reasons why it makes sense to minimize it even though you are insured.
Check Also:
Download JAMB CBT Past Questions And Answers App for Android
Download WAEC CBT Past Questions And Answers App for Android
RISK
Risks can broadly be sorted into four categories.
Preventable risks: are possibilities of something bad happening that you have the power to stop. If you don’t run red lights, you can prevent yourself from causing some types of car accidents.Minimizable risks: are bad things that you can greatly reduce the chances of. You can greatly reduce the chances of someone stealing your car by not parking it on the street with the keys on the front seat and the doors unlocked. You can greatly reduce your chances of getting lung cancer by not smoking cigarettes.
Avoidable risks: are dangers you can stay away from. Your house can’t fall off a cliff in a mudslide if you don’t buy a house on a cliff.
Unforeseeable risks: are ones you have no power to minimize or prevent. A sinkhole could open up in your backyard and severely damage your house. If you don’t live in an area that is predisposed to sinkholes (such as Florida), you would have no reason to think you were at risk of one.
Taking risks costs you money, and limiting risks can save you money. Here’s an example of how this works.
Type of risk: garage fire
The effect: You have to file a homeowners insurance claim.
The costs: When you file an insurance claim, you have to pay your deductible, and your premiums are likely to go up the next time you renew your policy.
Mitigating risk: Don’t store the gas can you use to fill your lawn mower next to the your water heater, whose pilot light could ignite the gasoline vapors and start a fire or cause an explosion. Buy a gas container with a flame arrestor and a lid that prevents spills.
0 comments:
Post a Comment
Thanks for reading McDoglaz Note
Use the comment box below to reach us.
Are you business driven? Do you want your product/service to go viral and reach a large audience? Promote your product on McDoglaz Note by Clicking here Advertise.
Kindly Share our Posts, Sharing is Caring