A correlation exists between risk and insurance. Insurers sell policies that you as a customer will buy to protect yourself against certain types of risk. This includes risk that involves driving a vehicle, owning a home and an insurers risk against claims. Insurers are able to provide policies that are designed to indemnify individuals that suffer a loss dues to a covered risk.
There is inherent risk to an insurer as well as in insured when insurance is needed and provided for an automobile. All insurers balance their amount of risk by designing certain criteria individual’s need to meet in order to be eligible for an automobile insurance policy. When selling auto insurance companies look at the type of vehicle being driven, where it is being garaged and an individual’s driving history to determine their eligibility for auto insurance. Contrary to the advertisements seen on TV auto insurers are not gong to insure just anyone. Insurers use underwriters that look over applications for insurance to determine if it is an acceptable risk.
There is also risk involved with owning and insuring a home. Owning a home is a big responsibility and buying an insurance policy to protect it is extremely important. This is because there are obvious risks that can occur such as storm damage as well as thefts. An insurer also needs to worry about these types of risks. As a result they charge higher rates based on the location of the home, how it was constructed and when the utilities were last updated. A home insurance policy provided by an insurer contains coverage for risks to the dwelling, contents as well as any potential liability to the home owner.
An insurer needs that provides an insurance policy does so to provide protection against risks that are included in the policy. However there are times when an insurer is unprepared for the amount of claims that can occur as the result of insuring various types of risks. What generally happens is that an insurer may be inundated with claims as the result of a storm or other natural disaster. As a result the insurer may pay out more in claims than they take collect in premium. When this happens an insurer will either raise rates to collect more premium or non-renew policies or withdraw from a particular market altogether.
Risks can come in many forms and there is usually an insurance policy available that can provide protection against these risks. An insured also needs to be aware of risks that can either cause their policy to be non-renewed or increase their premiums. The correlation between risk and insurance is seen in the insurance policy because an insured that pays the premium may file a claim that the insurer has to pay.