Many insurance policies have own form of deductible, which means that the insured people must cover the ﬁrst portion of their all loss. Like as for an example, a 10 percent deductible on a $100,000 home insurance policy means that the insurer is fully responsible for property damage that exceeds $10,000 amount up to some specified maximum amount but the coverage will have some limit.
Losses and claims
Insurance Concept is not only to know about insurance but also have knowledge of Insurance Policy. A policy holder is a person who has bought insurance policy. The insurance term loss is used to denote the payment amount that the insurer makes to the policy owner or next of ken for the damage covered under the Insurance policy. It is also used to aggregate all insurance payments in one time. We can say that there was some home loss under the home insurance policy, meaning that the hoe insurance policy holder received a value able payment from the insurer companies. We may also say that the industry lost if will be $50 bn in the earthquake.
A claim means
A claim means the insurance policy owner is seeking to recover losses payments from the insurer companies for any damage under the active insurance policy. But a claim does not result in a any loss if the amount of home damage is to subject to a insurance policy exclusion, but there still are some expenses in some investigating that the claim. There is a distinction between a claim & IN insurance loss, the terms are often used interchangeably. Mean that an insured People event occurred or with any reference to the prospect of having to pay out money.
The law of large numbers
Insurance markets can exist because of the law of large value which states that for a series of independent distributed random variables, the variance of the average amount of a claim payment decreases as the number of claims increases.
However, in some cases like as natural hazards such as any floods, hurricanes ,earthquakes, and such as the Oakland ﬁre like as in 1991, create a problems for insurers companies because the risks affected was very big and by these events are not independent. They are thus classiﬁed as risks. If a severe earthquake occurs in country, there is a high probability that many structures would be damaged or destroyed at the same time.
Therefore, Insurance Concept, The Basic Insurance Concept of Insurance Policy is the variance associated with an individual loss is actually the variance of all losses that occur from the speciﬁc disaster. Because of this high variance, it takes long history of past disasters to estimate the insurance average loss with any degree of predictability. This is why small insurance companies and risk assessors would like to have databases of hurricanes, earthquakes or other big or similar disasters over years periods. With the relatively short period of recorded history, the insurance average loss cannot be estimated with any reasonable degree of accuracy.
One way that insurers companies reduce the magnitude of their any catastrophic losses is by the employing high deductibles, where the insurance policy holder pays ﬁxed money of the loss like as the ﬁrst $5,000 or any percentage of the total insurance coverage like as the ﬁrst 50 percent of a $500,000 insurance policy. that is the way whereby all insurer companies pays a fraction of loss that occurs and an effect bigger or similar to a deductible. Another way of limiting potential losses is for the insurer companies to place caps on the maximum value of insurance coverage on any given piece of insured property.
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