Although it may seem complex, the insurance is actually very simple: payments (or premiums ) to allow the multitude to settle claims of a small group. Your premiums are paid in a large common fund, if you will, with your insurance company. Small group of claims are paid from this fund. As people who contribute to the common fund outnumber those with claims, the fund still contains sufficient funds to pay claims – whether a single claim of a major amount, eg when a person becomes permanently disabled following a car accident, or a multitude of claims of a lesser amount, as in the case of a natural disaster. (By some estimates, the ice storm that hit part of Quebec, Ontario and New Brunswick in 1998 gave rise to some 700 000 claims for damages totaling $ 1.4 billion.) However, major disasters (such as ice storms) reach almost to exhaust the fund.
Insurance for insurance companies
Even when the body passes close to being empty, there is another case in which insurance companies can dip to resolve claims. Part of your premium is used by your insurance company to purchase reinsurance, ie d. insurance for insurance companies. Sometimes the claims are so important – as in the case of an earthquake – it would be impossible for an insurance company to assume only the costs. Reinsurance is an additional protection against claims of importance.
Annual reconstitution of the box
Your insurance is a contract year, so that the fund is operated only one year at a time. The amount of your premiums and premiums for other policyholders is determined by the amounts that insurance companies feel they must make during the coming year to settle claims. Your premiums do not accumulate over time, unlike some types of life insurance.
Calculation of premiums
Within reasonable limits, some of which are dictated by law, your premiums are calculated based on the likelihood that you will submit a claim, that is to say that you pigerez in the common fund of insurance. Those least likely to dip into the cash pay lower premiums than those who are more likely to do so.
Insurers take many factors into account in determining the likelihood that you will make a claim. According to a preconceived standard, a policyholder who has never made a claim should pay less, little or nothing for their insurance. Although the history of claims are indeed important, a more reliable indicator of the likelihood that a person or company making a claim is the statistical group to which it belongs.
Your insurance dollar
Every dollar of premium received from policyholders is allocated as follows: 53.1 cents back to policyholders in the form of regulations; 15.9 cents back to communities in the form of various government taxes on insurance, 20, 5 cents goes to pay operating costs and regulation of the industry and 10.5 ¢ are the benefits of the industry.
This distribution is based on a national average of seven years, from 2004 to 2010.
The insurance covers …
The insurance covers only the types of claims described in your contract. It is very important that you read your policy or that you check with your insurance representative about coverage you receive or not. Your insurance will not cover all the problems you will face. And this is not a maintenance contract. Insurance is generally intended – and is priced accordingly – to help policyholders cope with the financial impact that can have unpredictable events, sudden and accidental. If, for example, you live on a floodplain near a river, flooding in the spring of your property is not sudden or accidental, is inevitable and therefore uninsurable.