Insurance policy programs are the financial compensation for the insured individuals. Insurance program works by the pooling risk. What is mean by the pooling risk? The simple answer is that when a vast group of individuals insured themselves and want to insure themselves against the particular loss, they pay their premiums is called Insurance Bucket or Insurance Pool. The reason is that the numeral quantity of the insured individuals is so huge. So the insurance companies use the statistical analysis to the particular project. Statistical analyses give them the complete picture of what their genuine losses will be within the particular class. Insurance companies know that all insured individuals will not go through the losses at the same time.
That is why the insurance companies work profitably. At the same time insurance companies pay for the claims that may come up. Let’s consider the auto insurance as example. The majority of individuals get auto insurance to protect them from the vehicle damage loss but in fact only individuals face the accident. Insured person pays for the possibility of the loss. So that the insurance company pays the premium for the financial compensation that he faces in the accident. There are six focal steps to understand the fundamental of insurance and How Insurance Work.
That is why the insurance companies work profitably. At the same time insurance companies pay for the claims that may come up. Let’s consider the auto insurance as example. The majority of individuals get auto insurance to protect them from the vehicle damage loss but in fact only individuals face the accident. Insured person pays for the possibility of the loss. So that the insurance company pays the premium for the financial compensation that he faces in the accident. There are six focal steps to understand the fundamental of insurance and How Insurance Work.
- What is Risks?
- Type of Risk
- Effect of Risk
- Cost of Risk
- Mitigating Risk
- Risk Control
- Risk Financing
- What is Risk Sharing?
- What is the Risk Management Process?
- What is underwriting?
- What is Insurance Contract?