Insurance is the annoying necessity that we all pay for to make sure we don’t end up in massive amounts of debt if our house burns down. If we crash our car or if something tragic happens insurance helps us maintain peace of mind knowing that even if something bad does happen someone else is going to pay for what it costs to fix it though.
When I’m trained on site this can be a little perplexing. I mean if you pay $200 a month for home insurance and after only 6 months your home burns down. The insurance company will buy you a new house likely in the matter of hundreds of thousands of dollars. But you would only give them $1200 why would they do that’s the power of insurance baby.
The basic concept of insurance is that a company insurer offers a guarantee for a certain risk that may or may not occur then another party. The insured pays the insurer in exchange for protection against that risk when a bunch of people do the same thing for the same risk eventually.
The insurer is getting a lot of income but the probability of that risk happening is spread out among a bunch of people. And stays about the same insurance companies make money by figuring out. How much money they need to bring in to turn a profit on a given risk with a given probability that calculation event influences how much each of the insured pays each month.
in general, it’s simple math but in actuality. insurance companies have highly complex models for all of this. Not every insurance company offers the same insurance companies. Will specialize in their own kind of insurance this is because each company has to develop a complex model to ensure that they can make money insuring a profit.
If you estimated that one in 100 houses burned down each year. But if it was actually 5 in 100 then you’d be losing money pretty fast. If you insured those houses you’re probably charging too little for everyone’s insurance. And then end up on the hook for those 4 extra houses.
There are many types of insurance companies from auto to health to life to homeowners most people in the world. Have these core insurance policies some of which are legally required to be held like auto insurance you might be wondering though.
Why wouldn’t you just want to save your money each month and get to hold on to it in a bank account? Then if nothing bad ever happens you will have a lot more money well while that may be true. It makes you the one exposed to the risk if you put away $200 a month for a year to save on home. You’ll have an extra $2400 at the end of the year.
However, if your house burns down the next year well then you’re going to be out with a few $0 that it’s going to take to fix it up pretty bad deal is that risk. You’re willing to take chances are it isn’t that’s why getting insurance is generally a good thing it takes all of the risks.
Anxiety in the financial burden off of you and puts it on to a much larger company. That can afford it when you understand insurance as just a way of paying a company to assume your risk you can start understanding.
Are you worried that while you’re toasting a cinnamon raisin bagel your toaster? Will overheat one of the reasons causing it to burst into a spontaneous plasma is to destroy your entire pantry full of stockpile bags of lucky charms in baked beans well.
That’s oddly specific but someone could probably insure you for that exact thing likewise maybe you are really attractive. And worried that if you fall one time you’re going to hit your face and stop being attractive. Be depressed because no one will like you anymore well somebody could probably insure you against it. That too this isn’t too far off of reality either celebrity will often have parts of their body insured because their image is a source of their income there are a few more pieces to the puzzle here though.
We should talk about reinsurance and claims? When an insurance company wants to buy insurance on their own policies. Well, then they buy something called read insurance. That is not a joke to see an insurance company realizes that they’re overexposed to home fire insurance. A hot summer’s coming up well they could take out reinsurance policies. On their insurance policies to protect them from high losses in case all their houses the insurer.
Just burst into flames because of global warming and whatnot then all the risk is all on the reinsurance agency. This is a necessary thing to think about if an insurance company insured everyone. In Florida’s cars but then a hurricane came through and destroyed all the cards.
Well, that insurance company may owe more in payouts than they have, and once they run out of money. Well, then no one would get money for their destroyed car like they thought they would reinsurance is necessary. And important to ensure that insurance companies remain profitable and insolvent to pay the insured.
When there are claims. In terms of claims insurance companies also don’t just automatically payout if you have car insurance. And you show them a crashed car the company. Will investigate to make sure that you didn’t intentionally crash your car to get the payout.
You can go to jail seeking claims actually does happen quite frequently people see it as a way. To either get a big cash windfall if they’re in hard times or get out of the car or house payment.
That they can’t afford however car insurance agencies employ a top of line investigators to make sure that they. Don’t make faulty payouts so now you can likely see is a big business. If you have the right models assume the right kinds of risk and have good investigators to make sure.
If something bad happens it can save you a lot of money in most cases. Is a winning formula for all parties involved it helps consumers be less worried about bad events? It makes companies a lot of money and that’s basically how works see.
I told you it was going to be interesting. Maybe hopefully that was interesting otherwise I don’t know why you’re still here. We have more videos would you probably click on right here that might be interesting or there’s probably J. U. G. G. just tired of hearing my voice you could click over to the right. It’s probably other people’s. But. Enjoy your day thanks for learning about insurance we’ll we’ll see where we’ll see you next time. By.