Whether an individual deals with an independent agent, an insurance broker, or directly with an insurance company, he needs to be certain of some issues before signing the document. Regardless of the type of insurance he is purchasing, he should be aware of the process. Here is an overview of the issues involved when buying insurance.Insurance is transferring risk to the insurance company at a price. The purpose is to get indemnified if and when the risk happens.
Why is transfer of risk required at all? In other words, why should one buy insurance paying premium upfront? Instead, risk can be retained, in full or in part, leading to self-insurance. Even if insurance is bought, the insurer will ensure that the insured will have to bear a part of the risk by imposing excess which is deducted from the claim amount. The insurer may induce the insured to accept a higher excess voluntarily with lower rates of premium.
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