Helpful Tips
So, You can make smart, sound decisions…
We believe every policy holder should be well-informed, and have the power to make smart, sound decisions when purchasing, negotiating, or using insurance contracts.
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Chance
You’ll hear this word a lot when working with insurance. Chance often implies some doubt about the outcome in any given situation. However, it’s important to remember that the outcome is often a favorable one.
‘Doctrine Of Utmost Good Faith’
A minimum standard that requires both the buyer and seller to act honestly toward each other, and not to mislead or withhold critical information from one another. The doctrine of good faith applies to many common financial transactions. You may also hear the Latin form of this expression; “Uberrima fides.”
Insurable Interest
This is one of the basic doctrines governing the practice of insurance. “Insurable Interest” means the person or entity that is requesting insurance should have a legally recognizable relationship with the interest (property or person) that is being insured and may suffer a loss.
Purchasing Insurance
When purchasing insurance, keep in mind the following tips:
- Know who your insurer is (not just who the broker is)
- See the premium clearly on the policy itself (not just on a side invoice)
- Respect the premium payment modality agreed upon, and have an official receipt from the insurance company itself for the paid premium
- Read your policy thoroughly to make sure it is what you bargained for
- When in doubt, do not hesitate to ask questions (in writing) to your insurance agent/ broker/ company
What is Risk?
A probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action. The word Risk implies both doubt about the future, and that the outcome could potentially leave us in a worse position than the present.
Risk can have many meanings:
- Risk as a cause: the risk of fire or injury
- Risk as a likelihood: implying there are levels of risk. We usually refer to high or low risk
- Risk as the object: when we talk about going to see a risk we do not mean that we are going to see a storm or fire. Instead, we refer to the object or person at risk.
- Risk as a loss: “taking a risk” means that we are going to place ourselves in a position or situation where there is some doubt about the outcome
- Risk as a verb: the act of placing oneself in a situation where a loss could occur. We might risk crossing the road between traffic lights
Essentially, Risk is:
- The possibility of an unfortunate occurrence
- A combination of hazards
- Unpredictability: the tendency that actual results may differ from predicted results
- Uncertainty of loss
- The possibility of loss
Cost of Risk
We can look at several different perspectives
- Frequency of risk
- Monetary cost or financial severity
- Human cost in terms of pain and suffering
Level of Risk
There are various levels of risk, divided into two criteria:
1. Frequency and Severity
2. Utility
Frequency and Severity: risk is a combination of the likelihood of an event and the severity, should the event occur.
Utility: this refers to the measure of risk to which an individual is exposed. Utility theory attempts to represent the probability of loss, and the cost of loss in one measurement. The value which a person attaches to a risky situation is a function of the probability of the occurring and the severity should it occur. Note: this cannot be seen in isolation of the aggregate wealth of a person.
Public Policy
It is common principle in law that contracts must not be contrary to what society would consider to be the right and moral thing to do. For example, it would be unacceptable to insure against the risk of a criminal venture going wrong. A more extreme example would be for thieves to put a policy info effect that would pay them the expected gain from a theft, if they were caught by the police. A simple example would be the risk of incurring a fine. Society would not find it acceptable for a person to avoid punishment implicit in the fine, simply by taking out insurance.
Uncertainty
As humans, we have imperfect information about the future, and this imperfection in our knowledge is what leads to the doubt, and hence, uncertainty that we express. Uncertainty exists regardless of whether this doubt has been recognized by those who may be most directly involved.
We’re happy to guide you through the insurance process, and to make this complex world easy, stress-free, and rewarding. Drop us line today, our friendly team is eager to assist!
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