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Common Insurance Points
Written by Anthony C. Martin

Most people have to deal with different types of insurance during their life. This can be auto insurance, home insurance, health insurance and others. Insurance contracts are always very complex documents with lots of different items and clarifications. Even the lawyer not always can understand all the intricacies of the insurance contract. However, there are some items that are usually common to all of insurance contracts that you need to know.

All insurance contracts include events that may occur or may not occur. This is your risk for insurance. There may happen such events like damage, injury, theft, flood, fire, medical expenses for illness or many others. The only exception is life insurance, which covers the death. Clearly, this event would occur, however there is uncertainty which lies in the fact that the time of this event is unknown.

There should be some quantifiable economic loss. The insurer covers the risk, but he should be able to evaluate and predict the likely losses. The insurance company should know what the costs may be if an accident does occur. All losses of course are evaluated in monetary terms. That is, you can insure your losses in case of illness or loss of the car, but you will never be able to insure yourself against feeling upset over the incident trouble.


The loss should be definite. The insurer needs to know what financial risk he is taking. Otherwise, insurers would not be able to set prices for their services.

The loss should be significant. The cost of risk should justify the cost of insurance payments. If you insure your new car, the representative of the insurer will come and assess your car, calculate the cost of insurance, execute the contract and describe all the details which are covered with insurance. The price of your car will justify the efforts spent on drafting such a contract. However, if you want to insure your gold fish, it will be difficult to justify the effort expended on the preparation of such a treaty.

The loss should not be catastrophic. Determination of catastrophic losses depends on the size of compensation and the assets of the insurance company. If damage is more than the insurer can afford, such insurance will be absolutely useless. For example insurance against earthquakes is hardly possible, because the insurance company will not be able to make all payments in full.