Insurance – Affordable Or Not?

Is insurance affordable or not? Insurers tend to think the cover they offer is very affordable, considering all the risks involved. However, most consumers think insurance is unaffordable due to their own financial situations. So how does one go about determining the affordability of insurance?

How insurers determine affordability

When insurers determine affordability, they have to decide whether someone or something can reasonably be insured at a fair price. The insurer has to be able to assume the risks involved at a fair price to both, the insurer and the insured person. If the insurer cannot provide it at a reasonable price, the individual won’t purchase the policy.

In order to set a fair price, the insurer has to do massive research into the possible risks that might be assumed by issuing an insurance policy. This analysis includes studying:

o Potential cost to insurer, insured party, and other policy holders

o General environmental conditions

o Specific location

o Proximity and ratings of emergency services

o General economy on a global, national, and local community level

o Specific financial status and credit scores of individual or business

o General and specific social environment, such as crime rate and civil unrest

o Occupational safety hazards and risks Hauser Insurance

o Laws, regulations, and building codes in place or pending

o House/Building Infrastructure rating-this is usually based on age of building and the materials used for its construction

o Climatic change risks, as well as current local climate conditions

o Person’s age, gender, marital status, educational level, occupation, and employment outlook

o Person’s health, general well-being, driving record, and criminal history

There are many more factors considered by insurers during the affordability determination process. Basically any and all possible loss or damage from any risk, peril, or hazard is taken into consideration.

How consumers determine affordability

Insurers must consider what is affordable according to the risks being assumed and the potential cost to themselves, the insured party, and other policy holders. However, a consumer only cares about gaining financial protection in case something happens to something they value monetarily or sentimentally. The consumer will therefore do their own risk evaluation, based on what he or she thinks will likely happen to the item and its personal value. If the insurance costs very little compared to the item being insured, then the consumer may consider it to be affordable.


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