Risk goes hand in hand with insurance. You pay for insurance policies due to the fact that there are risks – it serves as your contingency plan. It pays to be practical and to be a worrywart. It is indeed better to have a full-proof plan than to have no plan at all.
You may come across the thought “why pay for insurance when I can just be careful?” Well, you have a point there but not all things can be foreseen in a way that you really have to expect the unexpected. Even expecting the unexpected still is not enough since things may really turn out different from how you pictured a scenario – whether it is optimistically or pessimistically.
There are different risks, thereby resulting to different types of insurance policies. Risks may vary even though it falls under the same type of insurance policy. Picture a damaged Ferrari and a damaged Toyota. Both fall under automobile insurance but if you consider each car’s worth, you will definitely come to a conclusion that indicates that the Ferrari will require a higher insurance premium as opposed to the latter – or at least a wider coverage.
Although insurance companies may have varied terms and conditions, as long as there is an agreed coverage then they will reimburse you for any loss that may happen.
A risk, by definition, is a possible or probable occurrence. However, in terms of insurance, risks are just possibilities while hazards are those that heighten a possibility or risk from happening. Hazards may be in the form of smoking (for health insurance). Say a policyholder smokes incessantly; this amplifies the threat of possible diseases that one may acquire due to smoking. Insurance companies take hazards in careful consideration since this may and will make a big difference in a policyholder’s premiums.
If, for example, a policyholder fails to ensure a certain property that is not stated in an existing policy, an insurer (the insurance company) will most likely disregard the loss. Overall, there are certain insurance policies for certain risks. It pays to know which ones go with what. A careful study of such policies and their premiums before purchasing an insurance policy is always one of the best ways for you to get your money’s worth.
However, a policyholder has no right to by any means deliberately worsen or heighten a risk. This then makes claims invalid at all costs. A situation wherein one lies to get more benefits is definitely unacceptable and is characterized as an uninsurable risk.
If you plan to buy an insurance policy anytime soon, it’s best to do the research and do the math. You don’t want to end up insuring yourself or any of your properties because of constantly thinking of an already existing insurance policy that you are problematic with. At any given time that you cannot continue paying your premiums, a company may cancel or hold your insurance plan that is why it is best to prepare for all possible costs and be well aware of all benefits you can get for every policy you purchase.