Put basically, insurance allows those who suffer a loss or accident to be compensated for the effects of his accident. Payments from a fund of money that all holders of individual insurance. In other words, individual risks are pooled and shared with each secured a grant to the Common Fund.
The grant is called the price. Premiums paid to insurers, these are institutions which accumulate the money in the fund from which claims are paid. The loss is borne by the contractor that the claim and all other policyholders who have not suffered in the same way.
Insurers are professional risk takers. They know that the likelihood of different types of risks is ongoing. I can calculate the premiums needed to create a fund large enough to cover likely loss payments. It is clear that only a fraction of policyholders will require compensation from the Fund at any time.
Since there are two important factors arise when calculating the refund. First, the great risk is that there is a loss. Second, if the contractor is above or below average in risk.
Take three examples. In motor insurance a couple with a high powered car or a driver with a long history of accidents will pay a higher premium for a mature and experienced driver with a small lounge that has been incident free.
Even the owner of the shop fish and chips will pay a higher premium for his fire insurance, for example, the owner of an office. The risk is greater, so that the premium is higher.
Someone who is young, fit and function in a risk-free, it becomes easier to buy life insurance reserves and pay lower premiums for those who have a heart condition or are in a risky profession.
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