Is insurance affordable or not? Insurance companies tend to believe that they cover the offers they are very affordable, considering all the risks involved. However, most consumers believe that insurance is insurmountable because of their own financial situations. So how is it possible to determine the affordability of insurance?
How the insurers determine the affordability
When the insurers decide on affordability, they must decide if someone or something can reasonably be insured at a reasonable price. The insurer must be able to take the risks involved at a reasonable price for both the insurer and the insured. If the insurer can not provide it at a reasonable price, the individual will not buy the policy.
In order to establish a reasonable price, the insurer must conduct a comprehensive examination of any risks that can be assumed by assuring insurance. This analysis involves studying:
Potential expense for the insurer, insured and other policyholders
General environmental conditions
Proximity and rating of emergency services
General economy at global, national and local level
Special financial status and credit points for individuals or companies
General and special social environment, such as crime rates and civil concerns
Occupational risks and risks
Laws, regulations and building codes in place or waiting for
House Building Infrastructure rating This is usually based on building age and materials used for construction
Climate change risks, as well as current local climate conditions
Age, gender, marital status, level of education, occupation and employment prospects
human health, general well being, driving register and criminal history
There are many more factors taken into account by the insurers under the compliance decision making process. Basically, all possible loss or damage is taken into account from any risk, danger or danger.
How consumers decide on affordability
Insurance companies must consider what is cheap according to the risks assumed and the potential cost for themselves, insured and other policyholders. A consumer only cares about getting financial protection if something happens to something they value monetary or sentimental. The consumer therefore makes his own risk assessment based on what he or she believes is likely to happen with the item and its personal value. If the insurance costs very little compared with being insured, the consumer may consider it affordable.
Although the individual determines affordability using some of the same factors as the insurer, there will be a difference in the interpretation of the results of the risk analysis. While the insurer sees the danger or risk as an absolute event, the consumer considers it a very unlikely event. It is human nature to assume that bad things will happen to other people but not you, especially when you are young.
Because of this basic human assumption of invincibility, most consider that insurance is not a high priority. Some do not consider that insurance is necessary at all. Many people are only interested in obtaining insurance, because the law or a creditor insists they have it.
For example, someone who is hardly living does not usually regard it as a necessity. For that person, an insurance premium does not appear to be necessary to fit into the monthly budget. When the money is very limited, other living expenses will be higher priority. Many people in this situation would even consider insurance useless, that they had no value to lose anyway.
But these people are the ones who need the most insurance. They are the ones who would have the biggest financial difficulties if anything happened. They could not afford to replace all their belongings at the same time, nor could they afford to pay compensation and legal fees if they caused other peoples death or injury. If they could not afford to replace their own possessions, they would certainly not be able to afford to replace the property of others if they hurt it.
When the insurance does not have one or very low priority, the person will consider insurance at all costs insurmountable. A low income consumer will probably never believe in insurance as affordable. Whether you buy insurance voluntarily or with violence, consumers want the same thing. They all want high quality coverage at very low prices, no matter how much risk it can be. Unfortunately, most private insurance companies will never be able to meet this type of demand without creating a large deficit or going bankrupt because of the payment of claims when a major disaster struck a certain area.