Not all commercial risks can be covered in an insurance policy in the US. The event that results in loss should theoretically at least be certifiable as to definite location, definite time, and definite cause. Only then can it be in principle considered as coverable under an insurance policy.
Death of an insured person, an injury sustained by a workman, a fire, and an automobile accident are all considered events that form coverable risks. On the other hand, in case of occupational diseases, the definition is not altogether met. Therefore whether a certain occupational disease will qualify for insurance coverage depends on several judgmental factors. Therefore, verification of the time, the place, and the cause of loss is necessary to make an insurance claim admissible.
Another criterion impacts whether an event involving loss is coverable from the point of view of insurance. It is that the beneficiary of the insurance claim should have no means of controlling the said event or manipulating the event simply to claim insurance. At least in this respect, the loss involving event should be pure. Events involving speculative losses such as share transactions or other ordinary business risks are not coverable under an insurance policy.
Another requirement that must be met is that the loss in the event must be meaningful. Any claim that involves a sum of money that is much less than the administrative expenses borne by the insurance company to verify the claim and award the claim is not coverable. The guiding principle here is that the insurance company should not suffer an untoward loss that cannot be hedged from anywhere else.
The premium for a coverable risk cannot exceed what is fair when the population of insured persons is considered as a whole. On the other hand, no risk can be coverable under an insurance policy for which the premium is so low that considering the whole population of insured persons, it will incur a loss to the insurance company. Therefore, the amount of insurance premium always needs to be fixed so as to be fair for both the insured and the insurer.
Any event that is coverable from the point of all other criteria, but that involves only a miniscule portion of the population to be potentially subject to the loss through it, cannot be covered under an insurance policy. The reason is that the premium will become exorbitantly unaffordable for each of the insured persons.
Insurance companies use quantitative statistical calculations in respect of an event to predict the quantum of affordable premium. Where such methods cannot be used, the event cannot be covered under an insurance policy.
If there is a possibility that an event will simultaneously affect large segments of the population, the insurance companies generally do not cover such an event. The reason is that the insurance company will go into a non-hedge able loss. Even when the insurance companies agree to cover the event, the claim admissible is so miniscule that going in for the policy becomes a worthless exercise.
Death of an insured person, an injury sustained by a workman, a fire, and an automobile accident are all considered events that form coverable risks. On the other hand, in case of occupational diseases, the definition is not altogether met. Therefore whether a certain occupational disease will qualify for insurance coverage depends on several judgmental factors. Therefore, verification of the time, the place, and the cause of loss is necessary to make an insurance claim admissible.
Another criterion impacts whether an event involving loss is coverable from the point of view of insurance. It is that the beneficiary of the insurance claim should have no means of controlling the said event or manipulating the event simply to claim insurance. At least in this respect, the loss involving event should be pure. Events involving speculative losses such as share transactions or other ordinary business risks are not coverable under an insurance policy.
Another requirement that must be met is that the loss in the event must be meaningful. Any claim that involves a sum of money that is much less than the administrative expenses borne by the insurance company to verify the claim and award the claim is not coverable. The guiding principle here is that the insurance company should not suffer an untoward loss that cannot be hedged from anywhere else.
The premium for a coverable risk cannot exceed what is fair when the population of insured persons is considered as a whole. On the other hand, no risk can be coverable under an insurance policy for which the premium is so low that considering the whole population of insured persons, it will incur a loss to the insurance company. Therefore, the amount of insurance premium always needs to be fixed so as to be fair for both the insured and the insurer.
Any event that is coverable from the point of all other criteria, but that involves only a miniscule portion of the population to be potentially subject to the loss through it, cannot be covered under an insurance policy. The reason is that the premium will become exorbitantly unaffordable for each of the insured persons.
Insurance companies use quantitative statistical calculations in respect of an event to predict the quantum of affordable premium. Where such methods cannot be used, the event cannot be covered under an insurance policy.
If there is a possibility that an event will simultaneously affect large segments of the population, the insurance companies generally do not cover such an event. The reason is that the insurance company will go into a non-hedge able loss. Even when the insurance companies agree to cover the event, the claim admissible is so miniscule that going in for the policy becomes a worthless exercise.