Characteristics of insurable loss-:

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In summary, the book explains that insurance premiums should cover the expected cost of losses, as well as the costs of administering the policy, adjusting losses, and providing enough capital to ensure that the insurer can pay claims. For small losses, the additional costs may outweigh the expected cost of losses, making it not worthwhile for the buyer to pay for insurance.
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shivajikobardan
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Homework Statement
Large loss what is that?
Relevant Equations
None
Large loss-:

Book says

" The size of loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and adminstering the policy, adjusting losses and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses, these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to the buyer."
is it trying to say insurance premim need to cover=insurer cost+etc money
so if insurer cost<etc money, don't offer it?
 
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  • #2
I can't tell which costs listed in the quote you mean to include in "insurer cost" and which are in "etc money". Can you define your terms better?
 

FAQ: Characteristics of insurable loss-:

What is an insurable loss?

An insurable loss refers to any event or occurrence that causes financial damage or loss, and is covered by an insurance policy. This can include things like property damage, personal injury, or loss of income due to unforeseen circumstances.

What are the characteristics of an insurable loss?

The characteristics of an insurable loss include being fortuitous (unforeseen and accidental), measurable (able to be quantified in monetary terms), and non-catastrophic (not affecting a large group of people at once). Additionally, the loss must be caused by a specific peril or risk that is covered by the insurance policy.

What types of losses are typically not considered insurable?

Losses that are intentional, predictable, or catastrophic in nature are typically not considered insurable. This includes losses resulting from illegal activities, wear and tear, or natural disasters such as earthquakes or floods.

How do insurance companies determine the insurability of a loss?

Insurance companies use actuarial analysis and risk assessment to determine the insurability of a loss. This involves looking at historical data, probability of the event occurring, and the potential cost of the loss. If the risk is deemed too high, the loss may not be considered insurable or may require a higher premium.

Can insurable losses be prevented?

While some insurable losses may be preventable, such as installing security systems to prevent theft, others may be unavoidable. Insurance is designed to provide financial protection in case of unforeseen events, so it is important to have coverage in place for potential losses that cannot be prevented.

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