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Risk in insurance

Who Bears The Risk In Insurance?

Insurance can be said as the transfer of risk from one party to another party. These two parties have a contract with each other and according to this contract, on will have to pay the other in case of any accidental loss or emergency. The two parties which are involved in insurance are called insured and insurer. Insured is the person which purchases the insurance from the insurance company and pays them in order to get help in any time of need. Insurer is the company which gets paid by the insured and they have to help them in any case of emergency from the money they got from him. Risk in insurance is faced by both of them but the question is HOW?

Risk faced by insured:

If you take everything in bookish perspective then the insured person will face no risk because he or she has transferred his or her risk to the insurance company but this is not true in a natural perspective.

A person purchases insurance from a company by paying them money. The first and the most important risk is that whether this was important or not? The risk is that what if he or she is not going to face any crisis in his or her next life then where will the money go? He or she could have done a lot of other important things from that money like investment in some business or buy a new car but he or she paid for insurance. The person will face regret of this paying after realizing that his or her insurance has expired and he or she faced no situation to use it.

Risk in insurance

The second risk that insured face is that whether that company will help him or her and pay him in case of crisis or not. Insurer will find a lot of ways to reject the claim of insured for money because he really looks forward to keep his money. Insurer uses the phrases from his/her own insurance contract to say that the insurance does not cover this claim. This is the most difficult situation but this risk can be minimized by reading the insurance policies very carefully before purchasing. You can also get help from a legal advisor in this case because he can understand legal terms in a better way.

Risk faced by the insurer:

Insurer also faces a lot of risks because he has spent a lot of money to bring clients and then after making a customer he will have to pay for all of the damages. Sometimes, the damages cross the insurance limits and they have to pay because they lose case in the court. They also have to look for fraud customers e.g. some people get health insurance on the basis of fact that they are physical fit and they never face any health problem. Insurance policy is cheaper in this case but it can be a loss if the customer hides his disease in a real clever manner.

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