An insurance risk is the threat of a loss for which an insurer can provide indemnity to an insured. For every type of insurance policy out there, there are insurance risks specific to that type of policy for which specific coverage is provided. For example, for auto insurance coverage, obvious risks to you, the insurer, is that your client will have an auto accident or have their car stolen. If the insured has obtained the proper coverage, they would file a claim and receive a payout from your company.
The type of auto coverage the insured has in these cases is critical, since collision and comprehensive coverage are both optional insurance purchases, unlike liability coverage, which is almost always mandatory under state law.
As Coverage Increases So Does the Premium
The least expensive type of auto insurance you can buy is straight liability coverage in an amount only high enough to satisfy your state’s minimum requirements. Unfortunately, these minimum mandatory limits for automobile liability coverage tend to be woefully low for the real world. A policy that you’ve underwritten for a client found legally responsible for causing an accident in which a third party is seriously injured could end up costing many thousands or hundreds of thousands of dollars in a liability suit. A minimum liability policy would only help pay a fraction of these costs, with the balance falling on the shoulders of your client. With these types of insurance risks so common, it might be prudent for the client to be protected by 5-10 times the minimum required amount of liability coverage, as recommended by many experts. Even better, a $1M umbrella policy would add an even more realistic amount of protection at an affordable cost.
In the example above of a car being in a collision or being stolen, two other types of coverage are needed besides the mandatory liability protection. For a car collision, collision coverage is needed to help pay toward the cost of repairing or replacing the client’s vehicle. A stolen car would be claimed under the client’s comprehensive coverage. Each different insurance risk is covered by different coverage, and the more protection provided by your company, the higher the insurance premium will be.
Other types of auto policy risks include:
- Being in an accident caused by another driver who is uninsured or underinsured. Coverage is available specifically for this scenario.
- A driver and/or passengers involved in an accident are injured and require medical treatment. Medical Payments Coverage will help pay these costs regardless of who is responsible for causing the accident.
- An accident causes injuries that require medical treatment and, afterwards, income is lost from missing work or child care is required. Personal Injury Protection (PIP) can help with these costs.
When Insurance Policy Risk is Most Prevalent
The holiday season, between Thanksgiving and New Year’s, is the time of year when insurance companies see the highest number of claims coming in, making this the time when insurance policy risks are at their height.
Some of the major factors contributing to this increase in claims include winter weather, an increase in the consumption of alcohol, and the increase in commercial activities.
In areas where snow falls during the winter, insurance risk rears its head to affect claims on several types of policies. Slip and fall accidents become prevalent both indoors and out. Sidewalks can get snowy and icy, making them slippery and a potential danger to those using them. If a slip and fall accident occurs on commercial property it’s likely to be followed by a liability suit, which would be claimed against the business’ insurance coverage. Someone slipping on a residential sidewalk or driveway might also involve a liability claim, which should be covered by the homeowner’s insurance policy.
Snow and ice can also play havoc with winter driving, causing auto insurance claims to spike. Families may be traveling long distances to visit family and friends, and traffic patterns around holidays typically become heavy, posing even higher risk. Another big problem during this time of the year is the number of drivers under the influence of alcohol or other intoxicating substances.
Finally, winter weather can often dump copious amounts of snow and ice on building rooftops, the weight of which can create dangerous problems to a building’s structural integrity. Often claims are made on homeowner’s policies after heavy snowfall continues to build upon rooftops. The buildup of ice dams can also cause water to enter a home, causing damage to interior walls and personal property within the home. Winter cold can also cause unprotected water pipes to freeze and burst, causing damage to homes and the personal property within. All of these incidents are insurance risks that will keep your insurance company busy at this time of year.
With so much gift-buying and gift-giving during the holiday season, it’s the perfect time for robbers and thieves to take advantage of the easy pickings they may find. Expensive gifts may be found in homes or in shoppers’ automobiles, and a dedicated criminal can find ways to liberate these items, leaving the would-be gift giver with potential damage to their home or car. They’ll need to file an insurance claim for the stolen goods and damaged property. Stolen gifts are a huge problem during the holiday season. Hackers and cybercriminals may also find ways to steal from you while you’re buying online, finding ways to access your bank and/or credit card information.
Holiday parties almost always involve alcohol consumption and this may present risk in several ways. For one thing, anyone who’s been drinking should definitely not be getting behind the wheel to drive home, but many people don’t take this warning not to drink and drive. If the party takes place at someone’s residence and one of the guests is involved in an accident and causes injury or property damage to a third person, the owner of the home who hosted the party may be held liable.
Sometimes, in the rush to produce enough inventory to meet customer demand, toy and other gift manufacturers may cut corners in their production process. This may lead to substandard quality products that may cause injury or harm and later be the subject of a recall. This may be followed by inevitable liability claims and judgments that must be handled by insurance companies.
Insurance Risks Are Everywhere
There’s no getting away from insurance risks in everyday living, but many things can be done to avoid them. As an insurance underwriter, you want to write coverage for those who work to avoid risks, who don’t like “living dangerously,” whether you’re writing car, life, or homeowner’s insurance. Insurance Risk Services (IRS) are experts at uncovering homeowner’s insurance risks. Let them help you uncover hidden risks, enabling you to write more accurate policies. They’ve been successfully doing it for nearly four decades. Contact IRS to find out what they can do for you too.