Insurable risks really have only 3 basic things to learn about them. The average policy holder is independent enough from the other people that they usually only experience a small loss at any given time. The risks that are involved in accidents are beyond the control of the insured, but the Insurance Company can pre determine the risk or loss before insuring the insured. There are three basic concepts that will help you manage your risks and decide which you should get insurance for. Something’s are not optional on what kind of insurance you have to have required by law. These three things will help you understand why.

The first one is arbitrary chance. In order for insurance to operate effectively, the risk of loss must be random enough so that not too many people experience a loss at the same time. There are certain natural disasters that occur such as tornadoes and hurricanes. These are catastrophic events that will set an insurance company up for bankruptcy if they are not prepared. Sometimes insurance companies will help one another and also seek help from the government depending on how big the disaster is.

The second is what we will call beyond your control. This is where the accident was beyond the insured person’s control. This is where the insurance company would return the policy holder to their original state. These will enable people who experience accidents to get their car replaced at only a small cost to them of what it would have cost without insurance.

The last is what we will call being realistic. This is when the insurance company must verify what has happened and calculate the loss. Without this, then the insurance company could not measure risk and determine how much to charge for a policy. This is the reason that insurance companies note in their policies what they are and are not responsible for.