How Insurance Companies Work
Today we’re going to talk about how insurance companies work now for most people out there they think of insurance companies as the people who take your money and never pay when something bad happens and that’s really not true and it’s really not fair insurance companies serve a very noble purpose.
They are the people who are in charge or the organization entity that’s in charge of making sure that anything happens happening bad in your personal or your business life that’s going to be paid for so you don’t have to pay for it because if you did you couldn’t afford it and so really what now I’ll do it from a personal standpoint if you take a look at your home and your auto and if you have a boat or anything else you have all of those needs you have liability for third party liability in case you damaged something or hurt someone and you have the actual property itself.
so the insurance company figures out a rate and the rate is determined by the geography where you’re located it’s based on experience that they’ve had by insuring countless homes and autos and boats and RVs and all of that and so they are able to actually figure out what the appropriate rate for you in the area that you live in for.
whatever it is that you need to insure and that’s how they figure out a rate and what they actually do is they add on a little bit more for their expenses because they have to pay underwriters and claims people and all those folks and so they factor that in as well and that’s how the rate is determined so in essence you pay the money.
And they are promising that if something really bad happens that you can’t afford to pay they’re going to pay it on your behalf finally I do want to say it’s important you do want your insurance company to be profitable they are not a nonprofit organization they’re required by the states that they work in to be profitable and you want them to be profitable because if there is a bad claim you want them to be able to pay it we’ve seen recently what happens insurance companies are not and that’s never good for the consumer.