Critical insurance

Insurance policies work taking the premiums of customers instead of stripping the risk of costly events that occur. For example, if there is a fire in the city every month, all just could sit tight and hope his house burn down not following, or could pitch and pay an insurance premium every month and is then used to reconstruct the house burning down. It is very simply how insurance works. It is a method of spread of risk over a much wider area, so it will be not as devastating as if it focused entirely on the person experiencing the loss.

Exclusion clauses

However, there are some problems with this and they attract many criticisms. A criticism is that taking the risk to persons, insurance makes people take greater risks that would otherwise. For example, if you know that the contents of your home is insured against theft, then can't so careful about locking the doors and Windows each time leave the House. Or if your bike is insured, you can not bother to block as much as if you were not insured. In the insurance industry, this problem is known as moral hazard.

Insurance companies protect against this by inserting exclusion clauses in their contracts, to withdraw its obligation to pay if the insured person or not perform certain actions indicated. For example might require that fit smoke detectors use good locks on their doors, or other things that will reduce the risk that the insured against events that occur.

Too complex

There are certain risks that are not allowed to make sure against in the majority of countries. This is, above all, because it would be too difficult for insurance companies to quantify, but mainly because they are the risks that the Governments want the person at risk to undress himself or herself. Generally apply to multinational enterprises.

It is also critical that policies of insurance are too complex for the majority of consumers to understand. It is reasonable to simply expect the client to understand the long documents have been developed by not one, but usually teams of specialized lawyers. This can lead to consumers being misled or purchasing insurance under unfavourable conditions. To avoid this, most countries regulate the content of contracts of insurance to make sure that they are fair to consumers.

There is also the option of using the services of an insurance broker for market purchases for you.