Insurance Premiums and Risk Exposure

Insurance Premiums and Risk Exposure

insurance exposure

The field of insurance involves many definitions and policies that are confusing to people who are not experienced in this area. One of these terms refers to insurance exposure and how insurance providers calculate premiums for your policies. Depending on the type of policy you are looking to acquire your risk exposure will vary greatly. For example, if you are looking to purchase an automotive insurance policy, your frequency of driving will depend on your exposure risk. If you do not drive your vehicle that often, you are less likely to get into an accident unless you are truly awful at driving. However, if you drive frequently, your risk exposure is higher even if you are a better driver than most.

Evaluating Risk

When underwriters are looking at bringing on potential clients, insurance exposure is one of the most important metrics they refer to. While people have individual exposure to risk, insurance companies often refer to those being insured as exposing this business to further risk. Depending on how risky a potential client is, the insurance provider will forgo doing business with them. Alternatively, if the risk potential for a potential client is low, the insurance provider will likely work with them. This is because the likelihood of ever having to pay out a policy is extremely low in these circumstances.