North Little Rock Insurance: Understanding Your Risk And Loss

This blog was created for people in the greater Little Rock and central Arkansas area. North Little Rock Insurance hopes to become a source for people in this geographical area that have questions concerning all types of insurance, the different policies available and hopefully providing the information you need to make an informed decision before purchasing a policy.’

First we need to understand what insurance is and how it works and operates in within the industry. Most people see insurance as a necessary evil, rarely understanding how to utilize insurance products efficiently and effectively for us. Most of us find ourselves complaining about the cost of insurance premiums, justifiable so in some cases, but do we really understand what we are paying for and how insurance best benefits us?

North Little Rock Insurance is here to fill this void and help you better understand what you are paying for or what to help you find what you need. The largest complaint by far is paying too much in premiums for the coverage you need. Unfortunately this is true but should fault be laid at the feet of insurance companies alone? Yes, but not entirely. The consumer also bears some responsibility for paying high premiums. Many times when people get their first insurance policy it is auto insurance when they first begin driving as a teen, usually obtaining their policy from whatever insurance company their parents currently use.

As they grow into adults, they continue to use the same company since they are familiar with the company and feel a sense of security. This is where fault can be placed on the individual policyholder for not making the effort to shop around for a better price and in some cases, better coverage. By default, we as consumers allow companies to charge high prices because we don’t take the time to actively seek out better pricing for our insurance needs. Competition breeds lower prices and it’s a simple fact, if more people would shop around more, companies would be forced to lower insurance premiums.

Another reason we as consumers pay higher prices than we should is we don’t really understand the industry and what we are purchasing. This results in cases where duplication of coverage is present and we pay double for what we don’t really need. On the other side of the coin, there is potential danger of not understanding of what we don’t purchase and need to, leaving us unprotected in some areas. In order to avoid these situations and paying too much for insurance coverage, North Little Rock Insurance is here to help you gain the education you need to become an informed insurance consumer.

Insurance is all about risk and we can best explain the concept of risk of by understanding that on any day, the potential is there for an incident to occur that may cause a loss to you or your family. These incidents may be an auto accident, a house fire, or a health issue which could put your savings, property or even you health at risk. Everyday when you wake up, the potential for loss is everywhere although we don’t actively consider this potential, this is what insurance is for, so we don’t need to walk around worrying ourselves about risk that lurks with every step we take.

When risk becomes a loss, it is defined in two different categories: First person loss and third person loss. A first person loss would be a loss incurred by you as a policyholder. For example, if your house was burglarized, this would be a direct loss to you. A third person loss would be when a loss occurs that effects another party other than yourself but you are responsible for that loss. An automobile accident where you were at fault is an example of a third person loss.

When first or third party losses occur, the question arises of whom must bear the burden of compensation for the loss? If you didn’t own a insurance policy if your house caught fire and burned down, you would bear the burden of paying to rebuild your home. If you were in an automobile accident and someone was hurt through negligent driving, you would bear the cost of paying their medical bills if they were injured and possibly a judgment and attorney fees if a third party were hurt. However, the chance of these things happening are extremely low but are very common, spread over the entire population.

When an insurance policy is purchased, the policyholder in essence barters with the insurance company. When agreeing to pay premiums as a policy holder, you are accepting a loss, but the loss is fixed. On the other hand, by accepting your premium, the insurance companies agrees to take on your risk and the larger loss should you have a automobile accident, house fire or a health issue. On the front end of the transaction, you are paying a insurance premium at a fixed, smaller rate for the insurance company to accept the potential for a possible unknown larger loss.

The insurance policy that is issued and signed by both parties, the insured and the company, is a contract outlining what will be covered by the insurance company should a loss be incurred. The insurance company itself spreads this risk throughout the companies policyholders while all policyholders in the company pay for individual losses since the money to pay for claims made by individual policyholders is paid by premiums paid by all policyholders.

We will cover more aspects of risk and loss in later articles on this website and we hope you visit North Little Rock Insurance often to become and informed insurance