Nowadays, insurance contracts, whether they are optional or required by law, are crucial to the balance of life in modern societies. Without insurance, many sectors of the national and world economy wouldn´t work. The insurance industry provides protection against various and numerous risks (climatic, technological, political, etc.) therefore, allowing developments, investments and innovations by companies (through operations) and helping people live their daily lives more relaxed.
The insurance contract is a transfer of risk, i.e., in exchange for a certain amount (insurance premium) the risks of financial and / or non-financial loss, triggered by specific, but unpredictable events, are transferred from an individual or company to an insurer.
The insurance contract has also the principle of pooling risk, in other words, it works by the division of potential losses between the policyholders. Individually, the payment of the insurance premium for the risk of a loss would be virtually unaffordable, so this principle of “solidarity” between the insured leads to lower insurance premiums for all, since only a small number of group members suffer a loss. Thus, this transfer mechanism based on risk pooling allows the losses of few to be paid by the premiums of many, exponentially reducing the average premium for all.
Each policyholder, be it individual or collective, presents different risks for insurers. Thus for each insured to pay a fair and appropriate premium for the existing risk level, combined with what is desired, insurers have to evaluate several factors that establish the correct risk profile. For example, a wooden house presents a higher fire risk than a brick house, so the higher the risk, the higher the insurance premium payable by the customer.
Each insurance company has its own underwriting process and each one may present equal general terms and conditions for all, so that customers generally can´t influence the basic clauses, but they can customize their contracts through the inclusion or exclusion of certain events to be covered by the policies, therefore adapting the contract to the individual needs.
However, no insurance contract may infringe legal provisions and guidelines for its establishment, as well as all terms and conditions must be previously authorized for sale by the official body that oversees and controls the insurance activity in our country: Insurance Institute of Portugal (Instituto de Seguros de Portugal).
Although not all risks are insurable, there are many solutions on the market that meet the needs and desires of customers, as well as a significant number of certified insurance companies that offer solutions and professional advice to all interested parties, through its various distribution channels (insurance agents, insurance intermediaries, etc.), always safeguarding the interests and needs of each client.
Without an innovative, professional and competitive insurance market, many aspects of our society and economy would cease to exist or would work less effectively.
So, if you want to purchase insurance for your car, your home or want to protect your own life, be sure to seek a properly certificated insurance professional, who is happy to present you the best solution tailored to your needs.
This information does not free from consultation of the general terms and conditions of each insurer.