The file can be written or oral. For example, if you call an agent to have your home insured, the agent will ask for the necessary information, make a brief statement about the contract – the coverage and cost of the premium – and will probably say, “You are insured.” At that time, you made an oral request and the officer accepted your offer by creating an oral file. The agent can send you a written record by mail or email to prove the contract until the policy is received. The written record indicates who is insured for what risks, the amount of insurance and the company for which coverage is insured. Guidelines written on the basis of identified hazards cannot cover all possible causes of damage due to an “unknown hazard”. There is always a possibility of loss caused by a danger which was not known to exist and was therefore not mentioned in the Directive. For this reason, the Open Risk Directives cover many hazards that are not covered by designated hazard Directives. This broader coverage usually requires a higher premium than a designated hazards directive, but it is often preferable, as there are less likely to be gaps in coverage. The fear of anthrax described in Chapter 4 “Evolving Risk Management: Fundamental Tools” is an example of an unknown hazard covered by insurance policies. Kevin then discovers that he has collision insurance with a deductible of 500 $US that he has to pay. He is angry because for him, “the works” meant complete insurance for any losses he might suffer due to collisions. Dana thought he wanted cheaper coverage and had used the deductible to reduce the premium.
Current government law and insurers` underwriting practices allow deductibles of up to 250 $US, although they can be much higher. Another example for a driver is long-term care (LTC) insurance (see Chapter 2 “Risk Measurement and Metrics”). Most long-term care policies include a rider that offers some sort of inflation protection, typically 5 percent per year. Jack Crawford, “Inflation Protection: Is the LTC Industry on the Right Path?” National Underwriter, Life & Health/Financial Services Edition, January 21, 2002. As discussed in Chapter 9 “Fundamental Doctrines Influencing Insurance Contracts”, an insurance policy is a contractual agreement subject to the rules applicable to contracts. Understanding these rules is necessary to understand an insurance policy. But that`s not enough. In the following chapters, we will spend a lot of time discussing the specific provisions of different insurance contracts.. .
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