Insurance Risk

Last Updated: October 31, 2017

Definition - What does Insurance Risk mean?

An insurance risk is a threat that is covered by an insurance policy and can cause financial losses. When the insured event takes place and a claim is filed, the insurance company has to pay the policyholder the agreed reimbursement amount.

Insuranceopedia explains Insurance Risk

There are a wide range of events that are considered insurance risks. For example, an auto accident is an auto insurance risk, a policyholder's death is a life insurance risk, and water damage is a homeowner's insurance risk.

Insurance premiums are calculated based on the chance that a certain insurance risk will be realized. The greater the chance of the risk occurring, the higher the premiums will tend to be. A driver with a history of accidents or traffic violations, for instance, will be viewed as a higher risk to the insurer and will, therefore, be charged more for auto insurance coverage.

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