When you consider the risks that you face on a daily basis, you have many different points of data to consider. You know how often you come into contact with, or are exposed to, certain risks; you know how your reactions are to those risks and you know how to avoid risks as well as how likely you are to make the effort to do so.

When an insurance company is considering you for coverage, they have only a fraction of the data available that you have. That means they need to come up with an alternative way to measure your overall risk.

Statistics versus Personal Traits

Insurance companies look at statistics for individuals who are similar to you and they use that data to determine the basis of your risk exposure. Then they look at certain individual traits you have that could increase your likelihood of claims, making it greater than the generic data indicates. They also consider those traits that make you less likely to be exposed to certain risks.

Your History, Your Possible Future

Another consideration that insurers take on is your historical behavior. Moral turpitude, actual claims experience, and other relevant historical factors will be considered underwriters. This information will be combined with the other data to get an idea of the actual risk that you present to the insurance company.

Issue or Decline

Once your risk has been estimated the insurance company will determine whether to issue a policy or not. Certainly high-risk individuals may place too great a potential financial burden on the pool of collected premiums. If that much of a strain is added by one individual, it could hurt the insurer’s ability to pay claims of other customers and will result in a declined application for coverage.

If the insurance company decides to issue your policy, they will then assign a cost to the policy that is a reflection of your risk. The more risk you present, the higher the cost of your policy will be. For certain coverages, your insurance company may decide to exclude individual risks if they are deemed too high. For example, let's say you apply for a life insurance policy and you are a skydiver. Your insurer, after looking at all of your information, may decide that with the exception of skydiving you are reasonably low risk and they want to offer you a policy. However they may decide that the skydiving is too risky. Instead of declining your policy outright, they may simply exclude payments for death that occurs while you are skydiving.

We can help find Maryland Contractors insurance policies for even the most hard-to-place individuals. Give us a call at McFarlin Insurance Agency and let us help you solve your insurance dilemma today.