Insurers use a pool of many premiums to pay for home, auto and business losses. Your insurance company estimates an annual cost to accept the risk of covering your home, business or car. You pay an annual or monthly premium to your insurer for assuming risk on your behalf. Your insurance company puts all premiums into one large pool. Your insurance company uses the pool of many premiums to pay for the losses of a few who make claims for that year. Year after year insurance companies manage the pool of premiums to ensure there is sufficient funding available to cover all losses.
Your home, auto and / or business insurance premium is calculated to reflect the probability that you may suffer a claimable loss. When you make a claim, you draw funds from the pool of insurance premiums paid by all policyholders. Those who are unlikely to draw from the pool (low risk) pay less than those who are more likely to draw from it (higher risk).
Review your policy and policy limits carefully. Ensure coverage is as required and that the limits are adequate. Read all conditions carefully. Many insurance contracts include policy conditions that must be followed in the event of a loss. If you are unfamiliar with any of the wordings or conditions within your policy, have your Insurance Broker review them with you.