How are insurance companies able to make the much compensation from the claims made each day by their clients? This article will focus on elaborating how insurance companies are able to meet demands of their clients. Get an auto insurance quote today and get to secure yourself against losing your car in the event that some risk that you face happens such as theft, fire, vandalism and so forth.
Insurance companies do not insure one person, not even two but many people exposed to the same risk. The insured persons pay premiums. There are of course so many risks. The premium paid by the insured will depend on his or her risk profile. This means that if one is more exposed to the risk, he or she will pay more. This is the money that insurance companies bring to a pool. From this pool, the insurance company will compensate those who bring genuine claims. However, those insured against do not suffer the loss at the same time because insurance companies avoid catastrophic risks. The company is therefore able to compensate those who have suffered a loss. The money that remains in the pool is then used for investment and therefore earns the insurance company some returns.