What is non-life insurance? Part 1

By Randell Tiongson on February 24th, 2010

MANY of us have some form of property and casualty insurance, or more commonly referred to as nonlife insurance. We probably have motor-car insurance, fire insurance or personal-accident insurance. However, I dare say that so many of us who do have some form of coverage are not really aware what this form of insurance is all about.

When you compare life insurance and property and casualty insurance, you will notice that the only thing similar with them is the term “insurance.” Let’s try to demystify property and casualty insurance.

So what is property and casualty insurance? Property and casualty insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. The definition is clear about how property insurance operates. For the insured, it means that the agreement is merely to help him recover what was actually lost due to the unknown or contingent event. A contract of indemnity is therefore exclusive to property insurance.

Why is there a need for this type of insurance? Well, for starters, it really is a risk-distributing device. A person puts money called premium to a common fund and distributes his risk to the group. There is no way for a person to know in advance whether he will receive compensation more than he has contributed or that he will be merely paying for the loss of others.

The primary goal of a person getting insurance coverage is to assure himself that he will not shoulder the loss alone. He may gamble, take his chance that he may be able to steer his property away from a loss and its devastating effect. But putting a minimum amount, and considering that such amount is the only sum he is bound to lose in case a loss actually occurs, is the logic behind getting protection for your property. However, it is unfortunate that most Filipinos still cling to his fatalistic philosophy of bahala na. When the loss happens, it is already too late.

Risk is an everyday reality. This is the reason people make calculations instinctively to avoid risk. They forget that their own negligence (lack of foresight, lack of skill to prevent loss) is the paramount reason why property insurance is there in the first place.

… to be continued.


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What is non-life insurance? Part 1