Insurance Law Lesson 62: Risky Business

Insurance is about risk transfer. Your policy premiums are purchase price for protection. It’s like paying a security guard. There could still be a messy situation, but you’ve paid somebody else (the insurance company) to bear the brunt.

Also like a security guard, an insurance company might be better prepared to handle the situation — or it might be more interested in saving its own skin. Its important to get one that will protect you when the levee breaks rather than running away. Its important to get enough security to protect whatever it is you value.

In insurance lingo, the thing you insure is called “the risk.” In an auto policy, the vehicle is the risk.

An insurer who has an active policy covering the “risk” is called “on the risk.” As you know (lesson 7) policies have start and end dates. Thus, we describe insurers as being “on the risk” for particular periods.

When an exclusion applies to bar coverage (lesson 14), it is said that “it is impossible to hold an insurance company liable for a risk it did not assume.” Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 567 (1992).

Insert witty closing line here.

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