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Why do insurers provide coverage for some things and not others?

Insurance companies exist to make money. In general, insurance coverage is provided under the following conditions:

  • There is a large enough, homogeneous group of people who need the insurance. This allows the company to accurately predict the level of losses and, therefore, claims for benefits.
  • The loss is accidental. A "planned" accident is not insurable.
  • A loss is specific, and easy to observe and measure.
  • The existing peril must not have potentially catastrophic effects for the insurance company (e.g. war is not usually covered). The cost of insurance must be affordable to large numbers of people.



Brenda Procter, M.S.,  Consumer and Family Economics, College of Human Environmental Sciences, University of Missouri-Columbia









If you'd like to learn more about this and other personal finance topics, the University of Missouri offers 'Personal & Family Finance,' a correspondence course, through the Center for Distance and Independent Study (800-609-3727). Information about this course is available at





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Last update: Sunday, July 20, 2008




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