Freight Insurance Pt 2 of 3

Freight Insurance Pt 2 of 3

8/28/2014 Umut Türker 2539 Times Read

If there are 10,000 people like Mr. Smith and want to be compensated $10,000 in case X happens and the insurance broker determines that X will occur to just one of them then he may charge each one of them $1 so that when X happens to that one person then he will have the money required for paying that person.

 

Of course, insurance brokers need to be paid as well so he may charge somewhat more than the minimum or he may take the money and invest it, in the idea that the gain will be enough for profit

 

In short, insurance is a way of balancing risk by calculating the probability of something occurring (using statistical analysis) and then making sure that enough money will be received or earned to cover the payments of X happening.


People on their own can determine whether or not to take on insurance. For example, you may not want life insurance for dying in an accident if you do not have any family members or dependents who would suffer financially (in addition to emotionally) by your passing. However, in some places and some events insurance is mandatory. For example, in the United States, if you drive a car then you must have auto insurance. You may determine that you are an excellent driver and that you would never cause an accident and that you are even willing to pay money on your own if another driver runs into you. However, if you do happen to run into Mr. Smith's car while driving, then he will certainly want you to have the insurance needed to pay for any and all repairs and costs.

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This idea is akin to all business transactions or contracts or, more pertinently, to freight or cargo insurance. One website defines cargo insurance by saying that "Cargo insurance provides coverage against physical damage or loss of goods during shipping, whether by land, sea or air".

 

Some events (some X's, as in the example of Mr. Smith, above) that are usually insured are; damages from bad weather; seawater or freshwater flooding; improper stowage by the shipping company; and others.