(406) 652-4180 • 1320 28th Street West, Billings, MT

So What is this "Insurance" Anyway?

All the terms about drive a person mad: perils, premiums, hazards, losses and limits. There seems no end to it, and what does it all mean?


  Start a Quote Online    Find an Agent
  •   »  
  • What Is Insurance

All the terms about drive a person mad: perils, premiums, hazards, losses and limits. There seems no end to it, and what does it all mean? Well, insurance always boils down to a very basic idea. It is a mechanism to mitigate the negative outcomes of low frequency but high consequence events.

One might think, glad we got that cleared up...

Well, let's look at a very basic insurance mechanism, the spare tire. The infrequent, yet high consequence, event is having a flat tire. That is the peril, or the insured risk. Hazards are the things that increase the chance of a loss. The nail in the roadway for example. The loss, in this case being a flat. Everyone knows the consequences of the loss. The vehicle is no longer usable. The insurance mechanism is the spare tire, and the limit of coverage is one flat per occurrence. The premium is the portion of the purchase price of the vehicle needed to pay for the spare tire.

A far more serious example would be the RMS Titanic. The insurance mechanism was the lifeboats. The peril was the ship sinking. The hazard that did cause the loss was the iceberg. The number of lifeboats was the coverage limit. The premium was the cost that the lifeboats added to the cost of building the ship.

The Titanic hit an iceberg and sank. The consequence of the loss was the death of many of the passengers because the limit of coverage, the number of lifeboats, was not enough to cover the loss. Yet many people did survive the event because the lifeboats mitigated the loss.

So, what does this "insurance" do for us? Well, what insurance does is give people the confidence to do big things in spite of the risks and perils that they face. Whether it is taking out a car loan or loaning money to build a factory, none of these things could happen without the security that insurance provides should the unexpected and the tragic happen.

After all, who would drive to Disneyland without a spare in the trunk?

We'll Shop Around

We'll Shop Around So You Don't Have To

Start a quote by filling out our online application providing us with the basic information we need to perform a quote. It only takes a few minutes and we'll respond within one business day.

Start a Quote Online  Contact Us

Must Read Articles

Find Helpful Information and Articles from Darnielle Insurance

  View All

Supporting Our Community

There are many individuals and organizations in need and we are finding meaningful ways to give back and support our local community we serve.

 service   news  

So What is this "Insurance" Anyway?

All the terms about drive a person mad: perils, premiums, hazards, losses and limits. There seems no end to it, and what does it all mean?

 service   auto  

Talk About Full Service

Taking Customer Service to a New Level

 service   auto  

Reducing Your Insurance Costs ... Distinguishing Bad Advice from Good Advice

Many Americans are struggling financially in the current economy, particularly those struck by lay-offs, and are faced with tough decisions about how to reduce expenses.

 service  

Our Insurance Partners

— Protecting Everything You Value Most —

Darnielle Insurance is available to answer your questions. We are located at 1320 28th Street West, Billings, MT 59102. Give us a call at 406-652-4180.

Start a Quote Online