| Insurance
policies offer protection against economic loss, that is, loss or
damage which can be measured in purely financial terms and compensated
by money. For example, an insurance policy can pay for the cost
to repair or replace a damaged automobile or to rebuild a building damaged
by fire, for the cost of medical treatment for an injury or illness or for the
lost income of a person who dies or is unable to work. The purpose is to place
the injured party, as nearly as possible, in the same financial position
as if the loss had not occurred. It
is important to understand this limitation of insurance, since there are
many types of losses which can not be compensated by money. For example,
insurance can not replace a life or take away the emotional injury or pain
which often accompanies an accident or serious illness or compensate for loss
of the "sentimental" value of an item of property. When you buy homeowners
property insurance, for example, you are insuring only the economic
value of the home, i.e., the cost to repair or rebuild it. |
