Adequacy Of Coverage


Adequacy Of Coverage

The adequacy of coverage concerns how well your insurance policies protect your assets against unforeseen losses. In order to evaluate the adequacy of your insurance coverage, you should consider many different loss scenarios and judge whether your insurance deductibles and limits are sufficient.

The concept of adequacy of coverage is subjective, and largely depends on one's propensity to take on risk rather than pay higher insurance premiums. One's ability to absorb losses should also be considered, as a person with very few liquid assets will be unable to pay large deductibles or sustain other uninsured losses. Alternatively, those with substantial assets may wish to obtain higher limits to their coverage to avoid losing the wealth built up over many years.

When considering adequacy of coverage a four-squared matrix can be used as a rough model for dealing with the four main types of losses:

1) Frequent expensive losses - avoid these high-risk behaviors because insurance will be very expensive.

2) Frequent inexpensive losses - self-insure for these losses by planning ahead and setting aside funds.

3) Infrequent expensive losses - buy insurance for these losses.

4) Infrequent inexpensive losses - self-insure, these losses are no big deal.


Investment dictionary. . 2012.

Look at other dictionaries:

  • adequacy of coverage — A test that measures the extent to which the value of an asset is protected from potential loss either through insurance or hedging. Bloomberg Financial Dictionary …   Financial and business terms

  • Adequacy.org — Infobox Website name = Adequacy.org favicon = caption = Screenshot of the Adequacy.org page from September 16, 2001. url = http://www.adequacy.org/ commercial = type = Satire / Humor slogan = News for Grown Ups registration = Optional owner =… …   Wikipedia

  • Coverage ratios — Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio. The New York Times Financial Glossary …   Financial and business terms

  • coverage ratios — Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio. Bloomberg Financial Dictionary …   Financial and business terms

  • Operation Igloo White — Part of the Vietnam War Date 1968–1973 Location Southern Laos Result …   Wikipedia

  • Igloo white — Opération Igloo White ██████████1 % Traduction …   Wikipédia en Français

  • Operation Igloo White — Opération Igloo White ██████████1 % Traduction …   Wikipédia en Français

  • Opération igloo white — ██████████1 % Traduction …   Wikipédia en Français

  • Economic Affairs — ▪ 2006 Introduction In 2005 rising U.S. deficits, tight monetary policies, and higher oil prices triggered by hurricane damage in the Gulf of Mexico were moderating influences on the world economy and on U.S. stock markets, but some other… …   Universalium

  • ratio — the proportional relationship of one thing to another * * * ratio ra‧ti‧o [ˈreɪʆiəʊ ǁ ˈreɪʆoʊ] noun [countable] a relationship between two amounts that is represented by a pair of numbers showing how much greater one amount is than the other: •… …   Financial and business terms