👉 Damages math is a fundamental concept in insurance that quantifies the financial impact of covered losses. It represents the expected monetary loss an insurer will incur from a specific peril, calculated as the probability of the event occurring multiplied by the average cost of the loss. For instance, if a policy covers $100,000 in damages with a 5% annual probability of a $200,000 loss, the expected damages would be $100,000
0.05 = $5,000 per year. This math helps insurers set premiums that cover potential claims while remaining profitable. However, it's crucial to note that real-world scenarios often involve additional complexities like deductibles, policy limits, and varying risk factors, which can alter the expected damages calculation.
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What is the definition of Damages Math? 🙋
