Final answer:
Personable liability exposures like automobile accidents and injuries on one's property can be mitigated by a personal umbrella liability policy, which extends liability coverage beyond standard insurance limits. The insurance model aims to balance premiums with claims, operational costs, and profits while considering the impact of moral hazard.
Step-by-step explanation:
Two typical personal liability loss exposures include being at fault in an automobile accident and someone being injured on your property. A personal umbrella liability policy could provide needed protection by offering additional liability coverage above the limits of homeowners' or auto insurance policies, which could protect personal assets and future wages from being targeted in a lawsuit.
Insurance operates on the principle that an individual's premium payments over time should cover the average person's claims, the costs of running the insurance company, and allow for the company's profits. This ensures the sustainability of the insurance model, allowing it to provide financial security for insured events such as health care costs, accidents, theft, or significant life events.
It is important to note that the presence of insurance can sometimes lead to moral hazard, where the insured party takes greater risks because they have coverage.