Final answer:
AIR models usually include coverages for building damage, contents damage, time element losses, and additional coverages in a typical property policy. These types of coverage ensure that the insured is protected financially against a range of potential risks associated with property damage. The cost of premiums reflects the likelihood of filing a claim among different risk groups.
Step-by-step explanation:
The student has inquired about the four coverages that AIR models typically include in a typical property policy. These coverages address the risks associated with owning property and ensure financial protection against certain events. Within the context of property insurance, the generic key coverage types modeled by AIR (Applied Insurance Research) typically encompass:
- Building damage – covers the physical structure of a property in events like fires or natural disasters.
- Contents damage – protects personal belongings within the insured property, addressing losses from theft or environmental damage.
- Time element losses – includes business interruption costs or additional living expenses due to the unusable state of the property post-disaster.
- Additional coverages – could encompass a variety of other protections such as liability coverage or extra expense coverage.
The fundamental law of insurance states that over time, the average person's insurance payments must cover the person's claims, company operating costs, and allow for company profits. Variations in insurance premiums may reflect the differing risk groups, which are established based on the likelihood of claims within a group due to factors such as location, personal habits, or other risk factors.