A short-term insurance policy is an essential aspect of business and personal risk management. You can use a short-term insurance policy to cover almost anything – for a few weeks to a few years, with variable and changeable premiums that are based on changing needs and risks.
Insurance classified as short-term insurance includes car insurance, home and household good insurance, insurance on valuable items, and various other types of personal and business insurance. Basically, all insurance except for life insurance is considered short-term insurance.
Risk over a limited period: why short-term insurance cover is affordable:
The greatest advantage of of a short-term insurance is there is no commitment to paying the premiums beyond the length of time that you need the insurance. You can set a particular time for coverage (e.g. the length of time you will be driving a certain car or be in possession of a valuable item such a house. You can insure the valuable contents of a house you are renting – if they belong to you – for the rental period only and take out insurance on a business venture or travel insurance for the period of travel.
Short-term insurance for risk management:
Risk is variable. You might need business-related insurance for a venture partnership or cover for personal liability for a short period of time. You might need insurance for valuable assets for a short period between acquisition and sale if you are a trader. You may move to a move to a more secure complex and so lower your car insurance premiums.
Risk defined premiums:
Your insurance premiums on a short-term insurance policy are determined by the risk associated with what is being covered. Risk assessments done to determine short term insurance premiums include your personal risk e.g. if you are insuring a car, but you are an inexperienced driver, your premiums will be higher than those for a more experienced driver, for the same car.
As risk changes – so do your premiums. This gives you a certain amount of control and flexibility over your premiums.
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